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Tactical taxing

12 January, 2010
Page 14 

Well at least he left the VAT rate alone...

Perhaps the biggest relief in the Chancellor's Pre-Budget Report in December was that he resisted the temptation of any further tinkering with VAT rates, leaving us with the already-anticipated return to a standard rate of 17.5% from the start of this month. Retailers had feared the introduction of further rates to cover different types of goods or services, but thankfully that danger has passed at least until after the next election which, in case you'd forgotten, is required to be held any time between now and the end of June. That ought to give all retailer groups time to lobby each party with a plea to limit any future fiddling with rates or at least for an acknowledgement that the politicians understand just how much effort and disruption is caused in retail (and accounting) businesses by apparently 'simple' changes to VAT rates!

Not to mention booze and tobacco...

Now let's face it, what Chancellor in his right mind was going to announce a hike in tobacco and alcohol duty a couple of weeks before Christmas and Hogmanay, knowing also that his government will face the electorate just a few months later? So we can expect that onerous task to befall whoever picks up the poison chalice of the Treasury later this year quite probably with interest added.

And he dropped the Small Companies Corporation Tax rise...

A minor concession perhaps, but for those retailers operating their businesses as limited companies and there are many of you out there the Small Companies' Rate of Corporation Tax will remain at 21% for the financial year commencing April 1, 2010 and will not be increased to 22% as previously announced in last year's Budget.

Then he offered you a new (electric) van...

This is one of those odd things that Chancellors are prone to announcing as an obligatory nod to the 'green' lobby. So 100% First Year Allowance for Electric Vans legislation will be introduced to provide a 100% first-year tax allowance for business expenditure on new, unused (not second hand) electric vans for expenditure incurred on or after April 1, 2010 (corporation tax) or April 6, 2010 (income tax). At the moment it's estimated that there are only about 50 such vans in use in company car fleets yes, five-zero! Frankly this is one that probably won't happen: not only does the government admit that it is still "subject to compatibility with (EU) state-aid rules", a discussion that will hardly be a burning topic for the Brussels bureaucrats, but even if that hurdle is cleared quickly, they'll still have to make parliamentary time to legislate for it before the election.

Business Rates he won't tax your empty buildings for a little bit longer...

Now there are quite a few dealers out there who're sitting in sites that include old workshops (for example) that are simply unusable, but too expensive to demolish.

The 2008 Pre-Budget Report (PBR) announced that empty properties with rateable values of up to £15,000 would be exempt from business rates for 2009-10. In his latest PBR, the Chancellor extended this relief so that for 2010-11, empty commercial properties with rateable values up to £18,000 will be exempt from business rates, suggesting that this exemption applies to an estimated 70% of empty properties.

Of course, you have to claim the relief through your local rating authority, which may not be awfully keen to see its income drop, and which can drag the process out until ratepayers give up.

But he's taking more National Insurance off us all...

What is given with one hand is taken away with the other.

For the tax year 2011/12, in addition to the 0.5% increases to rates already announced at Pre-Budget Report 2008, the Chancellor has announced that there will be a further 0.5% increase to those rates, making a 1% increase in total from April 6, 2011. The primary threshold and lower profits limit will be increased by £570 to compensate the lowest earners. Now this is where we really do enter the world of 'politics' rather than 'economics'. If there's a change of government later this year, the incoming chancellor (of whichever party) will have plenty of time before April 2011 to reverse, leave alone or double this increase by the time it is supposed to come into effect.

Don't forget fuel duty...

As had already been announced at the time of the Budget 2009, the main fuel duty rate will increase by 1p per litre in real terms on April 1, 2010 and by a further 1ppl for each year to 2013. The current 20ppl duty differential for biofuels will cease from April 1, 2010. This is another one of those areas that only a suicidal politician would touch at the present time, as unleaded and diesel prices hit 110ppl or more.

And another one that will doubtless be racked up considerably (with due reference to the 'Global Warming Apocalypse' as justification) once the election is out of the way.

Overall then while December's headlines made a lot of noise, the reality is that many of the announcements made in the Pre-Budget Report may have very little (if any) effect on business because of the political timetable. What's definite is that we'll only see the real 'action' Budget-wise after the next Chancellor takes the keys to Number Eleven.