Looking Forward to the Post Election Summer Budget

Stuart Lisle, Tax Partner at BDO LLP in Southampton comments: "The principal theme of this, and almost all pre-election budgets, was the Chancellor's understandable wish to avoid own goals. Nevertheless, the absence of some measures amounts to additional stealth taxation and other measures have probably merely been delayed to the inevitable post-Election Summer Budget. “So far as stealth taxes are concerned, the Chancellor has failed to index the personal allowances for income tax, capital gains tax and inheritance tax. The effect of this will be to increase the tax burden for taxpayers in real terms for some years to come. An effective tax increase such as this has, of course, a much lower profile than increasing a headline tax rate. “An increase in either or both of the VAT and capital gains tax rates will remain on the agenda until the inevitable post election Budget. The former would merely be a tax raising measure, possibly deferred until 2011 to provide the Chancellor with a further reduction in the fiscal deficit which an incoming Chancellor might consider prudent. The latter would be focussed upon reducing the substantial gap between the fixed rate of capital gains tax, 18 per cent, and the top rate of income tax, 50 per cent, which apply from 6 April 2010. “Even more regrettable is the Chancellor's failure to reduce the UK's increasingly uncompetitive corporation tax rate from 28 per cent to ensure that global businesses view the UK as an acceptable location for branch activities. The headline rate of corporation tax is almost invariably a significant factor in these decisions. Countries such as Ireland and most of Central Europe have set their corporation tax rates below 20 per cent to attract these businesses. “So far as broad based tax reforms in either personal taxation or business taxation are concerned, the Chancellor was no doubt bruised by his experiences in reforming capital gains tax, corporation tax for very small companies and film finance. This at least partially explains his caution in avoiding broader based tax reforms in his final Budget before the General Election." For a clearer picture on the business landscape across the region, get your copy of the Central South Report published last week by BDO in Southampton, email: emma.wareham@bdo.co.uk or visit the website at www.bdo.co.uk/centralsouthreport - Ends –

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