TAX NEWS - June 2010

UK Tax: Firms fear Budget increases in capital gains tax

Nearly half of UK businesses are concerned about the prospect of capital gains tax rising in next week's budget – with the bulk of those worried that the government will struggle to distinguish business from non-business assets.

The British Chambers of Commerce (BCC) asked more than 1000 members for their opinions on potential tax changes ahead of Tuesday's emergency Budget.

Asked about corporation tax, 90% of companies said the government should proceed with lowering the headline rates at the expense of tax allowances. However, the BCC argues that the Treasury should only push ahead with its simplification programme after a proper economic evaluation of existing allowances and reliefs.

On national insurance, companies were clear that the planned April 2011 rise should be rolled back in full – with 30% of firms wanting it achieved "regardless of the cost". The BCC has suggested that a 1% rise in VAT would largely offset any potential lost revenue from scrapping the 1% increase to employer NICs.

Businesses were also asked what would be the least damaging way of implementing a potential 2.5% hike in VAT. Exactly half said it should happen in a single increase, from 17.5% to 20%. David Frost, BCC director-general, said: "The Chancellor must tread carefully to avoid introducing damaging new taxes that negatively affect private-sector growth.