UK Budget Announcement Delivered

March 26, 2010 International Tax CooperationOffshore BankingOffshore TaxationTax HavensTaxation in UK

Alastair Darling in BirminghamChancellor Alastair Darling delivered the much anticipated 2010 UK Budget announcement on March 24th, introducing a raft of new taxation measures and confirming several propositions laid down in the 2009 Pre-Budget Report (PBR).

As was announced in the 2009 PBR, the Chancellor substantiated the long standing expectations that taxpayers with personal incomes of above GBP 150 000 will see marginal tax rates rise to 50 percent, and a restriction in pension tax relief. Inheritance tax allowances will be frozen at GBP 325 000 for 2010 and 2011. Alastair Darling also announced that from April 2011 National Insurance Contributions (NIC) will rise by an extra 1 percent.

As stipulated within the new Budget, on April 1st 2011 corporate tax rates for companies earning in excess of GBP 1.5 million will be set at 28 percent, while from April 1st 2010 businesses with profits below GBP 300 000 will be retained on a tax rate of 21 percent. Corporate tax rates for income derived from patents will be set at 10 percent from April 2013. The Government will also continue its investigation into the viability of introducing “patent box” legislation with the hopes of garnering results in time for the Finance Bill 2011.

In an escalation of efforts to reduce offshore tax evasion, the new Budget will implement new penalties of up to 200 percent on deliberate evasion or concealment of tax liabilities due on income in a offshore account. The Chancellor said that the new measure will see an additional GBP 1.5 million in fees collected annually, and the protection of an extra GBP 4 million from evasion per year. From April 6th 2011 new legislature will be enacted to clamp down on avoidance of tax through Employee Benefit Trusts. In regards to international tax cooperation, several anti-tax avoidance measures have been introduced to combat various intricate schemes developed by financial institution to maximize relief from foreign tax.

To encourage the purchase residential properties amongst young and lower income buyers, the Government will provide relief on Stamp Duty Land Tax (SDLT) on residence purchased by first-time buyers and on properties worth less than GBP 250 000. The relief measure will be offset by a new 5 percent SDLT on property purchases exceeding GBP 1 million value.

Justifying the new Budget in the face of the upcoming election, Alastair Darling said, “The choice before the country now is whether to support those whose policies will suffocate our recovery and put our future at risk, or support a government which has been right about the recession, right about the recovery, and is right about supporting the people and business of this country to build a prosperous future.”

Photo by Downing Street