Market leading insight for tax experts
View online issue

What we expect in the Budget

printer Mail

For business, we’ll be watching to see the extent to which the Budget reflects the continued efforts to promote the UK as a place for business. In January, the government launched the next phase of its five year Open for Business plan. Related to this is the ‘Britain is Great’ campaign, showcasing Britain as a place to visit, study and do business. The momentum is building – we know of a number of companies soon to give the green light on investment here. But the Budget matters and businesses will be looking for consistent messages.  Not all the Autumn Statement announcements chimed with the overall approach.

Overseas investment can not only bring the know-how and opportunities to help smaller home-grown businesses expand, but increases overall business confidence, crucial to driving exports – another government priority.

Crucial to the government’s objective of driving £1trn of British exports by 2020 is ensuring UK businesses innovate and grow, and efforts to support innovation are bound to feature in the Budget. For example, we may see government funding for new innovation centres, on the lines of the Aerospace Technology Centre which opened in October 2012. The chancellor may also reiterate the tax incentives he has put in place to support innovation, such as R&D tax credits and the patent box. Interestingly, new PwC research shows that less than a third (31%) of UK companies take advantage of tax incentives to support innovation, whereas other countries use government support more aggressively. Arguably, more needs to be done to communicate the tax support on offer. It’s also worth exploring whether reliefs such as the patent box can be widened so more businesses can benefit. 

There could also be relief for utilities businesses. It wouldn’t be surprising if the chancellor freezes the carbon price floor at the current level, as the price in the UK has grown increasingly out of line with the rest of Europe.

But while there will undoubtedly be some incentives and giveways, the chancellor will be keen to balance the books and so we expect to see a number of revenue raising measures. Some may come from anti-avoidance and compliance provisions. For example, we should see more detail on proposals requiring taxpayers to pay tax under dispute upfront and plans to streamline the appeals process for tax disputes, by using one court ruling as the precedent for disputes that seem similar.

Super prime property is likely to be a particular target for tax rises. Options include new bands of council tax for properties worth over £3m, but more likely would be an extension of the annual tax on enveloped dwellings (ATED), which is charged on companies that own residential property worth more than £2m.

The Budget could also bring tougher rules for fund managers and banks governing the stamp duty due on shares bought electronically. The scope of SDRT, which is charged at 0.5% on electronic share transactions, was reduced in the last Budget as part of a package of measures to keep the UK financial market industry competitive, particularly asset management. There are signs that HMRC is looking to see how it can capture maximum revenue from the remaining regime. More transactions could consequently be brought into the tax net, increasing costs on liquidity, fund management charges and ultimate investors.

For individuals, the most likely change is an increase in the personal allowance threshold, potentially to £10,500 from 2015. Yet if more people are taken out of the tax net, people earning more can expect to pay more. Our analysis suggests the number of 40p taxpayers would rise to 5.1m, an increase of 345,000, if the chancellor freezes the 40p threshold to cover the cost of raising the personal allowance.