Budget predictions: Reduce corporation tax, encourage investment, greater certainty, no wealth tax, increase relief says RSM Tenon

John Taylor, office managing partner of RSM Tenon’s Southampton office, says: “There is likely to be a strong enforcement element to the budget some of which we already know about. We could see further developments on ‘naming and shaming’ and possibly tightening up on tax avoidance on topical matters such as bonuses.   "The traditional Budget day guess work is now largely a thing of the past as so much of the legislation has been announced in advance. However, with the coalition still trying to grapple with the current economic strife it is likely that even with all of the advance releases we may yet have some shocks on the day.”

Businesses

Business Tax has been reformed considerably over the last couple of years and the focus on innovation is welcome. The Patent Box is due to commence from April 2013 and coupled with the relaxation of some of the rules around R&D tax credit relief, it is vital to make sure businesses are aware of what they can claim. In addition we would like to see:

• Confirmation that the standard and small company rates of corporation tax will finally converge and be set at 20%
• An indefinite extension to the current temporary increase to the Annual Investment Allowance at £250k to encourage more investment
• Further upfront measures to encourage investment in owner managed business to bridge the bank funding gap. The current Enterprise Investment Scheme is too complex and restrictive.
• More certainty in the tax system. The new General Anti-Abuse Rule (GAAR) adds another layer of uncertainty, although we expect there to be some tidying up of this announcement.

Individuals

Individuals have been on the receiving end of many complex changes in the tax code over the last couple of years and there is no doubt the overall tax burden has increased. We would like to see some encouragement for investors and those trying to protect the wealth they have created through hard work. Our wish list and areas that require much more careful consideration include:

• The proposed tax on “mansions”, whilst an easy target, lacks all the ingredients of proportionality
• A u-turn on the proposed further restrictions to tax relief on pension contributions from April 2014
• Increase in the personal relief to £10,000 in 2014
• More encouragement for savers
• Equalisation on the application of the Child Benefit Higher Charge to address the anomaly whereby husband and wife each earning £49,999 do not suffer the restriction but a couple earning £50,001 and £49,999 respectively are caught
• Closure of outdated reliefs and anomalies in the income tax legislation even possibly on the 5% withdrawal on Investment bonds.