The debate about the chancellor’s proposed changes to double tax relief is set to run and run as the Treasury and taxpayers continue to dispute the estimated yield to the Exchequer of the proposals. Consultation on the proposals ends on 19 April. Multinationals should therefore lobby hard to persuade the Treasury that its estimates are incorrect, and that the proposals are very damaging to the UK as a holding company location. In the meantime, they should plan to take maximum advantage of the old rules during the window of opportunity between now and 1 July 2000. The increase in stamp duty was anticipated but it was expected that the increase would be confined to the top end of the residential housing market. Curiously, the rise in stamp duty is mentioned in the Red Book under measures to promote a fair and efficient tax system, in the context of a restatement of the government’s commitment to address unfairness in the tax system. As the brunt of the stamp duty increase will be borne by business, it seems difficult to understand how this will promote a fair and efficient tax system unless the definition of fair and efficient is ‘more revenue’.
Stamp duty is a substantial source of revenue for the government and is expected to raise £6.6bn in 1999/2000. Perhaps, we should now have a consolidated act for a tax which generates more revenue for the Exchequer than inheritance tax and personal capital gains tax combined.
There are a number of measures to promote simplification in the tax system. Groups of companies have been provided with a practical solution to their need to set capital gains off against capital losses on a group basis. Proposals have also been made to modernise the capital allowances system, to modernise the group relief rules and modernise the complex rules relating to exchange gains and losses, derivatives and loan relationships. These and the other simplification measures are very welcome but they only represent a small step in the direction of a more intelligible tax system.
Any overview of the significant number of proposals in this year’s Budget must be selective and there are many other measures which would be worthy of comment if space permitted. In any event, there is a substantial amount in the Budget for taxpayers and their advisers to get to grips with, and perhaps this is the training they require to prepare themselves for what is expected to be the longest Finance Bill in history.