Brown Delivers 2006-07 Budget

by Jason Gorringe, Tax-News.com, London

24 March 2006

Delivering the 2006-07 UK Budget, Chancellor Gordon Brown revealed that the economy is currently experiencing its longest unbroken expansion on record, with GDP now having grown for 54 consecutive quarters.

He stated that overall, economic developments since the 2005 Pre-Budget Report have been as forecast, with economic growth gradually increasing in momentum through the latter stages of 2005 and into 2006.

According to government figures, with the outturn for 2005 and the forecast for 2006 as expected at the time of the Pre-Budget Report, the UK economy remains well placed for a pick-up in growth to above trend rates later this year and into 2007. GDP is forecast to grow by 2 to 2 1/2 per cent in 2006, rising to above trend rates of 2 3/4 to 3 1/4 in both 2007 and 2008.

Among other announcements contained in the Budget were measures to further reduce burdens on business, including new commitments from HM Revenue and Customs (HMRC) to reduce the administrative burden of the tax system, and the launch of a review of how the experiences of large businesses can be taken into account in administering the tax system.

In order to better support the growth and R&D investment of firms with between 250 and 500 employees that are above the threshold for the SME tax credit, and at which there are lower levels of innovation compared to larger firms, the Chancellor announced the Government's intention to pursue one of the key recommendations of the Cox review of creativity in business - to extend additional support to these firms.

Further details will be published by the end of the year, subject to the outcome of state aid discussions with the European Commission. However, if the EC approves the measures, the higher rate of R&D tax credit (150%) and repayable credit will be extended to companies twice the size of the present SME limits.

In addition, the Chancellor unveiled more detailed provisions to tackle tax fraud and avoidance.

Meanwhile, HM Revenue and Customs has come under fire for attempting to 'bury' an important announcement regarding self-assessment deadlines by releasing it on Budget Day.

PKF, the accountanting and business advisory firm revealed this week that HMRC has introduced new filing deadlines for Income Tax Self-Assessment (SA) returns of 30 September for paper forms and 30 November for online returns from 2008.

Peter Penneycard, national director of tax at PKF, observed that:

“Bringing the return deadline forward by four months might encourage more people to file their returns online but with roughly one million people already missing the 1 January deadline, it is also likely to collect more penalty income for the Chancellor as well as increasing the burden of compliance for individuals in business."

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