At this stage, you should note that, given the current level of uncertainty, I am not going to look at the proposed changes to the taxation of the policyholders’ funds of UK life insurers. That said, I am happy to be able to report that there were a number of areas that were not pronounced upon. Two of these of particular interest to financial advisers are the pre-owned assets rules and trust reform. There had been a degree of expectation that the pre-Budget report may have contained some further detail on the as yet unresolved aspects of the pre-owned assets tax and also on the likely final shape of the reform of trust taxation. As it turned out, however, nothing about these topics was said in the Chancellor’s speech or stated in any of the supporting or other papers and documents published on the same day. In summary, the following points were picked up by Technical Connection as being the highlights for financial advisers.•Largely expected changes to tax allowances and National Insurance.•Some interesting pension changes.•Further specific attacks on tax avoidance, with particular focus on VAT and employee bonus/remuneration schemes.•The commencement of consultation on the taxation of small businesses, companies and the self-employed. A discussion paper has already been issued and I will say more on this below.•Commencement of consultation on a further payment to child trust funds at the age of seven of £250 or £500 for low-income families.•Commencement of consultation on extending the existing £7,000 higher Isa limit to 2009.•The launch of a further Savings Gateway pilot founded on matching an individual’s saving with a Government contribution. On pensions, the following were the key issues addressed:•An increase in the earnings cap to £105,600 along with amendments to the definition of final remuneration for pre-1987 and 1987-89 occupational scheme members to reflect the £105,600 earnings cap.•An increase in the basic state pension to £82.05 a week for a single person and £131.20 a week for a married couple.•An increase in the guarantee element of the pension vredit to £109.45 a week for a single pensioner and £167.05 a week for a married couple.•An increase in the pension credit savings reward to a maximum of £16.44 a week for a single pensioner) and £21.51 a week for a married couple.•An increase in the winter fuel payment from £200 to £250 for a pensioner aged over 70 in 2005-06 and from £300 to £350 for a person aged over 80. On tax avoidance, the new measures proposed are aimed at combating:•Avoidance of tax and National Insurance contributions on remuneration paid to employees in the form of shares and other securities. Among the changes proposed is an extension to the definition of securities to include certain insurance contracts. Where it is discovered that the proper amount of tax and National Insurance contributions is not being paid, the Government intends to introduce legislation to close schemes down where necessary from December 2, 2004.•The use of stripped bonds for income tax avoidance.•Controlled foreign companies achieving an artificial reduction in UK tax by double taxation relief.•Certain schemes which exploit the double taxation and annual payment rules to increase the amount of relief that is due.•Avoidance using film reliefs. This includes the prevention of tax deferral for more than 15 years and accelerated relief being claimed more than once on any film.•The exercise of options at uncommercial prices to avoid capital gains tax.•The exploitation of certain loopholes by life insurance companies.•The prevention of the avoidance of VAT, incurred in settling UK insurance claims, through the use of offshore insurance schemes. Following the continuing furore surrounding the Arctic systems ruling on the application of the settlements regime to certain dividend payments made to a spouse of a main contributor to the business, some further insight into Inland Revenue thinking on the subject of small business taxation can be divined from a perusal of the discussion document. I will look at this in my next article and give some highlights (if you can call them that) which I believe give an interesting insight into Government thinking on this important area of business for financial advisers.