Chancellor Gordon Brown delivered a whirlwind Pre-Budget Report speech on 10 December 2003 lasting less than 35 minutes. Despite the brevity of the speech, many different areas were covered and proposals announced. He avoided any obvious tax rises choosing instead to balance the books by borrowing some £10 billion more than previously forecast.
Good news came in the form of enhanced research and development tax credits and beneficial changes to Venture Capital Trusts and the Enterprise Investment Scheme. The increases in small and medium-sized company limits mean that many more businesses will benefit from 40% first year allowances on plant and machinery.
As ever, the good news was matched with bad. Trusts came in for some harsh treatment with proposed increases in tax rates and some pretty nasty anti-avoidance provisions. Perhaps the worst news of all was hidden away in the body of the Report. Measures are to be introduced ‘to ensure that the right amount of tax is paid by owner managers of small incorporated businesses on the profits extracted from their company’. Whilst the Report is light on detail, many fear that this heralds the introduction of a national insurance charge on dividends paid out by small companies. It is impossible to second guess what the government has in mind at this stage and the uncertainty created is most unsatisfactory. However as soon as we know anything more we will advise you accordingly.
The Report was apparently silent on company vans. However buried away in the small print was confirmation that we will hear further in the spring 2004 Budget - watch this space.
Many had feared that the rates of the newly introduced Stamp Duty Land Tax would rise but they are safe – for now. Similarly rates of Class 1 and 4 national insurance which increased in April 2003 are held at the current levels for 2004/05.
Life is never dull in the world of tax! Please talk to us if you have any issues on the Pre-Budget Report or anything else we have covered in this bumper spring newsletter.