Richard Mannion, national tax director at Smith & Williamson says the latest pre-Budget report offers no tax give-aways and the threat of more squeezing to come
This was Mr Brown’s 10th (and probably his last) Pre-Budget Report (PBR). The underlying theme was that the UK needs to put education for children and adults at the top of the agenda so that we can compete with the fast emerging economies like India and China. Mr Brown said that he had £8 billion that he could use for tax cuts ‘but I say invest in education first’.
All of this background leads me to the conclusion that it is unlikely that we will see significant tax cuts for the foreseeable future and indeed much of the report was devoted to tightening the system still further and closing some of the loopholes. HM Revenue and Customs (HMRC) have stated that they intend to outlaw contrived tax avoidance by 2008 and recent Finance Acts have seen increasingly stringent requirements for artificial tax saving schemes to be disclosed to the Revenue authorities.
With that background it was somewhat surprising that the number of schemes closed down on this occasion was relatively small (six corporation tax, one capital gains tax and an unspecified number of stamp duty land tax schemes). The total of schemes closed seems small compared to the number of schemes notified under the disclosure rules as recently reported, but it may be the case that HMRC believes that the other reported schemes just do not work and so will be contested in the courts.
Probably the most worrying aspects of the 2006 PBR are the changes to the alternatively secured pension (ASP) rules which were only introduced in April 2006. The Government are keen for individuals to provide for their own pensions whilst this sort of tinkering is likely to produce the opposite result.
As expected this PBR had something of a green tinge with tax increases for Air Passenger Duty and Landfill Tax, reductions for Biofuels and an extension of the Energy Savings Allowance.
As usual there were a large number of press releases and reports issued today. However the expected paper on modernising HMRC’s powers turned out to be merely an interim report with no firm proposals, indicating that there is still more homework to be done in this area.
The 2006 PBR was particularly notable for what was not included. Nothing more was said about the long running deliberations on the residence and domicile rules which begs the question whether this subject is stuck in the ‘too difficult’ drawer. Similarly there were no changes announced on the subject of inheritance tax. However it is important to remember that this is merely stage one in a two stage process. The fact that nothing was said today does not mean that nothing will be included in the ‘proper’ Budget in three months time.
Richard Mannion, National Tax Director at Smith & Williamson,
the accountancy and financial advisory group
To see our pre-budget report booklet go to www.smith.williamson.co.uk
Disclaimer
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
Smith & Williamson is an independent professional and financial services group employing over 1,200 people. The group is a leading provider of investment management, financial advisory and accountancy services to private clients, professional practices and mid-size corporates. The group operates from offices in London, Belfast, Bristol, Glasgow, Guildford, Maidstone, Salisbury, Southampton and Worcester.
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