Bill Dodwell, head of tax policy at Deloitte, comments on what today's Budget means for businesses and individuals

"Although widely expected to be a political knock-around, in truth the 2010 Budget was as much about delivering a message to the financial markets that there is a steady hand on the tiller.

"The forecast for public sector net borrowing for the current year has been reduced by £11bn (from £178bn at the PBR to £167bn). This brings the UK's net debt to 54% of GDP, which is actually better than France, Germany or the US. The UK deficit at 11.8% remains one of the highest in the world, although the Chancellor forecasts that the deficit will be more than halved over the coming four years, flowing from a combination of tax raises (60% from the top 5% of individuals) and efficiency savings.

"In absolute terms, the Budget measures are dwarfed by those announced in the PBR (the PBR forecast to raise £8.5bn over 3 years, compared to the Budget's giveaway of £560m over the same period). Modest tax increases will fund equally modest giveaways.

"The key announcement was a one-off £2.5bn package designed to promote small businesses, made up of a large number of measures which together amount to a welcome warming of the environment for entrepreneurs, including:

  • The "Time To Pay" scheme has been phenomenally successful as a recession-beating measure. £5bn of tax has been deferred by 160,000 businesses (although £4bn has been repaid). It will be extended for the whole of the next parliament It is surprising to find such a long extension; there is evidence that banks are relying on the BPSS when lending to businesses;
  • Business rates are the 3rd biggest cost for small businesses (after salaries and rents); there's a one year holiday from October 2010, but only for properties rated up to £6,000 (with partial relief for properties rated up to £12,000). 345,000 businesses won't pay rates at all;
  • The 100% deduction for capital expenditure for SMEs is doubling to £100k, potentially saving businesses £10,000;
  • Entrepreneurs selling their businesses will benefit from a doubling in the limit for the 10% capital gains tax rate (from £1m to £2m). There will also be no change to the main capital gains tax rate of 18%.

Key measures for corporates
"Great news for computer gaming, a really important industry in which the UK leads the world. Canada introduced tax breaks for computer gaming in the hope of enticing activity, and it's great to see that the UK will be creating its own reliefs worth £50m per annum.

"Disappointingly, there is still no substantive update on the Patent Box, despite wide speculation that a wider consultation would be forthcoming. However, it got a specific plug in the Chancellor's speech so is still clearly flavour of the month

"The Patent Box is due to be introduced in 2011 and the Consultation won't start formally until the summer. This won't leave much time to sort out issues in a potentially attractive and competitive regime.

"This Budget has two main themes for business: a package of support for small business and the threat of potential tax increases for employees who receive some types of shares in their employer.

"The Budget also announced possible limitations on companies using Employee Benefit Trusts and Growth shares to remunerate employees. Both these measures will be consulted on during the summer, with possible changes introduced in 2011. Working out the boundaries between income and capital gains for employees has been a continuing difficulty over many years.

"There don't seem to be new anti-avoidance measures for corporates over and above those previously announced.

Key measures for individuals
"The main disappointment for individuals is that all of the measures previously announced in the PBR continue to stand:

  • Income tax will increase to 50% for those earning more than £150k from April 2010;
  • 1p increase in NIC from April 2011;
  • Higher rate relief for pension contributions will kick in from April 2011 and the widely derided and incoherent anti-forestalling legislation is, of course, already in place. Interestingly, the Impact Assessment states that 50% of people facing restrictions live in London and the South East, 55% work in financial services, and 90% are male.

"Growth shares are an increasingly popular way of rewarding employees. They basically involve shares whose value are low at the outset and whose subsequent increase in value is subject to CGT at 18% rather than income tax. There will be consultation in Summer 2010 over their future.

"The increase in the Stamp Duty threshold to £250,000 for two years for first time buyers will be appreciated – it should help over 200,000 buyers each year. This will, in part, be funded by a new 5% threshold on residential property over £1 million, arriving in April 2011.

"New legislation is to be included in Finance Bill 2010 concerning transactions in securities for individuals, and will apply to tax 'advantages' arising on or after Budget Day. It's a measure aimed at taxing 'income to capital' planning undertaken by close companies (companies controlled by five or fewer people). The new legislation will continue to counter the income tax advantage arising from transactions, but is to be limited to transactions involving close companies. All the same, it's surprising to see that the anti-avoidance will raise £170m in the current year, given the consultation on transactions in securities was badged as simplification.

"A final disappointment is that the Government has chosen to ignore all the representations over restrictions on pensions tax relief for higher earners."

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