Budget - Grant Thornton's first reaction
21 March 2007
Commenting on the Chancellor's Pre-Budget report, Ian Luder, tax
partner at Grant Thornton said:
"In what may be his final budget speech, the Chancellor tried to
hit every button, shopping around for a legacy and announcing a
series of substantial measures, spanning beyond the next tax year,
which will prove a fiscal straightjacket for his eventual
successor"
Income tax:
"Scrapping the 10p lower rate of income
tax and aligning national insurance to a higher tax threshold will
eat away most, if not all of the savings generated from cutting the
basic rate of income tax by 2p to 20p from April 2008. The headline
announcement sounds good but most people are unlikely to be
celebrating."
Savings:
Disappointment remains on the announced ISA changes. "Firstly, it
is disappointing that these changes are deferred to 2008 with the
benefits only materialising in 2008/2009. Secondly, restoring the
cash element to £3,600 (in line with inflation) and pushing the
overall ISA allowance up by only 3% (over 11 years) to £7,200 is
hardly radical, long overdue and does little to further incentivise
a savings culture"
Environment:
"Despite a raft of small environmental measures, Brown's only meaty
environmental announcement regarded landfill tax which will rise by
£8 each year from 2008. A further battering of gas-guzzlers with
road tax rising to £400 is a better headline than a revenue
generating scheme - it remains to be seen whether this alone will
move drivers away from the 4x4 and onto less polluting cars or even
public transport"
Stephen Quest, tax partner at Grant Thornton commented:
Corporation Tax:
"Despite the headlines, the overall rate of corporation tax has not
been cut but redistributed. The beleaguered manufacturing sector
will be hit hard by higher taxes to fund a tax reduction for
service sector companies resulting in no overall benefit to UK
plc".
The new rates effectively kickstart the process of modernisation
of the capital allowance system, updating its post-war connotations
and placing the focus firmly on future investment
Brown's corporation tax cut from 30p to 28p is welcome but late
and still not competitive enough. UK corporates are still operating
within a tax regime which is two and a half times the rate of
Ireland, three times more than the EU average and less competitive
than Israel and several Asian economies".