Essex accountants Haslers is urging businesses to carefully study the Chancellor’s Autumn Statement to see if they can benefit from any of his announcements.

Among the measures declared by George Osborne that could have major repercussions for small and medium sized businesses include a £40 billion National Loan Guarantee Scheme where the Government will underwrite loans – Mr Osborne estimates that this will cut the average interest rate faced by those firms by 1%.

In addition from April 2012, anyone investing up to £100,000 in a new start-up business will be eligible for income tax relief of 50% under a new Seed Enterprise Investment Scheme (SEIS). In 2012, any tax on Capital Gains invested in such businesses will also be waived.

More over the Government will freeze the annual exempt amount for Capital Gains Tax at £10,600 for 2012-13.

Another measure announced included a £1 billion business-finance partnership aimed at Britain’s mid-sized companies.

In another move that will benefit small businesses, the Government has extended the current small business rate relief holiday for a further six months from 1 October 2012.

The Government will also give businesses the opportunity to defer 60 pc of the increase in their 2012/13 business rate bills, to be repaid equally across the following two years.

In an R&D u-turn, Mr Osborne announced an “above the line” tax credit in 2013 to encourage research and development activity by larger companies. This will be consulted on for the 2012 budget to ensure that SME R&D tax credits are not reduced as a result of this change.

Jon O’Shea, Tax Partner at Haslers said: “George Osborne has announced a raft of proposals, which, on the face of it, will benefit small and medium sized business, many of whom are our clients.

“We particularly welcome the measures announced regarding the National Loan Guarantee Scheme (NLGS), the new SEIS and rate relief.

“SMEs (small and medium sized businesses) often find it difficult to access credit. Hopefully the NLGS will open up new credit lines to help struggling businesses stay afloat.

“However because of the current uncertain economic times, it is difficult to say whether, in the long run, these incentives will really get the country back up and running.

“Businesses should carefully study the small print to see how they can benefit from any of these announcements.

“We are only too happy to help businesses make sense of these policies.”

29 November 2011

• Introduction
• Economic growth and borrowing
• Business
• Tax
• Pensions and benefits
• Infrastructure and transport
• Housing
• View official documents and full Autumn Statement

Introduction

Despite warnings this week that the UK was likely to slip back into recession, Chancellor George Osborne has said that the Office for Budget Responsibility’s (OBR) latest annual growth and borrowing figures do NOT predict this happening. However, the figures do show that the bust was deeper and had an even bigger effect on Britain than first thought, he said.

Giving his Autumn Statement in response to the OBR’s report, Mr Osborne updated MPs on the current state of the economy, as well as outlining the Government’s plans for its future growth.

Referring to the ongoing eurozone crisis, the Chancellor said that the Government would do “whatever it takes” to protect Britain from the debt storm.

Economic growth and borrowing

The OBR downgraded its growth forecast for 2011 from the 1.7% announced in March’s Budget to just 0.9%. An even bigger drop is forecast for 2012, down from 2.5% to 0.7%.

However, things start to look better after next year, with growth forecasts of 2.1% for 2013, 2.7% for 2014 and 3% for both 2015 and 2016.

UK borrowing forecasts were also increased, with borrowing this year being £127 billion – £5 billion more than first thought. Borrowing will be £19 billion higher next year and £30 billion higher in 2013/2014. These increases come as a result of the reduced expected growth levels, according to the Chancellor.

Debt to GDP ratio will peak at 78% by 2014/2015 and will fall afterwards.

Business

Increasing lending to UK businesses, particularly smaller firms which continue to face difficulties obtaining funding, formed a key part of the Autumn Statement, with Mr Osborne outlining a number of measures designed to tackle this problem.

As first hinted by the Chancellor during the Conservative party conference in October, the Government is to launch a credit-easing programme, the National Loan Guarantee Scheme, which will underwrite up to £40 billion in low-interest loans to small and medium-sized firms. New loans and overdrafts to businesses with a turnover of less than £50 million will be eligible for the scheme, which will be up and running within the next few months.

A £1 billion Business Finance Partnership will also be set up to help secure funding for mid-sized firms. This will involve the Government investing in funds that lend directly to these firms, in partnership with other investors such as pension funds and insurance companies, and is designed to provide mid-sized firms with a new source of funding. Mr Osborne said he would increase the Partnership’s size if it proved successful.

