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Budget 2009: Expert reactions

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22nd Apr 2009
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We've all heard what the Chancellor has to say, but what do the accounting and business communities think of this year's Budget? We're rounding up some of the day's opinions, so keep your eyes peeled for regular updates as the comments keep on coming.

Philip Turnbull, chief executive
Association of International Accountants

"Whilst some of the chancellor's predictions for recovery may be optimistic, it is reassuring that there have been some sensible measures implemented to support business.

A review of banking regulation and a commitment to reinstate trust into this sector is paramount to maintain the UK as a world centre for finance, furthermore the government's pledge of a single set of accounting standards will offer greater reassurance to investors and help stabilise the economy.”

Tom Delay, CEO
Carbon Trust

"This Budget is good news for carbon reduction. Moving forward we will work with government to ensure that the funding announced delivers maximum carbon impact and good overall value for money for Britain.

The government announcement to provide the Carbon Trust with an extra £165 million of interest free loans to be made available to business and the public sector to expand existing energy efficiency programmes is most welcome.

This loan initiative makes perfect business sense as it will deliver low cost carbon savings and drive significant overall cost savings for the UK economy.

The additional £165 million of loans funding represents a four-fold increase in our current loans programme for the public and private sector. Overall it will cut £40 million from the UK's annual energy bill and deliver a quarter of a million tonnes of additional carbon dioxide savings a year".

Catherine Jones, tax partner
PriceWaterhouseCoopers LLP (South East)

"The Chancellor has announced a number of tax and incentive measures which are designed to stimulate the economy. While we welcome this, we had hoped he would go further and don’t
believe this is a Budget for enterprise.

In addition, where economic growth will depend on businesses investing in the South East region, we are concerned that increases in income taxes will make the UK a less attractive location in which to base entrepreneurial business.”

Kevin Dickens, UK200Group president and senior partner of Howard Worth accountants

"I’m enormously disappointed the chancellor has failed to announce any plans to reform the public sector pension problem, which is going to be a blight on the UK economy for generations to come.

I’m disappointed that he again failed to assist small and medium-sized businesses with the ever-increasing burden of National Insurance, which I see as a complete disincentive to job retention and creation, and I think the return to the politics of envy with a 50 per cent top tax band takes us back to the policies of the 1970s and I’m concerned that if we’re not careful, the brightest and best of the UK’s wealth and job creators will be tempted to take their skills abroad".

Philip Howell, director of corporation tax
PKF

"Reform on foreign profits covered today in the Chancellor’s second Budget, is long overdue.This news from the Chancellor today is good and will have a positive impact, but it is not the end of the matter.

The government needs to improve the attraction of the UK to international businesses in every Budget, otherwise the country will no longer be seen as a competitive place for companies to do business.Today’s steps get the ball rolling, but there must not be any complacency about developing this further".

Bob Wheatcroft, parter and head of tax
Armstrong Watson

"I think there will be mixed feelings within the business community. Limited support was expected and
limited support only was given. The whole event was overshadowed by the massive borrowing figures which restricted his room for manoeuvre.

The Chancellor admitted that the economy is set to contract by 3.5% this year but stated that it would grow by 1.25% by 2010 before moving ahead at 3.5% from 2011. These forecasts will be seen as optimistic by many and it is the confidence of investors in this country by which this Budget will ultimately be judged. My view is that it will soon be forgotten and that is probably what the Chancellor wants most of all".

Chris Blundell, partner, employment tax services
Mazars

"The new 50% tax rate for individuals earning in excess of £150,000, effective from 6 April 2010, is a significant shift upward from the previous announcement.

Further combining these costs with the high cost of living could significantly affect an organisation’s decision to send individuals to the UK. This is likely to lead to an increase in the number of companies now looking to use more favourable tax locations in which to base their talented individuals such as Hong Kong, Dubai or Switzerland.

These measures rather than encouraging inward investment, will more likely accelerate a brain drain to other economies".

John Cheney, CEO and founder
Workbooks Online

"It’s disappointing not to see more support for small businesses, the backbone of UK industry. Whilst I welcome the extension of the enhanced loss relief for small businesses I can’t help thinking the government has missed a trick in not extending the reach of the Enterprise Investment Scheme (EIS) to private individuals.

It’s clear that banks have done a poor job of lending to the right people and frankly, individuals are more likely than banks right now to invest in the right places to provide a valuable lifeline to small businesses and the economy".

