Hello and welcome to Talkabout, the Webcast Programme from Saffery Champness. I am Keith Aitken and I am joined today by Tim Gregory, Partner in the Saffery Champness Private Wealth Group for some rapid reaction to Alistair Darling's last budget before the 2010 General Election.

Tim, what we heard this afternoon could hardly be other than a political budget in the circumstances but was there much of substance beyond the politics?

Hello again Keith, yes you are absolutely right. There was politics everywhere. The strapline that the Chancellor gave at this budget was securing the recovery and you might say that it could alternatively be termed recovering some security. I think there was a lot of vote-winning sort by the Chancellor through his speech, but on the economy side some interesting news, certainly the forecasts are looking somewhat rosier than they were. Tax receipts up, debtors down, some deficits down too but of course that is against the fact that the country is in really a very dark economic situation still.

Now I suppose some of the biggest surprises are the things that were not there, the things that had been trailed that might happen and that did not.

Yes, there were quite a few speculations in advance of the budget; probably the most significant one was potential increase in Capital Gains Tax. There was lots of talks about that going up to at least 25% possibly, possibly 30%, possibly considerably more, absolutely no change in the rate of Capital Gains Tax in most cases. There was talk about the Inheritance Tax rate increasing for estates of more than £1m, no change on that except in relation to nil rate band which perhaps we will talk about later. There were talks about VAT rates increasing up to 19 or 20% or even more and there was even talk of the increase in income tax being further increased. These are all very difficult decisions that probably need to be made after the next Election.

I suppose the centrepiece of what was there was this £2.5bn package of help with businesses particularly smaller businesses. It strikes me that was interesting for two reasons – one was the political one that it stresses the idea of investing your way out recession rather than cutting, but also the way it was paid for.

Yes, with £2bn raised from the bank payroll tax you could be forgiven for thinking that the one paid almost entirely for the other and indeed of course, that is the way that it looks but there are lots and lots of things there for businesses. There is commitments to extra lending, extra finance being available to businesses and there is a commitment of £94bn being available from the Royal Bank of Scotland and from Lloyds being the two banks under the control of the government of which £38bn is suppose to go towards small businesses, so that is great news. But in terms of the actual fiscal side of things, it is interesting to see that the annual investment allowance has been doubled from £50,000 to £100,000, giving people a tax write down over 100% in the year of purchase of plants and machinery so that is great news for business owners and probably the most significant change for business owners is an increase in the lifetime limit for entrepreneurs relief from £1m to £2m so that means that an entrepreneur can obtain chargeable gains of up to £2m throughout his or her lifetime and only pay tax of 10%.

A lot of this was targeted in smaller businesses, was it not? Particularly the business rates cut and things like that. He clearly sees that as a sort of growth for the economy for the future.

I think that is right and that must be right. That is where the growth has always been in this country – a country of lots and lots of small businesses, big businesses too, very larges corporations but lots of small businesses.

You mentioned the entrepreneurial threshold; let us talk about some more of the .personal bits of all of this. There was a surprise announcement on Stamp Duty, what there not? What there anybody expecting that?

It was trailed this morning of the budget, in terms of the holiday on Stamp Duty Land Tax for residential properties that are bought by first-time buyers up to a value of £250,000 there will be absolutely no stamp duty on those properties for first-time buyers. That side of it was announced or at least was leaked beforehand. The other side of it, an increase in stamp duty for purchases of residential properties over a £1m increased in 4% to 5% which does not sound like very much just 1% extra but bearing in mind that the base line is 4. That is an increase of 25% on buying property which is very significant.

So once again it is the strategy of trying to load the bill on to the better-off elements of the population, is it?

Yes, and it is interesting that the Chancellor himself announced during his speech that 60% of the tax increases have been paid for by the top earning 5% of the population.

Let us have a look at some of the changes that referred to people’s individual assets. First of all there is some encouragement for people who save through ISA’s was there not?

Yes there was. Investment limit in ISA’s is going to be £10,200 for 2010/11, we already knew that but the good news is that the limit is going to be linked to inflation in the future.

On the other hand he is freezing the Inheritance Tax threshold for four years that is effectively a tax rise, is it not?

Absolutely, and the nil rate band under which no Inheritance Tax is paid, is currently £325,000. It is going to stay at £325,000 for the next four years that is up to and including 2014/15.

There was a package of measures to close tax loopholes as the Chancellor was insist on calling them worth about the £0.5bn he told us, the most significant one seems to be to do with tax schemes. Can you take us through some of that?

Yes, the Disclosure of Tax Avoidance Scheme or DOTAS as it is known is something that was introduced several years ago and designs to prevent tax avoidance being achieved through the mass marketing of particular schemes. One particular change that has been announced is that the disclosure of those schemes must be made much earlier than before, which draws one to conclude that the Revenue are going to be clamping down on these things much more quickly. Another element is that the penalties for defaulting against these provisions are going to be increased substantially, so again one can see that the Revenue are really going after these sort of schemes. There is going to be an inducement for people to identify promoters of these schemes and indeed the promoters are going to have to provide lists of the people that they contact about the schemes, so there are really several things that form a package of attacks on this sort of tax planning. Interesting to see that one of the things that has been particularly targeted under this sort of heading is any kind of scheme that converts income into capital which clearly is very much in the interest of people who are going to be paying 50% Income Tax in comparison to 18% Capital Gains Tax. The Government said that they were going to attack those sorts of schemes and this is where we are seeing it.

Finally, he made great political play of the Conservatives’ non-domiciled benefactor, Lord Ashcroft with his tax-efficient Belize by announcing new information exchange agreements with a number of countries including Belize. Is that significant at all?

It is significant in a sense that is raised huge amount of reaction from the House of Commons, both in reality these tax information exchange agreements have been signed week in week out; there is no great significance of these sorts of things happening.

So, politics from first to last and I suppose the other political message from all of this we may be back here doing all this again at the other side of the election.

I thing we probably will be because it seems very likely that there will be another budget regardless of who is in power. It does not seem as though this budget is likely to have done enough to raise additional tax so even if we do see Labour return to power, I suspect that we will see another budget.

Thank you Tim. That was Tim Gregory, Partner in the Saffery Champness Private Wealth Group ending this budget day edition of Talkabout. As Tim said, regardless of the Election outcome there is going to be plenty more to talk about in the weeks and months ahead. Do join us for that.