Measures announced by the chancellor George Osborne in this year's budget include the plan for implementing the reduction of corporation tax in 2017 and again in 2020, and proposed reform to pensions.
Expert lawyers at national law firm Shoosmiths comment on these plans and proposals:
Reduction of corporation tax
Kate Featherstone, partner at Shoosmiths: 'The headline rate of corporation tax is just that, a headline. And it makes great headlines - emphasising the Conservative party's pledge to make the UK a great place to do business (the fact that the "surprise reduction" is fully funded by bringing forward the quarterly instalment payments dates isn't a headline, but it is rather clever).'
Tom Wilde, partner at Shoosmiths: 'The amendments announced to the venture capital schemes are generally more restrictive than those proposed earlier in the year, which suggests that the Government has had feedback from the EU on its original proposals (and presumably therefore is fairly confident that the new proposals will receive State Aid approval). New rules which prevent VCTs (whenever the money was raised and whether or not the investment is intended to be a qualifying holding) using their money to acquire shares, and a ban on both EIS and VCT money being used to acquire trades or assets have also been announced. Although we must wait until the detail is published next week in the Finance Bill, on the face of it this represents a new very significant restriction to the venture capital regimes. If it is as significant as it appears, then it is unfortunate and unhelpful that such a restriction was not part of the March consultation, and it would be interesting to understand the reasoning for this - was this a measure introduced at the last minute after responses to the March consultation highlighted the use of VCT and EIS funds in this way?'
Jamie Chambers, associate at Shoosmiths: 'The reduction in the rate of corporation tax to 18% is not all good news for individuals operating through personal service companies. After 6 April 2016, the removal of the notional tax credit to account for corporation tax already paid on a company's profits, originally designed to avoid double taxation, will mean that individuals will pay more tax on taxable dividends. No doubt companies will be looking to pay out healthy dividends before April 2016 - which must be good news for the Conservatives' likely tax receipts for their first year back as a solo act.'
Heather Chandler, pensions partner: 'The aims of the government in looking to simplify the pension regime and also look at ways to incentivise saving are to be supported. Our concern in moving to a TEE (tax, exempt, exempt) regime for pension saving is that it could act as a barrier to some individuals who do not have a lot of "spare cash" to invest in pensions. This effect may not be limited to those on low income given the increasing calls on the income of middle to high earners of costs such as university fees. There could therefore be an unintended drag on pension saving generally as there is an immediate dis-incentive to save, which the current EET regime was design to combat by rewarding saving with immediate tax savings. The loss of the upfront tax exemption makes pension saving immediately more costly for the individual. There may therefore be knock on effects to spending habits as reduced disposable income in most cases will equate to reduced consumption.
'The detail will be important, for example will the government top up proposed equal the tax savings enjoyed on pension contributions made currently under the EET system and when will it be applied to the pension savings. Although there is no direct change to the salary sacrifice regime the detail of any tax regime changes may mean that part of the new TEE regime is that employer contributions become subject to NI which would impact on the savings available to employers using such an arrangement.'
Suzanne Burrell, pensions partner: 'Scrapping tax relief on contributions needs to be balanced against the requirement to auto-enrol everyone into a workplace pension scheme. If payment into a pension is compulsory (auto-enrolment) then it doesn't sit right that those compulsory contributions are paid from taxed income. Perhaps unsurprisingly, this proposal seems to be more about boosting money into the Treasury now rather than about encouraging people to save for their retirement.'