4 opinion


It has to be good that 600,000 people will be lifted out of tax, following the chancellor’s decision to raise the income tax threshold to £9,205 ...


Raising the personal allowance will, of course, put more cash in many millions of workers’ take-home wage packets. In theory.


It is only theoretical because, as with most Budgets, this one will be broadly neutral for many people, as any give- away will be clawed back through additional revenue- raising measures elsewhere.


It’s the same for the so-called rich. While the top rate of income tax will be reduced from 50% to 45% from April next year – and that is the most controversial measure in this Budget – cash to pay for this measure will be farmed in other ways, and the better off in our society will probably end up not being, well, any better off….


Which makes you wonder how much of the theatrics on March 21 is economics and how much is politics.


We do support the corporation tax cut to 24% from next month. Having too high a corporation tax rate is a disincentive to businesses to expand; indeed, a disincentive to companies to make any kind of decent profit. Let’s hope it reduces to 20% soon.


We like the idea of enterprise loans to help young people start their own business; although experience of such loans in the past is that they are easy for governments to announce, far harder for entrepreneurs to find.


All in all, this Budget will not be a major turbo boost to the economy, more a small aerodynamic aid to help us on our way.


David Murray Publisher


www.businessmag.co.uk


The South ’likes’ the Budget


Businesses in the south appear to have given a positive response to the chancellor’s Budget, which was delivered as we went to press.


In a vote of over 200 business people at an event staged by advisers James Cowper, only 13% voted that the Budget was “bad“ for business. A total of 42% voted that it was “good“ while 46% voted “indifferent“; in other words, that it was broadly neutral and unlikely to have much effect.


Sharon Bedford, business tax adviser, described the “quite spectacular fall“ in corporation tax as being very welcome for businesses. On employers’ National Insurance, which remained untouched, it was a “bit of a disappointment“ not to see reductions.


Here’s a round up of some other reaction:


Higher rate taxpayers


Kerry McKeown, tax director at business and financial adviser Grant Thornton UK LLP in Southampton, said: “Bowing to the inevitable lesson of history that high tax rates don’t always lead to expected revenues, the chancellor is cutting back the temporary 50p tax rate with a reduction to 45p from April 2013. This will be welcomed by business, which has sought to attract top executives in the face of an unattractive tax regime.


“It is also likely to drive behaviour for the next 12 months as those with the wherewithal to defer dividends


occupy new space given the level of business rates which remained linked to a historical valuation date.


’’The government’s announcement of reduced corporation taxes, potential enterprise loans and enterprise zone rate allowances are incremental in the face of an anticipated business rate yield of £26 billion in 2012/13,’’ maintained Wackett. ’’The Enterprise Zone allowances are limited by European competition rules and will not extend beyond £50,000 per annum at the behest of the local authority.’’


George Osborne


and bonuses will do so until the tax rates fall.“


Corporation tax


The Centre for Business Taxation at Saïd Business School, Oxford, said the corporation tax rate reduction would significantly improve the UK ranking in the G20 – one of the goals of the Coalition agreement in 2010: “Our aim is to create the most competitive corporate tax regime in the G20.“


Property


The Budget “fails to go far enough“, said Richard Wackett, national head of ratings at property specialists Lambert Smith Hampton (LSH), and this was storing up problems for the economy and future growth. Property owners, developers and potential occupiers would continue to be reluctant to build and


Mark Budden, development director at CBRE, Southampton, said: “We endorse closing the offshore stamp duty loophole. Although stamp duty of 15% on homes bought through corporate envelopes appears harsh, buyers can purchase through traditional means and pay 7%. If stamp duty is paid on even a fraction more homes, it will generate significant revenue for the Treasury. It is unlikely to discourage overseas buyers in the medium to long term, as the prime London residential market is still seen as a safe haven for their money while the global economy is recovering.“


General Anti Abuse Rule (GAAR)


David Brookes, tax partner at BDO LLP, said: “Although the proposed General Anti Abuse Rule (GAAR) is also targeted at individual tax payers, the consultation and the resulting legislation over the next 12 months will be keenly followed by business. It is imperative that GAAR is properly targeted at abusive tax avoidance schemes and does not reduce the scope for legitimate and genuine tax planning, which all business ought to consider.“


Recovery underway in the south


A turnaround in business confidence suggests that the UK economy is taking tentative steps towards recovery, heralding positive growth by Q3 2012, according to the latest Business Trends report by accountants and business advisers BDO LLP Southampton, based in Ocean Village, Southampton.


BDO’s Optimism Index, which forecasts business confidence two quarters ahead, has surpassed the crucial 95.0 mark that indicates growth, with a reading of 98.0 for


February – the highest for nine months. This represents a huge jump of 3.9 points, the single biggest monthly increase since December 2009. It is also the first time the index has topped 95.0 since last August and demonstrates a considerable improvement from the lowly 91.5 reading just two months ago.


Encouragingly for the UK’s overall economic recovery, the upturn in business confidence is broad- based. In the services sector – which accounts for more than


75% of the UK’s output – optimism is especially marked, increasing to 98.3 in February from 94.7 in January and comfortably exceeding the 95.0 growth threshold.


In the May issue of The Business Magazine


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THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2012


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