Deloitte comments on Budget measures


24-04-2009

“The Budget is full of lots of headline-grabbing measures, however, many of them will actually apply to relatively few people," says Richard Blackwell, tax partner at Deloitte in Cambridge.

"This is of little surprise, given that we knew that the Chancellor had little to play with, and it is surely right that it is the individuals most in need who will benefit.

“The top rate of income tax will rise to 50% for the 350,000 people earning over £150,000, and apply from April 2010, which is a surprise. At the same time, those earning over £100,000 will lose all personal allowances - which will cost some 700,000 people around £220 per month. Tax deductions for pension contributions for those earning over £150,000 will be limited to the basic rate, from April 2011, with some new rules to stop early contributions. The Treasury expects to raise £7 billion per annum from these measures.

“For businesses the reliefs announced are modest. The £50,000 loss relief rule will be extended for a second year - allowing loss-making businesses to recover tax paid in the three previous years. However, the refund for a company is only £10,000 - so not a huge help. There is an increase in Capital allowances for expenditure in the year to April 2010 – a measure aimed at encouraging investment. However, the net present value (NPV) is very small and, therefore, we don’t believe it will encourage extra investment. The money would have been better targeted at loss-making businesses. Disappointingly, there is no further help for businesses with empty properties.

“The much heralded scrappage scheme will offer £2,000 to those who buy a new car, however, much of this money will end up financing cars manufactured overseas.

“There are important new powers in relation to tax evasion and tax reporting. There will be a defaulters list, to name and shame those who deliberately evade tax of over £25,000. Separately, finance directors will need to take personal responsibility for company tax filings.

“Finally, the Foreign Profits measures will come in this year. The dividend exemption will apply from 1 July 2009 but the tax-raising interest restrictions will apply only from accounting periods starting on or after 1 January 2010. This is a welcome delay, as it will allow HMRC to get the rules right, however, we will reserve full judgement until we see the detail.”

 

The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

Deloitte LLP