UK Chancellor's Budget 2009

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Our View

 

Our View by Sue Bonney, Head of Tax, KPMG Europe LLP

Wednesday 22 April 2009

Commenting on what today's budget holds for big businesses, Sue Bonney, Head of Tax at KPMG Europe LLP, said:

"Today's budget was rather a mixed bag for big businesses.  There was positive news on the key issue of the taxation of foreign profits and targeted practical measures for business.  Unfortunately however, a raft of additional legislation (principally around anti-avoidance) has introduced yet more complexity.

Welcome measures:

Foreign profits: News that the move to exempt foreign-sourced tax dividends will come in from July and that it will be decoupled from the controversial debt cap rules which limit the extent to which interest can be deducted from UK tax is good news for business.  It shows that the authorities have listened to business and it should lead to repatriation of cash to the UK.

Capital allowances: The move to double capital allowances is good news.  Business can deduct more spend against their taxable profits more quickly.  It could encourage more investment sooner but only companies that are taxpaying (ie not making losses) will benefit.

Extension to loss carry-backs for SMEs and more reliefs for tax payment dates: Both these moves are helpful as they give smaller business some more valuable breathing space but there was no extension to help larger businesses on this front.

Less welcome measures:

Personal liability for senior accounting executives: Senior executives in large businesses face personal liabilities if their processes and controls are deemed less than 'adequate'  whilst reasonable in concept, this could be tricky from a practical point of view and it is important to avoid this becoming a Sarbanes Oxley equivalent for UK tax.

Personal tax rate now the highest among large western European economies: with the introduction of the 50 percent band for those earnings over £150,000, the UK now has the highest personal tax rate in western Europe.  Business may be concerned that this may make it harder for them to recruit and retain talented personnel.

Targeted provisions on closing 'loopholes': Targeted provisions closing 'loopholes' coupled with the fiscal squeeze will inevitably lead to more complexity and uncertainty.

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The Budget proposals and other tax changes are summarised on these pages. The Budget proposals may, however, be amended significantly before enactment. The content of this communication is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining liability to tax or determining investment strategy in specific circumstances. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.