Business Alert Autumn Statement 2011
While the Government maintain their goal to reduce spending they also introduce measures to support business. Read our analysis and commentry.
30.11.2011
While the Government maintain their goal to reduce spending they also introduce measures to support business. Read our analysis and commentry.
Please click on the links below to read more from the Autumn Statement -
Seed Enterprise Investment Scheme
Following consultation, a new Seed Enterprise Investment Scheme (SEIS) will be introduced from April 2012. This will include:
a 50 per cent income tax relief on investments in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000; and
a capital gains tax exemption on gains realised on disposal of an asset in 2012/13 and then invested through SEIS in the same year.
Enterprise Investment Scheme and Venture Capital Trusts
The existing rules for the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT) are to be refocused to ensure they are targeted at genuine risk capital investments.
The EIS ‘connected person’ rules and the definition of shares that qualify for relief are to be simplified.
A new test will exclude from relief:
- companies set up for the purpose of accessing the relief;
- acquisition of shares in another company;
- investment in Feed-in-Tariffs businesses.
In addition to these changes, on which there has been consultation, the £1 million investment limit per company for VCTs will be removed to reduce the administrative burdens of the scheme.
Capital gains tax
The annual exempt amount for capital gains tax will be frozen at £10,600 for 2012/13.
Gifts of pre-eminent objects
At Budget 2011, the Government announced that it would consult on proposals to encourage donations of pre-eminent works of art or historical objects to the nation in return for a tax reduction. Following this consultation, legislation will be introduced to enable individuals to receive a reduction in their income tax or capital gains tax liabilities, and companies to receive a reduction in their corporation tax liabilities, in return for donating pre-eminent objects under this new scheme.
Total tax reductions under this scheme, together with taxes offset under the existing inheritance tax acceptance-in-lieu scheme, will be subject to a limit of £30 million a year overall.
Stamp duty land tax relief
The Government has concluded that the existing stamp duty land tax relief for first-time buyers has been ineffective in increasing the number of such buyers entering the market, and this relief will therefore end on 24 March 2012 as planned. The Government is addressing this problem by other non-tax means.
Corporation tax measures
The Government confirmed its intention to reduce the main rate of corporation tax from its current 26% level to 23% by 2014.
It also confirmed that, following consultation over summer 2011, it will publish on 6 December further details of:
- the Patent Box;
- the reform of the controlled foreign company (CFC) rules; and
- proposed changes to the existing R&D tax credits.
Research and development tax credit
An ‘above the line’ tax credit will be introduced 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 at Budget 2011 to increase the extent and accessibility of R&D tax credits for SMEs.
Enterprise zones
Plant and machinery investment incurred between April 2012 and March 2017 in Enterprise Zones within six assisted areas willqualify for 100% capital allowances. The six zones are: the Black Country, Humber, Liverpool, North Eastern’ Sheffield and Tees Valley.
Discussions are continuing with the devolved administrations on enhanced capital allowances in their Enterprise zones.
The Government intends to approve proposals from the Lancashire and Humber Local Enterprise Partnerships to form enterprise zones on and around the BAE Systems’ sites in these areas. It will also consider an enterprise zone in Battersea linked to the redevelopment of the power station.
Subject to due diligence, it will expand the existing enterprise zone in the North East to include land around the Port of Blyth, in order to encourage business investment in the renewables industry.
Employer pension contributions
As previously announced, changes are to be introduced to ensure that the amount of tax relief given to employers making asset-backed pension contributions to registered pension schemes accurately reflects the amount of payments made, and does not give rise to unintended excess relief.
Draft legislation has been published today (29 November 2011) and will take effect from today.
Bank levy
The Government intends that the bank levy should raise at least £2.5 billion each year. To offset a forecast shortfall in receipts for 2011 and future years, the full rate of the levy will increase to 0.088% from 1 January 2012.
North Sea oil and gas: ring fence expenditure supplement
The Government confirmed that, as announced on 5 July 2011, the annual rate of ring fence expenditure supplement will be increased from 6% to 10% for accounting periods on or after 1 January 2012.
Manufactured overseas dividends
It will be put beyond doubt that manufactured overseas dividends cannot be used to obtain repayment or set off of income tax that the Exchequer does not receive. This was announced in a Written Ministerial Statement on 15 September 2011 and will take effect from that date.
Business rates
The Government will extend the current small business rate relief holiday in England for a further six months from 1 October 2012. It will also give businesses the opportunity to defer 60% of the increase that arises in their 2012/13 business rate bills as a result of the RPI uprating, to be paid equally across the following two years.
The devolved administrations will be provided with funding to enable them to take similar action if they choose to do so.
Climate change levy (CCL)
The Government has stated that it is committed to ensuring that manufacturing is able to remain competitive during the shift to a low carbon economy. To reduce the impact of electricity costs on the most electricity-intensive industries it will implement a number of measures including, from 1 April 2013, an increase to 90% in the level of CCL relief on electricity supplied to climate change agreement participants.
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Low value consignment relief
As announced on 9 November 2011, the VAT relief for low value goods (below £15) sent to the UK from the Channel Islands will be removed with effect from 1 April 2012.
Cost sharing exemption
Following consultation after Budget 2011, a VAT exemption is to be introduced for services shared between VAT-exempt bodies, including charities and universities.
Fuel duty
The 3.02 pence per litre (ppl) fuel duty increase that was due to take effect on 1 January 2012 will be deferred to 1 August 2012, and the inflation increase that was planned for 1 August 2012, currently expected to have been 1.92 ppl, will be cancelled. This will ensure that there will only be one increase in 2012.
The recently announced 5 ppl discount for the Inner and Outer Hebrides, the Northern Isles, the islands in the Clyde and the Isles of Scilly will come into force on 1 March 2012.
The Government will publish details of the design of the ‘fair fuel stabiliser’ at Budget 2012.
On 1 August 2012 the duty rate for leaded petrol and compressed natural gas will change by the same monetary amount as main fuel duty, and the duty rate for aviation gasoline and rebated oils will change in proportion to the main rate. The duty differential for liquefied petroleum gas will be maintained until 1 August 2012 when it will be reduced by 1 ppl.
Air Passenger Duty
Air Passenger Duty (APD) rates will increase from 1 April 2012, as announced at Budget 2011.
The Government will proceed with the proposed extension of Air Passenger Duty (APD) to flights on business jets, with effect from 1 April 2013. Further details will be announced on 6 December 2011.
As announced on 27 September 2011, APD has been cut for passengers travelling on direct long-haul routes departing from airports in Northern Ireland, with effect from 1 November 2011. The direct long-haul rates fell to the prevailing band A rate of APD. To provide a lasting solution to the special situation of Northern Ireland the Government has launched a process to devolve aspects of APD to the Northern Ireland Assembly.
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Contact:
Paul Renz, Head of Tax
Scott Craig, Partner, VAT
