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2011 Budget predictions
Practical Law UK Legal Update 7-504-9074 (Approx. 13 pages)
A summary of the issues on which we anticipate that the government will make announcements in the 2011 Budget.
Speedread
George Osborne will deliver his 2011 Budget on Wednesday 23 March 2011. This update summarises the tax issues on which we expect the government to make announcements in the Budget, including further details of the patent box and the reform of the controlled foreign companies rules and, possibly, a response to the Office of Tax Simplification's recent interim report on the taxation of small businesses.
The table below summarises the areas on which we expect announcements in the Budget. In many areas, the draft Finance Bill 2011 legislation has already been published for consultation (see Legal update, Tax policy updates and draft Finance Bill 2011 legislation). In these cases, the Budget announcement is likely to either confirm that the government intends to enact the legislation as drafted or indicate changes in light of consultation responses.
The Finance Bill is due to be published on Thursday 31 March 2011 and is not expected to include much (if any) legislation in addition to that already published. This suggests that any new measures announced on 23 March are likely to be included in a future Finance Bill (or secondary legislation).
Topics that may be covered in the 2011 Budget
Topic | What can we expect in the 2011 Budget? |
Air travel | The Budget may include an update on reform proposals in this area, which may include a freeze in the rates of air passenger duty, extension of APD to private jets and response to criticism of the government's proposal to shift APD to a per plane rather than a per passenger model. |
Bank levy | The government may announce arrangements for prevention of double taxation in relation to non-UK levies. |
Benefits and expenses: inclusion in payroll | There may be an update on the status of this measure. |
Business record checks | There is a good chance that the government will issue a response to this consultation, which closed on 28 February 2011 (the consultation document suggests that the government will publish a response in "late March"). |
CFC: full reform | Further details of proposals for reform are expected to be published in spring 2011, possibly as part of the 2011 Budget. |
CFCs: interim measures | The government may clarify the start date of these rules, to be included in the Finance Bill 2011. |
Changes in accounting treatment to cater for IFRS 9 | There may be legislation on this (final or a revised draft) or, at least, confirmation of the start date as the consultation on the draft legislation closed on 15 October 2010. |
Climate change levy reform | The government is expected to respond to the consultation, and perhaps publish draft legislation for inclusion in the Finance Bill 2011, as part of the 2011 Budget. |
Corporate capital gains: value-shifting, depreciatory transactions, degrouping and capital losses | Final HMRC guidance on the draft Finance Bill 2011 legislation may be published with the Budget (final guidance was due after the consultation ended on 22 February 2011). |
Corporation tax: main rate for 2012 | This has already been announced (26%) but is likely to be confirmed in the 2011 Budget. |
Corporation tax: small companies' rate from 1 April 2011 and associated companies | These measures have already been announced, but the reduction in the small companies' rate, at least, is likely to be confirmed in the 2011 Budget. |
Debt cap: group mismatch regulations | HMRC may publish guidance: this was promised for "spring 2011". |
Deliberate wrongdoing by tax agents | An update may be provided on this consultation. |
Disclosure of inheritance tax avoidance | The government may publish a "white list" of existing schemes and arrangements that will not need to be disclosed under the new rules, which come into effect on 6 April 2011. |
Disguised remuneration | There may be an update on this measure, following consultation on the draft legislation published in 2010. |
Employment-related securities and geared growth | This review was postponed in August 2010. It is possible that the government will give an update on its status as part of the 2011 Budget. |
Enactment of extra-statutory concessions, including ESCs C10 and C16 and equitable liability | On ESCs C10 and C16 (and certain others), there may be legislation (final or a revised draft) or, at least, confirmation of the start date as the consultation on the draft legislation closed on 7 March 2011. On equitable liability (and certain other concessions), statutory instruments may be published with the Budget. |
Enterprise zones | The Budget is expected to include details of at least 10 proposed new Enterprise Zones in England. |
False self-employment in the construction industry | It is possible that this measure may be revived in the 2011 Budget, although it seems more likely that this will continue to be deferred until economic recovery is more firmly established. |
Foreign branches | The government may clarify the start date of these rules, to be included in the Finance Bill 2011. |
