Monthly Archives: November 2011

Business reacts to Autumn Statement announcements

The UK’s leading business organisation, the Confederation of British Industry (CBI), has given a broad welcome to the 2011 Autumn Statement, which it has described as the Government’s “Plan A Plus” in all but name.

John Cridland, CBI Director General, said, ‘This Autumn Statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs’.

“We particularly welcome the new emphasis on capital spending, and the measures to leverage private sector investment on infrastructure for roads and energy”.

Meanwhile, the Federation of Small Businesses (FSB) has labelled the Autumn Statement ‘a step in the right direction’ for small firms.

According to the FSB, the new Seed Enterprise Investment Scheme will allow small firms to bypass the high street banks and access alternative sources of finance. The business group also welcomed the additional funds being made available to small businesses through the credit easing scheme.

However, the FSB expressed its concerns that guaranteeing the loan books of existing high street banks ‘may service to reinforce their market position’, and has called on the Government to go further to promote alternative forms of finance and increase competition in the banking sector.

John Walker, FSB National Chairman, said, “Taken as a package, the announcements in the Autumn Statement address many of the concerns raised by small businesses and are therefore to be welcomed. The key now is for the Government to be consistent, and set to the task of translating these policy intentions into tangible actions on the ground”.

The British Chambers of Commerce also welcomed a number of the measures announced by the Chancellor, but warned that UK businesses remain concerned about the wider economic environment.

Chancellor vows to ‘protect against the debt storm’

With the latest report from the Office for Budget Responsibility painting a sombre outlook for the UK economy, Chancellor George Osborne has vowed that the Government will do whatever it takes to protect against ‘the sovereign debt storm’.

In line with predictions, the Chancellor announced a reduction in the economic growth forecasts for the UK, revising the forecast for 2011 down from 1.7% to 0.9%. This was accompanied by an increase in Government borrowing, with the forecast for 2011/12 rising to £127 billion. However, the Chancellor rebuffed recent reports that the UK is set to slip back into recession by the end of the year.

Key announcements for business include a new £40 billion credit easing scheme, which will underwrite loans for small and medium-sized businesses. A £1 billion business finance partnership will help to secure funding for medium-sized firms. The business rate relief ‘holiday’ for small firms will be extended to April 2013, and a new seed enterprise investment scheme for small businesses will offer 50% income tax relief for those investing up to £100,000 in start-up businesses, together with a one year freeze on capital gains tax. A £1 billion youth contract will also aim to boost employment by means of subsidised work placements for young workers.

Also central to the announcements was a National Infrastructure Plan to boost the UK’s road, rail and broadband facilities, to be funded by £5 billion of Government spending, with a further £20 billion investment from British pension funds.

Other significant announcements include a mortgage indemnity scheme aimed at helping 100,000 people to buy homes, a doubling of the number of childcare places for disadvantaged two-year-olds in England, a new 6.2% cap on regulated rail fare increases, and a cancellation of the rise in fuel duty scheduled for January, accompanied by a further increase in the bank levy.

Cameron outlines strategy for growth but warns of ‘tough times ahead’

The Prime Minister David Cameron has outlined the Government’s strategy for growth, conceding that Britain faces challenging economic times ahead.

Speaking at the CBI conference this week, Mr Cameron said the Chancellor’s upcoming Autumn Statement would include plans to improve the country’s infrastructure by building on investment in transport, energy and superfast broadband networks.

He also signalled that George Osborne would use next week’s Statement to unveil a new credit easing scheme to boost lending to small and medium-sized businesses.

However, the Prime Minister reaffirmed the Government’s commitment to its deficit reduction plan, adding that this was still ‘line one, clause one, part one’ of the strategy for economic recovery.

He also admitted that the Government was braced for disappointing growth figures next week when the Office for Budget Responsibility publishes its latest forecasts.

“We are recovering from a debt crisis, not a traditional recession,” he told the conference.

He continued: “I am absolutely clear about the right answer for the UK economy. It can be summed up in one sentence – we need to deal with our debts and go for growth.

“We need a fundamental rebalancing of the economy – more investment, more exports, and a broader base to an economic future. If policy is not directed towards this goal it will fail”.

The Chancellor’s Autumn Statement – what does it mean for you?

Today George Osborne unveiled a range of measures that he asserts will protect Britain from the debt storm, strengthen the British economy and develop an active enterprise policy for business.

Here are just a few of the key measures that may affect you:

