Authored by George Tonks
The Chancellor delivered his UK pre-Budget report on 9 December, confirming that the recession had been deeper than he had previously forecast, but predicting that the UK would return to growth from late 2009. Various positive comments followed about the state of the UK economy after 2010, although that will be after the next election, so we may well be under a different fiscal regime at that point. The growth in public sector borrowing was reported as higher than previously forecast, although not as bad as some had feared, with action proposed to reduce that and public sector spending from 2011/12. The overall picture given by the Chancellor should lead to more positive conditions for asset finance companies, although it is only his forecast.
A number of initiatives on “green” issues and the extension of the EFG may bring opportunities for asset finance companies.
On tax issues, the main headlines went to the new 50% levy on bankers’ bonuses in excess of £25,000, although we will have to wait and see whether this turns out to be simply a populist gimmick, or whether it has any substantial effect. Of more mainstream significance to asset finance companies is the further increase in NI rates and the confirmation of the return of the main VAT rate to 17.5% from 1 January 2010. Interestingly, at the same time, the Irish Government was announcing a 0.5% cut in its VAT rate, to 21%, although it had initially increased the VAT rate in response to the economic crisis. Also at the start of December, the UK Government had announced that HP transactions following the finance company’s normal commercial practice could fall outside the anti-forestalling provisions.
Further tax changes included an election to apply an alternative methodology for the effect of FA 2006 Sch10 (change of ownership of a lessor company), a move to ensure a staged sale of a lessor company falls within FA 2006 Sch10 and anti-avoidance provisions attacking structured arrangements which seek to take part of the income from an equipment lease out of UK tax, whilst still claiming full tax reliefs.
If you would like to find out more on any of these matters please contact George Tonks on +44 (0)845 003 1000 or e-mail: george.tonks@invigors.com
Comments