General anti-avoidance rule | Although the study group is not due to report on this until 31 October 2011, the government is likely to make some mention of this measure, either giving a status update or even just confirming the work being undertaken. |
Income shifting | It is possible that this measure could be revived as part of the 2011 Budget. |
Income tax: personal allowance | The Chancellor may publish more details about the proposal to increase the personal allowance to £10,000 and/or the possibility of transferable tax allowances for married couples. |
Income tax: rates, rate limits and personal allowances for 2011-12 | These have already been announced but are likely to be confirmed in the 2011 Budget. |
Investment funds tax review | The government may make an announcement of proposals for reform in relation to, for example, tax transparent contractual investment vehicles. |
Investment trust modernisation | The government may publish draft regulations setting out a new approval process and a transactions "white list". |
IP taxation: patent box and research and development tax credit | An update on proposals for reform, including further details of the patent box, are expected to be published in spring 2011, possibly as part of the 2011 Budget. |
Non-domiciled individuals: review of taxation | The government may give more details of this review, announced in the June 2010 Budget, see Legal update, June 2010 Budget: key business tax announcements: Non-dom rules to be reviewed. |
PAYE: improvements | It seems likely that the government will issue a response to the consultation, which closed on 28 February 2011. |
Penalties: late payment: extension to VAT and other taxes | There may be an announcement on the start date for this measure, which was enacted in the Finance (No.3) Act 2010 but only starts on a date to be appointed by Treasury Order. |
Penalties: simplification of regulatory penalties | The government may publish an update on this consultation, which closed on 11 March 2011, although a formal consultation document is not expected until the summer. |
Small business taxation and IR35 review | The Chancellor may respond to the 10 March 2011 interim report of the Office of Tax Simplification as part of the 2011 Budget. If not, he will respond "shortly afterwards". Reports suggest this could include pursuing the suggestion to merge income tax and NICs (see Warning over national insurance and income tax merger plans, guardian.co.uk, 20 March 2011). |
Tax policy making: a new approach | The final form of the consultation framework is due to be published and in operation by the 2011 Budget. In addition, the protocol for announcing immediate changes to tax law is due to be published as part of the 2011 Budget. |
Tax reliefs review | The Chancellor is expected to respond to the 3 March 2011 report of the Office of Tax Simplification as part of the 2011 Budget. |
Withholding tax compliance: HMRC power to amend rules | It is possible that the government will announce that HMRC is to exercise this power. |
VAT low value consignment relief | The government is reviewing this measure and is expected to announce any changes as part of the 2011 Budget. |
VAT on shared services | The government may provide an update on the status of this measure, perhaps launching a consultation. |
Other predictions
The following are among other 2011 Budget predictions reported in the press:
- It is possible that the government may not proceed with the scheduled 1p rise in fuel duty and introduce a fuel duty stabiliser (see Scheduled 1p fuel duty rise dropped from budget, guardian.co.uk, 2 March 2011).
- The government may expand the enterprise investment scheme while possibly narrowing the scope of the venture capital trust rules (see George Osborne to act on lack of investment, Telegraph.co.uk, 4 March 2011 and AIC challenges George Osborne's comments on VCTs, AIC press release, 4 March 2011).
- The income tax basic rate threshold may be further increased, perhaps with a reduction in the higher rate threshold, although the 50% top rate seems set to stay for now (see Nick Clegg puts more middle earners in 40pc band, Telegraph.co.uk, 14 March 2011 and Osborne to use Budget sweeteners to appease voters, Independent.co.uk, 13 March 2011).
- We can expect anti-avoidance measures aimed at corporates, including measures targeting complex arrangements used by companies to pay senior executives (see Budget 2011: Osborne to unveil private jet flight tax, BBC News, 21 March 2011). It is not clear whether this is simply a reference to the proposed disguised remuneration measures or an indication of possible further measures in this area.
- It is possible that the stamp duty threshold may be raised for first-time buyers (see Osborne to use Budget sweeteners to appease voters, Independent.co.uk, 13 March 2011).
- Meanwhile, Labour has called for the bank payroll tax to be continued and for the VAT rise on petrol to be reversed, see Ed Miliband to urge new bank bonus tax, guardian.co.uk, 14 March 2011.
PLC Tax Budget coverage
For details of all PLC Tax's intended Budget coverage, see Legal update, 2011 Budget: PLC Tax coverage.