Today the Chancellor addressed the House of Commons and the televised audience with his forthcoming plans. December is widely accepted as the season for good will so George Osborne had a tough job to deliver the Autumn statement.
The Chancellor was forced to admit his anticipated failure to reach the second of his fiscal targets being a reduction of debt as a percentage of national income by the end of this parliament. Whilst this is unlikely to affect the markets, as it confirms what we pretty much already knew, it will undoubtedly serve as a massive blow to his credibility and a source of ammunition for his rivals.
In a bid to retain business in the UK, Mr Osborne has further slashed the large company rate of corporation tax by 1% so that from April 2014 they will be charged 21%, down from the proposed 22%. This follows the promise already made to reduce the large company rate to 23% from April 2013.
Annual Investment Allowance
In the face of much criticism regarding the cuts to the Annual Investment Allowance down to £25,000, which allows businesses to gain a 100% tax deduction on capital expenditure on plant and machinery, the Chancellor has proposed that it will be decupled to £250,000. This will take effect from 1st January 2013 for a 2 year period.
EMI Entrepreneurs Relief
A principal barrier to Enterprise Management Incentive (EMI) share schemes at present is the requirement for shareholders to hold at least 5% of the issued share capital on disposal in order to qualify for entrepreneurs’ relief. Whilst George Osborne did not specifically reaffirm that a concession will be introduced into the 2013 Finance Bill on this point, he did rather loosely “confirm the tax relief for our employee shareholder scheme”. This would mean that EMI share issues from 6th April 2012 (backdated) will not need to meet the 5% condition. However, the other conditions for Entrepreneurs relief will still remain, most notably the requirement to hold the shares for 12 months prior to disposal.
Mr Osborne has confirmed that the current annual allowance on which individuals will receive tax relief on what they pay into their pension will be cut to £40,000 per annum from £50,000 per annum from 5th April 2014. Again the Chancellor has elected for the relatively soft target of the high earners who will be most affected by this provision.
In an attempt to satisfy the masses and his Liberal party counterpart, the Chancellor has taken a giant step to meeting the coalition target of raising the personal allowance to £10,000 by April 2015 by putting it up to £9,440 with effect from 5th April 2013. This will of course be of little comfort to those expected to lose upward of £1,056 per annum in Child Benefit, a change which is due to take effect from 7th January.
Confirmation that no action will be taken in the spring with regards to implementing a mansions tax or variation, as recently put forward by Vince Cable.
In the wake of a number of high profile cases of individual and corporate tax avoidance (legitimate use of transfer pricing and loopholes to mitigate UK tax) the government has faced immense pressure to take action as the argument of morality clearly does not stand up on its own. Reference was made to the fantastic grilling of the Starbucks, Amazon and Google executives by Margret Hodge and her colleagues at the Public Accounts Committee and 5 key measures have been implemented. Most crucially for those using intellectual property rights to extract funds from the UK, relief from non trade payments (payments of patent royalties) will be abolished with immediate effect.