Last Wednesday, though, I had to ask if we were watching a video recording of the pre-Budget report instead of the speech itself, so strong was the sense of d‚ja vu.
Here are thoughts on some of the few proposals that were actually new.
The proposed extension of enhanced research and development incentives to larger companies is a welcome development for businesses competing in an increasingly global market place.
A valid challenge can be raised to any delay in introducing the proposed relief when there is already a legislative framework for relief, albeit not on an incremental basis.
In addition, if the government truly wishes to encourage risk and innovative behaviour, why not give an equivalent incentive for marketing and commercial research to enable businesses to establish whether there are viable markets for products before time and money are invested in R&D?
The government announced that its proposed ‘simplification’ of the treasury tax regime (foreign exchange, financial instruments and loan relationships) is to be deferred pending further consultation. After the debacle of the double tax relief and controlled foreign company reforms, and the botched consultative process last year, it is heartening to see the Inland Revenue has listened to businesses at least to that extent.
While the case for a well-drafted, clearly targeted anti-abuse rule is clear, the press release suggests only that it is ‘being considered’.
It is likely that any such rule will be inserted into the Finance Bill as a late amendment. This will of necessity be hastily drafted and insufficiently debated. This will not be to the benefit of either the Treasury or the taxpayer. It is particularly disappointing that there is no similar sense of urgency over the connected party bad debt rules.
The intellectual property, intangible assets and goodwill technical note suffers from deficiencies identified through the consultation process to date ? for example, concerns over consistency in accounting treatments, the fact that some expenditure that might be regarded as capital could fail the identifiable asset test in financial reporting standards, and transitional rules which exclude existing assets.
In particular, the Inland Revenue makes reference in the technical note to the FA2000 rules on IRUs (indefeasible rights of use).
But this is a sore point with the telecommunications industry as rights acquired prior to Budget 2000 and lasting for many years were excluded from relief.
The same approach is now proposed for goodwill. It is welcome that the Revenue has accepted representations against the removal of rollover relief on intangibles and goodwill. The proposal to extend rollover into the assets of newly acquired companies is also welcome.
It is disappointing, though, that with three weeks to go to the climate change levy’s introduction, many of the detailed regulations provided for in Finance Act 2000 have not been published.
It is also a shame the chancellor has not taken the opportunity to introduce major simplification to the AESOP. Until he does, many companies will remain daunted by the immense technical and practical complexity of these plans.
Limited liability partnerships are an exciting new business concept. Clarity as to their tax treatment is vital for them to be attractive to UK and foreign investors. Restrictions on their use for tax avoidance are necessary, but these must be kept to the absolute minimum. They should target specific abuses.
We need to see the wording of the definitions of ‘investment partnership’ and ‘property investment partnership’ to be able to judge whether the Revenue has arrived at the right balance.
Crowe Clark Whitehill , the top 20 accountancy firm, has announced the promotion of Chris Mould to partner
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