Colin Pearson, Tax Partner at EY in Aberdeen, comments:
“This is a sweet and sour Budget with big businesses paying for the cuts for small ones.
“There is the sweet taste of stimulus for small businesses through exceptions to tax relief restriction but the taste for big businesses is less easily determined. The cut in corporation tax will help, as will deferral of the announced advance in payment dates, but the seven other changes to corporation tax will raise over £9bn over the budget period.
“Whether you like the dish the Chancellor has served depends very much on which menu you are ordering from.”
Productivity revisions have blown a sizeable hole in the public finances – EY ITEM Club
Martin Beck, senior economic advisor to the EY ITEM Club comments on the Chancellor’s Budget:
“The Budget was framed by the OBR’s more pessimistic view of future productivity growth. This means that the level of GDP is 1.5ppt lower by the end of 2020 than had been forecast in November. This downward revision to the productivity assumption is a judgement call and, it must be said, a pretty bold one given how big the stakes are. We have always been of the view that the OBR errs on the side of pessimism when it comes to the supply-side and this revision takes them further in this direction.
“Given the strong link between GDP growth and tax receipts the productivity revisions have, in turn, blown a sizeable hole in the public finances with the revenues forecast more than £16bn lower in the crucial year of 2019-20 compared to last November. This Budget demonstrates the flaws in the fiscal rules. In order to achieve the budget surplus by the fixed date of 2019-20, there has to be a whole series of measures to tighten policy in that target year. There are some sizeable question marks around the OBR’s forecasts here, as there is also a major improvement in the fiscal position in 2019-20 which isn’t related to the policy measures. The £31bn drop in borrowing in that year also has no apparent impact on growth, which looks a trifle optimistic.
“Overall, the net effect of the Chancellor’s tax changes in GDP terms - excluding a major, but revenue-neutral, shifting of corporation tax payments - amounts to little more than a rounding error by the end of the decade. The real ‘takeaways’ of the Budget come via spending cuts. Another £3.5bn is taken off departmental spending in 2019-20 and public service pension contributions are set to increase due to a cut in the discount rate used to calculate payments. In addition, the Chancellor has brought forward capital spending from 2019-20, flattering borrowing in his target year for a budget surplus.”
Capital Gains Tax
Colin Pearson, Tax Partner at EY in Aberdeen, comments on capital gains tax investors’ relief:
“On a first reading this relief will be hugely attractive, but there will be a dawning realisation that it can be notoriously difficult to extract value from private companies and this may dampen the enthusiasm of investors.”
Colin Pearson, Tax Partner at EY in Aberdeen, comments on capital gains tax rates:
“The Chancellor’s cut to the headline CGT rates will be a shot in the arm for the stock market, with investors in stocks and shares being the main winners. Investors in residential property (often badged as the villain in George Osborne’s Budgets) are once again left out in the cold, with the higher 28% rate continuing to apply to disposals of second homes and buy-to-let properties.”
EY: Drinks industry raises a glass to duty freeze
Andy Fyffe, food and beverage expert at EY, comments on the freeze in duty on beer and whisky:
"The freeze on beer, cider and whisky duty will be welcomed by both manufacturers and the pubs sector. For the manufacturers specifically, it should help to preserve domestic market sales and potentially alleviate some of the margin pressures experienced in recent years, ultimately boosting profits and protecting jobs across the industry.
“This latest announcement from the Chancellor will be universally appreciated across these fiercely competitive sectors.”