Last Thursday, George Osborne presented the UK Government’s Autumn Statement to Parliament against a backdrop of positive economic data. UK economic growth forecasts received the largest upward revision in more than a decade, from 0.6% to 1.4% in 2013 and from 1.8% to 2.4% in 2014.
However, the Office of Budget Responsibility warned that the growth is largely cyclical and does not necessarily reflect an improvement in the long-term outlook. Indeed, the Chancellor was also keen to emphasize that ‘the job is not yet done’, which may explain why the policy ‘update’ contained as many as 59 individual policy decisions.
- Corporation Tax – as previously announced, the main corporation tax rate will drop from 23% to 21% from April 2014;
- Employers’ NIC – this will be removed for employees under the age of 21 on earnings up to £813 per week; and
- Employment Allowance – as previously announced, businesses could receive a £2,000 Employment Allowance to reduce the cost of increasing employment from April 2014.
Investment and Ownership
- Corporation tax loss relief provisions – easing restrictions on the availability of relief for corporation tax losses following a change in a company’s ownership;
- Income tax relief for qualifying loan interest – from April 2014, the income tax relief established for interest paid on loans to invest in UK close companies and employee-controlled companies will be extended to cover investments in such companies that are resident throughout the European Economic Area;
- Employee ownership – from October 2014, companies controlled by an employee ownership trust can make employee bonus payments exempt from income tax, up to the value of £3,600. This builds on the announcement in the 2013 Budget that introduced capital gains tax relief on the sale of a controlling interest in a business into an employee ownership structure; and
- Office of Tax Simplification (OTS) review of employee share schemes – the UK Government announced plans to implement in 2014 a package of simplifications proposed by the OTS in relation to unapproved employee share schemes, including changes to the tax basis for employment-related securities and options awarded to internationally mobile employees.
The Autumn Statement also contained announcements regarding personal taxation as well a range of measures targeting tax evasion, both by corporates and individuals.
Overall, the announcements made by the UK Government in its Autumn Statement have been generally welcomed by the business community, with John Allan, Chairman of the Federation of Small Businesses stating: “Today’s Autumn Statement represents steady progress, with a range of announcements that address members’ concerns in the cost of doing business.”
However, John Longworth, Director General of the British Chambers of Commerce echoed caution: “While Britain’s economy is improving, and our businesses report strong confidence, the UK is still some way from achieving the truly great economy we need.”