THE Budget generated some strange headlines: granny taxes, tycoon taxes, mansion taxes and even a pasty tax. But behind the headlines are some issues that warrant a closer look.

One of these is “uncapped” reliefs. Some tax reliefs - such as the amount you can put into a pension fund or the amount you can invest in an Enterprise Investment Scheme company already have a fixed annual limit. Many other reliefs do not. The Chancellor has announced that he intends to limit these “uncapped” reliefs - some of which have now been branded loopholes - to a maximum of £50,000 a year or 25% of the individual's income, whichever is the greater.

So what are these “loopholes”? Four examples were given in Mr Osborne's interview with the Daily Telegraph: gifts to charities, business mortgage interest, buy to let mortgage interest and business losses. These are all subject to specific tax reliefs granted by Parliament for good reason and they have been on the statute book for decades.

Let me give you an example of how the proposed cap might be applied.

Mr Deane has two businesses, a garage and a building company. He employs around a hundred local people. The garage showroom needs major repairs and he decides that he will also build a bigger workshop, creating half a dozen new jobs in the town. He thinks the improvements are the right thing for the future of the business and for his employees' job security. He borrows from the bank to fund the work. Because of the bank interest, repairs and general disruption he makes a loss of £100,000 for the year.

The building company is doing well and he draws a salary of £50,000. He has other income of £10,000 from buy to let properties. His bank statements would effectively show £100,000 going out and £60,000 coming in: he would be £40,000 down. As the law currently stands, he would pay no tax for the year.

The government's proposed “cap” would mean that he would only be able to offset £50,000 of the loss in the current year, leaving £10,000 taxable.

I wonder how many people with businesses, with buy to let properties or who give generously to charities could find themselves faced with this problem, especially if interest rates rise.

Are the current reliefs really loopholes? I leave you to judge.

Paul Aplin OBE is a tax partner with A C Mole & Sons and chairman of the Technical Committee of the Institute of Chartered Accountants in England & Wales Tax Faculty. He and Taunton based tax partner Amanda Gunter can be contacted on 01823-624450, Bridgwater based tax partner Paul Kingdom can be contacted on 01278-446088.