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Darling Leaves UK Tax On Hold

March 2010 - Tax & Private Client. Legal Developments by Hassans.

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Delivering the government's last budget before the general election, Chancellor Alistair Darling decided against any further increases in income tax over and above those measures he has already announced.

Forecasting that the government's budget deficit will be some GBP11bn lower this year thanks to higher tax revenues in the last three months, the expectation of modest economic growth this year and next, and higher-than-budgeted revenues from the one-off bank bonus tax, Darling told the House of Commons that he has no intention of altering the rates of value-added tax, income tax or National Insurance.

However, previously announced plans for a 50% top rate of tax on incomes above GBP150,000 per year, restriction of pension tax relief for those earning GBP130,000 per year and a 1% increase in National Insurance Contributions affecting all those in employment who earn more than GBP20,000 per year will go ahead as planned. The first of these measures is set to come into force on April 6 this year, while the latter two measures will commence in April next year.

Perhaps the most eye-catching announcement was the decision to double the stamp duty threshold on house purchases for first-time buyers from the current GBP125,000 per year to GBP250,000 per year. This will take the vast majority of those buying a property for the first time out of the stamp duty net.

However, tax relief for first-time buyers is to be paid for by raising the rate of stamp duty on properties bought for over GBP1m to 5%. The inheritance tax threshold, currently GBP325,000, is also being frozen for four years.ďż˝

The usual annual increases in duty on alcohol and tobacco were also confirmed.

In a bid to relieve the strain of rising prices on British families and businesses, the Chancellor announced that a planned GBP0.03 rise in fuel duty, due to commence in April, will now be staggered over the course of the next year over the following schedule: GBP0.01 in April 2010; GBP0.01 in October 2010; and the last GBP0.01 in January 2011.

To encourage economic growth and entrepreneurship, Darling announced extended tax breaks targeted at small- and medium-sized firms, extra help for the UK's growing computer game development industry, and no increase in the rate of capital gains tax (currently 18%), as was widely expected prior to the budget.ďż˝

As expected, the Chancellor announced new measures to tackle tax avoidance and evasion, which are predicted to claw back some GBP0.5bn per year in additional revenues over the next four years. These include the signing of more agreements with offshore jurisdictions along the lines of the Liechtenstein Disclosure Facility.

However, what would ordinarily have been a rather routine announcement elicited a raucous cheer from the Labour benches when Darling told the House that the UK would be signing a Tax Information Exchange Agreement with Belize, where Lord Ashcroft, a major financial donor to the opposition Conservatives, has extensive business interests. Following a political furore over his prolonged UK 'non-domicile' status, Ashcroft recently agreed to become fully resident in the UK for tax purposes.

The Belize TIEA, along with tax agreements with Grenada and Dominica, are to be concluded in a matter of days, Darling told an excited House.

 

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