The Budget 2008
Please forward this bulletin to anyone you think would find it of interest. If you do not wish to receive future bulletins please reply to this message with the word 'unsubscribe' in the subject line.
Welcome to the first of this year’s Budget bulletins
The Government has announced that Budget day will be 12 March 2008. Tenon will, as usual, be bringing you comprehensive coverage of all of the Budget changes which are likely to affect you and your business. The centre piece will be the publication of our Budget book, which we will be writing on Budget day itself, but this is only part of our wider coverage which begins well before Budget day and will continue to the publication of the Finance Bill and beyond.
So we start off, as ever, with some speculation about what is likely to be in the Budget and, more importantly, actions which you might want to take before the day itself. Each week leading up to the Budget we will be producing a weekly e-mail bulletin, as well as our Tax Doctor’s online blog http://www.tenongroup.com/Services/Tax/Tax%20Doctor/
The key question for us this year is whether or not the Chancellor has got the appetite for further fundamental changes to the system. “Events, dear boy” in Harold Macmillan’s immortal phrase have landed Alistair Darling with an overflowing in tray and there must be real doubt about the Treasury’s ability to produce yet more change.
The uncertainty is, at least in part, because civil servants are still grappling with all of the consequences of the tax changes announced in the Pre- Budget report. Take capital gains tax for instance. The proposed introduction of an 18% flat rate on all gains led to an outcry from business owners, who had seen their expectations of a 10% charge on exit disappear. A compromise solution of sorts has emerged but the details of this have still not been published and we are still completely in the dark on exactly how much tax business owners would pay if they sell their business in a couple of months time.
This situation of “unfinished business” can be seen across the whole of the tax system. Small businesses face having to deal with rules on income shifting which apply from 6 April, yet the consultation period is still running to the end of this month. Non domiciled individuals face a completely new regime from 6 April and some fundamental issues are still unresolved.
And so it goes on. There are loose ends everywhere. So the Budget statement which we are looking for would be very simple. “I have decided not to make any further changes to the taxation system until we have worked through all of the changes which we have already announced”. But somehow we doubt that this is what will happen! We are sure that the Chancellor will want to put his personal stamp on the tax system by continuing his reform agenda.
The Chancellor has made a public commitment to simplifying the tax system, and to give him credit, there have been a number of situations where real simplification has been proposed. But the problem is that for every simplification there are two further changes which introduce further complexity. So we would expect that we will be counting the number of times that Darling uses the word “simplification” in the same way that we used to count Gordon Brown’s mentions of “prudence”.
Our single biggest wish from the Budget is that we will get a period of stability in the tax system for smaller businesses so that people can actually plan ahead with some confidence. Changes have come and gone with bewildering speed over the last few years. Tax experts struggle to keep up with it all, and most business people we speak to have long given up trying to make any sense of the rules. So please Mr Darling: finally sort out a proper system for small business tax and then leave it alone for ten years!
Will we get our wish? What do you think?
Next week we will look in more detail at what might happen to business taxes.
And finally….
Those of you with a strong sense of history will know that this year is the centenary of Lloyd George’s famous People’s Budget where the concept of National Insurance was first introduced (though the first contributions were not payable until 1912). And the rate – weep as you compare it to your current NIC bill: 4 pence (old pennies that is) a week!
Winston Churchill was a member of the Government of the time and he greeted the introduction of NIC with the following quote: "We have not dragged the toiler onto dry land; what we have done is to strap a life-belt around him."
No, we don’t know what it means either!
Andrew Jupp
National Head of Tax
Andrew Hubbard
National Tax Technical Director
The content of this newsletter is for general information only. It should not be relied on and action which could affect your business should not be taken without appropriate professional advice. Please contact your usual Tenon contact or local Tenon office. To unsubscribe please reply to this message.
Audit & Accounting - Corporate Finance - Financial Services - Recovery - Outsourcing - Tax