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We welcome the reduction in corporation and income tax rates to encourage entrepreneurial endeavour and thus increase the overall tax take, and the aspiration of introducing greater simplification into the tax system.
 
However people in the City will be worried that the move towards a more competitive tax regime will be drowned out by the other changes that are being brought in - the repeated threat of retrospective changes to the law and the introduction of CGT on offshore investors’ ownership of property by way of example.
 
The move to stop people owning residential properties via corporate vehicles, however populist the intent, will have serious perverse consequences far beyond the intended targets. And the damage done to the credibility of the UK by retrospective measures is not worth the loss of revenue, however painful that may first appear. 

It has also been a bedrock of the UK’s tax system that CGT is not applied to overseas investors but by changing the rules for those who own properties in corporate vehicles, it will raise serious concerns that this fundamental bedrock will be undermined further in the future.
 
As regards the proposed general anti-avoidance rules (or GAAR), the Government cannot win. Either it catches only a minority of the most egregious schemes as per the Aaronson committee’s recommendations - in which case it is not the headline grabbing attack on avoidance that Mr Osborne has predicted, or it throws a major spanner in the works of the UK tax system in terms of certainty, which is crucial to business. Business will be concerned either way: if it starts out narrow there will be inevitable political pressure to widen the scope of the GAAR to live up to the billing.

Finally, the simplification promised in the speech has only been enabled for the smallest of firms while there are millions of small and medium-sized businesses, let alone the large ones, which are still struggling to grapple with legislation which is extremely, indeed overly, complex.

 

 Budget 2012 Podcast

Get in touch

Michael Wistow

Michael Wistow

BLP
Partner, Head of Tax
Michael Wistow

John Overs

BLP
Partner, Head of Corporate Tax
Michael Wistow

Jonathan Kropman

BLP
Partner, Head of Trusts and Personal Tax

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