Experts From Pinsent Masons Respond to Today's Emergency Budget

LONDON, June 22, 2010 - Experts from international law firm Pinsent Masons comment on the
Chancellor's Emergency Budget delivered today 22 June 2010:

VAT Rise to 20%

Ian Hyde, tax partner at Pinsent Masons comments:

"The increase in rate will be a blow for retailers who will either have
to increase their prices to cover the increase in VAT or accept a reduction
in profit margins if they absorb the increase.

Exempt and partially exempt businesses such as financial services
companies, universities and residential landlords which cannot recover any
VAT that they incur will also suffer with the increased rate. For these
businesses there will either be a 2.5% increase in their cost base or
pressure on suppliers to hold down prices.

The UK has joined other EU member states including Greece,
Hungary, Spain, Ireland, Finland and Portugal in increasing its VAT rate in
recent months."

Capital Gains Tax

Catherine Robins, tax partner at Pinsent Masons comments:

"The CGT rules have been changed with effect from midnight so
that gains made by higher rate taxpayers will now be taxed at 28% rather than
18%. Gains made by basic rate taxpayers will continue to be taxed at 18%.

"This is somewhat lower than the increase which had been expected
in some quarters (a headline rate of 40% had been rumoured), which will come
as a relief to many.

"In addition, there has been an extension in the lifetime limit
for 'entrepreneur's relief'. The first GBP5m of lifetime gains on qualifying
'business assets' will now qualify for an effective 10% rate (instead of the
first GBP2m previously).

"However, the Government has not relaxed the strict qualifying
criteria for entrepreneur's relief. Specifically, despite lobbying from the
private equity sector, shares will still only qualify if they are held in a
'trading company', and the shareholder is an employee with a holding of at
least 5%. This will be disappointing news for many management shareholders,
and also 'carried interest' holders, who frequently do not meet the 5%
qualifying condition, as there had been hopes of a more thorough overhaul of
the regime.

"On the other hand, however, owners of assets such as property
investments, which would generally not qualify for entrepreneur's relief,
will be relieved that they have not suffered a higher increase in their
liabilities."

National Insurance (NICs)

Matthew Rowbotham, senior associate, tax, comments:

"As expected, the Emergency Budget has stuck with the increased
rates of NICs (both employer and employee) to be introduced from April 2011;
these future rate rises had been announced by the previous Government, and
the Coalition Government has now confirmed its intention to go through with
these.

"The increases will be partly off-set for employers by increases
to the thresholds for employer NICs and for employees by increases to the
income tax personal allowance. However, employers with a high-paid workforce
can still expect significantly increased NIC bills. Some employers will of
course benefit from reduced corporation tax rates, but this won't help
businesses whose profits are already-depressed (or worse, are making losses)
due to current economic conditions."

Tax avoidance and loopholes

Eloise Walker, tax partner, comments:

"The Coalition has made good their promise to crack down on tax
avoidance. Two contrasting areas here are specific measures aimed at creation
of artificial tax credits and generic measures aimed at de-recognition of
loans and derivatives.

"The former looks like other anti-avoidance measures we've seen
before - a specific response to a specific problem - and will (hopefully)
only affect those guilty of the scheme in question. The latter is described
as "generic legislation" and may be indicative of HMRC looking at more
general anti-avoidance rules (GAARs). HMRC's attempts to introduce GAARs have
thus far met with considerable opposition and it is to be hoped such will
prove to be the case here, given their tendency to hit innocent transactions
and cause a compliance burden out of proportion to their intended targets."

Corporate tax reform

Eloise Walker, tax partner, comments:

"In amongst the good news and bad today is a mixed bag for
corporate tax reform. Among the key announcements was a phased reduction in
the corporation tax rate to 24%, which will be good news for some sectors
(albeit funded by reductions in capital allowances). An overhaul of the
Controlled Foreign Company (CFC) rules by spring 2012 is also promised. Given
the (very) slow progress to date on CFC reform, it's somewhat disappointing
that we're going to have to wait another two years for this to bed down into
new rules. This will particularly affect industries involved in inbound and
outbound investment, which have suffered over the last few years from lack of
stability and certainty in the UK tax treatment of global groups."

Property tax (personal)

Jennie Newton, legal director, tax, comments:

"Today's Budget contained changes to a number of rules which will affect
individual investors in the real estate sector. Most obviously, the immediate
CGT increase for higher rate taxpayers to 28% (not the 40-50% feared) will
impact on property investment profits just as the commercial property sector
was showing signs of life. Collective investment schemes to take advantage of
Business Property Renovation Allowances have survived for the time being,
although this relief expires in 2012 anyway.

