Budget 2008: Crunch budget offers no significant gains for businesses and individuals in the South Midlands

Forced to scale down economic growth forecasts for the second time in less than six months,the Chancellor of the Exchequer has delivered a Budget Statement that reflects the impact of the on-going credit crisis and offers no significant gains for businesses and individuals in the region, according to PricewaterhouseCoopers LLP.

Andy Groves, senior partner and head of tax at PricewaterhouseCoopers LLP Milton Keynes, said:

"This is a Crunch Budget which reflects the impact of the on-going credit crisis and the subsequent downturn in economic conditions. While announcing only few new measures, the Chancellor of the Exchequer has clarified some of the planned changes already in the pipeline and overall, there are no significant gains for businesses and individuals in the region."

 Changes already in the pipeline that are due to take effect in April will be going ahead as planned. These include changes to capital allowances (as announced in Budget 2007), the removal of taper relief to simplify capital gains (announced in the Pre-Budget Report 2007) and the series of proposed changes to the tax treatment of non-domiciled individuals have all arrived without prior consultation with taxpayers about the consequences.

Entrepreneurial Businesses - "new rules will hardly encourage entrepreneurial spirit"
Gary Telford, head of the private client practice at PricewaterhouseCoopers LLP Milton Keynes, said:

"The Chancellor's announcement that he wants to provide new opportunities for entrepreneurs is very welcome and the extension of the Enterprise Investment Scheme relief from £400K to £500K and Enterprise Management Incentives to £120K will be beneficial.

"However the changes already announced to increase capital gains tax to 18%, increasing smaller companies corporation tax to 22% and the new rules to sharing income with spouses will hardly encourage entrepreneurial spirit."

Capital allowances on Company Cars - "another big change that will hit businesses in the region hard"

The Chancellor of the Exchequer has announced changes to the Capital Allowances scheme, which will affect businesses that provide company cars for their employees. Currently, the level at which businesses can offset the full cost of a qualifying low CO2 car against their Corporation Tax charge will be amended from the current threshold of 120g/km driven to not exceeding 110g/km driven

Pete Seedhouse, director of employment services at PricewaterhouseCoopers LLP in the region, comments:

"This is a big change coupled with the changes to the Company Car Scale Charges and Fuel Scale charges will hit Midlands’ businesses and their employees hard. This extra cost comes at a time when the costs of motoring are increasing sharply, with vehicle excise duty on certain cars increasing. The Chancellor’s decision to delay the 2p increase in fuel duty for six months will do little or nothing to allay these concerns."

Plastic bag tax - "a headline-grabber with a serious message attached"

The Chancellor of the Exchequer announced plans to legislate with a view to introducing charges on the sale of single-use plastic bags by 2009. Andy Groves, head of tax at PricewaterhouseCoopers LLP Milton Keynes, comments:

"This is a headline-grabber, with a serious message attached. The Government is increasingly looking for ways to use the tax system to address the environmental agenda. While often produced from recycled materials, plastic bags are damaging to the environment and this tax will encourage more retailers to introduce charges sooner rather than later."

For savers and wealthy individuals - "measures affecting non-domiciled individuals could risk alienating this dynamic group"

Gary Telford, head of the private client practice at PricewaterhouseCoopers LLP Milton Keynes, said:

"With more than five million non-domiciled individuals in the UK - many of whom are entrepreneurs or investors or are doing jobs that pay UK taxes - this is an important issue for the regional and national economy. The Chancellor’s decision to proceed with the proposed £30,000 charge could risk alienating this dynamic group of individuals."

Contact details
Email: Andy Groves
Tel: +44 (0)1908 353109