The Regional Growth Fund will receive a further £1 billion in funding, while a £250 million support package will be available for energy-intensive firms.

In a bid to create jobs for unemployed young people, the Government will launch a £1 billion ‘youth contract’ to subsidise six-month work placements for up 410,000 individuals.

The bank levy will be increased to 0.088% from January 2012.

Tax

The Enterprise Investment Scheme is to be extended to become the Seed Enterprise Investment Scheme (SEIS). Under this scheme, anyone who invests up to £100,000 in a qualifying new start-up business will be eligible for Income Tax relief of 50%, regardless of their respective tax rate.

The Autumn Statement brought further good news for small firms with the announcement that the business rate relief holiday would be extended for another year until April 2013. For all other businesses, the Government will allow them to defer 60% of the increase in business rates next year to the two following years.

The annual exempt allowance for Capital Gains Tax will be frozen at £10,600 for 2012/2013, with tax being waived for one year only on capital gains invested through the Start-Up Britain scheme in 2012.

Capital allowances of 100% will be available to encourage manufacturing and other industries in Enterprise Zones such as Liverpool, Sheffield, the Tees Valley, Humber, the Black Country and the North East.

Mr Osborne also announced an “above the line” research and development (R&D) tax credit in 2013 to encourage research and development activity by larger companies. This will be consulted on for the 2012 Budget to ensure that SME R&D tax credits are not reduced as a result of such a change.

There will be a below-inflation increase in some working tax credits, while the above-inflation £110 rise in the child element of the child tax credit will be scrapped altogether.

Pensions and benefits

The rise in state pension age to 67 is to be brought forward by 10 years from 2036 to 2026.

The basic state pension will rise to £107.45 per week – an increase of £5.35. Pension credit will rise by the same amount. Meanwhile, benefit payments will be uprated by 5.2% next year, in line with inflation.

Public sector workers will face a 1% cap on pay rises from 2013 to 2015, after the current pay freeze has ended.

Infrastructure and transport

Looking at the cost to people travelling to and from work, Mr Osborne announced that the planned fuel duty rise of 3p in January 2012 will be scrapped, with the duty rise planned for August 2012 being reduced from 5p to 3p.

Meanwhile, the rise in regulated rail fares will be capped at 6.2% – 1% above inflation – in January 2012. This is down from the 8.2% originally planned, which the Chancellor said was “too much”.

In terms of infrastructure, £5 billion is to be spent in this area, including £1 billion on the national rail network.

Up to 35 new road and rail projects across England will receive the go-ahead.

The Government will aim to unlock a further £20 billion in investment for infrastructure projects from pension funds.

Housing

Housing played an in important part in the Autumn Statement, with Mr Osborne announcing that the mortgage indemnity scheme will help up to 100,000 people buy homes with a 5% deposit.

Meanwhile, £400 million will be used to ‘kick-start’ construction projects which have stalled for whatever reason.

The Government’s Right to Buy scheme will offer a 50% discount for social tenants who wish to purchase their own homes.

View official documents and full Autumn Statement

www.hm-treasury.gov.uk

Pensions experts have warned that around three million people may drop out of a government scheme designed to encourage more workers to save for their older age.

According to the findings of a Populus poll for the National Association of Pension Funds, released on 20 October, one in three people would be unlikely to stay in a workplace pension they had been auto-enrolled into. It has been estimated that auto-enrolment – which will begin on 1 October 2012 – could create up to nine million new savers.

When asked why they would opt out, 48 per cent said they could not afford the contributions, 29 per cent that they did not trust the government and 26 per cent that they did not trust the pensions industry.

Meanwhile, the Pensions Regulator has warned employers against leaving their planning for auto-enrolment to the last minute. Its own research, published in the summer, found that 46 per cent of employers quizzed would leave it as late as possible before thinking about how to comply with the new law. Among larger employers, who will be affected first, only 13 per cent were fully prepared.