Richard Lambert, director general
CBI

"The key question for this Budget was whether it set out a credible and rigorous path for restoring the public finances to health. The CBI’s preliminary judgement must be that it does not.

The Chancellor’s economic forecasts, with a rapid end to the recession and well above trend growth from 2011-2014, look optimistic. Even so, the horizon for balancing the books has been extended to 2018, two years later than previously targeted. With annual government bond issue expected to exceed £200bn in the coming years and debt doubling by 2013, the government is running too much of a risk with the willingness of investors to finance UK debt.

If these projections are to be realised, a lot will depend on how far the government can deliver on its plans to reduce public expenditure growth. We need to take a serious look at the size and role of the state and embark on radical reform of the way we deliver public services through greater private sector involvement and contracting out of services. We should also look at the public sector pay and pensions bill.

This is the only realistic way of getting back to fiscal balance without having to resort to further hefty tax rises.”

Nick Goulding, president
Chartered Institute of Taxation (CIOT)

The Chartered Institute of Taxation (CIOT) reacted cautiously to the publication in the Budget of the enabling clause for the 'HMRC' Charter which is to be included in the Finance Bill.

The CIOT welcomes the fact that its consistent advocacy of a legal vires for the Charter has borne fruit. The need is for a Charter that reflects the rights and responsibilities of the taxpayer and tax administrator and for the clause to give the Charter legal backing.

"To have the Charter founded in statute is something to be welcomed. However, the CIOT has very real concerns over the content of the current draft Charter and its direction of travel as we have said in no uncertain terms in our recent response to the consultation document."

The Low Incomes Tax Reform Group
"Today the Chancellor set out his plans; they made grim reading.

Those on low incomes have the least reserves to weather bad times and although efforts were made to reduce the impact of the continuing recession on the most vulnerable, many will continue to struggle".

Bob Crawford, convenor
Institute of Chartered Accountants of Scotland(ICAS)Tax Committee

"Rather than complex changes, businesses need stability and certainty in their tax affairs, and simple well targeted temporary measures to help them through the recession. Instead, they are about to be faced with yet another Finance Bill containing a plethora of new anti-avoidance provisions that will be incomprehensible to all but tax specialists.

Against that background, businesses and individuals are to be ‘named and shamed’ if they get their tax seriously wrong, and senior company executives are to face personal penalties for shortcomings in their companies’ accounting systems.”

Mark Lee, chairman
Tax Advice Network and guest practice editor for AccountingWEB.co.uk

"Three things were conspicuous by their absence from the Budget Notices and Chancellor's speech.

1. There was no change in the rate of capital gains tax. It is to remain at 18%. With a new top rate of 50% income tax there is now an even bigger incentive for entrepreneurs to restrict the salaries and dividends they draw from their growing companies. Instead, they should build the companies up and pay just 18% when they eventually sell their shares.

2. There was no change in the date that the standard rate of VAT will increase back upto 17.5%. It remains set for 1 January 2010. (I explained why this would create a Nightmare before Christmas in a piece for AccountingWeb.co.uk last year).

3.The VAT registration threshold is only going up by £1,000 to £68,000. I was hoping that my April Fool spoof might have resulted in an increase to £100,000, but I wasn't really expecting it!"

Gary Heynes, tax partner
Baker Tilly

"The Chancellor has recognised the need to start repaying the cost of his economic stimulus package sooner and to collect more tax to reduce the debts he is incurring more quickly.

This is consistent with his acknowledgement that the recession will be more severe than he estimated in the Pre-Budget Report in November 2008".

Terry Baldwin, head of corporate tax
Vantis

"This was a timely opportunity to give significantly more help to the country’s small and medium businesses as they do their best to cope with the recession. Hopes of a Budget tax lifeline soon disappeared, and many companies do not have time to wait for previously announced benefits to filter through into next year’s accounts. It may be too late by then".

Eric Skinner, policy and campaigns manager
The Charity Finance Director's group

"The government has missed a chance to support collaborative working in the secto by not providing any targeted VAT relief for charities looking to share services.

In addition, we note that the legislation around Substantial Donors to charity has not been immediately repealed. Although this is disappointing, we hope to work with the government to develop an effective anti-avoidance purpose test as soon as possible".

James Close, government services partner
Ernst & Young

"Today's budget puts the Operational Efficiency Programme at the centre of delivering the cost savings that will enable the government to cut national debt by half as a the proportion of GDP by 2013/14.

Together with tax increases for the wealthiest, the Budget is expected to enable the Chancellor to fund investment in the industries that will drive economic growth - green business, advanced manufacturing and creative industries.

