What Withers’ experts foresee in UK Budget

As the 16th of March approaches, speculation among tax experts as to what exactly George Osborne’s red briefcase will contain on that day continues to mount.

The partners and associates of the London-based Withers law firm, which specialises in advising clients on tax matters, have been among those speculating on that briefcase’s likely contents. From their Old Bailey offices, pictured, they’ve considered what surprises, if any, Osborne is likely to spring on his audience next week.

Below are some of their thoughts, on key topics Osborne is thought likely to address.

Anti-avoidance

Tessa Lorimer, special counsel: “I have no doubt that we will see a continuing focus on anti-tax avoidance in this year’s Budget announcement. Specifically, I expect to see legislation to introduce tougher measures for taxpayers who persistently engage in tax avoidance schemes which fail.

“Looking at offshore avoidance, I expect to see a new criminal offence that removes the need to prove intent for offshore tax evasion, and new civil sanctions for individuals and businesses which deliberately enable offshore tax evasion.

“I also anticipate an increase in the minimal penalties for deliberate offshore tax evasion, a demand for greater levels of disclosure and an increase in the naming of offshore tax evaders and those who assist them.

“Furthermore, I think we can expect to see legislation allowing HMRC to issue conduct notices to a broader range of promoters under the promoters of tax avoidance scheme (POTAS) regime, following a consultation which closed in October 2015.

“It is likely that the threshold condition for triggering a conduct notice will be promoters of marketed tax avoidance schemes who have had three defeats over an eight year period.

“Finally, regarding corporate tax avoidance, I think that special measures could be introduced to prevent large businesses who persistently engage in aggressive tax planning and/or who refuse to engage with HMRC in an open and collaborative way.”

Property tax

Sophie Dworetzsky, partner: “The tax lock means that there will be no increases to income tax, National Insurance or VAT. We also now know (it seems) that pensions will be left alone, so inquisitive minds turn to where any revenue increases are likely to be found.

“Clearly, capital gains tax and inheritance tax remain options, as well as a host of potential indirect tax raises (freezing bands and so on).

“While it is always rash to speculate (and not a little fun), we can say with some certainty that second homeowners have invoked the Government’s ire and reaped the whirlwind recently, with increases to stamp duty and CGT rates, and reduced offsets against higher rate income tax for landlords.

“Might the axe fall more generally on homeowners, with a review of capital gains on sale of primary residences? Or will the political bets be hedged, with more subtle revenue increases through the long-favoured freezing of, for example, income tax bands, so that ever more taxpayers fall into the higher rate as the tax bands fail to keep pace with earnings increases?”

Capital gains tax, entrepreneur’s relief, PPR

Chris Groves, partner: “Looking at the areas that George Osborne has the leeway to adjust, capital gains tax is excluded from the tax lock, so could conceivably be raised. Buyers and owners of second homes and buy-to-lets may also find that more is added to their tax burden too.

“On the other hand, when George considers the reliefs he can cut back, entrepreneur’s relief appears to be the most vulnerable.

“Another possibility could be capping the amount that can be claimed in Principal Private Residence relief, as is currently imposed in the US.”

Pensions

Gillian Johnson, associate:  “As higher- and additional-rate taxpayers benefit most from the current pensions system (even allowing for the £6bn savings already made through reductions in the Annual Allowance and Lifetime Allowance over recent years), I expect the Chancellor will move to the middle ground and introduce a fixed flat rate relief, probably at 25 to 30%. This would boost relief for lower rate taxpayers and still give some relief for higher and additional rate taxpayers.

“Any change should ‘proceed gradually’ so it is unlikely to take effect before 6 April 2017, although that’s not to say the Chancellor won’t take immediate steps to stop a flood of pension contributions being made in the next year with full tax relief.”

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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