Businesses invited to bring your budget predictions

The Government has announced that Budget day will be 12 March 2008 and the fundamental question this year is whether or not the Chancellor has got the appetite for further fundamental changes to the system.

Martin Kirby, Managing Director of Tenon in the North West comments: “The uncertainty is, at least in part, because civil servants are still grappling with all of the consequences of the tax changes announced in the Pre-Budget Report, we have a situation of ‘unfinished business’ across the whole tax system.

“Small businesses face having to deal with rules on income shifting which apply from 6 April, yet the consultation period is still running to the end of this month. Non-domiciled individuals face a completely new regime from 6
April and some fundamental issues are still unresolved.”

“The Chancellor has made a public commitment to simplifying the tax system, and to give him credit, there have been a number of situations where real simplification has been proposed. But the problem is that for every simplification there are two further changes that introduce further complexity. So we expect to be counting the number of times that Darling uses the word ‘simplification’ in the same way that we used to count Gordon Brown’s mentions of ‘prudence’.”

Mr Kirby continues “We think that most people would agree that our current system of taxing small businesses is a mess! The amount of tax that a business pays on its profits can vary widely depending on the structure of the business and the way in which profits are withdrawn. 

“This year we can look forward – if that’s the right expression – to the new Income Shifting rules. These are designed to ensure that the taxation of dividend income (or partnerships profits) is related to the contribution that each individual makes to the business.

“One of the things to watch out for on Budget day is whether or not there are any changes to the draft rules which were published a few weeks ago. What may happen is a gradual abolition of the small company rate.”