Key points of auto-enrolment include:

• employers will be required to automatically enrol into a qualifying workplace pension employees who:
• are not already in a workplace pension scheme;
• are aged at least 22 but are below state pension age
• earn more than a minimum earnings threshold, currently £7,475 a year
• work in the UK
• the phased introduction of auto-enrolment will begin on 1 October 2012 with businesses employing 120,000 people or more. Other employers will follow until all are included by 1 September 2016. Businesses employing less than 50 people will come on board between March 2014 and February 2016
• the Pensions Regulator will write to each employer around 12 months before their date for starting automatic enrolment, to remind them of their new responsibilities
• based on each worker’s qualifying earnings (between a minimum of £5,715 and £38,185 maximum in the current tax year), the employer contribution will start at a minimum one per cent of those earnings during 2012-2016, rising to a minimum three per cent from October 2017
• overall, the minimum total percentage going into each employee’s pension pot – including their own contribution, their employer’s contribution and tax relief – has been set at two per cent of qualifying earnings from October 2012-September 2016, rising to eight per cent from October 2017 onwards
• pension schemes must meet certain government standards for employers to use them. The options include using NEST (National Employment Savings Trust), a simple, low-cost scheme, or using an existing scheme that qualifies or changing it so that it qualifies
• employees can opt out of the scheme during their first month of membership (when they can receive a refund of their contributions) or at any time afterwards (when contributions stay in the pension pot). They can also rejoin at any time and employers must automatically re-enrol non-members meeting the original qualifying criteria around every three years.

Link: The Pensions Regulator guidance for employers

Employers are being urged to make sure their PAYE paperwork is correct after hundreds of returns incorrectly claimed to employ A N Other in 2009/10.

As well as 507 A N Others, employer returns submitted to HM Revenue & Customs (HMRC) for 2009/10 also contained the following errors:

• 128 staff entered as Mr, Ms or Mrs Dummy
• 572 people whose surnames only included the letter X, ranging from Mr X to Mrs XXXXXX
• 75 staff with the surname Casual, 11 Cleaners, nine Workers and six Students
• 824 employees with the surname Unknown and
• 40 people who were apparently aged 200 or more, due to incorrect dates of birth being given.

Jim Harra, HMRC’s director of customer operations, said: “Most employers get their PAYE returns right. The few who don’t can cause problems for their employees, for example, incorrect deductions of tax.

“Around 80 per cent of errors in employee data are due to an incorrect name, date of birth or national insurance number – straightforward information that can be collected and checked quite easily.

“So, whether you are employing Mr or Mrs J Smith – or even Mr or Mrs A N Other, please use the full and official name on your PAYE paperwork. First names are very important, especially for common surnames.

“We really want employers to check that they are sending us the right details for all their employees, to make life easier for them, HMRC and their employees.”

Link: Getting it right for employers

Businesses are becoming more aware of their obligations under the Data Protection Act (DPA), according to new figures from the Information Commissioner’s Office (ICO).

Data published on 21 October found that showed that nearly three-quarters of businesses surveyed were now aware that the DPA requires them to keep personal information secure, up by 26 per cent on last year’s figure.

But public confidence in the security of personal data was down, with less than half of the individuals surveyed believing that organisations processed their data in a fair and proper manner and almost three-quarters of individuals that online companies failed to keep their details secure.

The number of data security breaches in the private sector was also up on the previous 12 months, with 58 per cent more breaches reported to the ICO so far in 2011/12 than in the same period last year.

Information Commissioner Christopher Graham said: “I’m encouraged that the private sector is waking up to its data protection responsibilities, with unprompted awareness of the Act’s principles higher than ever.

“However, the sector does not seem to be putting its knowledge to good use. The fact is that security breaches in the private sector are on the rise, and public confidence in good information handling is declining.

“Businesses seem to know what they need to do – now they just need to get on with doing it. It’s not just the threat of a £500,000 fine that should provide the incentive. Companies need to consider the damage that can be done to a brand’s reputation when data is not handled properly. Customers will turn away from brands that let them down.”

Link: ICO survey

Almost three-quarters of small and medium-sized UK businesses are failing to check on their customers’ credit worthiness, according to new research.

Global information services company Experian surveyed nearly 700 UK small businesses and found that 71 per cent did not check their customers’ credit status, increasing their risk of being paid late or not at all.

The September survey also found that 39 per cent of small businesses did not know what a credit score was and 61 per cent have never checked their own score, leaving them unaware of issues that could lead to them being turned down for finance or refused materials by a new supplier.

Experian said that for small businesses, low scores can stem from a lack of detailed data about the business or a failure to file complete or accurate information, rather than underlying financial insecurity.

