Chancellor Gordon Brown has veered away from a proposed tax on corporate debt in his pre-Budget Report, much to the relief of private equity firms.
Chancellor Gordon Brown has veered away from a proposed tax on corporate debt in his pre-Budget Report, much to the relief of private equity firms.
Kevin Hindley, associate director of corporate tax at accountancy firm Chiltern, says: ‘There was widespread speculation that the Chancellor may attack deductions for interest payable on corporate debt as a result of recent decisions going against HM Revenue & Customs at the European Court of Justice.’
It seems the concern proved premature. Peter Linthwaite, chief executive of The British Venture Capital Association welcomed ‘the strong emphasis on the continuing need to improve the UK’s competitiveness and the flexibility of the workforce and economy’.
Linthwaite is encouraged by Brown’s emphasis on the ‘increasingly important role of science, innovation, investment and entrepreneurship and we welcome the focus on funding for research for schools and universities’.
However, Chiltern’s Hindley sounds a word of warning in regards to possible future changes to deductions on corporate debt. ‘[T]axpayers should watch out for any changes in this area following the judgement of the European Court in the Franked Investment Income Group Litigation Order case (British American Tobacco) which is due on the 12th December 2006,’ he says.
