Gordon Brown’s Pre-Budget Report given today (5/12/05) sets out much of the policy and detail of the new tax legislation which will be included in next year’s Finance Bill.

Bill Dodwell, tax partner at Deloitte, comments:
“Business will be relatively pleased by the low level of tax changes proposed in today's Pre Budget Report.  Despite rumours of continued action against anti-avoidance, there were limited, but targeted, tax changes.

“Property groups will welcome the introduction of the new REITs regime from 2006 - but will want to see how big the conversion charge will be.  A REIT is a tax-exempt property investment company, where tax is borne only at the shareholder level.  As a result, a conversion charge is needed for taxable companies moving to a tax exempt regime.  Property companies will be affected by the major piece of anti-avoidance announced: a ban on buying capital losses incurred by other groups.  Most trading groups are unaffected, as capital gains are much less common now, due to the introduction of the 'substantial shareholdings' capital gains exemption in 2002.

“There are proposals to consult on changes to the Tax Disclosure regime - the rules whereby tax advisers, banks and companies devising their own planning must tell HM Revenue & Customs immediately they undertake tax planning.  It is envisaged that the rules will be extended from April 2006.  Business, the Revenue authorities and advisers will want to work on the plans for the extension to make sure that they do not create a significant administrative burden, without any corresponding tax yield.

“The real ghost at today's banquet is the European Court of Justice - which on 13 December will deliver its judgement in the highly-significant Marks & Spencer group relief case.  Should the Court decide in favour of M&S, major changes to the UK corporation tax system could be needed to keep the cost within manageable proportions.

“Not surprisingly the zero percent corporation tax regime for very small businesses which was introduced in 2002 will be closed down from April 2006.  What started out as a fairly simple tax regime grew rapidly in complexity in the following years once the Government realised that small businesses were incorporating to save tax. 

“The Chancellor proposes to amend two aspects of the new pensions regime which will come into force on 6 April 2006 (A-day). He has clearly taken account of the widespread press comment highlighting the opportunities for obtaining tax reliefs for ‘investments’ in fine wine, race horses and holiday homes.”

– ENDS –

About Deloitte

In this press release references to Deloitte are references to Deloitte & Touche LLP.

Deloitte & Touche LLP is a member firm of Deloitte Touche Tohmatsu, a leading professional services organisation, delivering world class audit, tax, consulting and corporate finance services, with around 120,000 people in over 140 countries. Deloitte Touche Tohmatsu is a Swiss Verein, and each of its national practices is a separate and independent legal entity.

Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.

The information contained in this press release is correct at the time of going to press.