Budget reaction round-up

Link: Budget 2004

‘Obviously the new disclosure requirements around tax avoidance have the potential to weigh quite heavily on business and will require careful consideration. We hope there will be genuine consultation on how to achieve the government’s objectives even if the timescale is shorter than ideal. There is an opportunity here for the Government to get it more right than wrong. But with the merger of Customs and the Inland Revenue going forward, there has to be a worry that the tax authority itself will find the reporting regime difficult to manage.

‘The 19% charge on distributed profits of SMEs was probably inevitable and may be the least worst option to sort out problems that the Government did not foresee. The positive moves on enterprise are welcome, let’s hope it all balances out.’
Aidan O’Carroll, national head of tax at Ernst & Young

On small businesses and section 5.91
‘Is the chancellor really being this generous? His budget might be a sleight of hand, apparently spending billions without obviously taking anything away. Unless of course you’re a small business owner, in which case you may well be thousands of pounds worse off than yesterday. He’s back-pedalling furiously – he giveth two years ago and now he taketh away.

‘Opportunities for minimising tax liabilities have been further curtailed. Because of the pre-approval requirements of what may be legitimate tax planning alternatives will we see the death knell for sensible planning.’
Guy Smith, partner at Moore Stephens

On the increase in the inheritance tax threshold and the freeze in stamp duty
‘At first sight, it is disappointing that the report seems ambivalent about the role of home-ownership within the overall UK housing market. But the themes of making the housing market more flexible, and the reference to the blurring of the boundaries between the market and social sectors, do chime with the CML’s desire to see a much more flexible tenure structure to meet the needs of people who cannot afford full home-ownership.

‘Of course, the primary problem – delivering a far higher supply of housing – is highly political, and it will take some time to implement change in practice. In the meantime, as the report highlights, there is a large swathe of people who cannot afford to become home-owners. Some targeted help for this group need not be expensive in terms of public expenditure and would provide at least a stop-gap policy response until the increased supply of housing begins to flow through.’
Peter Williams, deputy director of the Council for Mortgage Lenders

On the £1.5m lifetime allowance for pension funds
‘Good news. We’ve now got the go ahead. People can plan. The £1.5m will be a small but welcome improvement on what we were expecting (£1.4m) and the projections to 2010 should represent an increase significantly in excess of inflation – welcome again, but brings further complexity. A number of people will not be happy with the extra year’s deferral to 2006. Those retiring in that year to April 2006 will rue the lack of flexibility. But if that is the price of getting things right, then it’s a price worth paying.’
Trevor Llanwarne, chief actuary of pensions for PricewaterhouseCoopers in the UK

On the merger between Customs and the Inland Revenue
‘We are worried that Customs’ investigative approach may dominate this newly-merged tax authority. The Revenue has traditionally been more prepared to negotiate and has a more human face. Customs has had far greater powers of investigation and its history as an agency which chased smugglers has pervaded much of its approach. If our fears are realised, taxpayers would find themselves up against a Big Brother type of body.

‘It should not be forgotten that VAT and corporation tax are two very different animals. VAT is charged on a transaction basis and Customs’ IT system is set up for regular payments over time. A lot of Customs’ time is spent out in the field checking that retailers and traders have systems that will adequately account for VAT – an activity that contributes to the authority’s rather fearsome reputation.

‘The Revenue’s infrastructure, meanwhile, is geared to deal with annual or quarterly deadlines – so the risk is that there will be a hiatus of payments, which are processed and ideally cleared in time for the next deadline. The cost of bringing together two such disparate systems would be high indeed.
Chas Roy-Chowdhury, ACCA head of taxation

Related reading