The levy on bank borrowing has risen from 0.075% to 0.088%. The increased rate will be effective from January 1 2012 and represents the third time that the bank levy has been raised this year. Osborne said the new rate is expected to generate £2.5 billion ($3.9 billion) each year.
The measure, introduced today in the Chancellor’s autumn statement, is being framed as the UK’s alternative to entering into an FTT as is being championed by other European leaders, led by France and Germany.
“We want London to be the pre-eminent financial centre,” said Osborne in reaffirming the government’s rejection of an FTT, which he said is “not a tax on bankers, it’s a tax on people’s pensions”. He claimed introducing such a tax only on a European level would amount to “a tax on Britain” and instead he will use the bank levy to “make banks pay”.
“Better news for the City of London is that the Chancellor has reiterated that the UK will not consent to an EU-wide FTT,” said Richard Woolich, partner at DLA Piper.
The commitment to not folding under continued pressure from France and Germany in relation to an FTT has been welcomed.
“The Chancellor is to be congratulated for not bowing to EU pressure to introduce the FTT,” said Liz Peace, chief executive of the British Property Foundation.
Low value consignment relief will be abolished on April 1 2012 and Osborne also announced reform of the R&D tax credit scheme, with new R&D tax credits for 2013, as well as promising overall simplification of the tax system.
“The government plans to introduce an ‘above the line’ tax credit in 2013 to encourage R&D activity by larger companies,” said Samantha Vanagas, R&D tax partner at Grant Thornton. “This builds on measures at Budget 2011 to increase the generosity and accessibility of R&D tax credits for SMEs.”
On December 6, Legislation Day – or L-Day as some practitioners have coined it – will bring further specific details of the patent box and of government’s reform of the controlled-foreign company (CFC) rules and R&D tax credits.
David Pert, head of Alvarez & Marsal Taxand UK, said that while any measure to support small business is welcome as the economy flatlines, he would have liked to see greater help for big business to try and stimulate the economy.
“Accelerating the planned reduction in corporation tax would have been a big step in the right direction,” said Pert.
Osborne did confirm the corporate tax rate will move to 25% in April, part of the government’s planned commitment to move to a 23% rate effective from April 1 2014.
“If we tax firms out of existence, or out of the country, there won’t be any revenues,” he explained.
Osborne did not focus on anti-avoidance, which will surprise some, but with the general anti-avoidance rule proposals set to go through further consultation processes, as well as other related measures likely to come in throughout 2012, the issue has been left aside today.
“The government has placed a real emphasis on stamping out tax avoidance,” said Francesca Lagerberg, head of tax at Grant Thornton. “I expect to see further avoidance measures put in place that compliment this drive. I believe the chancellor will focus on stamp duty land tax and further measures to restrict the opportunity for tax avoidance.”
