PBR: Business taxpayers to have a tough year

Ernst & Young partners have responded to the chancellor’s pre-budget

Chris Sanger, head of tax policy, said: ‘The chancellor spent quite some time
reminding the House how stable the economy has been. He was obviously worried
that business might not notice. Did this Report match investment with reform, as
the chancellor stated? Will it help the UK withstand the pressure to move jobs
to the emerging economies of Asia?

‘Hailing 1.75% growth as a triumph rather begged the question. Having given a
little away this year, basically on fuel duty, he’s grabbing it all back over
the next few years – raising a total of £5.5bn by 2008/09. He spent a lot of
time talking about winter warmers for pensioners, which is a good thing, but the
small print shows that the supplementary charge on North Sea oil will raise an
extra £2bn in 2006/07. That’s the real winter warmer for Gordon.’

Caroline Artis, corporate tax partner, said: ‘Discussions with business on
changes to Treasury Consents is good news: we need to get rid of this dinosaur.
Gaming has been left alone, which is disappointing given what a period of rapid
change the environment is going through.’

Russell Gardner, middle market tax expert, said the changes to small business
taxation took businesses back to square one: ‘The changes to small company
taxation mean that the 0% rate of corporation tax introduced with such a fanfare
a few years ago has now been abolished, and we’re back to square one.

‘As a sop to small business people, first year investment allowances are
increased. Somehow we didn’t hear the chancellor admitting what a complete
reversal of policy this was. And where does it leave the businesses who were
encouraged to incorporate?’

On tax credits, Patrick Stevens, tax partner, said: ‘The changes to tax
credits recognise the difficulties of administering an annual benefit targeted
at people whose circumstances can change very rapidly. The problems arise when
people’s income rises compared to the previous year. In future, this will be
ignored up to £25,000 a year and will wipe out the great majority of the
reclaims that have caused such bad publicity.’

The property industry is still braced for particulars of changes, said Peter
Beckett, real estate tax expert: ‘The promise of legislation to bring in REITs
is very good news, after a period of hesitation. I hope the rules will be simple
and clear enough to attract the private investment the chancellor said he wanted
in this area.

‘The planning gain supplement consultation is at least a chance for the
property industry to make the case for sensible reform of a difficult area.’

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