Budget 2010 Summary
The Budget: So What?
In a pre-election period the Budget delivered on 24 March had rather more content than some had expected. With almost 450 pages in the Press Releases, Technical Notes and the Budget Report there was plenty of bed-time reading.
There was no big idea – the main taxes stayed the same in structure and rates.
Apart from the usual detail on rates and allowances, the main emphasis was on avoidance, evasion and closing the Tax Gap. Like proclamations about efficiency savings and waste, announcements on avoidance and evasion can give an impression of doing something about the public finances without annoying too many voters.
The Chancellor said his specific anti-avoidance proposals would save £0.5 billion now and £3-4 billion overall. But he did not use his retrospection weapon.
One proposal (Budget Note 15), although it may be more a technical point than anti-avoidance, involves the removal of the right to a CT deduction where a close company writes off a loan to a participator. Often HMRC suggest legislation is to put matters beyond doubt but as that was not done for this proposal that may suggest HMRC accept that the relief was previously due.
HMRC believe the Disclosure of Tax Avoidance Schemes (DOTAS) has been a big success. There will be more legislation to make sure HMRC know who the promoters and users of tax planning are to speed up the process and to “extend and enhance the hallmarks that require the disclosure of avoidance schemes, including schemes involving employee remuneration and those designed to convert income into capital.” Penalties will be increased from £5,000 to up to £1 million for failure to disclose a scheme. Also proposals to bring IHT within DOTAS were announced.
Unusually, the Chancellor gave advance notice of his intention to introduce one anti-avoidance measure. This concerned what he called, “attempts to avoid tax and National Insurance contributions through the use of Employee Benefit Trusts and other arrangements to disguise payments of remuneration”. This is, “to take effect from 6 April 2011” and that wording would seem to rule out retrospective legislation. Those who might have considered these opportunities have been put on notice that their time is limited.
There will be very heavy penalties of up to 200% of the tax for evasion associated with offshore accounts in what HMRC calls ‘opaque jurisdictions’. International pressure on countries that have been unwilling to share details with the UK and other fiscal authorities continues. And in his speech the Chancellor said he expected to announce arrangements with other countries similar to that which was agreed with Liechtenstein. The Liechtenstein Disclosure Facility (LDF) is expected to raise almost £1 billion. The LDF can actually be used by people who currently have no presence in Liechtenstein- we can provide more details of what is a great opportunity.
Please see attached a summary of the main Budget announcements.
