Alistair Darling's first budget as UK finance minister stuck to his predecessor's corporate tax commitments, but left out one document that was widely predicted.
In budget 2007, Gordon Brown, then the chancellor of the exchequer, cut corporation tax by two percentage points to 28% and reformed the system of capital allowances for business, though he also put up tax on small businesses. These changes take effect from April 2008. A slip of the tongue during his speech made Darling say that the tax rate was coming down from 38%.
The budget did not produce the expected consultation document on the taxation of foreign profits. The Treasury's promise to publish proposals that follow-up last June's discussion document is contained on page 44 of the budget's Economic and Fiscal Strategy Report. It says it will do so before the summer.
Though the Treasury is looking to put any draft changes on the taxation of foreign profits into next year's Finance Bill, it is not working to fixed dates leading up to that.
"It's a high priority and we're using considerable resources on it, but we're not seeking to introduce reform to a set timetable," said a spokeswoman. "It's got to be right."
"It's gone back into the slow lane," said Peter Cussons, a partner of PricewaterhouseCoopers in London.
Anti-avoidance measures kept their by-now-annual place in the budget documents. This year among the planning that the Treasury wants to stop is the generation of artificial losses using disguised interest, using partnerships and trusts to escape controlled foreign company rules, the abuse of the corporate intangible assets regime by companies or partnerships in administration, liquidation or insolvency and acquiring a capital allowance when a company sells a trade to a profitable group that does not to continue with it in the long term.
The government also reacted to the Fleming/Condé Nast VAT case, which it lost in the House of Lords in January, by opening a transitional period for refund claims, until March 31 2009, for those taxpayers the Lords said should have been allowed such a period to claim a refund before a three-year limit on claims was introduced in 1996 and 1997.
And the government picked up on the European Court of Justice verdict in the Manninen case on the taxation of foreign dividends. From 2008 UK and EEA individual shareholders in non-UK resident companies will be entitled to a dividend tax credit on one-ninth of the distribution, if they own less than 10% in the non-resident company. This equalises the treatment of an individual's dividends from UK resident companies.
The amount of budget documents made tax professionals question the chancellor's commitment to tax simplification.
"107 new technical tax proposals don't support the Chancellor's claims to be moving towards a simpler tax system," said Richard Lambert, director-general of the Confederation of British Industry.
The budget notes ran to 270 pages, leading one adviser to speculate that the Finance Bill could top 400 pages.
