The pre-Budget report enables the chancellor to announce good news in advance, and he reserves the bad news for consultation papers released at other times. This year, the big question is: will Gordon Brown increase taxation, or, more likely, increase stealth taxation?
He is committed to maintaining existing rates of income tax and has announced frozen personal allowances for 2003/4. Worse still, he's slapped 1% on all National Insurance contributions, with no upper limit. He could easily add another 1% for 2004, now that he has unlocked this Pandora's box. So it will pay to advance bonuses to the current financial year.
There is a good deal of uncertainty about how to mitigate the impact of irrecoverable VAT and what is or is not acceptable to Customs and Excise. It is likely to be some time before these issues are resolved, so expect yet more VAT avoidance legislation.
A reduced VAT rate of 5% was introduced on some kinds of refurbishment two years ago to help bring underperforming residential stock to the market place. The industry has been lobbying for a zero rate on repairs but this seems ambitious. However, a 5% rate on repairs to residential property might be a sop.
A radical reform of stamp duty is likely to be included in the 2003 Finance Bill, effective from later in the year. Expect a change of name, which can hide a tax hike. The good news is that the European Union has permitted the abolition of stamp duty on commercial property in disadvantaged areas, which includes swaths of inner city areas. This is likely to take effect from next month.
Consultation papers are doing the rounds on the reform of corporation tax, pensions and the construction industry scheme, so changes are unlikely before 2004.
Helen Demuth is a director at Smith & Williamson, the professional and financial services group. Email firstname.lastname@example.org