The OEP sets out, for the first time, an analysis of the opportunities that will have to deliver the savings. However, the OEP does not clearly identify the levers and incentives for ensuring that the efficiency saving are delivered.

As a result of this budget, the government will have to make a step change in the ability of the centre of Government (including the Treasury, Cabinet Office and centres of excellence such as OGC and the Shareholder Executive) to drive efficiency across Whitehall and the rest of the public sector without compromising investment or frontline services

Michael Wistow, head of tax
Berwin Leighton Paisner

(Commenting on Budget Note 62 'Accountability of Senior Accounting Officers) "We have reservations about the potential implications of this; with real concerns it could, however unintentionally, create a back-door Sarbanes-Oxley act for business.

While it is intended to ensure companies pay an extra £140 million of tax in the next four years, in reality it is likely to cause tax to distort commercial decisions.

It is an extraordinary retrograde step which shows little sign of learning the lessons of Sarbanes-Oxley."

Tyrone Courtman, president
Turnaround Management Association (TMA)

"Government policies simply haven't filtered through to the high streets and industrial estates where good companies need cash to pay their wage bills right now.Much has been said, but nothing has been done – and today's Budget has done nothing to change the situation.

It's the daily experience of our members that government policies have had zero impact where it matters; and what worries us particularly is that the Budget's failure to tackle the root problem means we're not even at the end of the beginning, and there will be a second wave of this tsunami when unemployment will rise above three million”

Philip Wolfe, director general
The Renewable Energy Association

"The economic storm clouds are clearly thundering through this budget, but at least they have a green lining.We are glad the government has sought to respond to areas we identified as critical and these measures should help prevent contraction in the renewables industry.”

Richard Manion, national tax director
Smith & Williamson

“Tax rises are to hit earlier, harder and wider than expected. Moreover, increases in alcohol, tobacco and fuel duties ensure that it is not simply high earners who will suffer the pain.

On the plus side, increased capital allowances and enhanced opportunities to benefit from carry-back relief on losses suggest that the Chancellor is trying to kick-start the business economy on the basis that the sooner we get through the recession the sooner tax revenues will start to increase".

Nick Clegg, Liberal Democrat leader

"Today we got a pick and mix Budget of recycled announcements from a government skilled in raising people’s hopes but incompetent at actually delivering help.

This Budget is a political supermarket sweep of random promises, without even a hint of a plan or any likelihood the promises will be put into practice.

The biggest disappointment in this Budget is its failure to sort out Britain’s unfair tax system. To put money into people’s pockets to help them make it through this recession.Britain’s taxes are too heavy on those who can least afford it and too easy to avoid for those who know how".

EXCLUSIVE: Paul Howard, tax director
BDO Stoy Hayward

"The Chancellor seems very optimistic as to what the recovery of the economy will be like.

Corporation main tax rates have stayed the same. The increase in capital allowance from 20% to 30% for the coming year will be useful. It would have been good to see the £50,000 limit increased, but it's better than nothing.

The measures set out in the budget aren't going to help SMEs or entrepreneurs. What will help them is an entrenpreneurial spirit to get things moving. If they succeed it will be despite what he's doing rather than because of it".

EXCLUSIVE: Chas Roy-Chowdhury, head of taxation
ACCA

"The average person on the street will not know the Budget happened at all, other than seeing drinks prices increase tonight and fuel prices go up in September. They're not going to feel better or worse off and it hasn't actually done any favours for UK PLC.

While I understand that the Chancellor does need to balance the books, by announcing these tax hikes now he is actually blunting the effects of any stimulus packages. Are people really going to spend now that they know tax increases are coming?

The whole episode today offered mixed messages, without any clarity about where we're going as an economy. It has given all the wrong signals".

EXCLUSIVE: Professor Mike Devereux, director
Oxford University Centre for Business Taxation

"The UK economy is forecasted to shrink by 3.5% this year, according to today's Budget and this is in line with what other forecasters predict, but what seems slightly optimistic is the forecasted growth for the subsequent years.

Next year is expected to see an annual growth of 1.25%, and 3.5% is expected in 2011. Given the dire state of the financial sector at the moment, things would have to turnaround quite strikingly to get that growth rate by 2011.

With regards to what the Chancellor has done for business in today's Budget, there are two or three relatively minor things. The total cost of these measures is about £2.4bn.If you look at the total cost of the VAT change it’s £7.8bn, so the amount of money he’s giving to business to stimulate cashflow and investment is considerably smaller than the amount he’s given on the VAT cut to stimulate demand.

