Leading national accountancy firm Saffery Champness, which has its Yorkshire office in Harrogate, has welcomed measures announced in today’s budget to help stimulate Yorkshire’s economy.
Tom Roseff (right), senior tax manager at the Harrogate office, said plans to cut corporation tax were good news for Yorkshire businesses as was the announcement of over £71m in funding for Local Enterprise Partnerships in Yorkshire and Humber.
He said that it was however “incredibly disappointing” that the Leeds Aire Valley Enterprise Zone would not benefit from the Enhanced Capital Allowances announced for zones in Scotland and parts of London.
He also welcomed the news that the Government will support Network Rail to invest a further £130m in the Northern Hub rail scheme, serving stations in West Yorkshire.
However, he questioned whether the Chancellor had missed an opportunity to significantly help Yorkshire’s small and medium sized businesses.
Tom Roseff added:
There seems to be remarkably little for SMEs or Yorkshire within the key taxation announcements and I would question whether enough has been done to stimulate the UK economy.
The new caps on certain investment reliefs are also disappointing and may well impact the level of business angel investment available to growing SMEs seeking alternatives to bank finance.
George Osborne announced further consultation on the merger of income tax and National Insurance Contributions and Mr Roseff said the simplification of the tax system for the smallest businesses as well as a general anti-avoidance rule would need to be watched carefully.
A badly drafted GAAR could significantly impact the competitiveness of the UK and impact the willingness of overseas businesses to invest into the UK.
Mr Roseff welcomed the announcement that the 50 per cent rate of income tax will reduce to 45% from 1 April 2013, although he said he would have liked to see it introduced from 1 April 2012.
It’s good to see that no mention of a mansion tax or more changes to restrict pensions relief crept into the Chancellor’s speech
Martin Holden (right), Head of Office at Saffery Champness in Harrogate, said most of the tax measures announced in the budget had been trailed well before it started, adding that the Chancellor was keen to point out that he was seeking to reward those who worked, and ensure that the wealthy pay more tax and the poor pay less.
The Chancellor said there would be no deficit-funded giveaways and, given the recent warnings from international credit ratings agencies, he will have been conscious of the need to show constraint: he said that his Budget was fiscally neutral over a five-year period,
Martin Holden said:
The reduction of the highest rate of Income Tax from 50 per cent to 45 per cent from 2013/14 will clearly be welcome news for those who are currently paying this tax. However, the news that the 50 per cent tax raised only £1 billion (just a third of what was forecast), against all the missed opportunities for investment that the rate led to, has shown that a higher tax rate is clearly not good for the nation, as well as being disliked by the wealthy.
The cut to a more modest 45 per cent is forecast to cost only £100 million. This highlights the fact that there simply are not enough very wealthy people for the tax rate they pay to have a substantial impact on the nation’s finances: we all have to bear the cost of the economic recovery. This cut is likely to lead to some immediate-term tax planning.
Mr Holden said the clampdown on Stamp Duty Land Tax avoidance schemes for residential property was widely expected, and a rate of 15 per cent for homes bought within a corporate ownership should be enough to close most of the existing schemes.
It seems likely that the greater impact though will be an increase in the rate of SDLT from 5 per cent to 7 per cent on homes worth more than £2 million. However, with such a substantial amount levied on the purchase of a home affected by the new rate (at least £140,000), there is bound to be more interest in seeking ways to avoid this tax.
He said the increase in the personal allowance would take many more people out of paying tax altogether and in Yorkshire and Humber alone this will be true for 74,000 people from April next year.
Still aiming for a £10,000 allowance, the Chancellor announced that the figure of £8,105 for 2012/13 would be increased to £9,205 in 2013/14. Higher rate taxpayers will also benefit from this, though people with an income of more than £100,000 will still see the personal allowance tapered away as at present.
Mr Holden said a new tax relief for investment in television production, video games and animation, based on the tax relief currently afforded to film tax schemes, would be welcomed by those wishing to make tax-efficient investments. However, he pointed out that the Chancellor also announced that a new cap on tax relief for investment would also be introduced, in that relief over £50,000 in any one tax year would be limited to a 25 per cent rate.
Exactly how this will work remains to be seen, but it could serve as a severe limiting factor on investment in UK business.
Whilst the confirmation that there would be no changes to the tax system for pension contributions is great news for an area that has seen nothing but upheaval for several years, there were two announcements in relation to pensioners.
First, the age-related personal allowance, by which pensioners benefit from a higher tax-free allowance, will be scrapped from April next year for those who have not reached age 65 by then. For those who are already 65, it will be frozen until full abolition when the standard personal allowance matches it. This will put pensioners on the same footing as other taxpayers in this respect.
The other aspect is that it was proposed for consultation that the state pension age be revised periodically so as to be in-line with life expectancy. This is likely to lead most people having to work longer before retirement.