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A pre-budget wishlist

8th Jun 2010
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Members of MGI UK and Ireland, part of the global association of accountancy firms, have called for the government to do all it can to soften the impact of any tax rises for business in its ‘Emergency Budget’ on June 22.

The Chancellor, George Osborne, is set to give his first budget speech against a backdrop of fragile economic recovery and a ballooning government debt.

Given the need to repair the public finances, our members are expecting tax rises and spending cuts – with Capital Gains Tax (CGT) and VAT considered the most likely candidates for an increase – but are hoping for some moves to mitigate the effects on firms as they attempt to recover from the recession.

Andy White, tax partner, Carter Backer Winter:

I would expect to see an increase in the main rate of CGT, coupled with extension of reliefs for entrepreneurs and long-term assets, an announcement of a reduction in Corporation Tax rates over time and an increase in VAT, perhaps to 20 per cent.

We are also likely to see a commitment to overhaul the corporate tax system to rationalise and simplify reliefs, a commitment to retain research and development allowances, amended Capital Gains Tax rules restricting the use of Principal Primary Residence (PPR) election and tax increases on petrol, tobacco and alcohol.

I would like to see the complete abolition of employer’s national insurance, which would encourage employment and the loss of revenue would be more than compensated by increased income tax and reduced benefit payments in relation to the hundreds of thousands of formerly unemployed individuals who will find work as a result. I would also welcome an overhaul of Stamp Duty Land Tax to make it a progressive, rather than ‘stepped’ tax.

Simon Denton, tax partner, Milsted Langdon:

I think everyone is expecting an increase in the rates of CGT. I would like to see common sense being applied and the rate increase applying from 6 April 2011 rather than from emergency Budget day itself and I’d also like the effective 10% rate for entrepreneurial gains maintained.

I’d like to see corporate tax rates cut, especially the small company rate, a drastic overhaul of the unworkable IR35 legislation and the extended use of consultation groups to address the complexity of legislation. Finally, I’d like to see a commitment to improving the levels of service taxpayers and agents receive from HM Revenue and Customs.

Peter Bond, tax partner, Midgley Snelling:

I am expecting the widely-trailed CGT rise; I hope it won’t be increased to as much as 40 or 50 per cent as has been suggested, and I also hope some allowance will be made for inflation so only real gains are taxed. My big fear would be that the government may reintroduce CGT on death, as we had in the 60s and 70s, although were this to happen, this would hopefully lead to a reduction in Inheritance Tax.

I hope higher-rate relief for pension contributions will not come under any further attack and while an increase in VAT to as much as 20 per cent has already been factored in by many people, I certainly wouldn’t want it to go any higher as that really would kill off any potential recovery.

Mark Hook, tax director, Rowley’s:

I would expect to see an increase in the standard rate of VAT to 20 per cent, together with a change to the CGT regime. This could include an increase of the main rate to 40 per cent together with the re-introduction of Indexation Allowance for individuals and/or taper relief to ensure that long term gains are not unduly penalised. I would also expect that some form of Entrepreneur’s Relief will be maintained to ensure that gains on business assets are subjected to a lower rate of CGT.

I would not be surprised if we saw an announcement on Income Splitting or the treatment of dividends from private companies and I would like to see an indication as to how the coalition is going to honour its commitment to increase the personal allowance to £10,000 but this may have to wait until the spring of 2011.

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