In my view, that’s fine, but it’s not very big and won’t have a big effect on business or on the economy. Having said that, the country is in a huge amount of debt and so it's not clear that there was much more he could have done in the current climate".

EXCLUSIVE:Frank Haskew head of ICAEW Tax Faculty

"There's a serious concern over the issue of public finances. The figures being quoted for borrowing are just colossal and I think there has to be a very serious question mark over the forecasts. It seems that the government has faced up to the size of the deficit but not how they're going to pay for it.

In terms of the tax provisions, there's a lot of additional information in the Budget notes that one might not have noticed from the Chancellor's speech, specifically with regards to new anti avoidance rules and a commitment to try and get some of the more blatant tax avoidance schemes blocked.

We are pleased to see the proposed loss relief, which will give businesses the ability to carry losses back for profits against the previous three years. The ICAEW has previously suggested that these rules need to be more flexible".

EXCLUSIVE:Elaine Clark, chartered accountant, AccountingWEB.co.uk member

"I am disappointed with today's Budget as I didn't see anything in there that would have an immediate impact on small businesses or start ups, and these types of companies make up the bulk of my client base.

I started a petition to up the VAT registration threshold to £100,000, which would have helped smaller businesses who are competing with larger firms. The government is doing a lot for large corporations, particularly with regards to financial services and the banks, but what was in the Budget for small businesses? Not a lot".

Chas Roy-Chowdhury, head of taxation
ACCA

"There are few give-aways in this Budget from the government because there has been little room for manoeuvre.

The surprising tax rate of 50 per cent for those earning £150,000 or more goes against the earlier election promise made by the Government, unless an election happens before April 2010.

This is indeed a Budget for serious times, where many key measures had already been leaked to test the reaction. If the Government wishes to make the fiscal stimulus work, then it needs to stop talking about tax increases. While tax rises have been brought forward in order to balance the books, it does nothing to encourage spending.

We have already seen this by way of people using surplus cash to pay down their mortgages. The worst of the downturn may now be over, so let’s make sure the economy does not just bounce along the bottom by the government paying negative lip service to taxpayers on the future direction of tax.”

Ian Menzies-Conacher, chairman
CIOT Technical Committee

"The further loss relief extension is very valuable to many small businesses in the current economic climate and shows that the government has been listening to representations made by the professional bodies such as the CIOT."

Chris Sanger, head of tax policy
Ernst & Young

"This is a “buy now, pay later” Budget with a £5bn cut in taxes this year, tax neutrality in the election year 2010 and a £5bn tax hike every year from 2011 going forward. The vast bulk of these revenues will be from the increase in personal income tax rate to 50% and the increase in fuel duty.

We are sceptical that the higher rate increase will raise the sums the Chancellor expects.It’s not just the entrepreneurs who will find themselves less welcome in the UK but also the cash rich multinationals who could face an effective tax increase of up to 43% (depending on the amount they currently borrow in the UK) on their profits from 2010. On the positive side, the Chancellor has pushed forward with the dividend exemption a rare element of good news in this Budget.

Whoever is Chancellor after the election will be gifted a tax system less attractive to investors and be faced with a daunting challenge and unrealistic expectations on tax receipts from income tax and fuel duty."

John Brazier, managing director
Professional Contractors' Group (PCG)

"The Chancellor has ignored the need to remove barriers to enterprise at this time of, in his words, ‘unprecedented financial crisis’.

The UK’s freelancers will be asking where are the helpful measures such as the repeal of IR35 and other distorting tax laws like s44-7; they will be sorely disappointed again by the lack of answers".

Michael Izza, chief executive
ICAEW

“To achieve the Chancellor’s optimistic ambition for a new high growth, sustainable economy to pull the UK through the current down turn will require a sustained commitment to and from the financial services sector whose skills are needed to turn vision into business growth and employment. As we have seen with previous Budgets the challenge will be to ensure that businesses are able to take advantage of the new measures announced today with the minimum of delay.

We also welcome the government’s commitment to a robust set of single accounting standards for the global economy, which will be a key driver in rebuilding economic confidence.”

Tim Good, partner
The Professional Training Partnership

“Whenever a budget speech is lauded as ‘taking from the rich to give to the poor’ it is inevitable that the average accountant and tax adviser will have a lot to deal with in the aftermath for their clients and themselves.

