The facts below are extracts taken from a wide variety of professional & trade press articles following the Budget of Chancellor George Osborne. The proposals set out within the Budget speech will be ratified in due course through The Finance Act 2012 although some measures were introduced as part of the previous announcements.
In most peoples opinions it is probably fair to say that when the cosmetic appearance was stripped away, the 2012 Budget was somewhat neutral overall. There are certain areas which have caused controversy and others which have caused comedy. 2012 will in our view always be remembered as the Pasty, Pie & Pensioners Budget.
When the country is looking to emerge from an economic recession, are we really employing civil servants with the sole aim of further complicating already complex VAT legislation against a background of a Parliament keen to reduce red tape & encourage business entrepreneurship? Moreover are we concerned whether Mr Osborne has ever eaten a sausage roll from Greggs?
Income Tax rates were almost a non event as they were announced in 2011. A 5% drop in the higher 50% rate was announced but only effective from April 2013.
For Inheritance Tax purposes there was no change in limits but a 4% tax discount will be applied if the estate is over £325,000 & over 10% is left to a registered charity. A nice idea given that charitable donations have been hit by the recession but for higher rate tax payers who are minded to give to charity anyway, a lifetime donation would seem to have more benefit.
Various Benefits including State Pension & Jobseekers Allowance are increased in line with the Consumer Price Index set in September 2011 at 5.2%. Pensioners however are still mainly affected by the low rates of investment returns which affect their day to day lives and were planned to top up pensions through retirement.
The most controversial change in this area was in respect of Working Tax Credit where couples with children must work 24 hours per week instead of 16 hours and that one person must work at least 16 hours. We believe that this will have a short term impact upon businesses who have arranged part time staffing around the original rules and may now face employee requests to change their hours. Failure of an SME employer to be able to respond could see increasing movement of employees with the consequent associated costs.
On the periphery of the Budget, businesses are still struggling to obtain finance from a banking system which claims to be releasing credit in line with expectations. Whose expectations these are we cannot say as in the SME sector it is fairly clear that banks are only lending where the level of security available not only from the business but from owners personal guarantees is up to 4x the amount of borrowings. Suffice to say that Government statistics announced on 11 April showed that British firms were not investing in capital which would enable them to pull clear of recession & that they might struggle to do so. – If they cannot borrow to invest then perhaps the idea of a nationally owned business bank is the way forward? We still see banks visiting businesses, not to lend money but to sell Life Assurance & Pensions.
Finally it is worth commending our Chancellor on his astute awareness of the tax system over which he has stewardship. As recorded in an interview with the Daily Telegraph:
“Chancellor George Osborne has expressed shock after looking at 20 anonymised tax returns of multi-millionaires which demonstrated they have exploited tax loopholes to legally reduce their tax bills.”
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