Emergency Budget 2010

Commenting on the Chancellor's emergency Budget, Anneli Collins, Head of Tax Policy, KPMG LLP (UK), stated:

Overall the Budget is likely to get a mixed response from Business, with some winners and losers. However it is a good example of expectation management, since most will be left thinking it could have been worse.

In particular, the fact that the Corporate Tax reduction is not currently matched by substantial relief restrictions will lead many to breathe a sigh of relief.

However, companies should not feel too complacent; there are huge issues up for future consultation including a general reform of the corporate tax system, taxation of foreign profits, a possible general anti-avoidance rule and amendments to the research and development tax regime, so we should reserve final judgement until we see the full impact of the proposals. Still, at present, this Budget will be welcomed by many, since if taxes have to rise, many businesses would prefer it to be via indirect taxes like VAT (although here there will be some significant losers, such as retail).

All in all the Budget looks like good news for the UK's competitiveness. This will improve with the phased reduction in the main rate of corporation tax from 28 percent to 24 percent over four years, starting next year. And while the VAT rise is significant, it still leaves us firmly "in the pack” compared to other EU countries (although again there are specific industries, such as leisure, that may be worse off comparatively.

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