It’s looking as if we’ll have both Christmas and Gordon Brown’s ninth Pre-Budget Report (PBR) in December, though don’t expect the Chancellor of the Exchequer to be playing Santa in the PBR.

Most focus in this year’s PBR will be on the state of the economy. The UK is not doing as well as had been hoped, but we are still growing and looking in a better position than many of our Euroland neighbours.

So any gloom is strictly relative, with growth probably coming in just under 2% for the year and borrowings in the region of £38 billion (compared with a Treasury forecast of £32 billion in this year’s Budget).

As with any Budget or PBR there will be anti-avoidance talk, though the Tax Avoidance Disclosure (TAD) regime and talk of retrospective action in last year’s PBR have already had a significant effect. Some further moves as a result of disclosures can be expected and some tweaks to the TAD regime are on the cards.

Whatever is done it is to be hoped that the Chancellor maintains the image of the UK, as conveyed by its tax system and the need for it to contribute to our international competitiveness. While nobody wants a porous tax system, it does need to be one that offers as much certainty and administrative simplicity as possible. On both these criteria the UK’s system is doing less well than it should.

If talk of a windfall levy on oil companies comes to pass, that will be another blow to the image of the UK as a regime that makes changes in a measured, consultative way.

Things that do seem on the fiscal horizon include:

- Corporate tax reform – ideally abolition of the outdated schedular system; changes to leasing will no doubt be confirmed as proceeding.

- Property taxation – the introduction of Real Estate Investment Trusts (REITs) should be confirmed and will be welcomed. We may also get a planning gain levy, the aim of which would be to impose extra tax on developers, but with the risk of choking off development as happened with Development Land Tax in the 1970s.

- Research & development – probably a widening of the tax credit in light of the recent consultation.

- Pensions – some further tweaks are likely before ‘A’ day (6 April 2006) ushers in the reform package. This might include SIPP property investment restrictions but hopefully concerns can be addressed by better education and guidelines, not compulsion as the latter would go against the deregulatory nature of the reforms.

- HM Revenue & Customs’ (HMRC) powers may get a mention in the fine print – reforms are under way.

We should hear some of the basic tax figures for 2006/07, including personal allowances. And there will no doubt be a giveaway – perhaps more help for the elderly with their winter fuel allowance, or enhancements to the tax credit regime (coupled with a robust defence of the system). What is sure is that there will be plenty for tax anoraks to study on some long winter evenings.

John Whiting is a tax partner with PricewaterhouseCoopers

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