Press Room
Grant Thornton's wish-list for the Pre-Budget Report
FRANCESCA LAGERBERG, HEAD OF TAX, GRANT THORNTON:
"The Prime Minister and Chancellor have now both conceded that
spending cuts are on the way and some public sector projects will
be abandoned. This Pre-Budget Report (PBR) will focus on how the
Government intends to lead the UK out of the recession, moderate
the rate of inflation and slow down the pace of unemployment. The
PBR will not be handing out generous tax benefits but will be more
focused on tax efficiencies and is expected to shy away from broad,
harsh tax raising measures with an election only six months away.
However, more targeted tax rises are possible and, already in the
firing line, are high net worth individuals (who face a 50% tax
rate from next April) and those who hold funds in offshore
centres."
BUSINESS TAXES
VAT : The lower rate of VAT that was introduced at last year's PBR
has done little to help many businesses in the long term. In this
PBR, the Government should focus its attention on easing the burden
for businesses by enabling them to improve their cash flow
management.
With that in mind, we would like to see the cash accounting scheme
made available to include businesses that have a taxable annual
turnover of up to £10 million. At present, a business is eligible
for cash accounting if the turnover is no more than £1.35 million
and we believe this benefit should be extended to more businesses
during these difficult times. This would mean that businesses in
the scheme would only have to account for output tax when payments
have been received from customers.
We would also like to see the bad debt relief rules reviewed so
that claims can be made earlier than at present. Most non-retail
suppliers currently have to account for output tax even if they
have not been paid for a supply. Where payment has not been
received within six months of the date that it was due, the
supplier can reclaim the output VAT previously declared on the
supply. We would like to see this period reduced to three months to
assist businesses with cash flow difficulties caused by the late
payment of debts.
We would also like to see a more flexible approach to the payment
on account scheme so that a smaller decrease in business activity,
of say 10%, would enable the payments to be reduced. A review is
currently permitted but only after the turnover has declined by 20%
or more.
Cut to the corporation tax rate: We would like to see the headline
(mainstream) rate of corporation tax reduce from the current 28%,
to 25%. This reduction would encourage multinational groups
with European headquarters to remain in the UK and might also
attract other groups to decide to locate their headquarters in the
UK rather than in other European countries. A substantial reform or
abolition of the controlled-foreign company regime will also boost
the UK's attractiveness as a location for business. Work has
already started on this project but there is still much to
do.
Small companies rate change: We ask that the Government further
delays the planned increase in the small companies' rate of
corporation tax to 22%. The rate increase was scheduled to come
into force in April 2009 and it was announced at last year's PBR
that the increase would be delayed until April 2010. Grant Thornton
would like to see the increase delayed until April 2011,
allowing small companies to get back on an even keel before this
rate increase is enforced.
Employment measures around training and getting people back into
work: Businesses would like to see the availability of grants to
employ those currently unemployed. We also call for a temporary
National Insurance Contributions(NIC) holiday for employers who
employ the recently unemployed and younger entrants to the
workforce.
Empty Property Business Rates to be abolished: Under the existing
rules, when a business loses a tenant, not only does it
lose the income that arises from that tenant but they then
face picking up the cost of business rates too and therefore we
would call for empty property business rates to be abolished.
Reconsider the proposals concerning false self-employment in
construction: Tackling tax inequality is a laudable aim but further
work is required if the proposals for the construction industry are
to work. We suggest that specific legislation should be introduced
to determine a worker's employment status under employment law
which can then be applied unilaterally across all industries. The
income tax/NIC treatment will naturally follow on from this.
PERSONAL TAXES
Full utilisation of the New Disclosure Opportunity (NDO): We urge
all those who hold offshore trusts, structures and assets to
register to declare any previously undisclosed income and gains
arising under the NDO before the deadline of the end of
November. We expect the Government to take strong measures,
including increasing penalties, for those who do not use this
opportunity.
Clarity on the rate of Capital Gains Tax (CGT): We call for greater
clarity on the rate of CGT. With the collapse of tax receipts
during the recession, there may be a temptation to simply raise CGT
to bridge the growing gap between capital and income tax rates. We
ask the Government not to make any changes to this area of
taxation. Any change in rate will have a huge impact on the
entrepreneurial community in the UK who have already been hit hard
by the introduction of the 50p income tax rate from next
year.
Stamp Duty Land Tax (SDLT) review: For first time buyers, we
believe the SDLT threshold should be increased to £200,000 and the
Government should consider providing tax relief on mortgage
payments to help them get on the property ladder. We would like to
see a review of the current SDLT thresholds with a more sensible
banding system and would call for the abolition of the 'slab
system' that causes artificial price ceilings around the
thresholds.
Increase the personal allowance threshold: The personal
allowance for 2010-11 has yet to be announced and if the normal
rules were to apply, then there would be no increase for 2010-11
owing to an annual decrease in the retail price index to September
2009. We call for an increase in the personal allowance threshold
to help those on the minimum wage and other low income
earners.
Pensions and tapering of relief: The proposed tapering of tax
relief on pension savings from 2011 flies in the face of the
general policy of encouraging pension saving. We would therefore
welcome greater consideration given to ways to encourage long term
savings.
We would welcome the introduction of a Statutory Tax Residence
Test: A statutory and comprehensive residence test would bring
greater clarity to individuals who need to understand whether they
are or are not resident in the UK. The current rules, guidance and
conflicting case law leads to confusion and if a test is not
possible in this Finance Bill cycle we would welcome a public
commitment to pursuing this issue for the near future.
For further information please contact:
Suvra Datta, Grant Thornton Press Office, 0207 728 2375 or via
email on suvra.datta@gtuk.com
Marielle Legair, Grant Thornton Press Office, 0207 728 2183 or via
email on marielle.legair@gtuk.com