Published on Monday, March 21, 2011
In the past few weeks, words like 'growth' and 'investment' have come out of No. 11 as the Chancellor prepares for his second Budget this Wednesday.
However, what can travel businesses and owners expect from this? Russell Eisen, tax director at Elman Wall Travel Accountants, takes a peek into his crystal ball.
Air Passenger Duty – despite ABTA’s recent letter to the Chancellor requesting reform of APD, as part of the Fair Tax on Flying campaign, it is unlikely there will be any move from a per passenger duty to that determined per plane, which will disappoint many. It has been announced that there won’t be an increase in APD for 2011 which is a step in the right direction.
Fuel Duty – in contrast, to try and help out the already beleaguered motorist suffering both the austerity cuts and high pump prices, it is probable the fuel duty inflation adjustment, calculated to be around a 5p per litre uplift, will be scaled back.
VAT – Given the 2.5% rise brought in only a couple of months ago, it is unlikely there will be any changes to this. However, although not directly the remit of the Budget, it would be welcome to get clarity in relation to the new place of supply rules that came into effect on 1 January 2011. With confusion about what exactly is caught and the possibility of double taxation, in particular for many ski and golf specialist this remains an issue, with possible loss of significant elements of their business as a result.
Corporation tax – unless there is backtracking on previous announcements, rates are set to fall. However as part of the drive for tax simplification, further to a report published on 3rd March, it is possible that there may be some imaginative administrative changes, for example aligning company tax years to the April fiscal year end.
For companies with foreign branches, e.g. ski operators, there is good news following recent Government consultations, with the 2011 Finance Act almost leading to exemption from UK tax on profits from these branches.
Equipment purchases – the current capital allowances regime is set to change again, with some impact from 1 April 2011, although the full change is not until a year later. It would be good to see an extension of the current regime allowance 100% write offs on equipment purchased up to £100k, as opposed to the £25k previously announced.
Income Tax and National Insurance – these two taxes lay at the heart of basic tax planning, relevant to most owner-managers in travel. There is, albeit slightly muted, talk of these being combined, to present more clarity in tax policy. However this is a huge exercise, and would probably not be until 2015 before any significant happened.
In the meantime almost certainly further moves will be made to up the income tax personal allowance towards the £10k exemption promised for 2015. However most middle income earnings will not feel the benefit of this due to the likely offset in actual tax bands meaning 40% tax will be paid earlier.
Capital Gains Tax – the prospect of selling travel businesses and only paying 10% tax on gains up to £5m now has the potential to stimulate longer term growth. Given the movements in this over the last 12 months, no change is expected, although a relaxing of the rules to allow employees participating via share schemes would be welcome.
It may well be that other tax efficient investment, for example venture capital trusts are now removed, to ensure focus is on those with direct business investment.
General Anti-Avoidance Rule – this could significant change the way tax planning is carried out in the UK, and the Government is already committed to this with a report due in the Autumn. However this is unlikely to stop further announcements in relation to currently perceived tax avoidance, in an effort to plug the current Tax Gap.
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