Tenon the Budget 2008
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Budget Day Bulletin
After months of waiting Alistair Darling has finally presented his first Budget. But of course, we already knew much of what he had to say, with the autumn’s Pre-Budget Report turning out to be more exciting than the real thing! Whereas Gordon Brown favoured prudence, Mr Darling is all about stability, mentioning the word four times in the first minute of his speech!
This was a Budget, said the Chancellor, for “equipping Britain for the times ahead”. In particular, he referred to the need to cut child poverty, and as expected, there was a focus on climate change and carbon emissions.
But in terms of any significant tax changes, there weren’t any. Rather, we had confirmation of measures already announced.
So for personal tax, we have the two rates – 20% and 40%. However, one new quirk is that so that charities do not suffer with a reduction in tax reclaimed via Gift Aid, there will be a notional intermediate rate of 22% for the next three years. In other words, even though taxpayers might pay tax at 20%, charities will be able to continue to reclaim at the rate of 22%.
There is good news, at least for now, for small businesses. The Government has considered the responses received to the consultation on income shifting and believes that further consultation is necessary. The good news is that legislation will now not come into effect until the Finance Bill 2009; the bad news is that small businesses face continued uncertainty for another year. There is also to be consultation on simplified tax returns for small businesses. Last year we noted that some smaller companies would want to look again at whether it is appropriate to continue to operate in corporate form. That situation continues.
Unexpectedly, the much publicised changes to capital gains tax will proceed as expected, so we will have an 18% flat rate, with a lifetime Entrepreneurs’ Relief giving a 10% rate on the first £1 million of gains on business assets.
The changes to the so-called non-doms also proceed, but there are a series of small changes which remove some of the anomalies that these changes produce.
To encourage investment in entrepreneurial companies, the amount of investment that qualifies under the Enterprise Investment Scheme and Venture Capital Trust Scheme will rise from £400,000 to £500,000. The limit for issuing options under the Enterprise Management Incentive Scheme rises from £100,000 to £120,000.
As expected, there are a number of measures introduced to tackle anti-avoidance, and the announcement that there will be changes to the tax avoidance disclosure regime to improve the identification of users of disclosed schemes.
But in summary, three things strike me about this budget. There is a lot of tinkering. There is confirmation of measures already announced. And there is a lot of consultation promised over the next year.
Overnight we will be producing our detailed analysis. Log onto our website tomorrow to download our Budget Book.
Andrew Jupp
National Head of Tax
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