Autumn statement 2013: Highlights
Tax breaks for small business, new measures against tax avoidance and tax incentives for investment in young people and shale gas were among the main announcements in the 2013 Autumn Statement.
Backed with several tax policy proposals and a number of measures enacted on the day, the statement looked more like a pre-Budget report from Gordon Brown’s more activist period as Chancellor.
There was even a call back to 1999’s notorious IR35 press release.
Chancellor George Osborne opened his speech on Thursday by declaiming, “Britain’s economic plan is working.” Yet “difficult decisions” was the phrase that cropped up most frequently during the next hour - 10 times in all. An upturn in economic forecasts would allow the Chancellor to unveil a selection of tax concessions for business, but this was balanced by plans to increase the pension age.
He previewed a £9bn programme to increase the tax take by clamping down on "evasion, avoidance, fraud and error" that would involve most immediately a restriction on the use of artificial intermediaries to avoid national insurance. While Whitehall departments would continue to get their budgets squeezed by £3bn, HMRC would be exempt.
Employer National Insurance contributions are to be scrapped on 1.5m jobs for young people. "Employer Nics going for under 21s. Undisputed good news at last," commented BDO employment tax and rewards partner Philip Fisher in AccountingWEB's live autumn statement blog. More than 220 participants from both AccountingWEB and our sister site BusinessZone followed the speech in the live thread, and at the end they gave a cautious welcome to the announcements, with 81% deeming it friendly, but 56% voting "friendly, but not enough":
Here is a quick overview of the main business and tax-related announcements, with links to further information sources.
Economy on the up
Setting the scene with good news, the Chancellor reported a revision in the Office of Budget Responsibility’s growth forecast from 0.6% in March to 1.4%. The figure for 2014 was upgraded from 1.8% to 2.4%. The OBR estimate of national debt was revised down from 7.5% in March to 6.8% and would continue to fall in the years to 2018-19 when the OBR expects to see a small surplus. Borrowing for 2013 would be £111bn, £9bn less than expected. The latest estimate is that borrowing will be £73bn less over the next five-year period and “the government will not have to borrow anything at all” by 2018-19, the Chancellor said. However the feelgood projections did not distract the chancellor from imposing a cap on welfare spending of 50% of government spending (excluding state pension and cyclical benefits for job seekers).
Along with HMRC, small businesses appeared to be the main beneficiaries of spending handouts to maximise the political advantages of the recovery ahead of the next general election. The NIC holiday for under-21s was the finale of the Chancellor’s speech but along the way he also announced a 2% cap on business rate raises from April and a £1,000 “discount” on business rates for the next two years on retail premises with rateable values up to £50,000. The people in business such as small shops, cafes and restaurants “epitomise the hardworking values this government supports”, Osborne said. Also in the frame are:
- Businesses moving into vacant properties will have their rates cut by 50%
- Extension of the new enterprise allowance
- A new tax relief is to be introduced for investment in social enterprises
- Corporation tax relief for commercial theatre productions and relief for investing in new writings or touring productions to regional theatres
- An expansion of apprenticeships – an additional 20,000 over the next two years. Employers will get the funds from HMRC.
- New tax allowance for investment in shale gas; halves tax on early profits
- Tax-advantaged employee share schemes to get self certification and online filing of returns, as recommended by OTS review.
Capitial gains tax (CGT) crackdown
The first inkling of a tightening of CGT conditions emerged as the Chancellor outlined his strategy to add £9bn to his tax take. The final period exemption for private residence relief will be reduced from 36 months to 18 months from 6 April 2014. A CGT charge will also be introduced on future gains made by non-residents disposing of UK residential property. The details will be put out for consultation in early 2014.
Yet more anti-avoidance
A small number of tax measures will be enacted from 5 December to avoid potential tax losses including a Finance Act 2014 restriction on mixed membership partnerships reallocating excess profits from a non-individual partner to an individual. Legislation will also deny certain income tax loss reliefs and capital gains relief for individual partners who are deemed to be party to arrangements intended to gain them those reliefs.
The government will also seek to extend its current power to force people using tax schemes that have been defeated at tribunal to pay the tax they were trying to save up front.
Three other measures were introduced on the day to address potential risks affecting corporate groups and those operating internationally:
- Controlled foreign companies: profit shifting
- Avoidance scheme using total return swaps
- Double taxation relief: revenue protection
For more detailed explanations, see the Treasury's 2013 Autumn Statement page and continuing coverage on AccountingWEB over the next few days. After draft Finance Bill clauses are published next week, Rebecca Benneyworth will produce an impact report sponsored by BTCSoftware on what they will mean for small businesses.