An emergency UK budget shows support for
public companies and small businesses, however, much needed
simplification of the tax system has failed to materialise.
Corporations have been provided with welcome
relief, while banks and especially families are the victims of the
government’s plans to tackle the budget deficit.
The Institute of Chartered Accountants in
England and Wales (ICAEW) head of tax, Frank Haskew, called on
government to simplify the UK’s complicated and burdensome tax
system to help drive economic growth.
“The Office of Tax Simplification needs to
harness the resources and experience of the tax profession to help
it achieve its goal of a simple, stable and predictable tax system”
Association of Chartered Certified Accountants
tax leader Chas Roy-Chowdhury warned some parts of the new budget
will cause pain through complexity.
“I’m disappointed that there has been no
movement on simplifying the tax system – some measures, such as the
regionalisation of National Insurance Contributions, could confuse
issues for small businesses struggling under the burden of the
system,” Roy-Chowdhury said.
Among the winners, corporation tax will be
gradually scaled down to 24% over the next four years, making it
one of the lowest rates among major global economies. The small
business rate will also change to 20% next year.
Frank Haskew said the government has listened
to businesses concerns and provided businesses sufficient time to
plan for the reductions through various tax reliefs.
“This will help build confidence in the UK as
a place to do business,” Haskew said.
However, there are concerns coming from banks
regarding a new levy that will apply 1 January 2011. The banking
levy will be based on banks’ balance sheets and the proposed rate
will be set at 0.07 percent, with an initial rate of 0.04 percent
UK head of Banking at KPMG Nigel Harman said
the changes to corporation tax are a double-edged sword for
“On the one hand, the gradual reduction in
this tax over the next four years means that the value of deferred
tax assets to UK banks will reduce considerably, and on the other
hand the ongoing reduction in the headline corporate tax rate will
mean lower taxes on future profits,” Harman said.
Another loser from the tax overhaul will be
middle income families, who are receiving savage tax credit cuts to
Roy-Chowdhury said the changes will see tax
credits aimed much more at those on lower-incomes and there will be
a steeper cut-off too.
Haskew said the government should review how
benefits are delivered to those who are in most need and the
options for structural reform.