And there's a little bit more!

Worldwide Debt Cap

Following further consultation with businesses, a number of amendments to the draft debt cap legislative changes, announced with the 2009 Pre Budget Report, have been proposed.  These include:

• Confirmation that limited liability partnerships cannot be the ultimate parent of a group of companies for debt cap purposes.
• The "available amount" (ie the financing costs for the group as a whole) for securitisation companies will be computed on the basis that the results of the securitisation companies were not included in the group's consolidated accounts.

Comment

Given the complexity of the legislation a clarification of the rules is welcome.  That said, we have reservations as to the framework and operation of the Worldwide Debt Cap which will be difficult for taxpayers to administer on an ongoing basis.

Chancellor in CGT Rate Quandary

Under current rules, an individual is able to claim entrepreneurs' relief on qualifying gains (including, for example, gains on the sale of shares in property trading or development companies or properties occupied for business purposes) in order to reduce their effective rate of tax from 18 per cent to 10 per cent. An individual is currently able to shelter £1m of gains across their lifetime, leading to a total lifetime saving of £80,000.

Today's Budget announced that the lifetime allowance would be doubled to £2m from 6 April 2010, effectively allowing entrepreneurs' to save an additional £80,000 at the current rates.

Comment

This change is welcome as it recognises that creating successful new businesses is the lifeblood of the economy.  However, the gulf between the 50 per cent income tax rate and the 18 per cent capital gains tax rate is glaring and it is entirely possible that the wider capital gains tax regime could be the subject of reform in the future.

The difference between the 18 per cent capital gains tax rate and the top 50 per cent income tax rate will, of course, incentivise individuals to seek ways to obtain returns from their investments by way of capital gains rather than income.  Perhaps anticipating this there has been an announcement that there will be new anti-avoidance disclosure measures designed to target schemes intended to avoid paying the 50 per cent rate of income tax.

Boosting the property industry
Small Business rate relief

The Government will fund a temporary increase in the level of small business rate relief so that, for one year from October 2010, eligible small businesses occupying properties with rateable values of up to £6,000 will pay no business rates.

Mortgage Interest

The standard interest rate used to calculate support for mortgage interest will be frozen at 6.08 per cent for a further 6 months.

Comment

Although these measures are to be welcomed, it is unlikely that they will have a profound impact beyond a small minority of taxpayer.