Mazars’ Tax Predictions for the Chancellor's Autumn Statement Dec 5th 2012
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Filling the gap - The Chancellor George Osborne will likely use the Autumn Statement to address the treasury shortfall through stamp duty tax, pension contribution relief, corporation tax incentives and increased fuel duty.
Increases in stamp duty land tax
High cost of administration and few taxpayers make a mansion tax a "bad" tax. If something changes, expect yet further increases in the tax on buying a house. Last year we had a new 7% rate of charge on houses over £2m. One possibility is an increase in the 5% rate that applies between £1m and £2m. However it's the 3% rate that hits the greatest number of homebuyers. This kicks in at £250k. This was intended to be a higher rate on expensive houses and only applied to few purchases when the 3% band was introduced. Now many buying their home are hit with the 3% charge. In the Autumn Statement, might the Chancellor make a modest increase in this threshold? Of course unless the rate structure is changed it will just shift the cliff edge up a bit and make it even larger.
Tax relief for pension contributions
The rules for tax relief have swung back and forwards. Since April 2011 we've had an annual limit of £50k. This is much more generous than the immediately previous regime. The "cost" of higher and additional rate relief for contributions makes reducing this a tempting choice. The way the limits work means that they are extremely generous to final salary schemes - for employees in a final salary scheme the value of their pension benefits can increase by £100k or more with full tax relief. The lopsided way that the rules are more generous to members of final salary arrangements is buried in the detail and far from immediately obvious. So if the Chancellor tinkers with limits in his budget statement, will he level the playing field?
An increase in petrol and diesel duty
A 3.5p per litre increase in duty on petrol and diesel is due to come in on 1 January 2013. From 1 August this year, as you may recall, the government reversed last January's increase for a five month period to the end of the year. This end to the temporary reduction is already enshrined in legislation. The government faces a dilemma - will it temporarily extend its temporary reduction, or face down protest over a post-Christmas increase in the cost of motoring? With falling tax receipts and the political cost of being portrayed as taking a lead from the opposition, we believe the increase in duty will take effect.
No changes to corporation tax
It’s expected the Chancellor will reiterate the benefits to the UK of having a competitive (for which read low rate) corporate tax in attracting internationally mobile businesses. 2013 will see several changes take effect. Much may be made of new venture capital incentives, the already announced reductions in the main rate of corporation tax, the new "patent box" and the reformed controlled foreign company (CFC) regime.
Predicting a surprise
We always know to expect the unexpected. The almost off the cuff announcement at the Conservative party conference of employees being offered shares for giving up some employment rights came right out of the magician's hat. It is turning out to be fraught with practical difficulties. Will the surprise rabbit on the day be a more thoroughly thought through version of the same idea?
See Mazars reactions to the Autumn Statement here online, or follow us on twitter. If you’d like more information about the impact of the treasury’s announcements, please contact