Sunday, 21 April 2013

Budget 2013

Budgets come & Budgets go and Budget 2013, which George Osborne described as a Budget “for an aspiration nation” passed with hardly a whisper. There are many that argue that the Chancellor had little room for manoeuvre, whereas there are others that argue that it was time, or even past time, for Plan B. Either way, the Budget is what it is & the main points are:
  • An increase in capital spending plans by £3bllion a year from 2015-16, funded through reductions in current spending so no plan B!
  • A reduction in Departmental spending of £1.1billion in 2013-14 and £1.2 billion in 2014-5. The schools and health budgets to remain unchanged – again, no plan B!
  • A limit in public sector pay awards to an average of up to 1 per cent in 2015-16 – whatever that will actually mean in practise!
  • A reduction in the main rate of corporation tax to 20 per cent – the joint lowest level in the G20 - & really welcome to those large corporates that actually pay tax.
  • An entitlement to a £2000 per year employment allowance towards employer NIC bills from April 2014 – a huge incentive for micro businesses, an incentive which is limited to businesses and charities, which means that it is not available to private employers of domestic staff. But why is it available to large corporates?
  • A £5.4 billion package of financial support to tackle long-term problems in the housing market – although this particular announcement already appears to be in trouble, with memories of the pasty tax in the forefront of every bodies mind.
  • £1.6 billion of funding for an industrial strategy to include the creation of an Aerospace Technology Institute.
  • Meeting the commitment to make the first £10,000 of people’s income free from income tax a year ahead of schedule.
  • Cancelling the beer duty escalator and reducing general beer duty by two per cent from 25 March 2013.
  • Cancelling the fuel duty increase that was planned for 1 September 2013 – did he have any other choice & notably, he didn’t cancel the escalator?
  • Introducing a Tax-free Childcare scheme so that working families can pay for childcare effectively tax-free – but why is it only available where there are two parents, both of whom work? & why is it available for parents with a combined income of £300,000 per annum.
  • Introducing the single-tier State Pension and implementing the £72,000 cap on social care costs from April 2016 – where, of course, a cap isn’t what you or I might have understood by the word.
  • An updated remit for the Monetary Policy Committee.
  • A crack down on tax avoidance and evasion, which is intended to raise over £4.6 billion in new revenue over the next five years – and on face value not many people, will argue with that. But this crack down includes a couple of nasty surprises which might have effects that many people might well argue with.
The first nasty surprise relates to partnerships. Apparently there are avoidance schemes that use partnerships to avoid PAYE but equally, there are thousands of partnerships that are perfectly legitimate but whose very existence has been called into question until we see the full details of the proposals. Watch this space!
The second nasty surprise relates to Inheritance Tax. Again, apparently there are avoidance schemes where wealthy people attach loans to their estates, thus reducing the value of the estate, and use the proceeds of the loan to purchase assets that fall outside of the scope of Inheritance Tax. & where these schemes are clearly tax avoidance, they should be regulated. But what about the entrepreneur who uses his home as security for a loan that is used to invest in his trading business? Isn’t this legitimate? Isn’t this a standard requirement of many lenders of capital? Watch this space again, because this proposal needs careful consideration!

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