The Chancellor giveth… and taketh awayOct 29, 2007
According to leading mid-tier accountants Baker Tilly, the headline announcements from a tax perspective were a much trumpeted change in the inheritance tax allowances for couples and civil partners, a proposal for the introduction of a Â£30,000 flat rate charge on non domiciled individuals and a change in the capital gains tax legislation which swept aside the previous taper relief regime introduced by Gordon Brown in 1998.
“The real attention grabber in the PBR was the change to the workings of the IHT nil rate band”, explained Baker Tillyâ€™s Milton Keynes-based tax partner Judith Hooper (pictured). “This is being hailed as a massive extension of the exemption. However, all it really does is recognise the difficulty of planning for couples. It merely removes the penalty for those who do not make provision via their wills or trusts in their lifetime and whose heirs cannot, or will not, do so by Deed of Variation after death.”
Alterations to existing CGT legislation have also drawn comment from Judith Hooper, who believes that Chancellor Darling has paid very close attention to the “magician’s trick”” of “”giving with the left and taking with the right”” performed by his predecessor in his final budget. She believes Darling has given us more of the same.
She said: “”The introduction of the new flat rate charge of 18% on capital gains almost doubles the rate of tax on the sale of businesses. It will be a significant disincentive for those entrepreneurs who have built up their companies with the expectation of a sale over the next few years at a tax rate of 10 per cent. We might now see a sudden rush to market businesses for sale pre 6 April 2008.
“”Conversely, the sometimes more passive pastime of share and property investors will benefit from a significant reduction of 22% in their tax bills. As always, there are some winners and losers in this PBR, but it is interesting to see which sector the Government seems to be favouring.””
The PBR speech also indicated that there would be moves to tackle certain examples of anti avoidance and there would be consultation on tax simplification in three specific areas: VAT, anti-avoidance, and corporation tax.
Judith Hooper added: “”It was widely expected that the PBR would, following HMRCs defeat in the Arctic Systems case, contain specific measures to counter what HMRC has described as “”unfair income shifting arrangements””.
“”The PBR did not directly tackle the perceived abuse, but did announce a specific consultation on the draft legislation it will shortly propose and which will be introduced from 2008/09.””
For more information, telephone 01908 687800, e-mail firstname.lastname@example.org or visit www.bakertilly.co.uk“