Budget 2009 Highlights

Summary

Summaries of the main points of interest in the 2009 Budget, prepared by members of our tax practice.

Index

Unfortunately, today’s Budget is unlikely to motivate increasingly mobile taxpayers and individuals to greater economic endeavour or reduce the rush of UK companies migrating. 

Both individuals and corporations are being squeezed on taxes, by the removal and restriction of reliefs, increases in rates and an increasing compliance burden. 

History shows us that increasing tax rates rarely achieve their objective of increasing the tax take: individuals will now look to find other ways of earning money or reducing tax liabilities, and making capital profits will now be even more attractive. 

Whilst the new foreign dividend rules are generally welcome, the compliance burden of the new foreign profits package is unlikely to have a positive effect on the UK’s competitiveness. 

The worldwide debt cap rules (restricting interest relief), whilst amended somewhat to take into account certain representations, still work in an arbitrary and illogical way in many cases. 

Making senior accounting officers of large companies personally responsible for self assessment errors is a seriously retrograde step.  HMRC has also signalled its intention to take its increasingly aggressive approach to a new level, with the publication of schemes which in its view are not effective and which it will challenge.  Threatening taxpayers with penalties if they disagree with HMRC’s view is not, in our view, an appropriate way to run a tax system.  It is for Parliament and the courts to determine what is acceptable. 

In this climate the need for top quality professional tax advice is even more crucial, both for individuals and corporations.  The BLP tax practice continues to grow and now has the largest number of tax partners of any major City law firm (including the largest tax disputes practice, which is increasingly important given HMRC more aggressive approach), and offers unparalleled breadth and strength in depth across the full range of contentious and non-contentious direct and indirect tax for individuals, corporations, funds and charities. 

Below are summaries of the main points of interest in the Budget, prepared by members of our tax practice. 

• Exemption for foreign dividends and changes to the CFC rules from 1 July 2009 
• Restriction of interest relief: update on worldwide debt cap
• Anti-avoidance: a new level of aggression?
• Personal responsibility for senior accounting officers of large companies
• Higher rates for higher earners 
• New disclosure opportunity for offshore account holders 
• Names of tax defaulters to be published
• Pensions: no pot left unraided
• Surprise increase in capital allowances 
• REITs: disappointment 
• (A bit of) good news for non-doms 
• Sukuk reliefs are here 
• Business payment support extended 
• Another quiet Budget for Stamp Duty Land Tax 
• New tax elected funds regime 
• New rules for investment trust companies investing in interest bearing assets 
• Changes to tax on foreign dividends for individuals 
• Charities: further consultation on substantial donor rules
• Important tax changes for North Sea oil and gas
• Principles-based anti-avoidance legislation effective from today