CITY firms and their partners are most likely to benefit from the budget, which has created new areas of financial services work and greater flexibility on private pensions pay-outs.
Private client lawyers may also benefit by advising on tax changes, but high street firms may gain little from what has been a cautious budget.
Venture capital trusts were the most exciting announcement for firms acting for institutions – largely the City practices.
The trusts, to be listed on the Stock Exchange, aim to raise u2.5 billion in three years for new ventures. They will be aimed at wealthy individual investors, who will enjoy big tax breaks. Such investors will get up to 60 per cent of their inv-estment tax free, because of an intended 20 per cent tax relief plus suspension of capital gains tax on the trusts.
“It's going to be good for City firms that act for the promoters of these things,” says leading tax lawyer Ron Downhill, partner at Berwin Leighton and previously chair of the Law Society's revenue law committee.
Further provisions on Schedule D self-assessment and the Inland Revenue anti-avoidance provisions, which affect all partnerships in the 1995-96 period of transition from preceding year to current year taxation, were largely as expected.
The anti-avoidance penalty will stand at 25 per cent – so if a lawyer is found manipulating accounts to avoid tax on u10,000, he or she could end up paying tax on u12,500, says Downhill.
Lawyers with the biggest personal pension plans will benefit most from the relaxation of pension rules, allowing them to make withdrawals without buying an annuity, says Downhill.
Private clients renting out property will benefit from simplified assessment on Schedule A, allowing the set-off of expenses and interest as though they are a business. Tax for beneficiaries of estates is simplified, the first maturing TESSAs will now be allowed to roll into new ones, and PEPs can now invest in corporate bonds as well as shares, for income rather than just capital gain.
“For the high street firms, the only benefit will be for wealthy private clients,” says Downhill.