Simon Streat, managing director of Experian’s UK SME business, said: “Two-thirds of small businesses may be blind to their credit scores, but their larger customers, suppliers and banks certainly won’t be.

“It is important for businesses to monitor their credit score on a regular basis to ensure it reflects their situation accurately and to be able to take action to resolve any issues that are highlighted.

“Simply taking the steps to check the credit score of firms before doing business with them is straightforward and affordable, and it could make all the difference.”

Factors such as incomplete accounts, a location change, the move from non-limited to limited status, or mergers and acquisitions, can all influence credit scores.

Link: Business Link guidance to getting paid on time

Delays in dealing with business rate appeals are costing businesses £300 million per year, according to new research.

Business rates specialist CVS revealed in October that there was a backlog of more than 328,000 business rate appeals at the Valuation Office Agency (VOA), which calculates business rates and council tax in England and Wales. A third of the appeals date back to the 2005 business rate valuation.

CVS said that tens of thousands of business ratepayers who had paid too much in rates were now unable to get back the money owed to them due to an inefficient appeals process.

It said that at the VOA’s current rate of performance, it would take another 2.4 years to clear the backlog of appeals against rate valuations carried out in 2010 and that by holding over appeals from 2005 to consider alongside those from 2010 the VOA was making the backlog worse.

Don Baker, national head of rating at CVS, said: “the moment, businesses need all the revenue they can get and the VOA’s inefficiency is penalising companies unfairly and preventing those companies from recovering money that is rightfully theirs.

“This is weakening the financial health of a large number of SMEs across the country and damaging businesses’ ability to invest and grow. Urgent action is needed to clear the backlog and to give SMEs a fighting chance of leading the recovery.

“Every day the appeals backlog continues to grow and the delays are harming businesses’ ability to invest and contribute to local economic growth. The Government is championing a growth agenda and looking to private sector firms – and that means SMEs in particular – to stimulate investment. That policy and the VOA’s current performance are completely inconsistent.”

Link: Business rates guidance

Innovative UK businesses are set to benefit from a free system to access information on patents launched by the Intellectual Property Office (IPO).

The new, online service, called Ipsum, will remove the cost to businesses of requesting patent documents and the government estimates it could save UK business up to £100,000 a year.

Previously each document requested by a business would cost £5 and by the time it had been delivered it might already be out of date. Ipsum is updated in real time so businesses will now have the up to date information on patent applications they need.

The service is open to anyone, benefiting businesses researching patents, patent attorneys working for clients protecting their IP rights and potential inventors looking for the best way to find information on patent applications. This can help them understand why a patent was granted or rejected or know more about particular patents.

Launching the new service on 6 October, Minister for Intellectual Property Baroness Wilcox said: “The service will give businesses, universities and consumers instant access to the information they need so they can understand the progress of patent applications and save money.

“Patent examiners around the world will also benefit as they can now immediately understand why the UK Intellectual Property Office did, or did not, grant a patent. This could help reduce the global backlog of applications benefiting UK business hoping to get their patents processed in another country.”

Link: Ipsum website

Insolvency experts have warned that a proposed new European Commission measure to freeze the assets of British businesses could deal a serious blow to work to rescue firms in financial difficulties.

The European Account Preservation Order (EAPO) is set to give courts anywhere in the European Union the power to freeze funds in UK businesses’ banks accounts without warning.

But Frances Coulson, president of insolvency trade body R3, said the new measure “would drive a coach and horses” through attempts to rescue businesses formally or informally.

She added: “Cash flow is critical during delicate rescue work. Removing access to substantial funds without notice gives a single creditor the right to jeopardise hopes of business preservation, harming creditors as a whole.”

Though intended to help creditors protect assets from concealment or removal by directors, R3 says the drafting of the EAPO enables the measure to be granted for a range of reasons unrelated to a serious risk to assets. As such, they risk being routinely granted in cross-border debt recovery cases.

Ms Coulson added: “The UK is seen as an international leader in business rescue, benefitting creditors who usually receive higher returns in rescue than terminal procedures. If EAPOs are supposed to protect assets from dodgy directors, the new regulation should reflect this objective. As they stand, the proposals are dangerous and draconian.”

The Ministry of Justice is now considering responses to a consultation on whether it is in the UK’s interests to be a party to the proposed EAPO regulation, which closed in September.

Link: Ministry of Justice consultation documents