Cathy Taylor, tax partner at EY in Cambridge, comments: “With this Budget announced in the dying embers of the coalition, next week’s event will be somewhat of a novelty. We are looking at a different kind of Budget that will inevitably reflect on the Chancellor’s successes over the past five years. But with the election just around the corner the Chancellor is faced with a tough decision. Will he press ahead with key announcements on the 18th March, and share them with his Coalition partners, or save any pre-election giveaways for the Conservative Party’s manifesto? ”
Regardless of the timing, below is a selection of measures that EY says the Chancellor could be considering:
Business tax predictions
Cathy Taylor, tax partner at EY in Cambridge, adds: “On business taxes we will see more incentives and tightening of the rules. The vast majority of businesses (69%) are happy with the changes the Chancellor has introduced to the tax system so far, as our survey showed. However, there are still outstanding elements in particular around investment allowances, support for SMEs and business rates.”
Extension of the £500,000 Annual Investment Allowance (AIA) - “The AIA is due to revert back to £25,000 this year. We expect the Chancellor to prolong the £500,000 extension, or even to increase it, to allow the policy to further support the economy’s expansion.
“To stimulate and support spending on critical infrastructure, we may also see the introduction of a capital allowance taking us back to the good old days of industrial buildings allowances. These allowed businesses to claim a tax deduction for a proportion of the cost of certain buildings.”
Introduction of a tobacco levy - “A new levy introduced in addition to corporate tax rates, based on a tobacco company’s market share is on the cards. We will be keeping an eye out for this announcement on Budget day as it may be the Chancellor’s way of laying the foundations to expand similar levies to other sectors in the future.”
Reform of business rates - “Following the announcement of the Government’s consultation, the Chancellor may use the Budget to provide details around the reform of what is an outdated system. How fundamental this reform will be remains to be seen and many will be hoping that the Chancellor will remove constraint that any review should be revenue neutral.”
Personal tax predictions
Ian Thomas, executive director of private client services at EY in the East of England comments: “We are unlikely to see the Chancellor pull any rabbits out of his personal tax hat so don’t expect any major new announcements or changes. However, particularly as a pre-election Budget, the Chancellor may choose to make tweaks to some of the existing reliefs and allowances that are already available. These will include measures to ensure that, from 6 April, non-residents will pay Capital Gains Tax for the first time when they sell residential properties in the UK.”
Below is a list of EY’s runners and riders on possible personal tax measures that could be announced in the Budget:
- 60% chance – “We are likely to see an increase in the inheritance tax nil rate band with the Chancellor even promising to raise the threshold to £1 million by 2020. This will help families take their homes outside the inheritance tax net.”
- 30% chance – “We know that the personal allowance will be increased to £10,600 and there will be a repeat of the promise to raise this to £12,500 by 2020. The Chancellor, however, may spring a surprise by setting out on his path to reach £12,500 earlier than expected by raising the personal allowance again. However, it would be more helpful to the lower paid to increase the threshold at which national insurance is paid.”
- 15% chance - “ There is a slim chance that the Chancellor will announce an increase above the £11,100 level already scheduled for 2015/16 in the Capital Gains Tax allowance. We may see changes to Capital Gain Tax entrepreneurs’ relief, which ideally would be amended so that it offers more encouragement to serial entrepreneurs.”
What else can we expect?
Devolution
Cathy Taylor says: “In the Autumn Statement the Chancellor announced that Northern Ireland would have control over its Corporate Tax rate. This raises questions as to whether corporate tax will be devolved to Scotland, among other powers, and what that means for the English regions.”
Avoidance and transparency
Cathy Taylor says: “Tax avoidance will be a key theme in this Budget. We are likely to see more announcements building on recent comments on criminalisation of assisting tax evasion and the introduction of possible penalties for evasion and aggressive tax avoidance.”
“More details around the implementation of country by country reporting may also be included in this Budget, as a result of the project by the OECD and G20 on Base Erosion and Profit Shifting (BEPS). Combined with the introduction of direct recovery of debts by HMRC, we should expect announcements of increased resources heading the Treasury’s way.”
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Hannah Forrester
EY Media Relations
+44 (0)121 535 2997
+44 (0)7900 703 020
HForrester@uk.ey.com
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