UK Budget 2012

Anyone else keeping up with this?

Daily Mail (Apologies)

Small businesses are also set to benefit from a greater supply of credit as Mr Osborne announced a £20bn Government-backed loan scheme.
The much-trailed move to get banks lending to business is hoped to aid Britain's economic recovery.
From today, firms with a maximum turnover of £50m will be allowed to apply for the first £5bn of loans from banks including Royal Bank of Scotland, Barclays, Santander and Lloyds.

Budget to get Britain working again: Osborne set to slash tax for millions of families and businesses and pay for it with raid on super-rich and more public spending cuts
However, HSBC decided not to take part in the National Loan Guarantee Scheme which is designed to enable banks to borrow more cheaply on the wholesale money markets and pass on these savings to customers.
Small businesses that take out a loan will receive a discount of 1 percentage point compared to the interest rate they would otherwise have received from that bank outside the scheme.
Loans will be issued on a ‘first come, first serve’ basis, but only businesses with turnovers of less than £50million need apply.
Some £5billion of guarantees will be released from today. RBS is understood to be taking £1.5billion while Lloyds will be taking between £1billion and £1.5billion.

Lending scheme: RBS is just one of a number of banks to offer better laons for smaller businesses
But the absence of HSBC, one of the few banks to increase net lending to small businesses last year, is a blow to the initiative.
The bank said it did not need to sign up because it secures the vast majority of its funding from deposits from customers – and does not rely on the wholesale markets.
HSBC is also able to raise funds on the wholesale market at a relatively low cost already.
Controversially, the liabilities of the credit easing scheme will not appear on the nation’s balance sheet, because they will be deemed investments rather than public spending.
Opposition MPs argue the scheme demonstrates the failure of the ‘Project Merlin’ deal between the Government and the banks, which was was supposed to boost lending to small and medium-sized firms.
Mr Osborne said before the Budget: ‘It’s only because we’ve earned credibility with our deficit reduction plan that we have low interest rates, and it’s only because of this scheme that we can pass the benefits of those low rates on to businesses.’
John Walker, chairman of the Federation of Small Businesses, said: ‘We are pleased that credit easing is now available for small firms to use.
‘What we now need to see is clear communication to small firms and bank branch staff so that everyone is aware of it and how it will work so that businesses can benefit from it.’
John Longworth, director general of the British Chambers of Commerce, said the scheme was a ‘step in the right direction’ but not a ‘panacea’.
Last week a Government report warned UK businesses could face a £191billion funding gap within five years.

Corporation tax to drop from 28% to 22% in 2014.


Here is a totally slanted, but interesting nonetheless, article on the Guardian: http://www.guardian.co.uk/commentisfree/2012/mar/19/britains-tax-rules-written-by-multinationals

We live in austere times, and yet the budget this week will be a bonanza for big business. For all the chancellor's rhetoric about clamping down on tax dodging as a quid pro quo for abandoning the 50p tax rate, some of the biggest handouts will be in tax cuts and tax-avoidance-made-simple for multinationals. But this is no surprise, given that the multinationals themselves have been closely involved in rewriting the tax rules.

The budget will usher in major changes to the way UK-based multinationals are taxed on profits from their overseas subsidiaries, as well as huge cuts in corporation tax. Over the lifetime of this parliament, about £20bn will be lost in tax receipts as a result, according to the Treasury's own estimates.

By the time George Osborne's cuts to corporation tax – from 28% when the coalition took power, to 23% by 2015 – have been phased in, they will have resulted in losses of more than £5bn a year to the revenue. A further cut – to just 20% – was floated this month.

In addition to these losses in revenue, the exchequer will be deprived of close to £1bn a year by 2015 in taxes on foreign subsidiaries. The tax changes involved – to the controlled foreign companies rules – are so complex and arcane, much of the proposed cuts to taxing offshore profits have slipped in under the radar.

The Treasury argues the reforms are necessary to stimulate growth and to make our corporate tax system "more competitive". But this is a race to the bottom. The changes will encourage multinationals to shift more of their business to tax havens. There is no benefit to small- and medium-sized British companies. The reforms represent a triumph of corporate regulatory capture, begun under the last Labour government and accelerated under this one.

The technical bits are as follows: under old controlled foreign companies rules, if a British company (currently liable for a corporate tax rate of 26%) has subsidiaries overseas – in Ghana, say (tax rate 25%) and Switzerland (tax rate 8%) – and it chooses to shift profits out of the territories with the higher tax rates to the lowest tax haven rate, the UK would tax its profits on the difference between what it pays in Switzerland and the UK rate. This avoids companies being taxed twice on their profits, but also acts as a disincentive to shifting to tax havens, since it would end up paying much the same as if it left the profits in Africa.

The budget will bring in new exemptions, so that the CFC rules only apply if the tax haven subsidiary can be shown to have most of its dealings with the UK. So under the new rules, if a company transfers ownership of its brands from Ghana to Switzerland, its profits on those brands won't be subject to UK tax. It now has every incentive to shift its profits to the tax haven. The charity ActionAid estimates this could cost poorer countries £4bn a year in tax. Rubbish, says the Treasury, offering no impact assessment of its own.

