UK Budget 2012
Commentary from EY:
- Corporation Tax
- HMRC's Report
- 50p tax rate
- Personal allowance increase
- "Mansion Tax"
- Air Passenger duty
- General Anti-Avoidance Rule (GAAR)
- Cap on Tax Reliefs
- Seed Enterprise Investment Scheme
- Venture Capital Scheme
Michael Hall, Managing Partner at EY Northern Ireland, comments on Corporate Tax
"In a drive to boast the private sector, making the UK more competitive is a key priority. Whilst a reduction in rate of corporation tax was well sign posted, a corporate rate of 22% by 2014 will make the UK very competitive".
"A further 1% reduction in the overall UK corporate tax rate should reduce the cost for Northern Ireland in seeking to implement a 12.5% tax rate".
"Whilst there is a further 1% reduction in the rate of corporation tax, it is clear it is clear it will be funded by a very concerted effort to clamp down on companies seeking to avoid paying tax".
Michael Hall, Managing Partner at EY Northern Ireland, comments on HMRC’s report on “Making tax easier, quicker and simpler for small business”
“The government's new offer to the unincorporated small business allows them to set aside the complex tax regime and instead pay tax on the cash that they keep at the end of the day. This will apply to businesses with a turnover up to the VAT threshold of £77,000 per annum and could significantly simplify the system.
“The document however also sets out a new approach to working with small business, and sets a far more positive tone in the way that HMRC will engage with them.”
Robert Heron, Tax Partner EY Northern Ireland, Comments on the 50p tax rate
"In a recent Ernst and Young survey almost a 30% of businesses quoted the 50p rate of income tax as being the biggest deterrent to growing their business in the UK. The Chancellor has clearly listened to these concerns and responded by reducing the top rate of income tax to 45p from 6 April 2013 although the 45p rate still remains one of the highest in the G20".
Robert Heron, Tax Partner EY Northern Ireland, Comments the personal allowance increase
"As expected the Chancellor reaffirmed the Coalition's commitment to ultimately raise the personal allowance to £10,000 with an increase of £1,100 in April 2013. It is estimated by The Treasury that the increase in April 2013 will lift and additional 25,000 people out of income tax and benefit another 605,000 people in Northern Ireland".
Robert Heron, Tax Partner EY Northern Ireland, Comments the “MansionTax”
"Following the significant amount of pre budget speculation regarding the so called "Mansion Tax" the Chancellor has announced a stamp duty rate of 7% (current rate 5%) on the acquisition of residential properties over £2m from tomorrow. This change is unlikely to have a significant impact locally as there are very few residential properties in Northern Ireland which are sold for more than £2m".
Robert Heron, Tax Partner EY Northern Ireland, Comments Air Passenger Duty
"We welcome the Chancellor's commitment to devolve the powers to set Air Passenger Duty on direct long haul flights departing from Northern Ireland to the Assembly. This should help ensure direct air links between Northern Ireland and, for example, New York are maintained which are vital to the re-balancing of the local economy".
Neil Gibson, Economic Advisor to EY Comments on Rebalancing the tax base
“The budget brought few surprises, they seldom do in an era of leaks and spin, but there were announcements which will have direct relevance for Northern Ireland. The changes to income tax thresholds will be welcome as the region has a lower average wage and relatively fewer high earners. This benefit, that will not take effect until 2013, must be set against the welfare changes already announced and the possibility of regional pay in public service, both having an impact on the NI economy. Overall the budget gives little reason to alter the Economic Eye forecasts for NI which at 0.4% for NI in 2012 and 1.6% in 2013 remains below the UK average and insufficient to generate the levels of jobs so badly needed in the region”.
Neil Gibson, Economic Advisor to EY Comments on Positive signals about principal of lower Corporation Tax
The announcement of an accelerated reduction in UK Corporate Tax rates with an explicit intention to aim for 20%,confirmation of the devolution of Air Passenger Duty policy to Northern Ireland, allied to increased local spending powers in places like Manchester indicate a willingness to devolve responsibility for hauling the UK economy back towards growth. This is a welcome attitude for Northern Ireland and its on-going debate to seek the ability to lower its own Corporate Tax rate. If policies have a well evidenced ‘business case’ and the long term effect is a net benefit for HM Treasury there seems to be a willingness to listen, such is the perilous state of UK finances.
Neville Crowe, Tax Director Comments on General Anti-Avoidance Rule (GAAR) - businesses
Confirmation of the General Anti Avoidance Rule (GAAR) may not come as a surprise, but how this will be achieved continues to be a cause for concern. The future consultation will need to clearly set out the government’s proposed approach and avoid introducing significant uncertainty into the tax regime. Businesses would be well advised to monitor any draft legislation, in particular to see whether the proposals could be wider than expected or introduce uncertainty to the extent of undermining the UK's competitiveness.
Neville Crowe, Tax Director Comments Cap on tax reliefs
The Chancellor announced that legislation will be introduced in 2013 to cap certain income tax reliefs that are currently unlimited. The proposed cap will be the higher of £50,000 or 25% of income. There is as yet no detail on the scope of this measure however it could impact tax relief in areas such as gift aid and trading losses. Draft legislation is to be published later this year.
Neville Crowe, Tax Director Comments on Seed Enterprise Investment Scheme
The well trailed introduction of the Seed Enterprise Investment Scheme is designed to help small, early-stage companies to raise equity finance by offering a range of tax reliefs to individual investors. These reliefs include a 50% tax credit for individuals investing up to £100,000. This extension of existing venture capital schemes should be seriously considered by eligible Northern Ireland businesses and new ventures seeking to raise finance.
Neville Crowe, Tax Director Comments on Venture capital schemes
Budget 2012 confirms the introduction of a widening to existing venture capital schemes, namely the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs). For example, individuals will now be able to avail of tax relief on investments of up to £1million per annum in EIS qualifying companies. Together with the introduction of the Seed EIS for very early stage companies we welcome these measures to assist smaller private businesses in accessing finance.