No unfunded tax cuts to be expected on Budget Day

Robert Brown

Robert Brown

We should not expect to see any unfunded tax cuts to ‘kick-start’ the economy announced on Budget Day, according to business advisory firm BDO LLP.

Robert Brown, Tax Director at BDO Bristol, believes the Chancellor will continue to play a careful balancing act between creating a platform for economic growth while also clawing back spending.

He comments: “We expect relatively focused reforms which are consistent with the major tax themes of the Coalition Government.

“This means making the UK an increasingly attractive destination for foreign direct investment; combating abusive tax avoidance and, the theme upon which they have made least progress, tax simplification.”

BDO claim that George Osborne needs to provide further guidance on the dividing line between acceptable tax planning and unacceptable tax avoidance.

Robert also believes the Chancellor could announce a flat 20 per cent corporation tax rate by the end of this Parliament.

This, he says would enable the Government to demonstrate its commitment to creating one of the most competitive corporate tax systems within the G20.

Robert further believes there is a possibility of the introduction of a reduced VAT rate for the hospitality and leisure sector, which would benefit businesses in the South West.

He comments: “The industry has been aggressively lobbying for a reduced VAT rate for visitor attractions and hotel accommodation.

“According to the industry, a reduced rate would mean more jobs, more public spending and a boost to the economy.

“It would also level the playing-field for the UK with most other major EU countries that already apply a reduced rate, recognising that tourism is a price-sensitive market.

“This could be a big boost for the South West economy.”

BDO also anticipate that the overriding fiscal imperative to reduce the fiscal deficit will prohibit a broad based employers’ national insurance rate reduction.

However, NIC holidays could be extended to apprenticeships to incentivise the take up of apprenticeship schemes.

In terms of other announcements, BDO predict that Mr Osborne may announce a £10,000 personal allowance to offer a feel good factor as part of the Government’s central personal tax policy that no one will pay income tax until they earn £10,000.

A reduction for the top rate of tax for individuals from 50 per cent to 45 per cent has already been proposed, with Robert asking whether this will see it reduced further to 40 per cent.