This was a colourful Budget with the Chancellor trying to encourage activity in the economy against a background of less than predicted growth.
Mr Osborne pulled a rabbit from the hat when he revealed a reduction in fuel duty and a conditional abandonment of future increases. The reduction was widely anticipated but the further measures exceeded expectations and will be warmly welcomed by motorists and businesses alike.
There was much to encourage investment in business and the significant increases to the opportunities for tax relief for investors and entrepreneurs should lead to increased activity in the market place.
While the headline tax rate change was the 2% reduction in the mainstream rate of Corporation Tax this will only help large companies. There was less on the table for small businesses but it was good to see a simplification of the rules and increases in the rates for Research & Development tax credits. Along with the proposed introduction of a reduced rate of tax on profits from patents there is a now a real incentive for businesses to invest in new products.
The sizeable increase in the supplementary charge for oil and gas production companies, to pay for the reductions in domestic fuel duty, should be viewed against increased oil prices leading to bigger profits. However there is a concern that this could inhibit investment in the North Sea and the knock on effect that this could have on the local economy. The reduction in the main corporation tax rate does not apply to profits earned from oil production activities and these profits will now be taxed at an eye-watering 62%. Only time will tell whether these tax increases for oil and gas companies will lead to higher prices at the pumps.
For the man in the street there was a welcome additional increase to the personal allowance. However the already announced increases in National Insurance along with the usual increases to duty rates on alcohol and tobacco and the recent increase to the VAT rate will mean that few will feel better off.
Disappointing to many will be the Chancellor’s refusal, hidden away in the small print, to abolish the much disliked IR35 rules. Along with the introduction of a statutory test for tax residence many individuals working in the oil and gas industry will continue to have an uncertain future from a tax point of view.
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