Editor's foreword

Budget 2005

As election fever (or at least a ‘slight election temperature’) grips the nation, the 16 March Budget struck once more against the principle of ‘tax simplification’.

The Hampton review

Amidst all the undeniably rivetting information arising in the Budget, the report by Philip Hampton, Reducing administrative burdens: Effective inspection and enforcement, was slightly lost as a matter of detail. Copies of it are available on www.hm-treasury.gov.uk/hampton

Despite the fact that a survey in March of 1200 people for “City and Guilds” found that one-third of people are planning to postpone retirement (one is six actually believe they will be ‘forced’ to stay in their job rather longer than they would prefer), there comes a time when work is not an option any more. I am thinking of when people need care at home or in a care home.

The Hampton review is specifically geared to reducing the number of inspections (and inspectors), by about a third. Let us hope that inspectors responsible for checking care provision are not lumped in with the same lot that might apply to such distinguished bodies as the British Hallmarking Council, British Potato Council, Football Licensing Authority, National Bee Unit, Wine Standards Board, and indeed that great beloved daddy of them all, the Financial Services Authority.

‘Cutbacks’ conjure up images of the ‘Thatcherite axe’. And, there’s nothing wrong with that in the right place perhaps, but professionals need to be aware, on behalf of their vulnerable clients, that standards need to be maintained and that if there is any inspection-related ‘slippage’, or indeed a failure to improve standards, they should make their feelings known. ECA is always responsive to this as are other organisations such as Solicitors for the Elderly. We have to be pro-active and cannot be part of any culture of “acceptance of second class service”.

The government is continuing to work to “secure consensus” on the best way to simplify trusts taxation. That will obviously be a great relief to everybody. Further consultation is now underway on the current law and proposed revisions. The aim is to get everything into the 2006 Finance Act, but it really is a matter of ‘watch this space’, but not too hard.

Tax

There were the usual batch of welcome changes such as the £200 ‘one off’ payment to hard pressed pensioners on account of council tax, modest increases in the income tax and capital gains tax allowances for 2005-2006 and an interesting development on inheritance tax. The threshold is to be increased beyond statutory indexation (SI) to £275,000 for 2005-2006 although the draft SI 2005 No 718 said £272,000 when issued! This will reduce the number of tax paying estates to ‘only’ 37,000 or six in 100 deaths. The rate is to be increased to £285,000 for 2006-2007 and £300,000 for 2007-2008. If I was cynical (perish the thought), I would suggest that the Chancellor was expecting a sudden burst of inflation which would reduce the real value of these rises. Or is it really too cynical? The price of Brent crude having just surged over $55.40 per barrel as this issue of ECA goes to press and you can usually date inflationary roots to commodity prices as any good economic historian will tell you.

The capital gains tax annual exemption for individuals is increasing to £8,500 for the tax year 2005-2006. It will be half that for most (non-settlor interested) trusts. The principal private residence exemption continues, but given that the potential taxation ‘black hole’ would be neatly filled by taxing gains on sales of residences, will this ever last?

From 5 December co-habiting same-sex couples will be able to enter ‘civil partnerships’, giving them the same legal rights as married couples. This has been extended to tax for which readers should refer to the release on the Inland Revenue website at www.inlandrevenue.gov.uk. This is likely to be something of increasing importance.

It was not the most exciting budget ever, but having had enough budgetary excitement in the volatile 1970s and 1980s to last a whole lifetime, professional advisers will undoubtedly have slept fairly easily on the night of 16 March 2005.

David Coldrick
Editor

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