Experts warn of hidden costs of Budget
EXPERTS believe that rising costs for employing staff are a major concern for firms following the Budget.
Terry Jones, partner at accountancy firm BDO, said that given that Chancellor Alistair Darling was committed to a 1% increase in National Insurance next April then many employers would be exploring issues surrounding their employment costs such as flexible working.
Mr Jones said that support in yesterday’s Budget for research & development and a £2bn green investment bank sounded positive but we will not know their real significance until more details are released by the Government.
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A 2.2% increase in the national minimum wage is the one hidden measure in yesterday’s budget that could send small businesses reeling.
The Chancellor made no mention of the 13p hike in his budget speech, which will see minimum wage for adults rise to £5.93 and hour from October, and the measure was only revealed in a Treasury document published afterwards.
”This increase strikes a balance between helping low-paid workers and families, and ensuring that the rise does not damage their employment chances,” said the document.
”When increased in October 2010, the NMW will have risen by over 22% in real terms since the Government introduced it in 1999.”
Business lobby groups said the measure detracted from other business support measures, particularly given plans to hike employer National Insurance contributions from April next year remain in place.
The British Chamber of Commerce described the announcement as “astounding”, when other public sector wages remained virtually flat with average pay rises of 0.4%.
The highly political budget also saw Robin Hood measures, such as the increase of stamp duty to 5% on homes costing more than £1m to pay for the abolition of stamp duty for first time buyers up to a £250,000 threshold.
Other measures that will hit the better-off included confirmation that tax allowances for those earning over £100,000 would be gradually removed, and that the inheritance tax threshold frozen for four years.
The Budget also implemented measures to tackle offshore tax evasion, with the implementation of Tax Information Exchange agreements with Belize, Grenada and Dominica.
Terry Jones, tax Partner at BDO, said: “The data received from five retail banks in the UK showed HMRC that only 25% of individuals declared income from offshore accounts on their tax returns. This information is cited as one of the main reasons for pushing through further tough laws to stop tax evaders.That, and the desperate need to raise tax revenues.
“HMRC is taking a two pronged approach of huge penalties of up to 200% for those caught using offshore accounts to evade taxes, and increased information exchange. The new information exchange agreements signed by the Government are focused on offshore accounts held in countries where HMRC believe UK residents are hiding money.
“All UK banks are in the process of providing a vast quantity of information to HMRC regarding offshore bank accounts held by UK residents. We expect them to use this data to open investigations for many years to come, unless people come forward voluntarily.”
