Pre-Budget Report roundup and reaction

Tuesday, December 15, 2009 | Posted by: Fiona Cullinan
Categories: Tax | Tags: tax, inheritance tax, CGT, pensions, IHT, NIC, disclosure, reaction, analysis, comment, PBR, NDO, Offshore Disclosure Facility, banks, Pre-Budget Report, National Insurance Contribution, financial sector, bonus, HRMC

Most commonly used words in the 2009 PBR: © Wordle.

The Pre-Budget Report is one of the most important days in the financial year but especially this year with the Government facing rocky public finances and also a general election in 2010. So, on Wednesday 9 December, the PBR team at Grant Thornton put together analysis, video reports, comment and a breakdown of the issues arising from Alistair Darling’s speech…

For the full rundown on what happened in the 2009 Pre-Budget Report, we’ve put together a dedicated section of the website: Pre-Budget Report 2009: How will the Government lead the UK out of recession? You can also check out a six-minute video roundup of the PBR’s highlights and lowlights by Grant Thornton’s Head of Tax, Francesca Lagerberg, with commentary by Dana Ward, Financial Services Tax Partner, and Robert Langston, International Tax Director.

For the full list of comments issued by Grant Thornton, view our press releases.

And for a rather nice infographic on the Pre-Budget Report by numbers, check out this Times infographic, which breaks down Darling’s four-year plan on spending and saving – by year and by policy.

Meanwhile, here’s the reaction as reported in the press:

In the Times…
Mike Warburton, Partner at Grant Thornton, on costings for how the tax on bankers’ bonuses would work:

…should a banker be paid a £125,000 Christmas bonus before April 5, the lender would have to pay £191,000 in total. The £191,000 sum includes £125,000 paid to the employee of which £25,000 is exempt, a £50,000 levy to the tax man, and national insurance of 12.8 per cent, which equates to £16,000…Full story…

Grant Thornton also teamed up with Times Money to answer your questions about the Pre-Budget Report:

Expert Q&A – includes questions about bankers’ bonus tax of 50%, boiler scrappage scheme details and taxation of non domiciles. Full story…

Maurice Fitzpatrick, Senior Manager at Grant Thornton, on the freezing of Inheritance tax (IHT) next year:

…Those affected by the freezing of the threshold have two main ways to mitigate the tax. The first, more modest way, is to make use of the annual exemption for gifts. The other is to make a potentially exempt transfer of wealth, which will fall out of the donor’s estate for inheritance tax purposes if he or she survives for seven years from the date of the gift. Full story… 

Further reading: Sue Knight on Five ways to reduce your inheritance tax

In the Telegraph…
Francesca Lagerberg, Grant Thornton’s Head of Tax, on news that a £380m tax hike on company profits has been deferred for a year:

‘Small businesses have been hit hard and they will be pleased not to see tax hikes again straight away. But the Tories are saying publicly that they will cut the corporation tax rate further. So have they cut it enough? This [reprieve] is just the start of the story and not the end. To cover the debt we face, they will have to fund this in some way. The Conservatives are talking about removing lots of business tax reliefs.’ Full story…

Paul Roberts, Head of Tax Investigations at Grant Thornton, on the announced 200% penalty for those failing to declare tax held in offshore bank accounts:

‘The new requirement going forward to notify HMRC when opening offshore banks accounts in certain jurisdictions indicates that HMRC will stop at nothing to claw back missing tax revenue to UK shores. The severity of HMRC’s pursuit should come as no surprise as David Hartnett has consistently made it clear that there is no second chance. Such a draconian penalty relating to tax evasion existed for many years but fell away in the late 1980s. This demonstrates the resolve of HMRC to follow through its threat to punish those who have not taken advantage of both the NDO as well as the earlier Offshore Disclosure Facility.’ Full story…

Further reading: Paul Roberts on recent ‘tax amnesties’.

In New Civil Engineer…
Nathan Goode, Renewables Partner for Grant Thornton’s Government and Infrastructure Advisory team, on the new planning body, Infrastructure UK, to secure funds for future major infrastructure:

‘Meeting the low carbon agenda and a new high speed line from London to the West Midlands and beyond is expected to require in excess of £200bn of new funding. However, if investors are to be attracted to meet this gap, they require the Government to provide a clear strategy and supportive investment framework. The creation of Infrastructure UK working closely with the sponsor departments, represents a clear tick in the box. That the Government is looking to build on the successful track record of the UK in PFI/PPP will provide a further fillip to the infrastructure investment community.’ Full story…

In the Financial Times…
Richard Proctor, Partner at Grant Thornton, on the 1% increase in national insurance contributions (NICs), and the freezing of personal allowances and income tax thresholds:

‘Clearly, the burden of the government’s deficit-reduction programme is going to fall heavily on ordinary taxpayers as well as the wealthy.’ Full story…

Richard Proctor, Partner at Grant Thornton, on new limits on pensions tax relief:

‘It’s a major disincentive to save for high earners.’ Full story…

Further reading: Richard Jameson on Raise NICs, not state pension age, to fund pensions deficit

In the Wealth Bulletin…
Francesca Lagerberg, Grant Thornton’s Head of Tax, on how the PBR will mean tax planners having to blow the whistle more frequently on clients.

‘The definitions [under which tax planners are required to report to HMRC] are now much broader… In conjunction with the 50% tax rate, the 1% increase in National Insurance from April 2010 and the removal of higher rate pension relief, those wealthy individuals who are internationally mobile are now likely to start booking their flights out of the UK.’ Full story… 

Further reading: Richard Jameson on Where have one million higher rate taxpayers gone?

In the Evening Standard’s This Is London…
Andrew Robinson, Director at Grant Thornton, on capital gains tax not rising to 25% as forecast ahead of the PBR:

‘This is good news not just for people who work in private equity but also for other people who can be paid in shares in order to take advantage of the lower rate of capital gains tax.’ Full story… 

In Director of Finance Online…
Dana Ward, Financial Services Tax Partner at Grant Thornton, on the supertax on bankers’ bonuses.

‘Today’s announcement is a bold move by New Labour to show the Government is listening to public dissatisfaction over the salaries and bonuses of wealthy City bankers with an election only months away. [But] …they could be counter productive and seen as an attempt to regulate pay within financial institutions when what is really needed are longer term measures to achieve the cultural shift within organisations to ensure that their remuneration policies are not contrary to public interest … Arguably the current measures will be seen by some as a form of fiscal retribution given their targeted nature. This could lead to highly paid individuals seeking to take themselves out of the UK tax net.’ Full story…  

In Dow Jones’ Financial News Online…
Mike Warburton, Partner at Grant Thornton, takes part in a Q&A on the loopholes in the one-off 50% tax on bank bonuses.

Supertax Q&A with Mike Warburton. Full story…

In the Daily Mail…
Paul Smith, an International Tax Specialist at Grant Thornton, on the cut in tax on patent income from 28% to 10% :

‘This could be a real money spinner. After all, 10 per cent of a large number is better than 28 per cent of nothing. It will also make the UK more competitive with other jurisdictions, as well as encouraging research and development.’ Full story…

Read Grant Thornton’s Tax Manifesto – our proposals for pragmatic tax changes following the 2010 general election. The Tax Manifesto combines economic analysis undertaken in conjunction with Lombard Street Research with the solicited views from a business community of 500 UK Finance Directors.

Or have your say by signing up to our tax policy committee petition on the Number10 web site.