Rod Edwards of London-based HeadStart Partners LLP provides an early summary of the Chancellor's latest Budget for the UK.
Rod Edwards of London-based HeadStart Partners LLP provides an early summary of the Chancellor's latest Budget for the UK.

Once again, the direct tax impact of the Budget is to be found in the 64 sets of Notes and hundreds of pages of releases and reports. Once again there is a considerable volume of anti-avoidance rules which underline the dramatic effect that the Revenue and Customs tax scheme disclosure rules have had on tax shelter arrangements.

Over and above this however the Chancellor has also removed some of the more useful (and few remaining) tax perks for employees, which may raise a little further tax but will greatly increase the administrative paperwork involved.

Personal allowances and reliefs, and income tax and NIC thresholds for 2006/07 have been increased as mentioned in the pre Budget report, and corporate tax rates remain unchanged, although the zero rate band has been abolished.  No mention of any further plans to change the tax rules on residence and domicile.

A number of the anti-avoidance rules have previously been announced but they cover:

• Seven company schemes involving contrived financial products
• Use of SIPPs to hold fine wine, residential property etc as investments post A Day, and introduction of pension "recycling" rules taxing the reinvestment of the tax free lump sum on retirement
• Sale of leasing companies that are moving from tax loss into tax profit
• Back-dating to December 2004 the use of options over securities to avoid PAYE/NIC on rewards for employees
• Rules to counter several capital loss schemes

Sadly the ability for employers to provide computers and an unlimited number of mobile phones to employees has been stopped. From 6th April, a PC or laptop can only be provided tax free if there is no private use, and only one mobile phone provided tax free.

On the benefit side the VCT regime has been extended although limited to 40% tax relief on £30,000, and the EIS limit to income tax relief has been doubled to GBP 400,000. However the size of company that qualifies for a permitted investment under both VCT and EIS rules has been halved.

Capital allowances for small businesses will be increased back to 50%, but there is, as previously mooted, a complete re-write of the finance leasing rules, where for leases over 5 years in length, it will be the lessee and not the lessor who claims capital allowances. Essentially this extends the tax law on financial products to bring tax in line with commercial reality.  The rules on Shari'a financing have also been extended, as have the temporary rules on securitisation.

There is a detailed Report on London as a global financial services centre and thankfully hedge funds do get a mention, but on the other hand the very last document on the HMRC Budget website is entitled "Progress towards a new relationship: How HMRC is working to make life easier for business".  If only that were true.