Mixed Response To Darling's Maiden Budget

by Jason Gorringe, Tax-News.com, London

13 March 2008

The response to UK Chancellor of the Exchequer, Alistair Darling's first budget has been mixed, with accounting firms and other concerned parties welcoming the relative lack of surprises for the business community, but with many arguing that the measures announced on Wednesday do not go far enough.

Chas Roy-Chowdhury, head of taxation at ACCA (the Association of Chartered Certified Accountants) was of the latter opinion, observing on Wednesday that:

“This seems to be largely a Budget of delaying tactics. Rather like the Cheltenham racers, businesses are left waiting in the stalls by today’s announcement. We knew what was coming for business, but the Budget still penalises entrepreneurs and SMEs.”

Mr Roy-Chowdhury further stated:

“ACCA welcomes the Government’s renewed focus on increasing the number of female owned businesses. But it is important to note that the Government has missed its previous target of achieving 20 per cent more female enterprises by 2006. What will be different this time round?"

PKF was similarly underwhelmed by the Chancellor's maiden budget, and Lisa Macpherson, National Director of Tax at the accounting firm suggested on Wednesday that:

"The benchmark for 'good budget performance' has fallen from being one that isn't unpopular to one that isn't incompetent. To that extent, Alistair Darling can claim this was a good Budget."

She continued:

"The Chancellor will be satisfied that, unlike his 2007 Pre-Budget Report, he has not roused almost universal condemnation and protest. Nevertheless he was so risk averse, deferring even minor initiatives, that he could be accused of refusing to act."

"Arguably there were no opportunities to miss this time round so the Budget cannot be labelled a 'missed opportunity'; it is more of a hazard avoided."

"In focusing measures aimed at tackling child poverty, protecting the environment, and cracking down on binge drinking, smoking and tax avoidance, there is little room to criticise his goals. Yet the Government's own 2010 target for reducing child poverty is unlikely to be met; environmental moves are little more than 'greenwash'; sin taxes on alcohol and tobacco taxes are designed to raise revenue not change behaviour; and shutting down tax loopholes is a task that the electorate expect the Treasury to fulfil on an ongoing basis in any case."

"The as yet unanswerable question is whether the books will balance. As the economy continues to slow, tax revenues are falling; with lower levels of corporation tax, stamp duty land tax and so on. The measures announced today won't rock the boat economically but nor will they make up the revenue shortfall and the position is unlikely to improve by the time of the Pre-Budget Report in the Autumn."

Darling also announced in Wednesday's budget that the government intends to forge ahead with its controversial plans to introduce a new tax scheme for non-domiciles, albeit with some concessions.

Responding to the announcements that income and gains in offshore trusts will only be taxed when they are remitted to the UK, even if these come from UK assets, and that the Government will not substantially revisit the rules for this and the next Parliament, the Director of Policy with the Society of Trust and Estate Practitioners (STEP), Keith Johnston announced that:

"We welcome the measures announced today in relation to UK non-domiciles. The consultation has been constructive and the changes to the trust regime will ensure that the UK remains an extremely competitive destination for mobile entrepreneurs."

"These changes mean non-doms will continue to invest, employ people and pay tax in the UK. It’s still early days but the promise not to revisit the rules substantially for two parliaments will give some stability. The Government have listened."

Most of Darling's other announcements in the sphere of taxation also confirmed proposals previously announced by the government in last year's PBR, including the new 18% flat rate of capital gains tax, due to go into effect in the 2008/9 tax year.

However, he revealed that a new "entrepreneurs' relief" will reduce the effective tax rate on some gains to 10%.

The Chancellor also reiterated the government's commitment to reducing the general rate of corporation tax to 28% from 30%, effective April 2008, in tandem with a 1% rise in the Small Companies rate to 21%.

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