On Wednesday 9 December the Chancellor of the Exchequer the Right Honourable Alistair Darling will once again try and balance the books in his 2009 Pre-Budget Report (PBR) statement.

Observers are more than ever keen to see what the Chancellor has to say, given that, according to Allen & Overy’s UK Tax Partners:
“This year’s report will be made in unique circumstances. There is a large fiscal hole for the UK Exchequer to manage; increased tax revenues will be needed. A general election will take place within the next six months, so some of the possible measures mentioned below may fall by the wayside.”

And the partners at Allen & Overy have highlighted a number of issues they reckon will come to the fore.

First up is that there could be a VAT rise to 20% as a one-step increase from the temporary 15% rate. This in fact represents a significant cost to business associated with VAT rate changes, even though VAT may largely be a "pass through" tax for those businesses.

Second issue is the talk of an end to the generous corporation tax carry forward of losses rules, together with a time limit of such losses.

Third on the table, possibly, is a move to clarify the new dividend exemption has given rise to some uncertainty as to what amounts to a dividend, especially in relation to overseas entities.

Fourth is the issue of trying to address taxpayer behaviour and/or the relationship between HMRC and taxpayers, which might include an update on the proposed Banking Code and the first public indication that Alternative Dispute Resolution may be used to reduce the current HMRC/taxpayer dispute mountain. It could be that the Code is made less onerous, so as to encourage more banks to sign up to it.

The fifth point worthy of recognition is that following the decision in the HSBC case that the 1.5% SDRT season ticket charge is unlawful, there will almost definitely be a further announcement about how the issue of shares into clearing systems and depositaries is to be taxed.

Sixth issue is the now very attractive looking 18% Capital Gains Tax which has been put in the spotlight following the new 50% income tax rate. Although Allen & Overy point out that there here is a danger that the new rate will lead to a reduction of tax on certain profits from 40% to 18% rather an increase from 40% to 50%, which suggests either an increase in the general rate of CGT, or the introduction of a higher CGT rate for "short term" gains.

And finally, the people in the know say that strict anti-avoidance rules – given that the higher rate has increased from 40% to 50% – look very likely indeed. So maybe being paid in bottles of wine, or antiques (as happened the last time the tax rate was high), might not work this time.

Guest Article by Neil Camp