Jo Gilbey, tax partner at accountancy and business advisory firm BDO LLP, comments:
“The Chancellor’s Budget is already being overshadowed by two things this year: the EU referendum and pensions speculation. But with global instability and a business community feeling strangled by red tape, it’s important this Budget focuses on tax simplification and on positive incentives for firms to invest, grow and boost productivity.
“I expect this will be a revenue raising – not neutral – Budget, and will be less about tax giveaways or winning over the electorate than in previous years. It will be focused on business and economic stability, and I wouldn’t expect it will immediately hit people in their wallets on a day-to-day basis.
“Osborne will inevitably use the Budget as a platform to canvas support for an ‘in’ vote at the referendum in June. His tactic will be to warn people of the economic threat Brexit poses. I would not be surprised if he announced that, if the referendum vote results in a win for the ‘out’ camp, there’ll be an Emergency Budget in July to fiscally address what he calls Britain’s “long, costly and messy divorce” from the EU.
“In terms of the deficit, the Chancellor seems to have ruled out raiding pensions to help balance the books. The Treasury had floated several pensions options, including introducing a flat rate of tax relief on contributions or bringing in Isa-style pensions. These pose serious and complex changes for individuals and businesses alike, but government sources are now saying “it’s not the right time” for yet more pension changes.
“The challenge for the Chancellor in reducing the deficit will be whether to raise other taxes or make yet more spending cuts. The low oil price means it could finally be time for fuel duty to rise. Alternatively he may simply factor in estimates for higher corporate tax collection in future years because of the implementation of the anti-BEPS legislation.
“Overall, it’s unlikely we’ll see many significant tax announcements in the Budget this year. What we can look out for, however, are plenty of reassurances from the Chancellor that the Government is focused on ensuring the UK is a fair and transparent tax destination for business.
“The Government’s focus on a “higher wage, lower tax” economy has seen the introduction of new policies for businesses, including the National Living Wage and Apprenticeship Levy. However, these are likely to prove costly and burdensome for many businesses. Now is the time for firms to be given incentives to invest in their long-term future, in terms of both physical and digital infrastructure.
“Two ways of doing this would be to introduce a capital allowance for digital infrastructure (to include investment in automation, online control systems and the so called ‘internet of things’) and, secondly, increase the Annual Investment Allowance for expenditure on plant and machinery on a temporary basis until 2020 to help boost productivity and drive future growth.
“Looking ahead, the Government’s ambition is to create a balanced and sustainable economy. To do this, we believe Osborne should focus on three core areas: make the most of the forgotten middle (the medium-sized businesses with a turnover between £10m-£300m); help UK businesses grow internationally; and create regional and sector powerhouses that will fuel our economy.”