Alistair Darling’s proposed changes to higher rates of income tax, pension tax relief, savings taxes and capital allowances will affect almost everyone in small business and require the urgent attention of their advisers”.

Have we missed your organisation out? Send us your organisation's official comment to be added onto this feature: [email protected].

Alternatively, if you're a member and would like to have your say, please feel free to add your comments below as usual.

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By User deleted
24th Apr 2009 13:03

What about the new FHL rules
there have been a lot of reaction about the changes to the pension relief, 50% tax rate etc.. but no one seems to have mentionned the proposed changes to the Furnished Holiday Lets. while I welcome that this is being extended to include properties in the EEA which fullfill the conditions to qualify as a FHL, it would appear that these rules are being abolished as from 2010/11. Losses (either from UK or EEA properties) will not be able to be set off against other income. Does it also mean that this business will not longer qualify as a trade so will not qualify for BPR, entrepreneurs relief, Roll over relief, hold over relief?????

The excuse we are being given is that it is all the fault of the EU.... I can understand the extension to EEA properties but surely the decision to repealed the rules on FHL is purely a decision from the UK government and I have not seen any where that the EU is twisting their arms to do so. I can see the £ signs and Mr Darling rubing his hands in glee at the prospect of all these extra revenues generated from these businesses which will no longer qualify as a trade (extra IHT, extra CGT, less tax to repay when losses arise)...

The statement mentionned that we will be able to submit until 31 July 2009 amendments relating to the 2007 tax return. What about earlier years?

What I hate about this government is their under hands tactics. And the other parties are just as bad.
I see that they have voted themselves a bigger pay rise than they have given to the nurses, teachers, police, fire brigade.
And why should they have a second home allowance at all. After all a lot of people have to travel, commute to work every day and they can't claim any expenses as it is normal home to work travel. Why should politicians be any different? they want to be members of parliament then they should pay for their own travel to work like the rest of us, any subsistence should be allowable only if travel is allowable and restricted to a reasonable amount (and not include expensive meals and wine in top restaurants).
After all most of them don't bother to attend parliament anyway, anyone can see that when you look at some of the news...

If they really meant to show the country that they are trying to help they should show restrain and not take any second allowance until the debt is cleared up. That money would be better used elsewhere... If we have to tighten our belts so should they?

Now I have to go and explain to our clients that they are going to be worth off next year....

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By MikeBellisimo
23rd Apr 2009 10:46

Despair!
Does Labour not understand that people earning more than £150K are quite likely to have IQs and be financially literate and mobile?

Labour are just encouraging more and more people that working for a living and working hard and saving is a mugs game.

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By mikewhit
23rd Apr 2009 09:17

Not for turning
I guess Darling was just too much of a wimp to undo Gordo's last Income tax (and CT?) change as chancellor, the 20%, 10% one.

But IMHO that would have been better

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By rcbarrettandco
23rd Apr 2009 09:55

soak the rich
I'm half surprised they didn't announce a one off "wealth tax" effective immediately. Confiscate some of the assets of the wealthiest; would seem to fit with the new Socialist Labour way!

Would be a surefire vote winner as it would hit the city bankers right in the pocket - shame about the collateral damage to the genuine wealth generators and entrepreneurs, but that would be the next government's problem to sort out. (MPs of course would have to be quietly exempted...;-)

Oh god the mess we are in and Darling/Brown just keeps digging and looking for cheap vote winners to save their own jobs...

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David Winch
By David Winch
22nd Apr 2009 21:55

Does anybody remember Prudence?

It seems a long time ago, but we used to have a Chancellor who talked about prudence and keeping to golden rules.

Now we have a chap who is talking about absolutely huge amounts of public sector borrowing with no prospect of sorting that out for years.

I cannot understand how some commentators are saying the worst is behind us when we face these very serious difficulties going forward.

David

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By markfd
22nd Apr 2009 19:59

An entirely political budget
For every million pound earner who decides to leave the country (or not come in the first place) rather than give another £100k to Gordon, 40 people earning £250k pa have to stay just to break even.

The measure will not raise a penny of tax, net. It is simply a political gesture with two motivations (i) to persuade Labour votes that the party is still anti-rich and (ii) to hoodwink the electorate into believing that they don't have to worry everything will be paid for by a few rich people.

Not to mention another attack on private pensions again with no reciprocal measures affecting public sector (and MP) pensions.

Will the last entrepreneur out please switch off the lights. Actually don't bother they'll be going out soon anyway.

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