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  1. Wealth
November 24, 2008

Reaction to Pre-Budget Report

By Spear's

David Blumenthal, corporate tax partner at Mishcon de Reya:

“In a major play to increase the competitiveness of the UK corporate tax system, the Government is going ahead with the exemption for foreign dividends for large and medium-sized companies. But what could detract from this is the proposal to press forward with reform to the controlled foreign company regime.

“It was the very uncertainty about such a reform that has been cited by many as a major factor in a series of UK companies, including Shire, UBM, and WPP announcing their departure from the UK. For small companies, the postponement of the rise in the small companies rate of corporation tax (due to increase from 21% to 22% in April 2009) is clearly welcome, but unlikely to make much of an impact.

“More helpful at the current time are (i) the proposal to enable these companies to delay making payment of their corporation tax bills over a schedule which is more manageable for them and (ii) the ability to carry back up to £50,000 losses for three years.”

Andrew Goldstone, Partner and head of the Personal Tax and Estate Planning practice at Mishcon de Reya:

“Having spooked some of the country’s most successful wealth creators last year with the botched attack on non-doms, the Chancellor has done the same again now, with his politically motivated tax hike for very high earners. Like the new tax rules for non-doms, a 45% tax rate for those earning above £150,000 will generate very little additional tax revenue yet the downsides could be enormous.

“For some of the country’s leading employers, spenders and philanthropists, both changes are a big disincentive to hanging around in the UK at a time when the country really needs them.”

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