Budget reaction
Jane Parry, tax partner, PM+M chartered accountants
“Today’s Budget has been very much about keeping the status quo ahead of the election with a few headline grabbing boosts for business, but not much else. I very much suspect that there will be a second budget come shortly after the election, in which there will be much bigger and tougher decisions made.
“There have been no massive income tax surprises; it was as we expected with the 50% income tax rate coming in on 6 April and the phasing out of personal allowances for higher earners. There was a surprise giveaway from a capital gains perspective, with entrepreneurs’ relief being doubled. This relief allows business owners to sell their business or shares and pay only 10% currently on £1m of gains – increasing to £2m of gains from 6 April.
“We also saw an improvement to business capital allowances and a one year business rates reduction for small businesses. We had the usual closure of tax loopholes – forecast to save tax of £500m per year. I am sure the scheme providers will still have some more planning up their sleeves, so this is likely to be a moving target."
John Green, chief executive, Pierce Group, president, North West Society of Chartered Accountants
“We applaud all the measures that have been taken to support businesses, including the support for small companies and business rate cut. Hopefully these will continue beyond the short term. However, it is the doubling of the entrepreneur’s relief and the maintenance of the main capital gains tax rate at 18 per cent that are really cause for celebration.
“This is a strong incentive for entrepreneurs and people considering selling their businesses either now or in the future. The announcement has maintained the differential between income taxes and capital taxes. We were afraid this would be eroded because of the increase in income tax rates for high earners.
“Our concern was that capital taxes would rise similarly which would be a disincentive for people considering starting, incorporating or selling a business, or passing it on to the next generation.”
Colin Tice, tax partner at Cassons chartered accountants and business advisers
“Was Alistair Darling’s Budget speech really a Budget speech or pre-electioneering politics?
“As always, the small print in the Budget press releases will contain the detail. But this was certainly presented as a “Budget for recovery”. A £2.5 billion fund to assist small business innovation and to fund key skills is the headline grabber, funded partly by the £2 billion “payback tax” received this year on bank bonuses.
“SMEs should be encouraged by the doubling of the Annual Investment Allowance for tax relief on capital spend to £100,000 and by RBS and Lloyds making available new business loans to SMEs of around £50 billion next year compared to £38 billion last year.
“The Time to Pay Scheme to enable tax payments to be deferred is to be extended throughout the next Parliament – a welcome extension – and a general reduction in business rates is further good news. And for shareholders in SMEs, those qualifying for Entrepreneur’s Relief reduce their tax on sale by up to £80,000.
“Upcoming tax increases, including the 50% rate, are confirmed but the Chancellor insists these increases are “not out of dogma or ideology”.
“The biggest cheer was saved for the announcement of a tax information exchange agreement with Belize within the next few days, perhaps much to the disappointment of Lord Ashcroft.”
Entrepreneur’s relief
“For many entrepreneurs, the key feature of the Budget will be the Chancellor’s surprisingly generous approach to capital gains tax. There is no increase in the main rate, which is 18%. When the top rate of income tax rises next month to 50%, the gap between the two rates will be striking.
“More significantly for business owners, the amount of Entrepreneur’s Relief is being doubled. At present a business owner who sells a business or company generally has the first £1m of gains taxed at only 10%. From 6 April that will double to £2m. Where a business is owned by a couple, each will have an individual allowance of £2m. That is a tax reduction of up to £80,000 each!
“Many business owners will have rushed to sell their companies before the Budget, just in case the rate of capital gains tax was increased. They will now be licking their wounds. A couple of weeks later and anyone with gains over £1m could have saved tax – and paid the tax a year later!”
Malcolm Ireland, head of Licensing, Napthens solicitors
“The licensed sector is already struggling with several factors combining to mean difficult times for many operators. The increase in duty for the licensed trade simply does not help the situation.
“There is also an argument that measures like this are a false economy. It is highly likely that the closure of pubs we have seen over the last 12 months and beyond will continue as a result. This could well cost the Government more than they make through the duty increase because of the taxes pubs already pay that they will miss out on.”
Kevin Richardson, partner, Garside Waddingham Estate Agents
“Although any help from the government in relation to the property market is welcome, sadly the stamp duty announcement in the budget will do little to benefit the market in and around Preston.
“The changes will only benefit a limited number of local buyers as the majority of first time buyers in the Preston area will purchase a property below the previous threshold of £125,000. Due to the current restrictive lending criteria offered by most lenders only a minority of first time buyers will be in a position to take advantage of the new arrangements even if they wanted to.
“It would have been of real benefit if the Chancellor had offered this stamp duty holiday to all buyers and in particular families with young children who are keen to move up the property ladder.
“As usual the pronouncement is yet another example of style over substance.”
David Kitson, director of tax, RSM Tenon North West
“This was a rather bland Pre-Election Budget with some welcome news for entrepreneurs. The big decisions have been postponed to later on in the year – round two of Budget 2010 may be very different.
“However we have no doubt that the small print will hold a few surprises. The Budget speech itself was light on content so we will only see the full extent once we have completed our detailed analysis of the plethora of information released by the Treasury today.
“The Government’s overriding priority is to get cash into its bank account – in that respect it is no different to the rest of us. So Alistair Darling has sent out some very strong signals to those who deliberately fiddle their taxes or engage in aggressive avoidance: life for them is going to get much tougher.
“On the surface the Chancellor played it safe on tax - the fiscal framework looks very much as it did yesterday. The stamp duty relaxation may give a boost to first time buyers and there was some good news for businesses.
“We also welcome the increase in Annual Investment Allowance and the reduction in business rates, albeit on a temporary basis.”
