Commenting on today’s Pre-Budget Report, Bill Dodwell, head of tax policy at Deloitte, says:

“The Chancellor has delivered a road map for tax reductions now, followed by tax increases in 2010 and 2011. 

Business will be pleased to see the Foreign Profits announcements, although they will still want to see the full detail.  There will be a dividend exemption in 2009, together with a worldwide debt cap on interest, which finances it.  However, the most important announcement is contained in letters to the CBI and the Hundred Group, where the move to a territorial tax base and the reduction in the scope of the Controlled Foreign Company (CFC) rules will be welcomed.  The Treasury has costed the CFC reduction at £275 million, in two years' time

Small business gets a wide ranging package of extra finance, including a scheme to spread tax payments and a new three year loss carry-back rule for losses up to £50,000.  In addition, the increase in small companies rate to 22% is deferred a year, to 2010.
 
We shall all start paying for the tax reductions in 2011, assuming the Government is re-elected.  National Insurance contributions will rise by 0.5% for both employers and employees, although the lower rate threshold will be increased to match the new personal allowance. Higher rate taxpayers will see personal allowances cut (for those earning over £100,000) and eliminated (for those earning over £140,000).  In addition, there will be a new 45% rate for those earning over £150,000.

In the meantime, the Government's message is 'spend, spend spend' at least for the next 13 months, to benefit from the reduced 15% VAT rate."

For further comment from Bill Dodwell, please call the Deloitte PBR Press Hotline on 020 7007 3333.

Ends

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