Budget 2007: AccountingWEB's predictions. By Nichola Ross Martinby
The widely held view is that the 2007 budget will be chancellor Gordon Brown's last. Given that he had the opportunity to announce his measures for the forthcoming year in the pre-budget report back in December, he is not expected to make any major announcements on Wednesday, but then again, you never know.
It is highly likely that a couple of further targeted measures will be announced, as this is the desired outcome of the disclosure of tax avoidance schemes regime. Stamp duty avoidance remains big business and recent press reports have highlighted how corporate structures and trusts are being used to circumvent the rules which now may be changed to bring the whole arrangement into charge rather than the land transaction on its own.
Tax amnesty for off-shore account holders / review of domicile rules
Everyone who is "anyone" in tax is predicting that there will be an amnesty for holders of off-shore accounts in the wake of HMRC's recent spate of successes over the high street banks with s.20 TMA 1970 notices. An amnesty would limit penalties for those willing to own up and declare income not previously returned on foreign accounts. Realistically, HMRC has not got the resources to check on each and every account, and so encouraging voluntary disclosure is the only practical method of clearing the backlog. We will have to wait and see whether HMRC or Mr Brown will announce this, and also whether there is any further news about the review of the domicile rules which has been supposed to be on-going since 2002.
Review of corporation tax / Varney review
The UK is not as competitive for corporates as it might be, not only in terms of the 30% top rate, but also in reference to the UK’s rules in a steady stream of multi-nationals' tax cases that come before the courts. David Varney has also been examining large business risk and compliance, and this will have a knock on effect into smaller business, although it may be too soon to expect anything on this front.
Whether you believe that humans are responsible for global warming or not, additional "green" measures will be on the cards. These might be in the form of reduced rate VAT on energy saving devices or through business tax incentives. Following the pre-budget announcement on air passenger duty, it seems unlikely that the airlines will be penalised further. This is not the case for "gas guzzling" cars, and road fund licences are expected to increase in line with CO2 emissions. There has been no news from HMRC since its review of employee car ownership schemes, and so an announcement in this direction is quite possible.
Cutting red tape
Given that this Chancellor is responsible for creating more tax legislation than any other it seems to be a tall order to expect him to change his stance and announce measures to simplify life for business. Nevertheless, it is predicted that he will be introducing some new measures to streamline employment dispute resolution to assist employers. Some measures to simplify IR35 would also be welcome from the point of view of the enforcers (HMRC) who have complained that they do not have the resources to enforce the rules on a case by case basis.
Managed service companies
HMRC has been consulting on MSCs and the general view of the tax bodies is that the proposals fall short of tackling the underlying problems. It is clear that many MSCs are already changing their set-up to avoid being caught by new measures. Most commentators think that the proposed legislation will be introduced in any case, which of course makes a complete mockery of the whole “consultation process”.
Planning gain supplement
Since consultation on this topic last year, there have been further reviews and a bill put before parliament to secure funding for HMRC to further investigate the practicalities of setting up systems for this new tax. The new tax is on the agenda, but Mr Brown may leave any major announcements to his successor as the whole issue of council funding is still very much in the air.
There have been more HMRC consultations on this topic than the number of UN countries who have chosen to recognise the genocide in Darfur. It seems a dead cert that penalties throughout direct and indirect tax will be unified, but in terms of powers, HM Revenue officers are keen to get their hands on the same ones as their colleagues from HM Customs. We are sure they will, but this should come about via the new taxes management act, and not as a budget announcement. This is still being drafted and consulted on, and it is not too late to send in your responses.