The Chancellor, George Osborne, delivered his Autumn Statement today. Possibly the biggest announcement was the major overhaul of stamp duty which should deliver savings to around 98% of home buyers.
However, this blog shall focus on the key measures that were announced which affect businesses in the UK:
The Chancellor has announced cuts to business rates by £2.7 billion over the next five years and pledged to review the controversial tax next year.
The Chancellor extended a series of measures he first unveiled in last year’s Autumn Statement, including doubling business rate relief for a further year and capping the inflation-linked annual increase of business rates at 2%.
In addition, the Chancellor said that shops, pubs, cafes and restaurants with a rateable value of £50,000 or less will receive a £1,500 discount on their business rates, up from a £1,000 discount last year. This will impact 300,000 properties.
There has been criticism of the existing structure of business rates, with some arguing that it is outdated and should be abolished for smaller businesses altogether. Business rates is a type of tax that is calculated according to the rental value of the property that a business uses. With many businesses now based on the internet, many have queried why a company should be taxed based on the physical space it uses.
The UK currently has the highest rates of any EU member state.
Lending to small and medium-sized businesses:
A number of measures have been announced which aim to boost lending to small and medium-sized businesses (SMEs).
1. The Treasury has agreed to guarantee up to £500 million of new bank lending to SMEs. The new lending will be allocated under the Enterprise Finance Guarantee Scheme. The Government shall guarantee 75% of an SME’s bank loan and the lender shall cover the remaining 25%.
2. The Funding for Lending Scheme (FLS) has been extended for a further year to January 2016. The FLS aims to boost bank lending by enabling commercial banks to borrow funds from the Bank of England cheaply so that they can pass them on in the form of cheap loans. The focus of the FLS has been narrowed for lending to SMEs only.
3. The Treasury has agreed to pledge £400 million to extend government-backed venture capital funds which invest in SMEs.
High on the government’s list is to deal with the tax avoidance of some of the bigger multinational businesses based in the UK.
The Chancellor announced that these businesses will have to “pay their fair share” by introducing a new 25% tax intended to close loopholes that currently allow multinational businesses to extract their profits out of the UK to avoid UK tax.
Banks offsetting losses against future profits:
The Chancellor announced plans to introduce new rules which currently allow banks to offset past losses made against future taxable profits. He intends to limit “the amount of profit in established banks that can be offset by losses carried forward to 50% and delaying relief on bad debts.”
The Chancellor said: “Under the rules we inherited banks can offset all their losses from the financial crisis against tax on profits for years to come. Some banks wouldn’t be paying tax for 15 or 20 years. That’s totally unacceptable.”
There were some interesting measures announced in this year’s Autumn Statement. It will be of particular interest to SMEs to see what the outcome is of next year’s review of business rates. This could result in significant further changes to business rates.
If you would like to discuss how these measures might affect your business then please don’t hesitate to get in touch with one of our commercial solicitors on 0845 287 0939 or email us.