Business and investment

The Autumn Statement contained announcements affecting many aspects of business life.

Tax changes

At the last Budget the Government cut the main rate of Corporation Tax to 26%, and it will fall by a further 1% each year until 2014, when it will reach 23%.

Changes to the tax rules with immediate effect will ensure that the amount of tax relief given to employers making asset-backed pension contributions to registered pension schemes accurately reflects the amount of payments made, and does not give rise to unintended excess relief.

The climate change levy discount on electricity for climate change agreement participants available from 1 April 2013 will be increased to 90%.

As announced, the Government will remove the VAT relief for low value goods (below £15) sent to the UK from the Channel Islands with effect from 1 April 2012.

The Government will introduce the long-awaited cost sharing exemption for VAT exempt bodies that wish to share back-office services such as HR and IT.  This removes a VAT cost which can take place when organisations, such as charities, schools and universities, pool resources to achieve economies of scale.  Additional business sectors likely to benefit from cost sharing arrangements include health, insurance, banking, property, housing associations and gambling.

The requirement that entities wishing to share services must set up an independent cost sharing group (CSG) to benefit from the exemption was opposed by the not for profit sector but has been retained in the Government proposal.  The CSG must be controlled jointly by, and will provide services to, its members.  It is believed that the requirement to form a CGS may prevent some smaller charities from taking advantage of the exemption.

The draft legislation for Finance Bill 2012, due to be released on 6 December 2011, will include the detail of the implementation of the cost sharing exemption. 

Enterprise Zones

Enterprise Zones in six assisted areas – Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley– will qualify for enhanced capital allowances. In these areas 100% allowances will also be available for plant and machinery investment incurred between April 2012 and March 2017. Discussions continue with the devolved administrations regarding enhanced capital allowances in their Enterprise Zones.

Venture Capital Schemes

The Chancellor announced a new Seed Enterprise Investment Scheme (SEIS) to encourage investment in new start-up companies. SEIS will provide income tax relief of 50% for individuals who invest in shares in qualifying companies, with an annual investment limit for individuals of £100,000 and a cumulative investment limit for companies of £150,000.

In addition, the SEIS will offer a capital gains tax ‘holiday' for investments made. This will provide for a capital gains tax exemption on gains realised on disposal of an asset in 2012/13 and invested through the SEIS in the same year.

The Enterprise Investment Scheme (EIS) will be simplified by relaxing the connected person rules and the definition of shares that qualify for relief. At the same time the focus of the EIS will be tightened by the introduction of a new test to exclude companies set up for the purpose of accessing relief, exclude acquisition of shares in another company and exclude investment in Feed-in-Tariffs businesses.

In addition to these changes, the Government will remove the £1m investment limit per company for Venture Capital Trusts (VCTs) to reduce the administrative burdens of the scheme.

The Government had already announced that, from 6 April 2012, the employee limit for both EIS and VCT purposes will be increased to fewer than 250 employees (currently 50), while the gross asset limit will rise to £15m before the investment.

In addition, the maximum annual amount that can be invested in a company will increase to £10m and the maximum annual amount that an individual can invest under the EIS will rise to £1m.

Business rates

The Government will extend the small business rate relief ‘holiday' for a further six months from 1 October 2012 and give businesses the opportunity to defer 60% of the increase in their 2012/13 business rate bills as a result of the Retail Prices Index uprating, to be repaid equally across the following two years.

Employment regulation

The qualifying period for unfair dismissal claims is to be increased from one year to two years from April 2012 to help address employers' fears about the risks of taking on a new member of staff. The Government will consult on the level of fees to be introduced for individuals who want to bring cases to employment tribunals.

Planning law

The Government will:

• review planning appeals procedures, seeking to make the process faster and more transparent, improve consistency and increase certainty of decision timescales. Proposals will be brought forward for implementation in summer 2012 
• consult on a proposal to allow the reconsideration of those planning obligations agreed prior to April 2010 where development is stalled; and 
• consult on a proposal to allow existing agricultural buildings to be used for other business purposes such as offices, leisure and retail space, to make it easier for rural businesses to find the premises they need to expand.

Credit easing

The Government announced a package of up to £21bn of credit easing measures to support smaller and medium-sized businesses, comprising:

• a National Loan Guarantee Scheme whereby up to £20bn of guarantees for bank funding will be made available over two years. This will allow banks to offer lower cost lending to smaller businesses, subject to state aid approval; and 
• making available an initial £1bn through a Business Finance Partnership, which will invest in smaller and medium-sized businesses in theUKthrough non-bank channels.

 Innovation

The Government has announced that it will: 

• invest an additional £75m in supporting technology-based SMEs to develop, demonstrate and commercialise new products and services 
• invest an additional £200m in science, including an £80m investment in the Institute for Animal Health and £25m for large-scale technology demonstrators; and 
• introduce an ‘above the line' tax credit in 2013 to encourage research and development (R&D) activity by larger companies.

The Government will consult on the detail at Budget 2012 and aims to ensure that SME R&D incentives are not reduced as a result of this change. This builds on measures at Budget 2011 to increase the R&D tax credits for SMEs.

In December 2011 the Prime Minister will set out the Government's strategy to support the life sciences work of universities, the NHS, private investors and businesses, to attract and develop talent and improve incentives.

Following consultation over the summer months of 2011, the Government will publish on 6 December 2011 further details of the Patent Box and its reform of the Controlled Foreign Company rules and R&D tax credits.