Rhona Irving: A workmanlike Budget will build UK's competitiveness

IN THE absence of a Pre-Budget Report from the Chancellor at the end of 2010, we may be forgiven for thinking that next week's Budget will be full of new announcements.

In fact, in what will be his first "proper" Budget, George Osborne is expected to comment on a number of measures which we have already been made aware of following his Emergency Budget in June last year, and the raft of consultation documents which have been published since.

We already know, for example, that the standard rates of corporation tax will fall by 1 per cent from 1 April, and that the rate of capital allowances will also drop from the same time next year. An increase in the rate of national insurance contributions (NIC) and changes to the income tax limits have also long been expected and will be effective from this April.

Further changes will be introduced in relation to tax relief on making pension contributions, and we can expect to see the new rules come into force on 6 April.

After this date an annual allowance of 50,000 will apply to all individuals regardless of how much they earn, with contributions in excess of this no longer qualifying for tax relief at higher income tax rates.

This is a significant change to the current annual allowance of 255,000 and is aimed at simplifying the current pensions legislation which is overly complex.

There has, however, been some speculation over the new announcements Osborne will make, with changes to investment incentives likely to play a key part in his "Budget for growth". The Chancellor has signalled that he may bring back Enterprise Zones in some shape or form as a means of stimulating growth in the construction and enhancement of new commercial properties in designated regeneration areas.

Further incentives for stamp duty land tax would be welcomed by both first-time buyers and house builders, whilst some comment over future improvements to the research and development tax credit system are anticipated.

Over the past year the Office of Tax Simplification has recommended a number of changes to investment incentives such as the enterprise investment scheme, venture capital scheme, and entrepreneurs' relief.

Simplification over the applicability of these reliefs would be welcomed by entrepreneurs and private businesses, and would surely go some way to encouraging the type of business activity which the country needs to move out of the current depressed economic cycle.

We should also hear more from the Chancellor about a number of ongoing tax consultations including restrictions on remuneration planning whereby taxpayers try to secure lower rates of tax on their income and profits. Little more is expected at this stage on the corporate tax reform, though over coming months we should start to see a little more flesh on the bones of this far-reaching reform which is designed to make the UK a more attractive place to do business internationally.Given the rise in VAT to 20 per cent in January this year, no significant changes are expected to the indirect tax regime. Any announcement relating to excise duties to deal with the recent surge in the price of oil would need to balanced against affordability, and against a backdrop of businesses operating in the oil and gas sector who are calling for more stability of the UK oil tax regime to help maintain investment and capital projects in what is a key industry for Scotland.

Increases in fuel duty for motorists have previously been announced, though given the effect recent developments in the Arab world have had on oil price, there is growing anticipation that this will be deferred. Such a move would be highly popular with the man on the street but would also be warmly welcomed by business.

No big shift in fiscal policy is expected, though the Chancellor is likely to downgrade growth forecasts for the UK economy, whilst increasing his inflation forecast. A workman-like Budget is what we can hope for, continuing the pace on ensuring the UK is a competitive place to do business, and fostering an environment in which new investment is encouraged, whilst ensuring people pay the right amount of tax at the right time.

• Rhona Irving is head of tax at PwC Scotland.