Autumn Statement: Chancellor offers tax breaks to boost SMEs - Mazars - United Kingdom
Autumn Statement: Chancellor offers tax breaks to boost SMEs
Chancellor George Osborne delivered the Autumn Statement on 29 November 2011. Whilst the focus was very much on the state of the UK economy, there were a few references to tax changes.
29/11/2011
The most significant of these are, not surprisingly, encouraging funding of the SME sector to promote growth, with proposals to change the existing Enterprise Investment Scheme and Venture Capital Trusts coupled with a new ‘Seed Enterprise Investment Scheme’ targeted at start-ups and available from 6 April 2012. Further initiatives were dangled before businesses in an effort to boost the economy in the form of 100% capital allowances for companies that locate in the new enterprise zones, confirmation of the reduction in the main rate of corporation tax to 25% from 1 April 2012 and the promise that the much needed reforms to corporation tax to make the UK more competitive in the international arena will be included in the Finance Bill, which will be published on 6 December 2011.
Personal tax
Seed Enterprise Investment Scheme
The Chancellor's announcement of a new tax incentive for investing in shares in start-up businesses is a surprising yet welcome relief. New start up companies will be able to raise up to £150,000 using the scheme from 6 April 2012. Individual investors will obtain an income tax credit equivalent to 50% of their investment, effectively having their money doubled by the Government. Furthermore, if they sell an asset they already own that realises taxable gains in 2012/13 and invest in shares under SEIS in that year, no tax will be payable on the gain in relation to the amount of the SEIS investment. However, the individual investor is limited to an investment of £100,000 per year under the scheme.
Those with very long memories will recognise some similarities in these proposals to the "Business Start Up Scheme", as introduced 30 years ago by the Margaret Thatcher’s first Government.
The proposed relief is very generous which is realistic and necessary when seeking to encourage investment in new start-up companies, which by their nature are usually high risk.
The Coalition Government are making other minor amendments to the Enterprise Investment Scheme which can be assumed will also apply to these proposals.
Annual Capital Gains Tax Allowance Frozen
The capital gains tax allowance will be frozen at £10,600 for 2012/13
Stamp Duty Land Tax for first time Buyers
The Chancellor confirmed that the temporary stamp duty relief for first time buyers which currently applies to purchases between £125,001 and £250,000 will cease on 24 March 2012
Corporate tax.
100% Capital allowances in Enterprise Zones
A number of new applications for Enterprise Zone status are currently being considered. In the meantime, 100% capital allowances will be available in plant and machinery investment between April 2012 and March 2017 in the Enterprise Zones in the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley.
Research & Development Tax Credits
The Government has responded to the campaign by larger companies, for R&D tax credits to be recognised ‘above the line’ rather than simply being included as a reduction in the tax charge in companies’ financial statements. The objective is to give the relief more visibility in order to encourage more research and development in the UK by larger companies. The decision making process on whether to embark in an R&D project can then be made in the knowledge that the tax relief will reduce the impact on pre tax profits, increasing its attractiveness. Further consultation on the proposal is expected to follow in the Budget, with draft legislation expected in the draft Finance Bill next week.
Controlled Foreign Companies and Patent Box
The Chancellor confirmed that the draft legislation for the CFC and patent box reforms will be included in the draft 2012 Finance Bill, which will be published on 6 December. It is to be hoped that the draft legislation issued next week will be less complex than that issued during the consultation process, since the complexity of UK tax legislation is one of the key problems identified by multinational enterprises on doing business in the UK.
Bank Levy
The banks were not so lucky today, predictably, with an increase in the bank levy rate from 1 January 2012 to 0.088%.
For more information contact Tim Davies or Lindsay Pentelow .
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