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Budget stuff  •  Business Services  •  Business Tax  •  government  •  Personal tax  •  Tax Relief  •  Taxation

#AS2011 was a bit of an anti-climax on the tax front – What can we expect in these troubled times?

By RJP LLP on 30 November, 2011

Before we give the lowdown on the Chancellor's autumn statement, it's worth mentioning that pithy overviews of pre-Budget announcements such as this are easier to do when there are some upbeat headlines as well as the inevitable sharp intakes of breath and economic tightening of belts, says Paul Webb, tax partner at Surrey accountant RJP. Not so here. In his speech, Osborne said he would do 'whatever it takes' to protect Britain from the 'debt storm' in Europe.

However, there are some positive measures for SME’s and revitalised support from the Government should encourage business owners to review their business strategies and ensure they are getting the most out of new proposals, tax breaks and borrowing opportunities. SME’s should feel more confident today than they did yesterday given that the Government sees them as being critical to the overall recovery of the UK economy and not simply bystanders.

Headline measures of interest to business owners

  • The Government will launch a National Loan guarantee scheme. Eligible for firms with turnovers below £50m, it will lead to 1% lower interest rates than business can currently borrow at.
  • Osborne confirmed the credit easing programme, which will underwrite up to £40bn in low-interest loans for small and medium-sized businesses.
  • The Government is launching a £1bn business finance partnership to help mid-sized businesses by investing in funds that lend directly to these businesses.
  • The UK economy is now forecast to grow by 0.9% this year - compared with 1.7% forecast in March and 0.7% next year, down from the 2.5% forecast in March.
  • The Government will look for ways to provide a quicker and cheaper alternative to the current employment tribunal process in simple cases. The so-called ‘Rapid Resolution’ scheme could reduce the collective redundancy process for redundancies of 100 or more staff from the current 90 days to 60, 45 or 30 days.
  • To encourage investment in new start-up companies the Government will launch a new Seed Enterprise Investment Scheme (SEIS) from April 2012, offering 50% income tax relief on investments, and will offer a capital gains tax exemption on gains realised in 2012-13 and then invested through SEIS in the same year.  This will be paid for by a 1 year freeze in the capital gains tax annual allowance.
  • In addition, the Government will simplify and refocus the Enterprise Investment Scheme and Venture Capital Trusts.
  • The Government will extend the current small business rate relief holiday for a further six months from 1st October 2012. The Government will also give businesses the opportunity to defer 60% of the increase in their 2012-13 business rate bills as a result of the RPI up-rating, to be repaid equally across the following two years.
  • There will be £75 million pumped into supporting technology-based SMEs to develop, demonstrate and commercialise new products and services, as well as invest an additional £200 million in science, including an £80 million investment in the Institute for Animal Health and £25 million for large-scale technology demonstrators.
  • Osborne announced an ‘above the line’ tax credit in 2013 to encourage research and development (R&D) activity by larger companies. The Government will consult on the detail at Budget 2012 and will ensure that SME R&D incentives are not reduced as a result of this change. This builds on measures announced in the Budget 2011 to increase the generosity and accessibility of R&D tax credits for SMEs from April 2012.

Here, and not for the faint hearted, are the more general measures announced:

  • The UK economy is now forecast to grow by 0.9% this year - compared with 1.7% forecast in March and 0.7% next year, down from the 2.5% forecast in March. The continuing problems in the Eurozone are blamed for this downturn.
  • Borrowing is set to hit £79billion in 2014-15 – more than double the £37billion previously forecast.
  • Unemployment is set to increase from 8.1% to 8.7% in 2012.
  • Because debt interest payments have dropped, the Government will be spending £22bn less over the course of this Parliament on them than predicted.
  • In a move unlikely to encourage public sector workers into the office tomorrow instead of striking, when the 2% pay freeze ends in the spring, pay awards will be capped at 1% for the following 2 years.
  • The state pension age will increase from 66 to 67 in 2026. Osborne said it will save £59bn and will not affect anyone for 15 years.
  • Pay review bodies will be asked to make public sector pay more responsive to local markets.
  • The state pension will rise by £5.30 to £107.45. Pensioners receiving pension credit will also benefit from an increase worth £5.35.
  • Mortgage indemnities will help families to buy homes. Families in social housing will be able to buy their own homes under a new look ‘Right to Buy’ scheme at a discount of up to 50% and the money raised will go towards building new homes to stimulate the construction industry.
  • The Government pledged to underwrite mortgages for 100,000 young families attempting to get on the property ladder.
  • The bank levy will be raised to 0.088%, effective from January 1st 2012.
  • £5 billion of additional public spending on infrastructure will be made available, allowing 500 infrastructure projects such as roads, railways, power stations and broadband networks over the next decade and providing 25,000 jobs.
  • A 'youth contract' will help young people to gain work experience - but those who don't take part will lose benefits.
  • An extra £1.2million will be made available for spending on schools, with a focus on maths and engineering and more provision at pre-school level, including free nursery care for all 2 year olds from disadvantaged families.
  • Families in the south-west of England will have their water bills cut by £50.
  • The Government will help the country's energy intensive industries with the cost of the EU trading scheme carbon price floor with a £250m package over the parliament term.
  • Rail fare increases will be limited to retail price index (RPI) plus 1%, rather than RPI plus 3%.
  • January's planned 3p rise in fuel duty will be cancelled and August's increase will be limited to 2p – hoorah, as if petrol wasn’t pricey enough already.

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