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Following on from today's Autumn Statement, Armstrong Watson's experts have produced an at-a-glance guide to give you the highlights and explain what it means for you.
The Government today unveiled the latest growth figures and it comes perhaps as no surprise that these show a reduction over those previously forecast. The growth figure for the current year has been revised down from 1.7% to 0.9% and in the 2012 year the growth has been revised from 2.5% to 0.7%. These are clearly difficult figures for the Government but they do at least show growth and not the “mild” recession suggested by the OECD. The borrowing figures were also outlined by the Chancellor today and these confirm that over the next four years the country will need to borrow a further £100billion.
Against this backdrop the Chancellor had a difficult line to walk between finding money to stimulate the economy whilst not increasing borrowing further. This he has done by taking some very difficult decisions in relation to expenditure such as Tax Credits, where some planned increases have been shelved, although some elements will increase by the September inflation figure of 5.2%.
One of the main focuses of the statement was to release finance for SMEs who are either currently struggling to obtain finance from traditional sources or who find themselves suffering higher rates of interest for their borrowing. The Chancellor has put in place some measures to help here but with all of the measures announced time will tell if they have hit the mark and helped to achieve the currently elusive growth that the country needs.
Corporation Tax Rates
The Government remains committed to reduce the main rate of corporation tax by 1% per annum over the next three years. The current 26% rate will reduce to 25% on 1 April.
Unfortunately, there does not appear to be any expected changes to the Small Profits Rate; currently 20%.
Research & Development Tax Relief
The Government has announced plans to introduce an “above the line” R&D tax credit for larger companies. Steps will be taken in the 2012 budget to ensure the SME incentive for R&D is not reduced as a result of this change.
It is hoped that this change will not over complicate this very generous and often overlooked relief.
Nigel Holmes, Director of Corporate Tax, will be meeting HM Treasury and HM Revenue & Customs representatives next week regarding this relief and consulting on guidance to be published, so it will be interesting to see if additional information is made available in this forum.
10% Corporation Tax Rate for Patent Income
The draft legislation for the new 10% corporation tax rate on income from patents, known as the “Patent Box”, will be published with the draft 2012 Finance Bill on 6 December 2011. This is expected to apply from 1 April 2013 and is another tax incentive for science and technology companies.
We will provide more details, once known, in our tax newsletter which you can sign up to on our home page.
Enterprise Zones in six assisted areas will qualify for enhanced capital allowances. In these areas, 100 per cent allowances will be available for plant and machinery investment incurred between April 2012 and March 2017.
The six areas are the Black Country, Humber, Liverpool, North Eastern, Sheffield, and Tees Valley Enterprise Zones.
As a reminder, the annual investment allowance, writing down allowance and the time frame for making claims for fixtures within buildings all change adversely in April 2012. You should seek advice now to ensure your capital allowance claims are maximised.
Capital Gains Tax
The annual CGT exemption, currently £10,600 will be frozen for the 2012/13 tax year.
Seed Enterprise Investment Scheme
Following the consultation announced by the budget 2011 the government has set out the details of the new Seed Enterprise Investment Scheme (SEIS). The new scheme will offer an increased tax relief of 50% for the first £100,000 of investment in new start up companies by individuals, regardless of the rate of tax the individual suffers. The qualifying company will have a cumulative limit for this type of investment set at £150,000.
There will also be a Capital Gains Tax holiday for investments made in the new scheme. The exemption will apply to gains made in the 2012/13 tax year, where a SEIS investment has been made in that same tax year.
This seems to offer an interesting opportunity for company’s currently struggling to find finance from the traditional sources. For the investor the enhanced tax relief and CGT exemption will perhaps provide the incentive they need to look more positively at such investments.
Enterprise Investment Scheme
The government has also announced that they will introduce certain changes to EIS and VCT schemes. They will relax the connected person rules and share definitions that currently apply to these schemes. They will, however, tighten the rules on the types of company activities that qualify for the relief.
Finally, they are removing the £1 million investment limit that applies to VCT schemes to remove some of the administrative burden.
Further announcements were made which will reduce the amount of tax credits received by many families. It had previously been announced that the child element of Child Tax Credit was to be increased from April 2012 by the Consumer Price Index (CPI) plus £110 for each qualifying child. The additional £110 per child has been removed. The child element of Child Tax Credits and disability elements will rise by CPI only but all other elements of the system look set to remain unchanged for 2012/13.
Furthermore, the introduction of the Universal Credit System from 2013 will reduce the number of working families eligible for state benefits. This is due to the different definition of income for self employed individuals and increased use of means testing.
Business Rates Holiday
The Small Business Rate Relief scheme is being extended by another six months from 1 October 2012 to 31 March 2013.
The basic state pension will increase by £5.30 per week to £107.45 from April 2012.
The state pension age will hit 67 by 2026, Chancellor George Osborne has announced. He told parliament the state pension age (SPA) would rise from 66 to 67 in 2026 to adjust for rising life expectancy. Under Labour's timetable, the pension age was set to reach 67 between 2034 and 2036. The government recently passed reforms that would see the SPA for women reach 65 by November 2018 and rise to 66 for both men and women by April 2020.
National Loan Guarantee Scheme
The Government is seeking to reduce the borrowing costs of businesses with turnover of under £50 million by allowing participating banks to raise up to £20 billion of cheap funding over the next two years. Under the government guarantee the banks will only be able to secure this lower cost of borrowing if they pass the reduction on to the business. This could mean for many businesses they could see the cost of their borrowing reducing by up to 1%.
Pension – Artificial Asset Backed Schemes
The government is to crack down on ‘artificial’ asset-backed pension contributions which are being used to claim “excessive” tax relief. George Osborne said the government would change tax rules to ensure employers were not abusing tax relief on asset-backed pension contributions to registered pension schemes. Following consultation the Treasury has decided on new rules in the Finance Bill 2012 legislation that will take effect on 29 November 2011. Transitional rules will apply to existing arrangements that have already received tax relief to ensure the correct amount is paid by the end of an arrangement, the government said.
Business Finance Partnership
Further to the above the Government will also make a further £1 billion of funding available through this initiative, which is aimed at mid-sized and SMEs based in the UK who are looking to raise funds from non-banking sources.
The planned rise of 3p per litre that was due to take effect on 1 January 2012 will now be deferred until 1 August 2012 and the further planned rise due to take effect on that date will not now go ahead.
Investment in Infrastructure
The Chancellor announced £6.3 billion of additional infrastructure spending over the spending review 2010 period. These investments in transport, broadband, science, regional growth and education aim to boost economic growth and unlock private investment.
Finance Bill 2012
The Government will publish draft clauses to the Finance Bill 2012 on 6 December 2011. This new approach to providing the legislation in advance provides the tax profession with the opportunity to raise any concerns to the bill in advance of enactment.
Furthermore, we can expect specific anti-avoidance measures to be announced at this time, perhaps to take immediate effect, whilst the Government consults on a General Anti-Avoidance Rule.
If you have any questions on the Autumn Statement, get in touch with our experts today on 01228 690200 or email:
Bob Wheatcroft, Partner and Head of Tax - email@example.com
Graham Poles, Tax Director - firstname.lastname@example.org
Nigel Holmes, Corporate Tax Director - email@example.com
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