"No further changes were made to SDLT, although January 2011's VAT
increase to 20% will increase the SDLT bill and overall cost of acquiring a
VAT-opted or standard-rated property. The Government has not ruled out
attacking SDLT planning structures on high value property transactions in the
future, but for the moment existing structures are still available. Overall,
individual investors in real estate are not immune as the Chancellor looks to
high earners and profitable private sector businesses to shoulder the burden
of repaying Britain's debt."

Property tax (corporate)

Michael Hunter, senior associate, tax, comments:

"Corporate property investors seem to be overall winners from today's
Budget. Capital allowances were not abolished as feared by some but were
subject to a rate cut which will more than likely be compensated for by the
proposed reductions in corporation tax rates over coming years.

"The increase in the VAT rate from 4 January will hit partially exempt
corporate occupiers such as banks and insurance companies. All corporate
occupiers will feel a slight increase in SDLT costs owing to the fact that
they will pay SDLT on the VAT-inclusive cost of rents.

"Tucked away in a press notice and policy document are some headline
proposals in relation to avoidance which will include a review on whether to
introduce further changes to combat SDLT avoidance on high value property
transactions. This will be one to watch for property investors. A general
anti-avoidance rule is also being considered."

Manufacturing

Catherine Robins, tax partner, comments:

"The rate of capital allowances is set to reduce from the current
rate of 20% for plant and machinery to 18% with the rates for integral
features and long life assets going down from 10% to 8%

"Manufacturers will be disappointed that capital allowances are
set to reduce but will be relieved that R&D tax credits are not affected. The
reduction will not come in until April 2012 and it will be partially offset
by the first reduction in the rate of corporation tax from 28% to 27% which
will come in a year earlier in April 2011 (with the rate eventually reducing
to 24%). Smaller companies will be worse off following the reduction from
2012 in the annual investment limit from GBP100,000 to GBP25,000, but this
was a drop in the ocean for larger corporates (especially as for groups it
was split between the group members) and so will not be missed."

Reform of tax policy

John Christian, tax partner, comments:

"The Budget includes proposals to reform the way in which tax
policy is developed - the aim being to make it more predictable, stable and
simple. This acknowledges the deep concerns expressed by businesses about the
way in which major UK tax changes have been handled in recent years- the long
-running uncertainty over foreign profits being a key example. The tax policy
environment is not going to change overnight however and the discussion
around introducing a general anti avoidance provision (GAAR) and introducing
more changes to tax law outside the Budget and Pre-Budget Review promises
more rather than less uncertainty."

Notes to Editors

Pinsent Masons is an established, full service law firm with
truly international reach, a reputation for delivering both world class
service quality and excellent value, providing a full range of corporate,
financial and commercial legal services to major UK and international
corporations, institutions and public bodies. The firm ranks amongst the top
100 global law firms and has well over 1,000 partners and other lawyers
worldwide.

    - Pinsent Masons' office network includes the major
      international business and financial centres of London, Dubai,
      Beijing, Shanghai, Hong Kong and Singapore and the key business
      centres in the UK: Birmingham, Bristol, Edinburgh, Glasgow, Leeds
      and Manchester.

    - The firm also has a strategic alliance with Salans, a leading
      international law firm with over 700 lawyers across 22 or more
      locations in Western and Eastern Europe, Asia and the United States.

    - Pinsent Masons LLP is a limited liability partnership registered
      in England & Wales (registered number: OC333653) and regulated by
      the Solicitors Regulation Authority. The word 'partner', used in
      relation to the LLP, refers to a member of the LLP or an employee or
      consultant of the LLP or any affiliated firm who is a lawyer with
      equivalent standing and qualifications. A list of the members of
      the LLP, and of those non-members who are designated as partners,
      is displayed at the LLP's registered office: CityPoint, One
      Ropemaker Street, London EC2Y 9AH, United Kingdom.

    - We use 'Pinsent Masons' to refer to Pinsent Masons LLP and
      affiliated entities that practice under the name 'Pinsent Masons'
      or a name that incorporates those words. Reference to 'Pinsent
      Masons' is to Pinsent Masons LLP and/or one or more of those
      affiliated entities as the context requires. For important
      regulatory information please visit: www.pinsentmasons.com

    For further information please contact:

    Victoria Roe
    Interim PR Advisor
    Pinsent Masons LLP
    DDI +44(0)20-7490-6103

For further information please contact: Victoria Roe, Interim PR Advisor, Pinsent Masons LLP, DDI +44(0)20-7490-6103