The Chancellor’s second Autumn Statement proved to be a rather downbeat event with gloomy economic forecasts and further pay restraint for the public sector dominating the headlines. However, there was a clear need to boost growth and mitigate the impact of some planned tax and duty increases. In addition to the measures to support business growth that were announced, the draft Finance Bill for 2012 included a number of changes from the Government’s initial proposals – most of these appear to be favourable to businesses and investors. Click here to read our analysis
Key tax announcements in the Autumn Statement
Business investment
A new Seed Enterprise Investment Scheme (SEIS) is to be launched from April 2012. Investors will be able to claim 50% income tax relief on up to £100,000 of investment in shares in start-up companies. For 2012/13 only, any capital gains re-invested into SEIS in the same year will be exempt from tax, giving investors a maximum of 78% tax relief on the investment.
From April 2012, the rules for other venture capital schemes will be tightened to include a new test intended to exclude companies set up solely to access tax relief and to exclude companies that exploit feed-in tariffs.
It has now been confirmed that businesses based in enterprise zones in the Black Country, Humber, Liverpool, North Eastern, Sheffield, and Tees Valley will qualify for 100% capital allowances on investment in plant and machinery.
The R&D tax credit will also change from April 2013 so that the tax relief is given as an ‘above the line’ tax credit which the Government believes will increase the commercial visibility and take-up of the relief.
Help for SMEs
In addition to the National Loan Guarantee Scheme (see below) it has been announced that the current small business rate relief will continue for a further six months from 1 October 2012. Businesses will also have the opportunity to defer 60% of the increase in their 2012/13 business rates and repay this across the next two years.
Funding of £35 million will be made available to SMEs to help them use the services of UK Trade & Industry (UKTI) and an extra £10 million of funding will help mid-sized businesses access UKTI’s export support services.
The 3.02 pence per litre fuel duty increase that was due to take effect on 1 January 2012 will be deferred to 1 August 2012 and there will be no additional inflation increase at that time.
Personal taxes
The Government will freeze the annual exempt amount for capital gains made by individuals at £10,600 for 2012/13. The Chancellor also reiterated that the low value consignment relief from VAT on goods transported from the Channel Islands will be removed from April 2012 - putting up the cost of DVDs and CDs ordered from many online retailers.
It has been confirmed that individuals who give ‘pre-eminent objects’ (broadly nationally important works of art) after April 2012 will to receive a reduction in their income tax or capital gains tax liabilities of 25% of the object’s value (subject to a maximum gift value of £30m).
The current relief from stamp duty land tax for first time buyers will end on 24 March 2012 as planned.
Anti-avoidance measures
Although the Government is consulting on a number of anti-avoidance measures, they did not feature heavily in the Autumn Statement announcements. However, it was confirmed that amendments will be made so that employers making asset-backed pension contributions to registered pension schemes will not be able to claim excess tax relief. It has also been reiterated that (with effect from 15 September 2011) companies cannot use manufactured overseas dividends to obtain repayment of or set off income tax that the Exchequer does not receive.
Other tax measures
As expected the Bank Levy is to be increased: from 1 January 2012 the rate will become 0.088%. It will also increase in future years if this rate does not achieve revenue of at least £2.5 billion each year.
Charities and other VAT-exempt organisations will benefit from a new exemption for services shared between them from April 2012 which should allow such organisations to generate substantial cost savings.
Companies participating in climate change agreements will be able to claim a climate change levy discount on electricity of 90% from 1 April 2013.
Further tax measures and responses to consultations will be announced on 6 December 2012.
Measures to support business growth announced before the Statement
National infrastructure plan
Investment in major infrastructure is a well-established tactic in tough economic times although the fact that the Government hopes that most of the money for the 40 suggested projects will come from UK pension funds reflects its lack of room for manoeuvre. The £5bn that the Government will be investing to get the plan moving is not to be financed from additional borrowing but from restructuring existing budgets and clamping down on tax avoidance. Whether this just includes revenues raised from the anti-avoidance measures already under consultation and existing enforcement activities or signals yet another round of anti-avoidance proposals and further HMRC campaigns remains to be seen.
Credit easing measures for SMEs
The Government is to act as guarantor for £20bn of new bank lending to businesses with an annual turnover of up to £50m under a revamped National Loan Guarantee Scheme. The intention is that by lowering the risks of such lending for banks, the interest rates on guaranteed loans should be less for the borrowing businesses. The scheme is intended to start early in 2012 and run until the end of 2013 by which time the total borrowing it supports could be extended to £40bn.
Youth unemployment
A range of measures have been announced including:
- job subsidies of £2,275 each for businesses who take on an 18-24 year-old from the Work Programme from April 2012
- incentive payments of £1,500 each for employers in England taking on 16 to 24 year-olds to support an additional 20,000 apprenticeships in 2012/13
- 250,000 work experience placements (up to eight weeks) for unemployed 18 to 24 year-olds (starting with 50,000 extra places in 2012/13).
Housing package
Supporting the proposed house builders’ indemnity fund, the Government will underwrite a scheme allowing up to 100,000 buyers with just a 5% deposit to buy a newly built home from spring 2012. There will also be a £400m fund to support completion of partially built housing projects with the developer application process to start by the end of 2011. Further funding will be available for infrastructure projects to support new developments and to help bring empty properties back into use as affordable housing. Plans for the Green Deal on building insulation have been made more attractive by adding an upfront ‘cash back’ offer to participating households but scheme will not be fully underway until July 2013.
Employment rights changes
Red tape and regulation in employment law has been identified as a disincentive to take on employees and the Department of Business innovation and Skills is considering and consulting on a number of changes including:
- Dismissals - setting the employee qualifying period for unfair dismissal claims at two years and considering a new compensated no-fault dismissal scheme for employees of small businesses (10 or fewer staff).
- Employment tribunal system – streamlining procedures by May 2012 with individuals having to pay a fee to take a claim to tribunal.
- Introducing ‘protected conversations’ – allowing employers to discuss poor performance and other issues with the employee without these being brought into any subsequent employment tribunal hearings.
- Simplifying the current TUPE regulations, the rules for compromise agreements and the new Agency Workers Regulations.
- Collective redundancies – reducing the current 90 day notice period for statutory consultations.
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