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The Chancellor's Budget 2011 was in general a good budget for business, but there were a few offsetting disappointments. The increased reduction in the corporation tax rates by two percent from April 2011 will be welcomed, together with the changes to the controlled foreign companies’ régime and the proposed introduction of the patent box. This will help encourage multinationals, to locate in the UK, particularly in the new Enterprise Zones.
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The proposal to merge the operation of income tax and national insurance contributions is likely to reduce the high costs of business of running these two taxes side by side through the payroll. There will be many consultations and hurdles to overcome in the next few years, however, to get the new system in place. One potential disadvantage is in a comparison in the overall headline tax rate on earnings to competitor countries.
The increased benefits to business start ups and entrepreneurs with the increases in the Enterprise Investment Scheme and the doubling of the Entrepreneurs capital gains tax limit to £10m will help encourage business investment. In addition, the new exemption for non-domiciled individuals enabling them to remit foreign income and gains tax free into the UK for commercial investments will provide an additional encouragement for non domiciled entrepreneurs to invest into the UK.
The charity sector will welcome with open arms the improved changes to gift aid, and in particular the encouragement of the use of charitable legacies.
The simplification of the tax system by the abolition of tax reliefs will help reduce its complexity. However, it will be important to consider the detail to ensure that significant benefits are not being taken away.
Two business sectors will be feeling hard done by - the North sea oil and gas producers (who are paying for the reduced fuel duties on petrol and diesel) and the banks. Banking levy is being increased for the second time in so many months as a source of additional taxes. UK headquartered banks are at a disadvantage to foreign banks, as they pay the banking levy on their worldwide balance sheets, rather than just their UK balances. British taxpayers as significant owners in two of the major banks, may fear this is tending towards a tipping point where the UK banking sector is being put at a competitive disadvantage to banks overseas with the consequence of less banking activities in the UK.
Contact: anneli.collins@kpmg.co.uk |
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The Chancellor's Budget was in general a good budget for business, but there were a few offsetting disappointments.”
Anneli Collins – Head of Tax Policy, KPMG LLP (UK)
Andrew Smith, KPMG’s Chief Economist, and Alan Downey, KPMG’s head of Public Sector, address the Economic and Public Sector implications of the Chancellor’s Budget 2011.
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The Budget Report proposals and other tax changes are summarised on these pages. The Budget Report proposals may, however, be amended significantly before enactment. The content of this communication is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.
