Budget 2011

Home > News > Latest news > Budget 2011

Mazars issues cautionary welcome to improved tax breaks for companies and entrepreneurs.

"In addition to the welcome cut in fuel duty, the three main plusses coming out of today’s Budget for business were the increase in 10% entrepreneurs relief from gains of £5m to £10m, the proposed increase in Research & Development (“R&D”) relief to 225% and the reduction in headline corporation tax rate to 23% by 2014, starting with a 2% reduction from 1 April 2011.

Entrepreneurs relief is extremely valuable for many business owners / shareholders. With the relief potentially now worth an additional £900,000 (or £1.8m in total), business stakeholders need to ensure they satisfy the qualifying conditions and, if appropriate, defer realising gains until after 6 April 2011.

Whilst the increase in R&D relief is restricted to SME’s, all companies need to ensure that they are maximising their ability to claim this relief, especially since many companies with eligible research and development expenditure have failed to make claims in the past

The reduction in headline corporation tax is also welcome and coupled with the wholesale reform of the controlled foreign companies rules will go some way towards making the UK a more attractive location for multinational businesses but it remains to be seen if this will be enough to persuade some organisations from migrating their head office or principal functions to more tax favourable jurisdictions, especially given the increased employer and employee national insurance increases previously announced.

The consultation on merging income tax and national insurance is welcome but potentially creates an issue for the Government in terms of transparency of true effective tax rates. We also welcome the review of the effect of the 50% additional income tax rate which continues to drive an appetite for tax mitigation techniques despite HMRC’s “disguised remuneration” rules which take effect from 6th April and which could catch innocent, commercial arrangements.

Despite the welcome abolition of 43 little used reliefs, many new rules have been announced today that will affect non domiciled individuals, EIS investment, enterprise zones, capital allowances, controlled foreign companies and overseas branches as well as anti avoidance (including targeted stamp duty land tax planning).

In general, this Budget produced one or two welcome surprises, especially the reduction in the fuel levy. However whether the UK tax regime has, as a result of today's Budget, become 'simple to understand, easy to comply with' in the Chancellor’s words is clearly debatable."

- Tim Davies, Mazars UK Head of Tax