Colin Glass comments on inheritance tax increase

Businesses love Osborne’s tax cuts but blast pensions “political suicide”

5th December 2012

Chancellor George Osborne has delivered his Autumn Statement to the best reaction he could hope for: no immediate outrage or uproar over any of his measures.

Having learnt the lessons of the “omnishambles” March Budget, how are businesses feeling about Osborne’s latest raft of measures?

Obviously they’re gurgling with delight at moves like knocking the idea of a mansion tax or higher stamp duty on higher value properties on its head.

Although, there was concern that Osborne is ploughing on with new taxes to high value (£2m+) properties owned by companies from next April, with MHA Macintyre tax partner Katharine Arthur warning:

“Residential property is held by companies for many reasons, not just tax avoidance. The proposed new taxes will apply to many households which may be asset rich, but not necessarily cash rich. Many owners of high value residential properties will be looking to restructure their property holdings before 5 April 2013.”

The move to cancel a planned rise in fuel duty also went down a treat, as did the upcoming corporation tax cut to 21%.

The British Library’s entrepreneur in residence Stephen Fear is delighted with Osborne’s “exceptional and well thought-out autumn statement”.

Fear praises Osborne for the corporation tax cut as being “the lowest in the developed world at 21% [which] will encourage more overseas people to invest in the UK economy which again will create more jobs”.

Pimlico Plumbers boss (and Londonlovesbusiness.com columnist) Charlie Mullins said: “Like a business turned down for bank lending, George can only work with what he’s got. What he delivered was a statement that will encourage business and therefore help individuals.”

Gritter stuff like the boost for capital allowances was well received, with FSB chairman John Walker saying:

“It is an encouraging initiative that those businesses looking to invest in new equipment, machinery and vehicles for their business will get a tenfold increase in the amount they can invest tax free. This will boost investment which is needed to grow the economy and create jobs. This is a step in the right direction and recognition of the important role small firms will play in the recovery.”

Some were more neutral, offering a “must try harder” verdict, like the British Chambers of Commerce.

BCC director general John Longworth scoffed that Osborne was just “tinkering around the edges”, adding:

“The Budget next March must make truly radical and large-scale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state. Only a wholesale re-prioritisation of resources, to unlock private sector finance, investment and jobs, will be enough to win the ‘economic war’ we are facing. The danger is that our political class is sleepwalking with its eyes open.”

Even CBI director-general John Cridland insisted that Osborne’s words needed to be “translated into building sites on the ground”.

SumUp UK director Florian Richter cautiously welcomes the business bank but insists more action is needed, saying:

“This state-backed business bank has already been in discussion for months, but we’re still none the wiser about the details – from who would be eligible, to how the funds would be distributed. There’s been all this talk about simplified lending and easier credit, but nothing around how this will make a difference right now. So at the moment it’s very much all talk, and no action.”

Yet others were outright hostile towards ideas offered by Osborne, like the increase of the inheritance tax threshold by 1% in 2015 to £329,000, with DWFM Beckman lawyer Colin Glass raging at the “derisory increase”.

“It’s well behind the rate of inflation and especially house price inflation. Once again the Chancellor has penalised middle England by a cut of the nil rate discretionary band in real terms, bringing more people into the inheritance tax bracket,” he adds.

Policy chairman at the City of London Corporation Mark Boleat is just as frustrated with the increased levy on banks, calling it “unhelpful”.

“The banking sector has been working hard to improve balance sheets while mobilising capital and stands ready to pay its fair share to support the economic recovery. What the banks, like all businesses, require though is stability and predictably in the tax system so that they can confidently plan for the future. In this context, a fifth increase in the bank levy is unhelpful.”

What about the move to slash tax relief on pension contributions? Before it was announced, businesses told Londonlovesbusiness.com that the idea would be “desperate, naive and seriously damaging”.

Now that it is official – £50,000 going down to £40,000 – they are ballistic.

Vince McLoughlin, partner at business firm Russell New, says it could be a “drop too far” and the government is “going to the extreme and persecuting even the middle income earners”.

“Does this now mean that we are encouraging or discouraging pension provision? The problem is that far from being an attack on the wealthy as it is portrayed, the restriction to £40,000 starts to hit the middle income earner and the heart of the Tory support. It could be political suicide. Maybe a more acceptable solution is to restrict relief to the basic rate – simple to operate and overtly equitable to all earners.”

Equilibrium Asset Management partner Colin Lawson is similarly mocking, scoffing that the government’s pension policy is a “shambles”. “How can anyone plan for the future when they keep changing the rules?”

Tax head of the ACCA Chas Roy-Chowdhury says the cut is counter-productive and “gives out all the wrong signals to those who are trying to save in order to stay independent in old age”.

“It sends out a signal that the government doesn’t care about savers. I cannot say it is remotely sensible to keep messing around with peoples’ long term plans. Why keep shuffling the deckchairs, why not just let things stay as they are?” he told Londonlovesbusiness.com.

The move “hits all those who try and go out and work and do the right thing”. “They get shot down for moving up the income ladder and doing things which are helpful”, he adds.

So besides the awkward pensions “shambles”, Osborne came out this afternoon rather well for business!

 

Read the full article in London Loves Business here.