Overall, given the state of the UK economy, yesterday’s Autumn Statement is a positive attempt to stimulate growth. Here are the key points you should be taking note of as a small business:
Employment law is complex, and as such, many employers will not take on new workers as it is difficult to pay off employees when there is a down turn in business.
However, Britain’s smallest firms will, under new proposals, be able to pay off employees at will. When a business is expanding, they can take on extra employees, safe in the knowledge they can lay them off without breeching employment law. Any business with less than 10 workers will be able to pay off employees without the business being taken before an employment tribunal and “being sued out of existence due to the costs of an employment tribunal”.
This will, hopefully, encourage small business to hire new staff when needed. The joint benefit being that it will help business to grow, stimulating the local economy, while at the same time reducing levels of unemployment.
Expansion, for some companies is not an option, and in some cases not wanted, but often, they need help to continue operations. The taking on of Apprentices, where the government assists in the costs, and with the proposed changes to employment law, will encourage business to offer youngsters a way into the job market, without expanding their current operations.
A cap on business rates will extend such relief to April 2013. However, this only applies to rates between £6,000.00 (who will benefit 100%) and £12,000.00 (who will benefit by 50%) as the relief is tapered. Larger business will be able to defer 60% of the rise in business rates from April 2012 by spreading the increase over two years. This will, at least, help the cash flow position of small businesses, as some such SME’s still underestimate the vital importance cash flow plays in the daily running of a business.
The reduction of corporation tax to 25% will help companies manage their cash flow and for investment. In 2012, any tax on capital gains invested in businesses will also be waived during the tax year 2012/13 under a modified Enterprise Investment Scheme (EIS) extended for start-up businesses. Anyone investing up to £100,000 will be eligible for income tax relief of 50%.
The modified scheme will be referred to as the Seed Investment Enterprise Scheme (SEIS). The idea is to bypass the banks as a source of finance, and allow companies seeking capital to ‘find alternative sources’, this is in addition to the governments ‘national loan guarantee scheme’. However, a “test” will be introduced to prevent companies from setting up only for the purpose of assessing the relief where the risk of the investor of losing the amount invested in the company is negligible. The intention of the scheme is that only companies, the investment in which poses a risk to the investor of losing his investment, can benefit.
The ‘national loan guarantee scheme’ is designed to reduce interest rates for small businesses. This will help small firms with access to capital. However there is a perception that lenders do not “necessarily know how to grow and run a business” and as such, the loans available under the scheme may not be as far reaching as the government hopes. Alternatively, since the bank will not necessarily be risking its own money in some investments the potential for “‘subprime’ the sequel” will be present .
The Annual Investment Allowance Scheme currently allows relief of 100% for any Capital Investments (Plant and Machinery, Computers, fixtures and fittings, commercial vehicles, etc) up to the value of £100,000.00. From April 2012 this will reduce the 100% relief to a limit of £25,000.00. The effect on small business in most cases will be negligible unless it is a capital intensive business (farming for example, or printing).
For a great many companies, the internet is a major strategic part of their business. The £100m fund announced to increase broadband to help create ten superfast cities in the UK by increasing broadband speed to between 80 to 100 megabit speeds per second can only be positive. By 2015 the hope is that 90% of the UK will have superfast broadband. The freezing of the increase in fuel duty which will then be capped to 3% is welcome.
This is our interpretation of the announcements so far. However, a word of caution needs to be added, as how the proposals will operate in practice will not be known until the details have been published, debated, and passed into legislation. Contact us if you have any questions.
Corporation Tax Rate Changes
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Autumn Statement – Headline Changes
Autumn Statement – Headline Changes
Extracted from the ACCA Guide to the Autumn Statement 2022
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