Financial Times Editor, Lionel Barber and Chancellor George Osborne by Financial Times Photos
George Osborne will present his Autumn Statement tomorrow, outlining the economic forecast and announcing any key changes that are expected to be introduced in the 2013 Budget. The Autumn Statement used to be called the Pre-Budget Report under the Labour Government, and is an opportunity for the Chancellor to set the scene as to how the economic landscape is predicted to change over the coming months.
There are two key areas of tax that are widely anticipated to be featured. The first of these is to further restrict tax relief on pension contributions, which tops up contributions into pension schemes by refunding tax to them. By further restricting the limit on which tax relief is given (and the rumoured figure is to £30,000 a year) the logic is that less tax is repaid to pension funds. The long term effect is that people pay less into pension funds, which may cause problems for the future, although only those making contributions in excess of this limit will be affected. Suggestions of a so called mansion tax have been dismissed by the Chancellor, but will this creep back onto the agenda?
The second area is the current hot topic of tax avoidance and mitigation, including the possibility of tackling companies who derive income from the UK but have a group structure that means that profits are taxed overseas, or challenging UK based taxpayers who enter into legal tax planning structures. There is also a suggestion of a composite tax and NIC rate being introduced to prevent mismatches as to the PAYE and NIC treatment of payments, but perhaps this is a year to early for any sweeping changes to the tax legislation to address these concerns.
It is interesting to note that even as tax planning structures are firmly in the public eye, the Rangers judgment published just last week showed that at First Tier Tax Tribunal the tax planning they had entered into was determined to be legal and the tax assessments raised by HMRC that contributed to the demise of the club were not due. HMRC has the right to appeal this decision but commercially faces a difficult choice as to whether to do so, as there is little prospect of recovering any tax even if they are succesful – perhaps the Chancellor has some wide sweeping reforms to speed up the process by which such decisions are reached as delays and uncertainty are problematic for all.
Of course, the Chancellor may play safe and simply tinker around the edges. We will have to wait and see, but whatever the outcome let’s hope that there is little burden placed on businesses that are playing such a crucial role in kick starting our economy in these challenging times.
Leanne is a Chartered Tax Adviser, specializing in advising on UK tax matters but also including overseas tax as needed. Leanne is head of Taxation Services at EHL Solicitors in Leicester.
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