As part of the government's effort to support business and enterprise, the chancellor has announced another cut in the main rate of corporation tax. The main rate will now reduce by a further one per cent over planned reductions, to 21% from April 2014. The main rate will fall from 24% to 23% from 1 April 2013.
While this reduction is welcomed, it is unclear why the chancellor has not decided to align the main rate of corporation tax and the small companies rate (which remains at 20%) given how similar the rates will be from April 2014.
The chancellor has also announced that the Government will increase the Annual Investment Allowance from £25,000 to £250,000 for two years for all qualifying investments in plant and machinery made on or after 1 January 2013.This is a huge increase but the impact that it will have is questionable, given that many businesses are unlikely to be able to afford that level of investment.
Clampdown on tax avoidance
As expected, given the current media focus, tax avoidance featured heavily in the Autumn Statement, with the chancellor reiterating the government's commitment to tackling tax evasion and aggressive avoidance to ensure that "everyone pays their fair share."
The chancellor confirmed the introduction of a general anti-abuse rule (GAAR), to provide a new deterrent to abusive avoidance schemes. Guidance and the draft legislation will be published later in December 2012.
In relation to multinational companies and their UK corporation tax bills relating to their UK activities, the chancellor announced that the government will provide additional resources to HMRC to tackle any unacceptable avoidance and work with countries like France and Germany to speed up the international efforts in ensuring multinational companies are paying taxes in the correct jurisdictions.
It was also announced that the government will consult on the introduction of a new information disclosure and penalty power to target the promoters of aggressive tax avoidance schemes.
Further restrictions for pension savers
After much rumour and speculation it has been confirmed that the Government will reduce the annual allowance (the amount that can be saved 'tax free' each year) from £50,000 to £40,000. Furthermore, the overriding lifetime allowance for pension contributions will also reduce, from £1.5m to £1.25m.
While the measures will undoubtedly be unpopular and follow significant changes to the pensions regime in last year's Finance Act, the reduction to the annual allowance at least, was less than many were expecting. In addition, these changes will not come into effect until April 2014, so there are still two tax years to go to maximise contributions using the current levels.
The government's figures suggest that the measures are likely to only affect the wealthiest pension savers, as only one per cent of the population currently make pension contributions in excess of the reduced £40,000 limit each year. However, those with a defined benefit scheme may need to take extra care as will many of those in the public sector who may find themselves caught up in these changes.
Personal tax bonuses
The coalition government has long been committed to increasing the personal allowance to £10,000. In his 2012 Autumn Statement, chancellor George Osborne announced a further increase to the allowance for the 2013-14 tax year, setting it at £9,440 from April next year.
This represents a further £235 increase on the planned rise (a total increase of £1,335), from £8,105 in the current tax year.
As expected, higher rate taxpayers will not benefit from the full amount of the increased allowance as the higher rate threshold will again be lowered. From April 2013, the amount above which an individual will be subject to the higher, 40%, rate will reduce from £42,475 to £41,450.
However, the chancellor has confirmed subsequent one per cent increases to the threshold in 2014-15 and 2015-16.
The subscription limits for Individual Savings Accounts (ISAs) are to increase to £11,520 from April 2013, of which £5,760 can be in cash. The government will also consult on amending the rules for stocks and shares ISAs to include shares traded on the Alternative Investment Market, and comparable markets.
Finally, the inheritance tax threshold will increase in April 2015 by one per cent to £329,000, the first increase since 2009.
Shares in return for reduced employment rights
Despite widespread criticism of the proposal, the chancellor has announced the government is to press ahead on a new capital gains tax-free share scheme intended to come into force in April 2013. Draft legislation is expected to be published on 11 December 2012.
Under the proposals, a company can offer between £2,000 and £50,000 worth of shares in exchange for the employee relinquishing certain employee rights. There would be no capital gains tax on the sale of the shares by the employees. In the linked consultation only 3 of the 209 responsees indicated that they were likely to adopt the new proposals.
Francesca Lagerberg is head of tax at Grant Thornton UK