UK Budget Date Unveiled

by Jason Gorringe, Tax-News.com, London

23 February 2006

The UK Treasury announced this week that Chancellor Gordon Brown will be delivering his Budget Report speech to the House of Commons on March 22.

In his pre-budget report, delivered last December, Mr Brown lowered his forecast for growth to 1.75% per cent, and doubled the supplementary tax on North Sea oil companies to 20%, raising GBP3bn in extra revenue.

He also announced that the zero tax rate for small companies is to be scrapped, costing many companies an extra GBP1,900 a year. However, R&D tax credits will be extended, and the enhanced 50% first year allowance for small business investment in plant and machinery will be reintroduced for the period 1st April 2006 to 31st March 2007.

Responding to cries of anguish from the film production sector, the Chancellor revealed in December that there will be a new film tax credit worth up to 16% to big-budget productions and 20% for smaller films.

He additionally stated that further clampdowns on tax planning schemes are in the pipeline, including a focus on accounting for non-commercial capital losses.

Meanwhile, figures released by the Office of National Statistics earlier this month revealed that the Treasury had received GBP21.1 billion more in tax than it spent during January, which, according to the ONS, represented the largest monthly surplus since modern records began in 1984.

Although January is traditionally a strong month for tax receipts in the UK, revenues nonetheless were 14% higher last month compared with January 2005, driven by an unusually large 52% increase in corporate tax revenues, which totaled GBP10.8 billion.

As a result, the public sector ran a surplus of GBP12.6 billion last month - the highest since January 2000. After 10 months of the financial year the deficit stands at GBP29.8 and Mr Brown now looks on course to meet his forecast of a GBP37 billion deficit with two months of the fiscal year remaining.

According to analysts, the bumper revenue harvest alleviates fears that the Chancellor will be forced to increase taxation to cover his spending and borrowing commitments, and he is likely to continue to meet his self-imposed Golden Rule of borrowing only to invest rather than to cover recurrent expenditure.

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