Hope for oil and gas relief
Prepare for tax rises as Osborne fills fiscal gap
More cuts in public spending are unlikely to be his preferred option. This means only one thing – more taxes will need to be raised.
But from where?
The Government guaranteed not to raise Income Tax, National Insurance and VAT rates in this parliament, so it’s likely to be a herd of rabbits that he pulls out of his hat, removing reliefs and raising taxes across a range of areas. Overriding all this is the desire to build public support, as well as the European dimension.
For the individual taxpaying employee, a swipe at salary sacrifice schemes or the first £30,000 of tax-free redundancy payments would be easy targets, but they will not bring in a lot of revenue.
Taxing redundancy payments would hit the oil & gas industry which is already suffering extreme gloom, so this is unlikely to be top of his list. A fuel duty rise is a more obviously easier choice for him and the consumer may not even notice.
Capital Gains Tax has already been a great revenue raiser for this Government and perhaps an increase in the 10% rate for those entitled to Entrepreneurs’ Relief could be on the cards. Currently, the first £10m of qualifying gains are charged at 10% and he could tweak this.
The buy to let market has already suffered from tax changes and there is an annual tax on residential property valued over £500,000 held within companies or non-UK persons. In addition there is a non-resident landlord regime that taxes rental income earned on UK property and stamp duty / LBTT was only recently reformed. Could we see more changes here to raise more tax from those investing in UK property? Possibly.
Widespread reform of pensions is only just bedding in and further radical changes in this Budget have been mooted. The introduction of a pension ISA for contributions going in, or reducing the tax free lump sum that can be extracted, are possible options, but the Chancellor seems to have back-tracked on his idea of reducing high rate relief or pension contributions. Hopefully, he will let the already announced changes bed in first and allow individuals to understand what these mean for them.
Big corporates and further targeted anti-avoidance measures are likely to feature. We are anticipating further detail on the UK’s response to the OECD’s Base Erosion and Profit Shifting (BEPS) project, with public consultation closed on the possibility of amending the UK’s company distribution rules and the quantum of interest that’s tax deductible for a company. Restricting the latter, or restricting the offset of tax losses carried forward in big corporates, would be a revenue raising easy win for Mr Osborne and his public support wouldn’t be dented.
Topping the wish list as a Budget giveaway we hope for tax incentives and support for the deeply suffering oil & gas sector.
Susie Walker is Head of Tax at Johnston Carmichael