We set out below key tax implications for businesses arising from the Chancellor’s Autumn Statement:
Main rate of corporation tax
- The main rate of corporation tax will fall to 21% from April 2014 (following the reduction to 23% from April 2013). The small profits rate will remain at 20% from April 2013.
Annual Investment Allowance
- There has been a temporary tenfold increase in the capital allowances annual investment allowance (AIA) from £25,000 to £250,000 for qualifying investment in plant and machinery made in the two year period following 1 January 2013.
Corporation tax reliefs for creative sector/innovative businesses
- Targeted corporation tax reliefs are to be introduced from 2013 for the creative sector, targetting the animation, high end television and video games industries (subject to state aid approval).
- In addition, support is to be provided for innovative businesses through the introduction of “above the line” R&D credits from 2013.
- The Office of Tax Simplification is to review ways to simplify the taxation of employee benefits/expenses and termination payments.
- The proposed consultation on integrating income tax and NICs has been postponed pending planned operational changes to the tax system (presumably the introduction of real time information accounting for PAYE).
- The government will not proceed with its proposal to require engaging organisations to deduct tax and NICs at source from payments made to “controlling persons”. But amendments will be made to the rules dealing with personal service companies to ensure they apply to directors and other officeholders, as well as employees.
Employee share ownership
- Measures are to be introduced to support an expansion in the number of employee owned businesses, including simplification of the rules dealing with HMRC approved employee share schemes.
- A new “employee shareholder” employment status is to be introduced with effect from April 2013. In return for giving up certain employment protections and other rights, employee shareholders will be entitled to receive shares worth a minimum of £2,000 in their employing business. Gains on up to £50,000 of such shares will be exempt from capital gains tax. But income tax/NICs may still be payable on receipt of the shares, at least above the first £2,000 of shares.
- The government will introduce a general anti-abuse rule (GAAR) from April 2013, which is intended to tackle artificial and abusive tax avoidance schemes.
- The taxation of partnerships is to be reviewed given their increased use in tax avoidance schemes.
- The extent to which offshore employment intermediaries are used to avoid income tax and NICs is also to be reviewed.
- Further resources are to be made available to HMRC to increase revenues by tackling tax avoidance activity, in particular focusing on offshore activity, wealthy individuals and multinationals.
- The 3p per litre rise in fuel duty planned for January 2013 has been cancelled, and deferred to 1 September 2013.
- A number of measures have been introduced to encourage business investment and improve access to finance by SMEs, including a new £1 billion Business Bank and increased investment by the Business Growth Fund and Business Finance Partnership.