Budget 2012 - a view from the Midlands
No sooner does the Chancellor sit down, than the Budget controversy begins. So let’s look at the main headline: this, like earlier Coalition Budgets, is definitely a Budget for business. The focus really is on improving the business climate and offering incentives to base activities here. The UK is close to having the lowest corporate tax rate in the G20. Only Turkey, Saudi Arabia and Russia offer a lower rate – and they offer a slightly different investment proposition. The Patent Box regime – which offers a 10% tax rate on the income from patents – starts in April 2013. It supports much of the UK’s technology-based industries. The highly successful car industry has a great many patents, as does the Aerospace and Defence sector. The UK’s important electronics sector is another rich source of patents. We expect many companies will register more patents and benefit from the regime. The relief is based around high technology UK-based jobs. We’re also about to get a better R&D tax credit, when it will be turned into a taxable grant, from April 2013. This means temporarily loss-making companies will get some cash and, by giving that cash to the R&D team, should encourage a better-focussed relief.
The UK also has great creative industries – but it became clear that other countries were trying to muscle in with their own incentives. So I’m pleased that we’re doing something about it – with a new tax credit scheme for video gaming, TV production and animation.
There’s some controversy about the 50% tax rate – but it featured as one of the great bugbears with businesses large and small. I regard the 45% rate as an interim step, though. As the Institute of Fiscal Studies put in their Green Budget “...there might well be better ways of raising a similar amount of revenue from a similar group of people”. Of course we expect the better-off to pay the largest share –but they do already. The top 1% of income tax payers contributes 27% of all income tax receipts. The new cap on tax reliefs that may be claimed by those earning over £200,000 ensures those high earners do indeed pay a minimum level of tax – although I don’t support the idea of limiting Gift Aid in this way. UK Charities have seen their income decline and cannot afford to see further cuts due to tax policy.
What’s missing? The UK needs to spend a lot on infrastructure, but not all spend attracts tax relief. However, 24 Enterprise Zones are now going ahead, across England, including the Marches Zone in the West Midlands, which is already expanding. The Government also will fund an ultra-high speed broadband and wifi network in Birmingham, and in other major centres in the UK.
Still, time to put the laptop down. I must grab a freshly-baked meat pie – before the 20% VAT imposition in October. Getting rid of some of the VAT boundaries is one of the ways we’re paying for the tax cuts elsewhere.
Chris Loughran is the Senior Partner for Deloitte in the Midlands, responsible for the development and growth of Deloitte’s business in the region, across the full range of the firm’s services.
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