A boost for the property sector, a four-year freeze on the inheritance tax threshold and a clampdown on tax avoidance were announced this week in what could be Chancellor Alistair Darling’s last budget.
Stamp duty is scrapped for first-time buyers purchasing homes up to £250,000 for the next two years, but increased to 5% on residential sales worth more than £1m from April 2011.
Karen Campbell, head of stamp taxes at Grant Thornton, says the relief could be exploited unless a clear definition of "first-time buyer" is found. “I suspect that this change will immediately fall into difficulty as there is little clarity in how to establish if a person is a first time buyer which could potentially encourage abuse,” she says.
“For example, there is currently scope for a couple that co-habit to assign the ownership of a new house to the partner who is a first time buyer, consequently avoiding SDLT.”
Capital gains tax remains at 18%, while relief for entrepreneurs will double. Business rate cuts are to be introduced in October for 500,000 companies, and small firms’ investment allowance will double to £100,000.
There will be no change to income tax or VAT. The Treasury expects to raise £500m by tightening the rules on tax avoidance. Penalties for undeclared offshore assets are to rise 200% where there is no agreement from the country holding the bank account or assets to disclose them to HMRC.
"These eye watering fines for taxpayers who hold bank accounts offshore which have not been declared to the UK taxman could ultimately lead to certain individuals paying the Revenue more than they had in the undeclared account in the first place,” says Heather Taylor, tax investigations specialist at Grant Thornton.
There will be new tax information exchange agreements with Belize, Grenada and Dominica. These will limit penalties for undeclared assets to 100%.
Cider duty is to rise by 10% above inflation. Wine, beer and spirit duties will rise by 2%, with a further 2% rise planned in 2013.
Richard Mannion, national tax director, Smith & Williamson accountants, said: “Winners are first time buyers, small businesses, and successful entrepreneurs.
“The losers are essentially the evaders and avoiders, the wealthy and of course cider drinkers.”
