The Pre-Budget Report last week gave the chancellor his roughest ride in parliament for a while. Certainly, the general feeling from AccountingWEB members is that it has done nothing to excite business and has largely served to annoy practitioners. We look at the reactions members and give their verdict on whether the chancellor has passed or failed in their expectations.

Accounting standards
Although many accountants remain opposed to UITF 40, the announcement of new spreading rules has been welcomed. The rules will enable most business to spread any extra tax charge over three to years to six years, depending on the impact on the business, and will cover both income tax and corporation tax. The change is a feather in the cap for HMRC, says Colin Ives, a director with Smith and Williamson: "It is good to see that HMRC and the Treasury have responded positively in an area which could have caused considerable personal hardship for some taxpayers," he said.
However, there are a number of questions that remain unanswered. In particular, it is unclear exactly how the provisions will work. "We assume that this means that the increased 'one-off' profit will be spread over three years but subject to a cap, probably based on the profit for the year. Where the cap applies the balance of the charge would appear to be capable of being spread for up to a further three years. However, the full details of how this will operate have not yet been released. We will need to see those to identify what practical issues have to be considered." says Ives.
The PBR is also unclear on what it means by 'most businesses'. It appears that HMRC is taking the view that firms which adopted the change early based on the previous revision to accounting standards will fall outside of the spreading provision. "One fears that this is a case where good practice is being penalised," says Francesca Lagerberg, director of national tax, also with Smith & Williamson.
Among accountants the relief is palpable. "Hurray! I can now tell the wife to order a turkey and turn the heating back on. Christmas is no longer cancelled," said AccountingWEB member Robert Clubb.
Verdict: A pass, but only just

Pensions
The decision to remove the tax breaks forcast for A Day, whereby property and personal assets could be invested in a SIPP was predictable but annoying, say AccountingWEB members.
"If there were to be restrictions, it was a pity they were not imposed or trailed at the start of the whole reform process, which would have saved a lot of effort from scheme providers," said John Whiting , tax partner with PwC. 'Additionally, it does all run the risk of complexity creeping back in to a system that was being simplified."
Peter Penneycard, National Director of Tax at PKF agreed: "By introducing penal new tax charges on those holding residential property through a self-directed pension, he has kept his word on the new classes of permitted investment ' but only that at the cost of introducing complex new tax charges (no to mention the risk of de-registration of the whole scheme). It would have been much better if he had just banned investment in residential property via self directed schemes ' although I suppose he has to try to maintain the fiction that there will only be one set of pension rules from A day. Ignoring all the abortive time and money we have all spent on this, the really sad point is that this move has effectively turned off all those who had started to take an interest in their pension provision for the first time in years (even though most of them would not have had the cash to make a direct property investment anyway!)."
Other comments bear out Penneycard's view that the change will kill much of the upsurge in interest recently shown in pension provision. "I have never before experienced such interest (at least one enquiry per week)in pensions as when everyone thought they can buy a property and/or a classic car via a pension scheme," wrote Shaun Spalding. He anticipates that much of that interest will now die away.
The change has also put the pensions industry in a spin. "It was one of the saddest days of my professional life," said pensions expert Stephen Ward of Premier Financial Solutions (UK) and author of the Pensions Simplification chapters of the ICAEW's Tax Faculty's Tax Planning guide for the last two years. Some either agree with the chancellor's decision, or regard it as inevitable. Nevertheless it has done little to enhance the chancellor's reputation amongst practitioners. "The Industry may be sad, but I think it was so obvious that they would have to deal with this problem sooner rather than later was self-evident, I was not in the least bit surprised, it is simply the suck it and see approach so often adopted in a department where the minister is simply not interested in the practical workings of the tax system," said AccountingWEB member and accountant Paul Soper.
Verdict: Fail

Corporation tax and other business measures
The removal of the 0% corporation tax rate and the 19% NCD rate has attracted the widest comment. Most members and commentators agree that the rates were a mistake. "The 0% rate (and the 10% rate before it) was an ill-conceived and worse timed piece of legislation that was all about smoke and mirrors and not about an incentive to invest in your business. The cure ' if that's what the NCD rate was ' was horribly complex and caused unnecessary problems for people who were not trying to manipulate anything at all," said Simon Sweetman. But as with pensions, the chancellor's U-turn has done him no favours. Other reforms, such as the abolition of form 42 have been welcomed. However business in general remains unimpressed with the chancellor's changes. "It was pretty neutral," said Roy Cove, FD with corporate communications agency Mainstream Presentations in Manchester. However, he did welcome the introduction of Real Estate Investment Trusts. Michael Sterling, FD with recruitment company Eden Brown also said he was unimpressed. "There was very little in it," he said. "I would have liked to have seen a less stringent approach to capital gains and employee shareholdings. But overall I am more interested in the changes in the growth rate and the impact on interest rates. As long as inflation stays down and the chancellor is realistic about the expected growth rate, the interest rates will not go up and neither will the cost of borrowing. That is important if, like us, you are in a business with very low margins."
However, there are some incentives for business, albeit relatively minor - for example, the increase in first year allowances.
Verdict: A narrow pass

Anti-Avoidance
The continued attempt to tighten the anti-avoidance legislation was widely trailed prior to the PBR, and will increase the feeling that the chancellor is imposing a general anti avoidance rule by the back door. It was inevitable that we get a number of moves on the anti-avoidance front, said Whiting.
"In many ways this shows that the Tax Avoidance Disclosure system is working. The changes being made, particularly on capital losses, are complex and will require careful study. One useful feature of the capital losses provisions (which are the ones probably of most significance in practice) is the set of statements of aims/principles from HMRC - at least we know what they are aiming at, in contrast to some of the things we had to deal with in this year's Finance Acts. We have no problem in principle with disclosure - that is how we and our clients have always operated - but what we want to make sure we end up with is a system that does not impose unreasonable administrative burdens. There is clearly a risk that the system could become very time consuming to comply with."
One other measure which has attracted a lot of comment is the decision to close down the ability of UK-residents to avoid tax by sending assets abroad. There are fears that the move will stifle entrepreneurs, but these receive little sympathy. However, more criticism is reserved for the chancellor's failure to remove the distinction between the treatment of residents and non-residents. While the exact nature of the changes is unclear, there is concern that many property investment arrangements could now be brought within these anti-avoidance provisions.
Verdict: To early to tell