Baker Tilly’s Weekly Tax Brief – 10 March 2015 – Budget Tax predictions…
This edition of Baker Tilly’s Weekly Tax Brief includes a “colour supplement” setting out what we already know on the tax front, what we predict and what we would like to see happen.
Whatever detail the Chancellor’s 18th March 2015 Budget Statement holds on the tax front, the broader context of the forthcoming UK General Election and the fiscal challenges for whichever party or parties form the next government will be uppermost in everybody’s minds. While we expect the Chancellor to make much of the fact that this Budget is “business as usual” with no pre-election tax sweeteners, it’s difficult to imagine that he won’t have one or two treats in store, even if they are no more than promises to be enacted if the Conservative Party forms the next government. He may also try to pre-empt aspects of the Labour Party’s tax plans.
For businesses, we expect to see changes to:
- Tax avoidance by multinational corporations
- North Sea oil taxation
- The ‘patent box’
- Annual investment allowance for plant and machinery
For individuals there may be moves to:
- Review private residence relief
- Restrict pensions tax reliefs in a way which frustrates Labour’s plans to do something similar
- Reform capital gains tax and key reliefs such as entrepreneurs relief
- We would like to see parents able to transfer their ISA investments to children tax-free on death
Despite continuing changes in the economic picture and the rapid pace of development in many tax areas, some figures are slow to change. First, a recognition by many that, whichever party wins the May 2015 General Election, tough new austerity measures will be necessary. Required annual savings have been estimated at £45bn. Even if the UK’s tax system worked as perfectly as HMRC wishes – in other words the tax gap of £34bn was completely eliminated – tax alone could not fund the new austerity measures. So any political party which has promised post-election tax giveaways will find it difficult to live up to its promises. As we said before the Autumn Statement, tax promises which benefit some will have to be paid for by tax increases for others, by cuts in services or by increased borrowings.
Undoubtedly the attack on personal and corporate tax avoidance will continue, both via UK-specific initiatives and also as part of the broader changes being developed by the OECD. Recent calls for HMRC to tackle tax avoidance and evasion both harder and faster are sure to be reflected. We also expect to see more details of the UK’s “Google Tax” which was announced during the Autumn Statement. This represents unilateral action by the UK to maximise its tax yield from multinational corporations. The USA has subsequently announced an intention to tax US corporate profits which have not been remitted to the USA. At first sight, both of these initiatives are at odds with each other and – arguably more important – represent a break in the ranks in the OECD initiative to tackle base erosion and profit shifting through agreed multilateral action. With the OECD set to make a further statement on 18th March – Budget Day – it’s always possible that the UK’s “Google Tax” may yet be postponed.
So, while big-picture issues will dominate the Budget Statement, attention will inevitably focus on specific proposals. All the detail is contained in the attached colour supplement. We hope you find it interesting and informative.
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