George Osborne’s centrepiece of his Autumn Statement was a £2.9bn corporate giveaway in 2013 and 2014 on top of a £5.4bn boost for building projects to help bring Britain’s teetering recovery back to life in time.
Larger companies will be cheered by a surprise reduction in Corporation Tax as the rate will be cut to 21% from April 2014 (a further 1% off the planned reduction). However the rates governing smaller companies with profits of less than £300,000 remain unchanged.
The Small Business Rate relief scheme – which currently enables 350,000 businesses to be taken out of business rates has been extended until 2014, with over half a million small businesses set to benefit from the extension.
The scheme was introduced by Labour chancellor Alistair Darling in March 2010 and saw ratepayers receive relief of 50 per cent on properties with a rateable value of up to £6,000 and a tiered relief from 50 per cent to 0 per cent relief for properties up to £12,000.
The 50 per cent relief was doubled to 100 per cent for qualifying ratepayers until 2012, which was extended to 2013 by George Osborne in last year’s Autumn statement.
The Annual Investment Allowance in plant and machinery has now been increased tenfold, from £25,000 up to a considerable £250,000 worth of investment now eligible for 100% relief. This capital allowance will cover the total annual investment undertaken by 99% of all the business in Britain,” Osborne said. This increase will last for two years costing £910m in 2014.
The controversial Tax Relief for the Employee Shareholder scheme was confirmed. The idea is to reduce the tax “liabilities” that arise when employees are given the stock in exchange for giving up some of their employment rights, such as redundancy or requests for flexible working. Staff who opt for shareholder status could receive relief on income tax and National Insurance contributions in exchange for shares worth from £2,000, up to a limitless value,
The new Business Bank will have £1 billion of extra capital, “which will lever in private lending to help small and medium sized firms and bring together existing schemes”.
Exporting gets a boost with a new £1.5bn export finance facility to support the purchase of British exports.
Small businesses looking to trade internationally should benefit from the boost given to UKTI as it is set to receive 25 per cent more funding a year.
There is also set to be additional money provided to support Local Enterprise Partnerships (details to be announced in the Spending Review). From April 2015 more of the funding that currently goes to local transport, housing, skills and getting people back to work will go into a single pot that LEPs can bid for.
More money will also be going into the Regional Growth Fund, which is “helping businesses create half a million new jobs”
The government will also begin consulting on allowing investment in SME equity markets like AIM to be held directly in stocks and shares ISAs, to encourage investment in growing businesses the Chancellor announced. However it is unlikely we will see any scheme in place to allow investments to take place during this financial year.
The fuel duty increase of 3 pence a litre planned for January has now been completely cancelled. A move warmly welcomed by rural campaigners, MPs and business owners with fleets, who had made calls for the increase to be abandoned.
Personal wealth:
The higher rate tax threshold is to be increased by 1% in the 2014-15 and 2015-16 tax years, so the threshold for the 40% rate will go up from £41,450 to £41,865 and then to £42,285.
The capital gains tax annual exempt amount will be increased by 1% over the same period, reaching £11,100.
Economists said the change would drive the money from investments into the pockets of people who would spend it on the high street – potentially helping to boost consumer spending and rekindle confidence. Likewise, the decision to cancel the 3pc rise in fuel duty will put £1.6bn back in consumers’ pockets next year. The funds were clawed back from working age benefits claimants, whose payments will rise by a below-inflation 1pc for up to three years.
The British Chambers of Commerce said businesses “will cheer” the announcement. It also welcomed the £1.5bn of export finance to help ensure deals overseas go through. Another cut in the rate of corporation tax to 21pc from 2014 will cost around £800m. It is down from 28pc in 2010. Some £500m annually from the bank levy and a £7bn crackdown on tax avoidance will help pay for the measures.
General reaction from business owners on these announcements were positive with David Postings, chief executive of Bibby Financial Services, saying: “While there may be no “miracle cure” being announced by the Chancellor today, better access to finance options for small businesses would certainly be a welcome shot in the arm for the economy.
“With bank lending to businesses predicted to hit its lowest level since 2006 this year, we had hoped the Chancellor would take this opportunity to promote the wider use of alternative business funding options. Instead he has placed the funding pot in the control of the state-backed bank and local business organisations.
The British Library’s Entrepreneur in residence, and Business Matters columnist Stephen Fear, went further saying: “I see this as a brilliant statement for business but with caring and considered overtones.”
“Ed Balls must be wondering what hit him because it was clear to me that his speech had been written before George Osborne stood up to deliver his statement and Ball’s subsequent fumbling of the deficit issue did his cause cause no favours.”
Richard Jordan, Partner on the tax team at law firm Thomas Eggar, however focused on the Chancellors comments regarding the clampdown on tax avoidance, and said: “Having heard the Autumn statement I am not interested in the detail, I am only interested in the sentiment. Why? Because the law no longer seems to matter.
“We are in the midst of a clever and carefully planned campaign to change the culture of tax planning by vilifying high profile corporate and personal tax payers, the public servants (HMRC) and now their advisors. Banker bashing is so yesterday, now professional tax advisors are the lowest of the low.
Mark Pearson, Founder and Chairman of MyVoucherCodes.co.uk, completes our round-up with a positive message for Mr Osborne by saying: “What a pleasant surprise, the Government actually giving a small piece of good news to businesses. Yes, the 1% cut in corporation tax is a nice step towards helping businesses in the UK grow, but is it impressive? Not really. It’s a small step in the right direction, but if they truly want to help businesses here grow, they need to guarantee more consistent access to funding instead of re-hashing old policies.”
