With the 2014 Budget just around the corner, KPMG in the UK has launched a dedicated website of views and analysis. Chris Morgan, head of tax policy at KPMG in the UK, looks ahead at what to expect and what has already been announced:
“This is the Chancellor’s penultimate budget before the General Election in 2015. However, the final one will be on the eve of the election so this is his last chance to introduce measures that will have an effect before that date. What can we expect to see?
“In keeping with the stated Policy Cycle many provisions have already been announced. The most important of these are set out in this table as a reminder. However, Budgets are still a time for surprises so here are some thoughts on what we might see.
“In his speech in Hong Kong on 20 February 2014 the Chancellor suggested that the Budget would herald a return to a more balanced UK economy with allusions to restoring the UK’s manufacturing base. This may signal the Government intends to announce an extension of capital allowances – maybe to structures and related buildings - which would be very welcome as this is one area in which the UK tax system remains uncompetitive.
“Another welcome business friendly measure which would aid the recovery and jobs growth would be to bring forward the already announced NIC exemption for employing under 25 year olds to this April. However, so far, this has not been mooted publicly.
"Amidst a growing debate, some action around personal allowances seems likely. The £10,000 threshold is to come in at the beginning of the next tax year but could this be increased further? Some are suggesting it could rise to £10,500. After all, any increase in spending power for people with lower incomes is also likely to increase consumer spending. A further possibility is some relief for ‘middle England’. So far each increase in the basic rate allowance has been clawed back for higher rate taxpayers meaning that more and more people fall into the higher rate bracket.
HMRC figures show higher rate taxpayers in 2013/14 up 46 percent at 4.4 million from the 3.02 million in that bracket in 2010/11. One possibility is therefore to start to increase the threshold at which the 40% rate is paid. Another measure to help households would be a freeze on carbon taxes from 2016 to reduce energy bills.
“A fairly niche reform that has been mooted is to allow crowdfunding investments to be permitted investments for ISAs. This would be an innovative move supporting small business given the concerns about raising finance from traditional sources.
“Turning to revenue raising, the level of tax free contributions to pension funds and the overall cap on pensions savings are always candidates for Budget change. However, it is unlikely that any changes will be made here given the ongoing need to encourage general investment for old age. There have been some suggestions though that the Government wishes to raise more tax from expensive property. A possibility would be a further increase in the tax on enveloped properties, given that we have not seen the expected rush to remove properties from such structures. Another measure would be to increase council tax on unoccupied dwellings. Councils can already increase the tax to 150% but few currently do so.
“As usual, we are also likely to see some more targeted anti-avoidance rules and support to HMRC to tackle avoidance and/or evasion. The latter may well be linked to the recently released OECD Standard for Automatic Exchange of Financial Account Information.
“Finally, I think the Chancellor may make reference to the OECD Base Erosion and Profit Shifting (BEPS) work. If he does so it is likely to be on the one hand to underline the UK’s support for ensuring that multi-nationals pay their fair share of tax, while on the other hand indicating that the Government will not let the project undermine the competitiveness of the UK tax system and that there are no plans to bring in unilateral measures as have been done in some countries.”
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Chancellor’s Budget 2014
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This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.