ICAEW responds to detailed measures announced in Pre-Budget Report

Technical experts at the ICAEW have comments on individual measures announced in the 2008 Pre-Budget report

Reduction in VAT rate from 17.5% to 15%

Frank Haskew, head of the ICAEW’s Tax Faculty said:

“The cut in VAT is a short-term measure designed to help to rebuild the lack of confidence in the market by encouraging spending. Businesses, especially smaller ones, will have to spend precious time changing prices in tills and computer systems. The cost of doing this may outweigh the benefit of increased spending.”

John Court, head of the IT Faculty at the ICAEW said:

“Businesses should look at their accounting software and make sure they know how to change the VAT rate in their system. If they’re having difficulty, they should consult their manuals, and if necessary their software suppliers or their accountants, who in some cases will have helped them set up their accounting system in the first place.”

View the Tax Faculty's news item on the 15% VAT rate

 

Creation of 45% tax band, changes in personal allowances and increase in National Insurance contributions

Jane Moore, Technical Manager in the ICAEW’s Tax Faculty said:

“We have said that the chancellor needs to be very clear on the cost of the PBR, how it will be repaid and when. These measures won’t fund the whole package and further increases in taxes will be inevitable.”

 

Measures to help small business manage their cashflow

Clive Lewis, the ICAEW’s head of SME issues said:

“Businesses’ key concern in any recession will be preserving cash flow. Given the economic climate the freeze in the rate of corporation tax will be welcomed by small businesses, although most of them are now making less profits so will be paying less in tax.

"Time-to-pay arrangements have been used successfully in times of crisis such as farming during the foot and mouth epidemic. We welcome the Chancellor’s announcements and believe this will be helpful to small businesses in managing their cash flow over the coming year.”

 

Exemption of foreign dividends from UK tax

Ian Young, Manager in the Institute’s Tax Faculty said:

“This announcement will help resolve uncertainty, make the UK tax system more competitive and bring the UK tax system more into line with other EU countries. Uncertainty over the UK’s tax policy on foreign profits has contributed to the decisions by several large companies to relocate their corporate headquarters outside of the UK. These measures should ease those pressures.”

 

Making permanent the increase in the basic allowance

Jane Moore, Technical Manager in the ICAEW’s Tax Faculty said:

“The permanent above-inflation increase in the basic allowance will be welcome for those taxpayers who benefit. We urged the chancellor to resist the temptation to rush proposals out before Christmas, which appears to have been heeded.”

 

Inclusion of clause in Finance Act to give the Taxpayers charter legislative authority

Paul Aplin, chair of the ICAEW’s Tax Faculty said:

“This is a measure the ICAEW has been campaigning on for some time. We are therefore delighted that the Government has listened and taken on board our views.”

Visit our Pre-Budget Report 2008 resources page

24 November 2008

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Contact Simon Thompson, ICAEW press office, on 020 7920 8515 or email simon.thompson@icaew.com