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The Chancellor gave the autumn statement on 29 November. This is largely an economic report, but it did contain a few tax measures.
Some had been announced before, some had been leaked in the days leading up to George Osborne's announcement, but in most cases the detail will not be known until 6 December, when the draft Finance Bill 2012 is published.
The tax measures are summarised below and in the related articles (see links above).
EIS
The principles of a seed enterprise investment scheme aimed at encouraging investment in new start-up companies was announced. It will offer 50% income tax relief for individuals who invest in shares in qualifying companies on investments of up to £100,000 for start-ups from April 2012.
The cumulative investment limit for companies will be £150,000. In addition, there will be a one-year exemption from capital gains tax on gains realised in 2012/13 and invested through the scheme in the same year.
Noting that the enhanced relief reflected the ‘inherently risky nature of small start-up companies’, Bill Dodwell, head of tax policy at Deloitte, said ‘tax relief at up to 78% in the first year will make the scheme an attractive option for individuals who wish to invest in start-up companies’, although he added that given that it is unlikely that the rules will allow investment in a connected company, ‘investors will not be able to invest in a company they control’.
As announced in the 2011 budget, the autumn statement confirms that the enterprise investment scheme is to be simplified by relaxing the connected person rules and the definition of shares that qualify for relief.
A new test is to be introduced which will exclude companies set up for the purpose of accessing relief, acquisition of shares in another company, and investment in feed-in-tariffs businesses.
In addition, the £1m investment limit per company for venture capital trusts is to be removed to reduce the administrative burdens of the scheme.
The capital gains tax annual exempt amount is to be kept at £10,600 for 2012/13.
Inheritance tax
With regard to gifts of pre-eminent works of art or historical objects to the nation, following consultation after the 2011 budget, legislation is to be introduced to enable individuals to receive a reduction in their income tax or capital gains tax liabilities, and companies to receive a reduction in their corporation tax liabilities, in return for donating pre-eminent objects under this new scheme.
Tax reductions under this scheme, and taxes offset under the existing inheritance tax acceptance in lieu scheme, will be subject to an annual limit of £30m a year.
Research
Further to the changes to research and development tax credit for small and medium-sized enterprises made in the 2011 Budget, the government plans to introduce an ‘above the line’ tax credit in 2013 to encourage such activity by large companies. Consultation will follow at budget 2012.
Explaining how the change will affect claims, Diarmuid MacDougall of PwC said: ‘Under the new scheme companies that qualify for the research and development credit and are taxpaying will see their corporation tax bills offset by the amount of the credit.
However, where the credit cannot be offset against the company’s corporation tax bill, for example due to losses, the new scheme will allow the company to claim a cash payment from the Treasury. This change will allow the benefit of the tax credit to be recorded in the company’s accounts in profit before tax, rather than as a reduction in the tax charge, as is the case now.’
David O’Keeffe of Aiglon Consulting welcomed the news, saying ‘the current regime is attractive in itself but the fact that it is reflected in the tax line can make it difficult for the benefit to be reflected in the actual research and development activity’.
He added that the change will make it easier for UK subsidiaries of multinationals to use ‘the research and development relief to compete for research and development spending in their group’.
Capital allowances
Enterprise zones in six assisted areas, the Black Country, Humber, Liverpool, North Eastern, Sheffield and Tees Valley, will qualify for enhanced capital allowances. In these areas, 100% allowances will be available for plant and machinery investment incurred between April 2012 and March 2017.
As announced on 3 October, the government will be approving proposals from the Lancashire and Humber local enterprise partnerships to form enterprise zones, but it will consider an enterprise zone in Battersea linked to the redevelopment of the power station.
Bank levy
The bank levy will be increased to 0.088% from January 2012. The rate had been set at 0.078% in March but has been revised up to offset the forecast shortfall in receipts for 2011 and future years.
Rod Roman, tax partner at Ernst & Young, noted that this is the third increase in the rate, and added, ‘It confirms the government’s primary objective for the bank levy is to raise a minimum amount of £2.5 billion per annum from the banking sector.
‘The focus on raising a minimum level of revenue appears to be driving uncertainty in relation to the actual rates, which will cause concern among all major banks operating in the UK, in particular UK-parented banking groups who will bear this uncertain and growing cost on their entire global balance sheets.’
Stamp duty land tax
The stamp duty land tax relief for first-time buyers has been ineffective in increasing the number of first-time buyers entering the market, according to the government, and will end on 24 March 2012 as planned.
In its place, other measures will be introduced based on suggestions in the report Laying the foundations: a housing strategy for England, published on 21 November.
