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The truths they don't want you to read....

Wednesday, May 19, 2010

Tory Budget plans

George Osbourne has laid out his plans - or perhaps his outline ideas - for the Budget, so what can we read into the messages he has sent out.

He spoke at the CBI Dinner: it is a pro-business agenda
He is calling for lower and simpler corporate taxes: it is a pro-business agenda
A five-year plan to reform corporate taxes: it is a pro-business agenda
A reform of the CFC legislation: tricky and technical, but it is a pro-business agenda
Abolish employers NI for small new starts: a sensible, cheap but effective boost
A move towards increase the personal allowance: a nod to Clegg, but little action
"We will reform the corporate tax system by simplifying reliefs and allowances, and tackling avoidance, in order to reduce headline rates," said Mr Osborne.
Trite comments, but I can already see three big tax-planning opportunities for my profession which will attempt to circumvent the limits on any tax law changes.

Over the years I have learned that every major change in tax policy does nothing but encourage everyone to find new loopholes, simply because the tax system is so complex that you need to fine tune your plans to ensure that you don't fall foul of exemptions, exceptions and over-riding exclusions.

The plans seem quite clear to me:
  • Big, deep, public sector cuts (and the public sector better be ready for them)
  • Cuts in some business tax exemptions
  • Reducing rates of corporation tax (probably for big business only)
  • Minor tweaks to the personal tax system to benefit the lowest paid (h/t to Clegg)
Er, isn't that the virtually exact policy that Margaret Thatcher followed in 1979.

Cameron doesn't have a major industrial base to destroy, so the employment impact will probably be much less severe, but the overall further rebalancing (sic) of the economy in favour of services above manufacturing seems inevitable.

Sad to say, but my profession seems likely to be a major beneficiary of the changes. Again.

On a practical front, I'm suggesting strongly to clients to consider bringing forward large investment projects, as I think that the Annual Investment Allowance can't survive at its current level, due to the cost of the scheme. it may be flagged up for reduction/abolition at the end of the tax year, but I wouldn't be in the slightest surprised to see it halved with immediate effect in June. (If you don't understand this, don't worry. It's aimed at the self-employed and small businessmen only)

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