The Chancellor George Osborne on Wednesday made his Autumn Statement in the House of Commons. Michael Cope, Tax Partner at chartered accountants Duncan & Toplis, takes a look at the announcement and the impact it is expected to have on businesses.
The Chancellor announced an increase in the thresholds from which basic and higher rates of tax are paid. These increases give more tax relief for all taxpayers, and unlike some prior years this will include higher rate taxpayers as well.
Increases have also been announced for the Capital Gains Tax annual exemption and nil-rate band for Inheritance Tax, meaning capital taxes are to be marginally less onerous than before. These are only incremental changes, however, and tax planning advice should still be sought if these are expected to be an issue; these changes alone are unlikely to remove many taxpayers from the burdens of these taxes.
The good news for business is that the Annual Investment Allowance (AIA) has been increased from £25,000 to £250,000 for two years from 1stJanuary 2013. This means that businesses will now be able to invest up to £250,000 per annum in qualifying plant and machinery and receive an immediate tax deduction. This is expected to encourage many businesses to make capital investment in their business. Previous changes in the AIA have resulted in tricky transitional rules that can catch some taxpayers out, so businesses should speak to us to avoid falling foul of any such rules in the year of introduction.
The main rate of Corporation Tax has been set to reduce to 22% from April 2014. The Chancellor announced that this is to reduce further to 21% from April 2014. There will henceforth be only a 1% difference in the rate of corporation tax payable by small companies and those paying at the main rate. We can see there being only one Corporation Tax rate of 20% in the future but as yet no announcements have been made on this.
An increase in the fuel duty was forecast from January 2013 of 3p per litre and the Chancellor has announced that this increase is to be abolished. This will benefit both individuals and businesses that rely on the mobility of their workforce or deliver goods by road.
The Small Business Rates Relief has been extended. This relief was previously due to be withdrawn from April 2013 but has been extended by an additional year. In addition, newly built commercial property completed between October 2013 and September 2016 will be exempted from empty property rates for the first 18 months. This is good news for small businesses and for those developing new commercial property to reduce their overheads.
Tax avoidance and evasion
The Chancellor reinforced the Government’s stance on preventing both tax evasion and tax avoidance by allocating more tax inspectors and more funding to HM Revenue & Customs.
For the first time in the UK a General Anti-Avoidance Rule (GAAR) is expected to be announced in 2013.
In addition, the Chancellor has announced specific areas that have been open to abuse for which loopholes have been closed.
Although these rules are intended to attack tax avoidance schemes, innocent cases may well be caught unintentionally by these provisions. It will be worth seeking advice if any of the announcements may impact your business.
Rises in tax thresholds and exemptions and a reduction in main rate Corporation Tax should help many businesses reduce their tax burden. The significant increase in the Annual Investment Allowance gives an opportunity to receive immediate tax relief for those investing in their business.
Careful tax planning would always be recommended for businesses to ensure they do not fall foul of the small print of the changes in legislation.