Jackson Stephen responds to George Osborne's 2014 Budget
Chris Barrington, tax partner at Jackson Stephen, has cautiously praised the 2014 Budget, but warns the economic growth needs to support businesses as well as temporary consumer spending.
"He welcomed some of the tax rules on businesses, suggested the Chancellor needs to find more money to support with childcare costs, wants to see the complexity in the UK tax regulations be reduced and is concerned more families could be paying tax on their income three times during their lives, as Inheritance Tax levels continue to stay the same.
Chris was speaking after a Budget forum held at our offices, where north west regional business owners were joined by Chris Fletcher, deputy chief executive and director of policy and communications at Greater Manchester Chamber of Commerce.
Business Investment Tax Allowance
Chris has welcomed for the current annual investment allowance on businesses to invest in plant and equipment to be increased to £500,000 for all businesses beyond the current deadline of December 2014. This means more than 99 per cent of businesses will receive tax relief on all of their expenditure of qualifying equipment. It would be welcome to see this being continued beyond the new deadline of December 31st 2015.
It is welcome that from April 2015 there will be no National Insurance contributions for employees aged up to 21, as this will help support the current drive for young people on to apprenticeships, but the Chancellor could have raised the age limit to 28.
Personal Tax Allowances
The increase in personal allowances will put more money in the working man’s pocket and this will inevitably be spent direct in the economy. While this is positive news for many people, we must be wary of placing too much emphasis on growing the economy through consumer spending.
But the business tax relief benefits will certainly help growth among the companies and support the positive growth expectations in the economy.
Research and Development Losses
The increase to 14.5 per cent in the refund the Government will provide when a business incurs losses as a consequence of Research and Development is very much welcomed.
The announcement that the Government will help many families with young children cope with the struggle childcare cost, is to be welcomed, but doesn’t go far enough. Childcare costs often lead to parents not returning to work, but Mr Osborne should have enabled tax relief on the full cost of childcare, as this would make such a difference; allowing parents to return to work and contribute through taxes to the overall economy.
The Chancellor had the chance to increase the Inheritance Tax level from the current value of £325,000, which it has been since 2009, but by choosing to leave it alone, and it potentially staying at this rate until 2019, it means there will be a huge increase in the number of people who will be drawn over the limit and therefore paying 40 per cent tax.
Given the rise in house prices it could push millions of people over the current levels and means people could be paying tax three times on their income – Income Tax, Savings Tax and then Inheritance Tax. Of course we can live in hope that this is something Mr Osborne will amend in the Autumn Statement or in the 2015 Budget, which will be a politically sensitive manoeuvre in the run up to the General Election.
Complexity of UK Tax Regulations
The complexity of the UK financial world is beyond comprehension; we now have seven thick books on regulations, when 30 years ago there was only two. To address this we need to see significant investment in HMRC to help raise the opinion of the Government organisation among businesses and individuals.
This can help deliver a better and fairer taxing service, therefore reducing the costs of the addressing the many problems the organisation is currently forced to manage."
Chris Fletcher, deputy chief executive and director of policy and communications at Greater Manchester Chamber of Commerce. added: “The Budget has produced positive news for manufacturing, engineering and export businesses in the north west.
The annual investment allowance for business is very welcome news for north west businesses and this will have a positive effect on the regional economy.
By reducing air passenger duty, the Government is starting to help businesses increase their presence abroad.
Overall there is nothing to suggest this will derail the current economic growth and this Budget is constructive for north west businesses.”