Budget analysis – UK is now an attractive location for inward

The NHS seems to be the Budget winner as the government tries to bring health spending up to average European levels. The economy is doing well and the chancellor could easily afford some increased spending whilst keeping within his monetary limits. But the absence of any comments on the exchange rate or manufacturing industry, particularly in the light of recent events in the West Midlands, was noticeable. For inward investors, the UK has become an attractive proposition. The new rules allowing groups and consortiums to be traced through companies resident anywhere in the world extends the ICI v Colmer principle usefully. International groups often hold UK companies separate, perhaps as result of acquisitions, so it saves time and cost in not having to reorganise UK holdings. But, with the changes to double tax relief and Dutch Mixers, the Budget had bad news for UK outgoing multinationals. But the changes on capital gains for companies, obviating the need to physically transfer assets to match gains with losses, and proposing the introduction of a rollover relief for substantial 30% shareholdings next year, were both very sensible and long overdue. The chancellor is clearly in love with Silicon Valley and has grasped the importance of employee incentivisation. The All Employee Share Ownership Plan is a good improvement on the old approved profit sharing scheme although it may be easier for a public company to operate than a private one. The Enterprise Management Incentive scheme has now been extended to 15 key participants, and the flexibility in the arrangements has already fostered interest. But it was very disappointing that the chancellor did nothing concrete about the 12.2% NIC charge on unapproved share options though we have consultations to come. The acceleration of taper relief over four years for business assets was welcome. This is excellent news high net worth individuals wanting to invest in private ventures. Joe Public is left with a slow taper to 24% on his plc shareholding. Nonetheless, the UK capital gains tax regime is now starting to look much better. But where was the serious attempt to alleviate red tape surrounding businesses? SMEs in particular have become the unpaid tax collector for the chancellor – the prospect of a #50 discount for e-filing PAYE returns does not sound like Hector sharing the burdens and benefits equally. Tim Porter is a tax partner at PricewaterhouseCoopers.

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