Press Release
Budget leaves business stuck in stalls says ACCA
12 March 2008
Chas Roy-Chowdhury, head of taxation at ACCA (the Association of Chartered Certified Accountants) says: “This seems to be largely a Budget of delaying tactics. Rather like the Cheltenham racers, businesses are left waiting in the stalls by today’s announcement. We knew what was coming for business, but the Budget still penalises entrepreneurs and SMEs.”
“ACCA welcomes the Government’s renewed focus on increasing the number of female owned businesses. But it is important to note that the Government has missed its previous target of achieving 20 per cent more female enterprises by 2006. What will be different this time round?
“The Chancellor’s announcement that BERR will consult on radical new proposals about the amount of regulation for SMEs is interesting. A critical assessment of the regulatory burden is needed, and qualitative and quantitative criteria should be introduced.
“ACCA is pleased the Government is thinking again on income shifting, having listened to our comments about the need not to run ahead with their proposals. But this must not be a delaying tactic for what is now an unworkable proposal.”
“Credit is due regarding the Chancellor’s parallel Carbon Budget next year. This is good tax policy planning in terms of certainty and transparency. The Chancellor’s simplification measures for SMEs are also welcomed.”
When it comes to green taxation, Chas Roy-Chowdhury says hypothecation - detailing where tax goes - would make paying tax more palatable because business and individuals could follow their green pound. This approach could be used following confirmation that the climate change levy will rise in line with inflation.
Business Issues
1. Capital Gains Tax – A Capital Pains Tax
“No surprises here. Business has braced itself for the withdrawal of indexation and taper relief. This represents a sudden, painful and unexpected increase of 80% in the potential tax on disposal for many small business owners. It will be interesting to know how many entrepreneurs disposed of their businesses before 5 April so that they pay only 10% CGT rather than 18%. Looking ahead, ACCA fears that the new tax rules will impact adversely on economic activity by encouraging short-termism.”
2. Corporation Tax – The mixed message tax
“When it comes to Corporation Tax, the Chancellor has persisted in mixed messages for businesses large and small. Corporation Tax rises to 21 per cent in April 2008, then to 22 per cent in 2009 for small businesses; but then the rate falls for big business from 30 per cent to 28 per cent. The impact will be felt unfairly by small business.”
3. Non-doms – a number of minor relaxations as the levy is confirmed at £30,000
“While imposing a £30,000 levy on non-doms at least meets the needs of clarity, it still does not send the right signals to talented international entrepreneurs who want to do business in the UK. ACCA is encouraged by the Chancellor’s promise not to return for a second bite.
4. Cutting Carbon emissions - Climate Change Bill
National and local government, businesses and individuals need to do more to play their part in protecting the environment. ACCA therefore welcomes the Government’s ambitious proposal for a statutory target to reduce emissions by at least 60 per cent by 2050. Quantifying and promoting the financial consequences of climate change via sustainability reports is vital for success and for transparency.
5. Personal Taxation Issues
- Individual Savings Accounts (ISAs)
Increasing the cash ISA limit from £3,000 to £3,600 from 6 April 2008 is a step in the right direction; but as an incentive to save it is not convincing since the overall ISA limit is raised by only £200.
- Fuel duty deferred until October;
“Deferring the 2p fuel tax to October 2008 will be welcomed, but the real tax hit, with the extra half pence will come eventually, and there is no avoiding the £5.00 gallon of petrol price tag soon.
- Duty increases for cheap alcohol
“An above-inflation increase alcohol duty was always on the cards to discourage heavy drinking, a social issue which concerns Government policy makers. It is hoped this tax hike will influence behaviour and deter binge drinking. The increase has been justified by a prolonged campaign to highlight the problem of binge-drinking Britain. But again, this is an area whether hypothecation of taxes would prove to tax payers that the money raised is being targeted at specific health service programmes to tackle this problem, rather than just a way of raising more revenue for the tax coffers.”
- Vehicle Excise Duty (VED)
New bands for VED will be introduced so consumers choose the least polluting cars. This is a nod to the green lobby, but it will be interesting to see how consumers react to these new tax levels.
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