Budget zone

Budget 2008: A practitioner's view

Sadly the much publicised (and exaggerated) demise of the 10% rate of Income Tax was not revisited in this Budget, so it still lives on to make our tax calculations even more complicated from 6 April 2008.

Most general practitioners will be looking out for business tax changes. The announcement that capital allowances pools of up to £1,000 can be written off from 6 April 2008 is definitely good news for my smaller clients. It gives many of them 100% allowances over 2007/08 and 2008/09 on small capital expenditure.

The increase in R&D tax credits to 175% for SMEs is great news for the small number of clients who are eligible. It makes the extra work looking for such expenditure even more worthwhile. Many clients are quite unaware that they could claim and therefore forget to even raise the issue with their accountant.

However, the transitional rules to phase out IBAs and ABAs, together with the rules for the new Annual Investment Allowance for accounting years other than 5 April, are going to create a filed day for taxation examiners and a real nightmare for those of us who have to do the calculations for real! And while I don't object to the notion of encouraging people to drive more fuel-efficient and less-polluting cars, the introduction of different rates of WDA on business cars is just another complication we could have done without. I notice there's a big jump in VAT fuel scale charges from May too.

We do a lot of work with charities, so they will no doubt be relieved at the three year extension of 22% relief on Gift Aid. I know a number have been encouraging donors to give more after 5 April in order to maintain the charities' income, assuming that their Gift Aid income would drop this year, so they might well be even better off!

Income shifting – am I relieved? Well, yes, but mainly relieved that I have another year to get my head round what this all means! We have not encouraged our one-person company clients to split shareholdings with their spouses, so that's not a huge issue for us, but the knock-on effect on partnerships is still a worry.

I like the abolition of the £5 minimum stamp duty on stock transfers. We do a lot of company secretarial work for our clients, and this is one of those chores that we could do without. Now we can.

The consultation paper on Class 2 NICs made me smile. On two of the options it says: "We have not identified any monetised benefits for businesses associated with this option"! Well, that's not surprising really. Why can't they just merge Classes 2 and 4 and have done with it? The idea of adding Class 2 arrears to SA statements has some merit, it will avoid clients arriving at retirement age and finding they have missed years, except of course that it will automatically charge interest on the late payment! The proposal to align the payment dates for Class 2 NICs and Income Tax seems pointless. I don't know how the Treasury has calculated that taxpayers will save £9m by changing the payment date of £28.60 per quarter so it's only collected half yearly. The proposals do nothing to address HMRC's inability to collect the Class 2 DD from newly-registered traders, but will penalise taxpayers for late payment!

As for non-doms, we have identified a dozen or so on our client list but I still have work to do to fully understand the new rules. There was some welcome relaxation for non-doms with small incomes in the Budget but otherwise the Chancellor is sticking to his guns. At least he's clarified what a "remittance" is.

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