In response to the announcement made today in the Chancellor of the Exchequer’s Pre-Budget Report, Barry Marshall, UK head of tax, PricewaterhouseCoopers LLP, said:

“As expected the Chancellor introduced a comparatively neutral Pre-Budget Report. He broadly maintained his estimates of economic growth and public borrowing which are at the optimistic end of external forecasts.

“The headline grabber will be the bank payroll tax. This is clearly designed to send a message to the banking sector to rein in its bonus culture. We will have to wait and see if this and other measures have an impact on the competitive position of the UK.

“There were some encouraging measures for small companies especially those in difficulty, such as an extension of the successful time to pay arrangement.

“In terms of tax increases, there was no surprise of the return of the VAT rate to 17.5% in January. The first indication of the extra substantial tax rises required to deal with the fiscal deficit came with the announcement of a further increase of 0.5% – so a 1% increase in total – in all national insurance contributions (NICs) from 2011.

“For business, another raft of anti-avoidance measures was announced, but they will raise relatively insignificant revenues when compared against the budget deficit figures. An indication of the future approach to countering tax avoidance may be seen by the introduction of the Code of Conduct for banks and consultation on further changes to the tax avoidance disclosure. By contrast as an incentive, there will be a 10% corporate tax rate for patent income – although it is disappointing that this isn’t being introduced until 2013.”