ACCA Ponders Forthcoming UK Budget

by Amanda Banks, Tax-News.com, London

07 March 2008

Chas Roy-Chowdhury, head of taxation at ACCA (the Association of Chartered Certified Accountants), has made several predictions for the forthcoming UK Budget.

Mr Roy-Chowdhury, suggested that: “ACCA believes there could be a few surprises in this Budget, which is bound to be a tough one for the Chancellor given the current economic climate."

“Given last year’s Pre-Budget Report and recent news coverage, ACCA anticipates this Budget will tread a fine line between raising revenue for the public purse and attempting to be tax-friendly – no mean feat."

He went on to state that: “From a tax angle, ACCA will be questioning whether announcements made next week will add up to ACCA’s test for a good tax system – do they encourage stability, certainty, simplicity and fairness?”

The ACCA flagged up the following issues ahead of the Budget:

"1. Capital Gains Tax
From 6 April 2008, new CGT rates of 18% will apply, replacing rates of 40%. Since the Pre-Budget Report, business has been preparing itself for the withdrawal of indexation and taper relief. Looking ahead, ACCA fears that the new tax rules in this respect will impact adversely on economic activity by encouraging short-termism. And will next week’s Budget seek to exclude second properties from the 18% tax band?

2. Corporation Tax
Corporation Tax rises to 21% in April 2008, then to 22% in 2009 for small businesses; but then the rate falls for big business from 30 per cent to 28 per cent. There is little doubt the impact will be felt unfairly by small business.

3. Income shifting
ACCA is concerned that anticipated changes to income shifting arrangements will force spouses to share financial details, whether they want to or not. The Government is now proposing a much higher burden of proof and record keeping requirements for family businesses – another burden for small business.

4. Non-Doms
While imposing a GBP30,000 levy on non-doms meets the demand for tax clarity and certainty, it does not send the right signals to talented international entrepreneurs who want to do business in the UK.

5. Green Taxes
If placing sustainability at the heart of the Budget is the aim, then ACCA anticipates tax changes for cars and planes. But any green taxes need to be sold to the taxpayer carefully and with clarity. The tax collected here needs to be ploughed back into green initiatives. There is a strong case for government to prove that green taxes are allocated for specific green projects.

6. Basic Rate Tax issues
The fall in the basic rate of tax from 22 to 20% from 6 April will have an unfortunate knock-on effect for charities. They stand lose from the Gift Aid scheme, which offers tax-free donations. After 6 April, for every GBP1.00 donated the amount will be GBP1.25 rather than GBP1.28 under the current tax regime."

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