On 5th December 2012, the Chancellor of the Exchequer, George Osbourne announced his Autumn Statement for 2012. Here is a run-down of the main points that might affect our SME business clients.
The Chancellor has announced a further cut in the main rate of corporation tax from April 2014 by an extra 1% to 21%. This cut will apply to companies with profits in excess of £300,000.
Disappointingly, there has been no comparable cut for SMEs with profits below £300,000, with the Small Profit rate remaining at 20%.
From 1st January 2013, the Annual Investment Allowance will increase ten-fold from £25,000 to £250,000 for two years, in a measure principally designed to encourage and support investment by SMEs in plant and machinery.
Although this is a significant increase, the impact it will have for SMEs is questionable given that many businesses are unlikely to be able to afford such levels of investment in the current climate.
Small Business Rate Relief:
The temporary doubling of the Small Business Rate Relief scheme – which helps more than half a million small firms to pay small business rates of tax and 350,000 businesses pay nothing at all – has been extended for a further 12 months until April 2014.
Subject to state aid approval, an exemption from empty property rates will be available for 18 months on all newly-built commercial properties that are completed between 1 October 2013 and 30 September 2016.
Business vehicles users:
The 3p a litre fuel duty increase that was planned for January 2013 has been scrapped.
However, from 2013/14, there will be further tax increases for some company car drivers as the car fuel benefit charge multiplier will see another increase from £20,200 to £21,100. The van fuel benefit charge will also increase from £550 to £564.
In September 2012, it was announced that the Government would create a Business Bank. This bank will have £1 billion of additional capital to stimulate the private sector market for long-term capital and address structural gaps in the supply of finance to SMEs.
It is now understood that the Business Bank will be operational from Spring 2013, with the institution becoming fully operational in Autumn 2014. Further announcements are expected before the end of the month (December 2012).
The Government will apply a new voluntary cash basis for calculating tax for SMEs for self employed business with receipts of up to £77,000 from April 2013. This aims to reduce the burdens on businesses and individuals by making the tax system clearer and more efficient.
Business Growth Fund Investment:
It has long been considered that banks are not doing enough to help SMEs. The £2.5 billion Business Growth Fund (introduced by Barclays, HSBC, Royal Bank of Scotland and Lloyds TSB to invest in small business equity) is budgeting to substantially increase its level of investment to Â£200 million in 2013.
Start Up Loans:
The Government will provide £72 million of follow-on funding for start-up loans.
As a lawyer advising many small to medium sized businesses across the UK, the Autumn Statement includes very little to get excited about. There are some benefits for larger businesses, but if the Chancellor thinks this will be enough to really stimulate growth from the ground up, he may be disappointed.
For any further information on how any of the Chancellor’s announcements will affect you then please do not hesitate to get in touch.