Budget week

So begins a week of speculation over the Budget and what it actually means for businesses and individuals.

It’s interesting to note the main discussion over a suggested reduction in the additional rate of tax, as reported in the telegraph.

The gist is that rather than abolishing the rate altogether, it will be reduced from 50% on earnings and savings to 45%. I assume that this will be accompanied by a reduction in the dividend rate.

I’d imagine that this would see the dividend rate reduced to 37.5%. An effective rate of 30.56%, once you account for the tax credit.

Aside from this, I’m more interested in the responses to the Office of Tax Simplification reports. Particularly those on small businesses.

The OTS have put a few good simple ideas out there, but some of the more radical ideas need further work. The idea of putting businesses with a turnover of less than £30,000 on a receipts and expenses basis seems sensible. After all, almost half of small businesses appear to use this basis regardless.

A case of the legislation catching up with what happens in practice.

But it will take quite a bit of persuasion to get accountants to warm to the idea of a simplified turnover-based income tax.  I guess it will be seen as sacrificing equality for simplicity, which might be a step too far.

The concept of disincorporation relief is an interesting one in that it has been around for a long time. But nobody has really pushed the idea hard enough to make it happen. Perhaps the OTS can provide the political will to get it implemented, but let’s see what happens.

The issues with HMRC and administration will probably require less comment this week. Most of the recommendations are aimed at delivery rather than legislative solutions.

The OTS report on share schemes is also aimed at reducing administration, in suggesting a self-certification for SAYE, SIP and CSOP, very much like EMI. Though, whether CSOP survives as a separate scheme is another matter.

If most of these suggestions were adopted, it could see a significant change in how accountants and tax advisers deal with small businesses. A simpler system, and more customer-friendly interaction from HMRC is a good thing for the taxpayer, but what does it mean for their professional advisers?

Would it reduce demand from small businesses for accountancy services? Perhaps, it might be seen as less necessary to have an adviser, but what about desirable?  A simpler system should allow the adviser more time to look at where they can add value, as opposed to reducing risk.

We’ll have to wait and see, I guess. But there’s plenty more headline-grabbing things out there, I’m sure.

My one other hope is that they don’t make a massive change to the Seed Enterprise Investment Scheme… Please…

About Ben Saunders

I'm a Chartered Tax Adviser and a freelance writer. This is my personal blog about, well, mainly taxation. I might put other stuff in. Who knows.
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