Dec 7 2012 By Mike Parkinson, Gazette Business Briefing blogger
Business owners can breathe a little more easily since George Osborne sat down after delivering his Autumn Statement: No more VAT hikes or rises in employers’ national insurance contributions at least.
But relief at not being hit with a stick is still not the same as pleasure from being given a treat. There was little of the latter in what Mr Osborne had to offer, certainly not for smaller enterprises.It was instead a careful, calibrated mini-budget that adds nothing much for those with profits of less than £300,000, but targeted help for more profitable ones. They will benefit from tax cuts and better reliefs on investment.
The statement reflected the simple truth that his cupboard of options is more or less empty,and that whatever he gave with one hand last week would have to be recovered with the other. But there was still good news, albeit unlikely to send anyone waving flags out into the streets. Although who will not want to cheer the decision to scrap the planned 3p rise in fuel duty?
The reduction incorporation tax from 24 per cent to 21 per cent is also truly welcome, and overdue, despite not coming into force until 2014. This will give the UK the lowest rate of any major western economy and help competitiveness.
It should also be seen in the context of an ambition to reduce tax avoidance, and particularly the abusive use of partnerships. There is plenty of research to show that lower tax bands cut the temptation to seek out avoidance measures.
Still, it may become an increasingly tortuous line for advisors to tread between helping firms achieve avoidance (historically OK) and evasion (never OK),although the broad principle is very clear on avoidance: play fair.
The avoidance versus evasion debate seems certain to become a good deal more complex and nuanced when details of the general anti-abuse rules Mr Osborne promised emerge over the coming weeks.
The biggest surprise was the Chancellors decision to raise tax relief on investment in plant and machinery from s25,000 to s250,000.
This is a huge leap which will help, say, small printing companies wanting to spend s250,000 on a new printing press. They will now be able to offset the full costs against profits in the year of purchase. But it does nothing for smaller firms unlikely to reach even the earlier, much lower limit.
He also talked about the new business bank, pledging s1 billion of extra capital to lever in private lending to help small and medium-sized firms, the creators of 80 per cent of new jobs in the economy.
It will benefit some hugely, but those left out will see nothing, because in the grand scheme of things s1billion is not much. Here the devil may well be in the detail of who, exactly, can access the funds.
Mike Parkinson is a partner with accountants Barnes Roffe of Cowley Mill Road, Uxbridge