Has the Chancellor got the X-Factor?

The Government announced a one off exception for the X-Factor Christmas single for the chosen charity of Together for Short Lives. The exception will be in the form of a donation that will be equivalent to the sum of the VAT receipts collected on sales and will be funded by the Department of Health.

Financing the future

Billions of pounds will be made available to smaller businesses at low interest rates to stimulate growth through the National Loan Guarantee Scheme.  This should help to ease the pressure on those businesses that are seeking credit. The Government will also make an additional £1 billion available through a Business Finance Partnership, which will invest in smaller and medium sized businesses in the UK.

The Chancellor announced that a memorandum of understanding with two groups of UK pension funds had been signed. This will allow for large amounts of capital investment to be made in the UK economy.

A time to invest?

A new Seed Enterprise Investment Scheme (SEIS) was also announced, which will have effect from April 2012. This will run alongside the existing Enterprise Investment scheme and will offer investors a 50% income tax relief on investments in start-up companies irrespective of the marginal rate of tax paid.  With a CGT exemption being offered for those realizing gains during 2012-2013, which are then re-invested through SEIS in the same year, this could be an extremely attractive option for those realizing gains, but who may not be eligible for entrepreneurs relief.

Social Housing – a foot on the ladder?

A Right to Buy scheme was announced which will provide support to those in social housing who wish to purchase their property. This will provide discounts of up to 50% on the market value of the property, with a pledge from the Government to use the proceeds to build more social housing. This will give an opportunity for many to step onto the property ladder without risking daunting mortgage repayments.

Business rates- taking a holiday?

The small business rate relief holiday is going to be extended for an additional six months from 1 October 2012. It was also announced that there will be an opportunity to defer up 60% of the increase in the 2012-2013 business rate bill as a result of the uprating for RPI. This will be allowed to be paid over the following two years.

There has been an expansion to the Enterprise Zones, including two new Enterprise Zones in Lancashire and in the Humber area. 100% capital allowances will be available in six areas, including the Tees Valley and Liverpool.

Driving the economy forward

In a commitment to the motorists in the UK the Chancellor had announced that the fuel duty increase announced for January 2012 will be deferred until 1 August 2012. It is also anticipated that the inflationary increase for August 2012 will be cancelled altogether. This will come as a welcome relief for long distance commuters and hauliers.

Benefits and Tax Credits – winners and losers?

An area that has mixed fortunes is that of benefits and Tax Credits:

• Most benefits will rise in line with inflation of 5.2% for 2012-2013
• The disability elements of Tax Credits will be uprated by the CPI
• The Child Element of Working Tax Credits will increase by £135 in 2012-2013 and the planned £110 above inflation will not go ahead
• The couple and lone parent elements of Working Tax Credit will not be uprated for 2012-2013

Negatives

State pension age – are you affected?

The Government announced that the state pension age will rise to 67 between 2026 and 2028; a measure which it is claimed will save around £60 billion. With pensions being a hot topic at the moment, many people will be unsure about the future of the basic state pension and the extent to which it can provide for retirement. 

The basic state pension will increase by the triple guarantee announced in the June 2012 budget. This will mean the full basic state pension will be £107.45 per week from April 2012.

Employer asset backed pension contributions

The Government have published draft legislation aimed at pension schemes who, they believe, are obtaining excess tax relief. The new measures have the aim of ensuring that the available tax relief would accurately reflect the actual increase in value of the assets held within the pension plan.

Banking on taxation

A bank levy increase to 0.088% from January 2012 has also been announced. This is likely to be an unpopular decision with banks recovering from a difficult period.

Capital Gains Tax

The Annual Exemption for CGT will remain at £10,600 for 2012-2013, which although not a great surprise, will mean additional tax payable for those who are entrepreneurial during these harsh times.

Ongoing commitments

The Government has announced that it will be looking at the following measures to reduce the red tape and burden on businesses:

1. The National Minimum Wage regulations to create a single set of regulations as part of the simplification of the existing regimes

2. The Agency Workers Directive – these will be examined in 18 months’ time to ensure the practical arrangements for employers are as simple as possible.

3)      First employee support – the Government has pledged to work to reduce the burden for sole traders who are taking on their first employee.

4)      Income Tax and NIC reform – next steps were announced by the Government on 14 November 2011, with the intention that the reforms take place around 2017.

5)      Abolition of tax reliefs – following the consultation released in May 2011 seeking to abolish 36 reliefs, several reliefs are expected to be abolished in the Finance Bill 2012, with effect from 1 April 2013, including late night taxis.