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Budget 2012 Highlights and Commentary
As the Chancellor delivered the 2012 UK Budget today, he referenced Adam Smith's progressive system of taxation. However, despite modest signs of growth in the UK economy, there is very little in the purse for additional measures to assist business. Taxand UK discusses the key highlights for multinationals to look out for as they carry out their tax planning activities for the year ahead.
At this point, Mr. Smith's "invisible hands" of fiscal policy are tied. Instead, attention is being focused on a few notable announcements.
- Commitment to a UK corporation tax rate reduction of 24 per cent from 2012 and a 22 per cent rate by 2014
- Continued support and consultation for a General Anti-Avoidance Rule (GAAR) to be introduced in 2013
- Announcement of a reduction in the top 50 per cent rate of income tax to 45 per cent starting April 2013
- The introduction of a "Mansion" tax (by increasing stamp duty on purchases of homes worth in excess of ?2 million to 7 per cent)
- Closure of stamp duty avoidance schemes - with the introduction of a 15 per cent rate of stamp duty for residential properties acquired and transferred by companies
The changes to the 50 per cent tax rate are welcome and may dampen the negative impact on entrepreneurs and investment in the UK and, fortunately, the Chancellor has resisted calls for a punitively named "Tycoon Tax."
The commitment to a lower corporation tax rate is a welcome change and we are already seeing a marked change in how the UK is viewed as a potential location for multinational operations. However, the onerous GAAR will destabilise this and may be detrimental to the UK's position as an attractive fiscal location to do business.
"The UK's convoluted tax regime has hampered UK investment. This budget has taken steps in the right direction to make our tax system clearer, more certain and more competitive, but the fear is that it is too little too late." David Pert, Managing Director, Taxand UK.
On Income Tax
"The reduction in the top income tax rate is welcome but this is a political decision over what is essentially an economic issue. It would have been more advantageous economically to raise the ?150,000 threshold in line with other European countries." Shiv Mahalingham, Managing Director, Taxand UK
"The reduction in the top income tax rate is good news on the surface but in reality many of the supposed beneficiaries will pay for it through the increased tax on homes valued at over ?2m." Shiv Mahalingham, Managing Director, Taxand UK
On Corporation Tax
"The Chancellor has played it smart with his plan to cut corporation tax to 22% by 2014. With an increased reduction to 24% this year, at a stroke he has made the UK a more attractive proposition for international business." Kevin Hindley, Managing Director, Taxand UK
The General Anti-Avoidance Rule
"A general anti-avoidance rule will be bad for business - we don't need any more uncertainty in the UK tax system. It would completely destabilise the positive corporation tax changes introduced over the past few years." Shiv Mahalingham, Managing Director, Taxand UK
Stamp Duty Land Tax
"The clampdown will tick a few boxes but actually should not cost the Government many votes, given that the technique is employed by a relatively small number of wealthy individuals, many of whom are based overseas." Jonathan Hornby, Senior Director, Taxand UK
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Download the full Budget 2012 report from Taxand UK: