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Autumn Statement 2012 provides some relief for limited companies

With little room to manoeuvre given the country’s ongoing economic problems, the Chancellor managed to provide some good news to company owners in today’s Autumn Statement, with a ten-fold increase in the Annual Investment Allowance, and the scrapping of the unpopular ‘controlling persons’ proposals. On the flip side, pension tax relief has been reduced for higher rate taxpayers, and income tax thresholds will not rise in line with inflation.

Autumn Statement 2012

Key Points

  • The UK economy is expected to contract by 0.1% this year, and grow by 1.2% and 2% over the next two years. With Government spending significantly out-pacing tax receipts, it will come as no suprise that there were no real ‘giveaways’ in today’s Autumn Statement.
  • Any increases to the Income Tax thresholds, such as a 1% rise in the higher rate threshold in 2014-15 and 2015-16, will be easily out-paced by inflation. The basic rate threshold will rise to £9,440 from April 2013.
  • Likewise, the Inheritance Tax Threshold will also rise by a mere 1% from 2013, having remained at £325,000 for several years.
  • One of the most significant changes in today’s announcement is a reduction of higher rate pensions tax reliefs. The lifetime allowance will be cut from £1.5m to £1.25m from 2014-15, and the annual tax-free pension contribution limit will be reduced from £50,000 to £40,000.
  • The temporary doubling of the Small Business Rate Relief Scheme has been extended further – to 2014.
  • Many small companies will welcome the news that The Annual Investment Allowance (AIA) has been increased from £25,000 to £250,000 for two years – on qualifying investments in plant and machinery.
  • The ‘controlling persons’ proposals, which were announced earlier in the year, are to be scrapped. This news will come a great relief for consultants and interims who were faced with being taxed by their clients at source were the rules ever implemented. Rather that pressing ahead with the proposals, the Treasury has realised that IR35 is already sufficient to deal with all types of potential ‘disguised employment’. Read our separate article on the Autumn Statement and IR35.
  • Interestingly, section 2.103 of the Statement documentation states that “the Government is strengthening the existing intermediaries’ legislation (IR35) to put beyond doubt that it applies to office holders for tax purposes. The Government will keep this area under review.”
  • UK Export Finance will provide up to £1.5 billion in additional loans to help fund small companies’ exporting activities.
  • Other measures include the scrapping of the planned 3p rise in fuel duty from January 2013, an extra £1bn of capital for the new ‘Business Bank’, and small increases in the ISA and CGT exemption limits.

Further Information

The Autumn Statement itself, and supporting paperwork can all be found on the HM Treasury site.

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