UK Chancellor Delivers Pro-Business Budget
Friday, March 22, 2013
UK Chancellor George Osborne has unveiled his 2013 budget, introducing tax
measures that he claims puts the UK on the path to having the "most competitive
business tax system of any major economy in the world" while promising
action against tax avoidance.
In his Budget Speech, delivered in the House of Commons, Osborne announced
that corporation tax will be reduced to 20% from April 2015. The rate will not
only be the lowest in a large economy and in the UK's history, he explained,
but will unify the small company and main rates and therefore abolish the need
to make complex marginal relief calculations. Businesses will also benefit from
a new Employment Allowance from April 2014, which will reduce the National Insurance
bill of each business by GBP2,000; companies, charities, and community sports
clubs will be able to hire someone on GBP22,000, or four people on the minimum
wage, without paying anything in what Osborne referred to as "jobs tax."
Other measures for business include an extension of the Capital Gains Tax holiday,
as well as CGT relief for sales of businesses to employees. Above the line Research
and Development credit will rise to 10%, and Osborne also reminded the House
about the 10% corporation tax rate for profits on patents, which will come in
from next month. Also, the amount that employers can loan to employees tax-free
for the purchase of items such as season tickets will be doubled, to GBP10,000.
In relation to financial services, Osborne announced the abolition of the Schedule
19 Stamp Duty Reserve Tax, which is charged on UK domiciled unit trusts and
open-ended investment companies, and of Stamp Duty on shares traded on growth
markets such as the Alternative Investment Market. He quipped: "In parts
of Europe they're introducing a financial transaction tax; here in Britain we're
getting rid of one."
Obsorne further declared that he had cancelled a planned September rise in
fuel duty and scrapped the beer duty calculator. While duty on other alcoholic
drinks will rise, and the government remains committed to introducing minimum
pricing, beer duty will in contrast decrease by GBP0.01. The ceramics industry,
meanwhile, will be exempt from the Climate Change Levy.
Regarding personal taxation, Osborne confirmed that the personal allowance
before income tax becomes payable will rise to GBP9,440 from April, and reach
GBP10,000 from next year. According to the Chancellor, this will mean that three
million of the lowest earners will no longer have to pay the tax.
The Chancellor also revealed what he described as "one of the largest
ever packages of tax avoidance and evasion measures presented at a Budget."
These include information-sharing agreements with the Isle of Man, Guernsey,
and Jersey, new rules about partnerships, corporate tax losses and offshore
employment intermediaries, and plans to "name and shame" those who
give advice on aggressive tax avoidance.
Osborne also referred to plans to bring in a General Anti-Avoidance Rule, and,
echoing comments made recently by Prime Minister David Cameron at Davos, he
promised that the UK's presidency of the G8 would be used to promote the updating
of rules regarding the taxation of multinational businesses.
Obsorne's speech also discussed the wider economic picture, and he warned that
despite increased trading with non-Eurozone countries, the UK remains exposed
to fragility in the Eurozone. He also confirmed that the Office for Budget Responsibility
had revised its forecast for GDP growth downwards to 0.6%, although it is expected
to rise to 2.8% by 2017. However, he stressed that the deficit had fallen from
11.2% of GDP in 2009-10 to a forecast of 7.4% for this year, and is on course
to reach 2.2% by 2017-18. He also explained that new jobs were being created,
particularly in the private sector.
Osborne also took aim at public spending, telling the House that state expenditure
is forecast to reach 40.5%. Departmental budgets have been cut, and "the
traditional splurge of cash by departments at the end of the financial year,
just to get the money spent, has been curtailed." However, schools and
the NHS will not be affected, and members of the armed forces will be exempt
from an end to yearly automatic pay increases.
The Chancellor also spoke of the need for "new tools." He confirmed
the continuation of the Asset Purchase Facility, which exists to improve liquidity
in credit markets, and that he would look into extending the Funding for Lending
Scheme, which allows banks and building societies to borrow more money for lending.
Plans for lending from a new Business Bank were also under development.
For individuals, homebuyers will benefit from a Help to Buy Scheme, which will
provide a 20% loan to buy a home worth under GBP600,000, and a Mortgage Guarantee,
which will allow lenders to provide mortgages to those who cannot afford a large
Osborne ended by declaring the budget to be "for an aspiration nation,"
and "for a Britain that wants to be prosperous, solvent and free."