“Let’s hope Darling makes the Budget announcements unambiguous and easy to follow,” sighs Andrew Jupp, national head of Tax at Tenon.
“On Budget night last year several of the most experienced tax directors here worked long hours simply trying to piece together, from fragments of information spread between lots of separate documents, a coherent picture of what the changes actually were.”
Jupp reckons the first thing to look out for this year is unfinished business dealing with residence and domicile. “There are still a lot of loose ends that need to be tidied up,” he says.
“At the moment the UK doesn’t have a set of clear objective rules for determining whether somebody is resident in the UK. We still have to rely on subjective tests based largely on very old case law concerning master mariners who spent months on long voyages or rich Americans who hired hunting lodges for the shooting season.
“At the moment the lack of precision in our rules puts some people off coming to the UK for fear that they could become classed as resident.”
One thing’s for sure: taper relief will die a death. “If the Chancellor was going to change his mind on this one, he surely would have by now," says Jupp. "So we will have a basic CGT rate of 18 per cent (on all assets both business and personal) with a lifetime Entrepreneurs’ Relief of £1m, on which CGT will be payable at ten per cent. There will no doubt be some changes to the detail but nothing headline-grabbing."
And what about indirect tax? VAT has been at its current rate of 17.5 per cent for many years now. “We have one of the lowest VAT rates in Europe. If the Chancellor wanted to do something radical, he might just hike up the rate of VAT,” says Jupp.
“It’s instantaneous and improves the Exchequer’s cash flow almost overnight. And it could be the retailer who bears the cost. If you’re selling a sofa for £799, and VAT goes up by one per cent, do you really want to now advertise it at £805.80?
“Our wild card thought is that this might just be the year when we see a VAT rate change.”What do you expect – or hope – to see in this year’s Budget? Post your views.
Alistair Darling is speaking at the inaugural Women of the Future: The Economic Empowerment Summit on April 2 at The Dorchester. To hear him speak alongside Cherie Booth and Indra Nooyi, CEO of PepsiCo, click here.
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