Concerns linger over London's future as a commercial hub despite new Budget. Friederike Heine reports

City partners believe Chancellor George Osborne's Budget will boost business confidence and activity levels, despite concerns that taxation in the UK is too high and that more needs to done to boost London's position as an international finance centre.

Sixty percent of partners said the Budget would provide a boost to business confidence and commercial activity, although the majority (52%) said it would only help 'a little'. The majority of the remaining respondents (36%) said it would have no impact.

Similarly, three quarters of partners said headline cuts to corporation tax – which is dropping to 22% from 2014 – and personal tax – where the top 50p tax rate will fall to 45p from April 2013 – would improve the UK's global position as a legal centre.

The Budget leaned heavily on measures affecting high-net-worth individuals, with the introduction of a 7% rate of stamp duty on property sales over £2m in addition to the tax cuts. Other measures affecting corporates include a crackdown on tax avoidance schemes and relaxing the controlled foreign company regime.

Latham & Watkins European vice chair of tax and benefits Daniel Friel commented: "Though the Government is failing to simplify the tax system, there is a sense that the UK has begun to create a more attractive tax environment for businesses. Certainly, clients that were considering leaving the UK a number of years ago are talking about it less."

Linklaters UK head of tax Yash Rupal commented: "If I was advising a foreign entity on entering the UK I would say that the tax conditions are becoming more favourable; low rates of tax, exemptions for dividends and capital gains on disposals of subsidiaries and a soon to be favourable controlled foreign companies regime. But it's not all rosy. The UK tax system is too complex and its administration lacks transparency and creates uncertainty."

Indeed, around three quarters of City partners said that the UK tax system is too complex in comparison with other large developed economies, with a similar percentage (69%) stating that taxation in the UK is too heavy.

Smith & Williamson national tax director Richard Mannion said: "Reducing rates is only part of the story. The sad fact is that we have the longest tax code in the world and arguably one of the most complex. The whole system needs a root and branch reform if we really are going to compete for business on the worldwide stage."

Despite feeling that the Budget will have a positive impact on commercial activity, more than half of respondents acknowledged concerns about London's future as an international financial centre, with a further 20% saying it was an increasing concern. Only 26% of respondents said they were less concerned than they were a few years ago and felt the coalition Government was supporting the City.

The research shows that the Government has yet to secure the confidence of many UK partners, with only 41% categorising themselves as 'supportive' of the Coalition's business policies. A similar number reported mixed feelings on the subject, with a further 19% arguing they were 'not very impressed'.

Hogan Lovells senior tax partner Philip Gershuny commented: "Under the Coalition some very favourable policies have been introduced, including the patent box system and UK branch exemption.

"These measures have improved the UK's competitiveness as a jurisdiction from which to conduct international business. Let us hope that this good work is not undone by an over-willingness to legislate retrospectively and a general anti-avoidance rule that usurps the role of the courts."

The survey also found that nearly 70% of partners believe they pay too much tax, despite the fact the reduction in the top tax rate will save equity partners on £1m around £42,000 a year from April 2013, while those earning £850,000 will see their tax bill shrink by £35,000. Nine percent of respondents argued commercial lawyers earn a lot and should pay more tax.

Partners on the budget and taxation

69% – Percentage of partners who believe their personal tax bill is too high
9% – Percentage who believe they could pay more
60% – Percentage who say the Budget will boost UK business confidence and commercial activity
76% – Percentage who argue the UK tax system is too complex
41% – Percentage who support the Coalition Government's business policies