A Balancing Act Budget, says ACCA

But the Finance Bill risks a rush through Parliamentary process

Today’s Budget speech brings few giveaways, says ACCA (the Association of Chartered Certified Accountants) in response to the Chancellor’s statement.

Chas Roy-Chowdhury, ACCA’s head of taxation, says:

“With an election approaching in a few weeks time, there is every chance that today’s proposals could be over-ridden depending on the election outcome.”

“With the Finance Bill to be presented as soon as the 1 April, straight after a full length Budget, there are serious questions about the transparency, openness, and democratic nature of this process.”

“In 2005 some two-thirds of the 300 page Finance Bill was guillotined and rushed through in four hours. Therefore everyone needs to be on their toes and make sure that there are only a limited number of essential measures which are passed in the revised Finance Bill this time.”

“So close to the election and with so little room to manoeuvre with the public finances, this has been a bit of a phoney Budget. The real changes will come later.”

Small Business

Manos Schizas, small business policy adviser at ACCA says:

“Access to finance is vital for SMEs, so I’m pleased about the credit adjudication service; this is a good idea, but as a potential watchdog, it needs teeth and this is no substitute for shopping around.”

“This Budget’s emphasis on access to equity rather than debt finance is also spot on. You don’t build new industries on debt! It is also heartening to see that Lloyds Bank and RBS will be charged with providing £47bn of new SME loans. Both banks and the Government have historically been bad at predicting demand. It remains to be seen whether Access to Finance improves.”

“Progress on implementing access to public sector procurement is also welcome, but this needs to be tied to the government’s green strategy. 50% of Government contracts have to be green, so unless SMEs are given better access to this system, the Government could end up getting poor value for money in the future. “And lastly, the business rate cut is a welcome move – it allows SME start ups a breathing space. But they must plan for the future. The package for enterprise is a relatively positive one.”

TAXES – Business and Personal

Taxing banks (the “pollution tax”)

Chas Roy-Chowdhury, head of taxation at ACCA, says:

“There should be no bank tax without global agreement, so we are pleased the Chancellor has given this reform a global slant. We should not export the UK banking industry and its jobs by going it alone. One off ‘windfall’ taxes like this are rarely a good idea, as they are arbitrary and retrospective, making them an unsound basis for stable and consistent tax law that this country needs. There is a possibility that banks would also find a way of passing costs associated with this measure onto consumers. Additionally, they target consequences not causes of a flawed regime. The excess profits have been caused by a lack of competition in the banking sector and the lack of regulation to prevent the build-up of huge monolithic banks which are too big to fail – international action to deal with that would be better than a tax.”

Other Taxes

Chas Roy-Chowdhury says:

“I didn’t expect there to be any major new tax rises announced this Budget as the Government already announced £19 billion of tax rises at the Pre Budget Report (PBR). We already knew about the 50% tax band, the allowance restrictions for £100k earners, the pensions restrictions for those earning over £130k, and the National Insurance Contribution rise in 2011.”

Income Tax and Value Added Tax (VAT)

Chas says about the no change decision on these two taxes:

“I didn’t expect there to be any VAT changes for now. The Government picked up a lot of flak for the way they handled the VAT cut at the end of 2008. At the time, and on balance, the cut was probably the right thing to do as it was a quick way to encourage spending. But the administrative side of the changes was a nightmare for small businesses, and there is evidence that the smallest retailers never saw much of a benefit anyway. A more considered approach is needed now.”

Capital Gains Tax (CGT)

Chas Roy-Chowdhury says that:

“Today’s hold on CGT rates is also a welcome move, but changes are sure to happen in the future. The entrepreneur’s relief has been doubled too, which is very welcome.”

Stamp Duty

“Abolition of stamp duty on house purchases of up to £250,000 by first time buyers can help to move the market which is still sluggish in places. Million pound properties are funding this with a 5% levy. The hidden problem is for properties of £250,001 or more as this will attract a rate of 3% due to the ‘slab system’ of stamp duty. This is unfair.”

says Chas Roy-Chowdhury.

Small Companies Corporation Tax

This sticks at 21%, with the 22% rate delayed until 2011/12. Chas Roy-Chowdhury comments:

“I thought the Chancellor might slip in a corporation tax cut.”

Inheritance Tax (IHT)

Chas Roy-Chowdhury says:

“Freezing the nil rate band for four years is not a welcome move; this remains an unpalatable tax.”

Sin taxes – alcohol, cigarettes and fuel

“The ‘Sin Taxes’ were always going to go up, but it is surprising that a rise in petrol duty is delayed. It will go up by 1p in April, then 1p in October and a final 1p in January 2011. Usually, these revenues go up every year and are a very easy way to generate extra revenue for state coffers.”

A Savings Culture


“The re-announcement of the increase of ISA limits is not a surprise, but the decision to increase the rate in line with inflation is not as encouraging as it sounds. But this is a step towards a much-needed savings culture in the UK.”

Tackling Avoidance

A powerful HMRC and anti-avoidance measures

More tax planning and loopholes are being closed down and this is a way to raise money for HMRC and the Treasury. The focus will be on tax advisers’ conduct, but this will come later in the year.

Tax avoidance

“We’ve already heard a lot from the Government and HMRC on tax avoidance over the past year. Disclosure opportunities are something that they’re very keen on as HMRC sees them as an easy way to encourage people to come forward with their back-taxes. We’ve already had a focus on opportunities for professionals, so a focus on blue-collar workers is logical.”

“Tax havens are always going to take a bashing from the Chancellor, but it’s something of a sideshow. With so many more pressing problems for the nation’s finances, it really is frustrating that the Chancellor is overly focussing on an area with so little impact on the economy.”

“The UK receives a significant level of business from offshore jurisdictions, but changes by the Chancellor regarding tax avoidance could threaten this. Tax havens do not have a significant part to play in any current financial problems.”

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