The proposals, as former tax inspector and now Private Eye journalist Richard Brooks points out, will make the UK's arrangements more lenient than almost all other jurisdictions, in that only UK-generated income will be taxed in the UK while the costs of funding overseas operations remain allowable against UK profits for UK tax.

So far, so New Labour: these reforms began on its watch. But the new goodie given the go-ahead by Osborne is a further exemption which will reduce multinationals' tax bills dramatically: the exemption on profits of offshore finance company subsidiaries.

If a UK-based multinational sets up a treasury company in Switzerland and puts equity into it from the UK, which is then passed on in loans to its other subsidiaries to run its operations, with interest on the loans flowing back in profits to the tax haven. The tax rates on these profits will be a maximum of just one-quarter of the current UK rate.

These new policies have been written by multinationals. Labour established a series of working groups to consult on the CFC reform made up almost entirely of tax directors from businesses with large numbers of offshore subsidiaries.

The monetary assets working group, for example, consisted of Vodafone, Shell, Diageo, Tesco, G4S, International Power and BHP Billiton. The intellectual property group included Kraft, GlaxoSmithKline, Associated British Foods, Cable & Wireless, and the insurance working group had Aviva, RSA, XL Group, Prudential, Lloyds and AIG. The banking group came from banks including Barclays, which is famous for sophisticated tax avoidance.

Under the new coalition government, a senior manager in international corporate tax from accountants KPMG, Robert Edwards, was seconded to the Treasury for 20 months to see through developing the policy on CFC rules. His speciality at KPMG? Advising multinationals on tax-efficient cross-border financing and restructuring.

With stakeholders like this, it's no surprise that tax justice protesters have taken to direct action and occupation.

I wonder how this will effect Ireland? Could a British revival become a reality through business friendly tax-breaks?

OS119

Rojomcdojo wrote: »

...Could a British revival become a reality through business friendly tax-breaks?

its not going to do such a revival any harm, but, imv, such a development is going to depend on much more than corporation tax rates. things like domestic economy, education and infrastructure are going to be big issues for potential FDI and UK based exporting business - though to be fair, the 'business friendly' face being put on the budget, and the general mood music that the UK government is putting out are likely to help as much as the actual calculations around this or that tax rate.

George Osbourne also made clear that it is his 'aspiration' that CT goes down to 20%, though i don't think he outlined a timescale for that...

The budget will usher in major changes to the way UK-based multinationals are taxed on profits from their overseas subsidiaries, as well as huge cuts in corporation tax. Over the lifetime of this parliament, about £20bn will be lost in tax receipts as a result, according to the Treasury's own estimates.

By the time George Osborne's cuts to corporation tax – from 28% when the coalition took power, to 23% by 2015 – have been phased in, they will have resulted in losses of more than £5bn a year to the revenue. A further cut – to just 20% – was floated this month.

I would say that is quite a big deal. It's not as if the UK is posting budget surpluses. This is a move towards the Irish model, you could even say.

liammur

It's not good news to see corporation tax come down in countries. The only winners will be the Bill Gates of this world. It's a race to the bottom and at the moment we're amongst the leaders.

Fratton Fred

Rojomcdojo wrote: »

I would say that is quite a big deal. It's not as if the UK is posting budget surpluses. This is a move towards the Irish model, you could even say.

It's not a move towards the Irish model, it is a reaction to it.

MadsL

The proposals, as former tax inspector and now Private Eye journalist Richard Brooks points out, will make the UK's arrangements more lenient than almost all other jurisdictions, in that only UK-generated income will be taxed in the UK while the costs of funding overseas operations remain allowable against UK profits for UK tax.

Pigeons. Cat. Pigeons.

Cannibal Ox

I'd guess the corporation tax will only really prevent UK businesses from relocating their head office to Ireland (which is a bit pointless anyway). If they were part of the eurozone it' be a different story, but they aren't, so they aren't going to attract the big US firms Ireland aims at.

In general, it is nice to know that the Conservatives think they can buy my consent by what amounts to about a 10£ a month increase in tax credits.

getz

Cannibal Ox wrote: »

I'd guess the corporation tax will only really prevent UK businesses from relocating their head office to Ireland (which is a bit pointless anyway). If they were part of the eurozone it' be a different story, but they aren't, so they aren't going to attract the big US firms Ireland aims at.

In general, it is nice to know that the Conservatives think they can buy my consent by what amounts to about a 10£ a month increase in tax credits.

at least your getting something, me a pensioner is far worse off,its the old tory policy,take the money from the poorest to put more money into the pockets of those who dont need it

sarumite

Fratton Fred wrote: »

It's not a move towards the Irish model, it is a reaction to it.

I would argue its both.

Batsy

liammur wrote: »

It's not good news to see corporation tax come down in countries. The only winners will be the Bill Gates of this world. It's a race to the bottom and at the moment we're amongst the leaders.

We need more Bill Gates's in this country. We should do everything we can to encourage entrepreneurship, not stifle it.

That's why the Chancellor is right in cutting corporation tax and the 50p tax rate.