Measures affecting local businesses

  • The new Enterprise Zone at the BAE sites at Brough, Warton and Samlesbury is confirmed and will be up and running by April 2012. The zone offers 100% business rates reductions for 5 years, simplified planning restrictions and superfast broadband access.
  • The main rate of corporation tax to reduce to 25% from 1 April as planned
  • Expansion of the Enterprise Finance Guarantee scheme to include businesses with a turnover of up to £44m
  • Launch of a new National Loan Guarantee Scheme to help smaller businesses access funds at competitive rates – up to £20bn of guarantees to be made available over 2 years.
  • Making available an initial £1bn through a Business Finance Partnership for investment in smaller and midsized businesses.
  • Consultation on a new R&D tax credit scheme for larger companies offering greater visibility and generosity from 2013
  • Launch of a new Seed Enterprise Investment Scheme to give 50% income tax relief for up to £100,000 of investment in qualifying new start up companies as well as capital gains exemption for 2012/13 gains reinvested in qualifying businesses.
  • Simplification of the main Enterprise Investment Scheme – some welcome relaxations but there also appears to be some less welcome narrowing of the scheme.
  • A reform of employment law – he has already announced a doubling of the unfair dismissal qualifying period to 2 years and consultation on the introduction of tribunal fees. He is now also looking to change the TUPE rules, reduce delay and uncertainty in redundancy and bring in a new ‘compensated, no fault dismissal’ procedure for firms with less than 10 employees.
  • The reduction in the annual investment allowance for capital expenditure from £100,000 to £25,000 with effect from 1 April 2012 was not mentioned and seems to be going ahead as previously planned.
  • The planned 3p increase in fuel duty from January has been deferred to August 2012.
  • Small business rate relief holiday extended for a further 6 months.

Measures affecting individuals and families

  • State retirement age to increase to 67 with effect from 2026
  • ISA limits increase to £11,280 per individual from April 2012 (of which £5,640 can be in cash)
  • Junior ISA’s available now – limit of £3,600 per child per annum – all children under 18 who do not have a Child Trust Fund are eligible. Accounts are locked until age 18 and roll over into an adult ISA on maturity. Child Trust Fund savings limits are increased to match the £3,600 annual limit.
  • A new mortgage indemnity scheme to help families buy homes, coupled with a re-launch of the right to buy scheme for social housing and plans to boost the construction of new homes.
  • CGT annual exemption frozen at £10,600 for 2012/13
  • Changes to tax credits rates
  • Public sector pay awards capped at 1% average for 2 years after the current freeze ends
  • The small consignment VAT exemption that allows CD’s and DVD’s to be bought VAT free via the Channel Islands has been stopped with effect from April 2012, so this will be the last time you can use it for your Christmas shopping.

Wider economic measures

  • Electrification of the Pennine Express rail line between Manchester and Leeds
  • Consideration of further investment in the Northern Hub
  • A further £1bn into the Regional Growth Fund for England over the life of this parliament

For further information on how any of the above will affect you, please speak to your usual PM+M contact or contact jane.parry@pmm.co.uk

This is an initial summary based on the Chancellor’s Autumn Statement speech and initial press release and is written as a general guide only. Further advice should be taken before proceeding with any action and no reliance should be placed upon the contents of this guide.

Top marks for Lucy

21 year-old trainee accountant, Lucy O’Gorman is to be honoured at an awards dinner in December after scoring the best exam mark in the North West.

Lucy sat her financial accounting exam in the summer and scored a massive 84%, more than any other student in the region.

This prompted the Institute of Chartered Accountants in England and Wales to write Lucy personally, inviting her to a celebratory dinner in Preston where she will be presented with a special reward for her achievement.

“I was thrilled at the news. It’s important to me that I do well in my career, so I studied hard to make sure that I passed with good marks – but this was unexpected,” says Lucy.

“There is a very high calibre of students studying for the same exams as I do, so it’s an honour to rank so highly amongst them.”

Managing partner, Stephen Anderson comments: “The whole PM+M team is delighted for Lucy. She is known as a hard-worker and we are pleased that her efforts have paid off as well as they have. We are very proud to have her as part of our team.”

Government unveils plans for simpler personal taxes

The Government has launched a new consultation setting out its vision for a simpler and more transparent personal tax system.

It is seeking feedback on a number of ideas for reforming the current system, including plans to give every taxpayer online access to their tax records.

Ministers are also seeking views on a possible move to supply pre-filled tax returns to those in the self assessment system, a model that is already used in Denmark.

Under this system, existing information about incomes would be gathered from sources such as employers, banks, pension schemes and letting agencies and then added to the self assessment form before it is sent to the taxpayer.

The consultation, Modernising the Administration of the Personal Tax System, also suggests that taxpayers may be sent an annual tax statement in addition to their P60 and PAYE tax code notice.

Launching the paper, David Gauke, the Exchequer Secretary, said: “At the moment, for a lot of people, the tax line on their pay slip is the only time they see just how much they’re paying in tax, but the Government doesn’t think that’s good enough.

“We plan to lift the lid on tax so that people understand how much they are paying, what their overall tax rate is, and what they should be paying, in the same way that the Government has lifted the lid on what they are paying for,” he added.

The Government is already consulting on plans to integrate the operation of income tax and national insurance and intends to report on its progress at the 2012 Budget.

Small business group welcomes new ‘Finance Fitness’ scheme

The Forum of Private Business (FPB) has welcomed the Government’s new Finance Fitness initiative, which aims to improve the finance and cash flow issues faced by small businesses.

The Government recently announced a new business growth package for SMEs which includes the Finance Fitness campaign, aimed at improving access to finance for SMEs, together with a £95m investment from the Regional Growth Fund to support SMEs looking to invest in new capital assets, which will be facilitated by a number of High Street banks on a pro-bono basis.

The Finance Fitness scheme will offer advice and best practice guidance on cash flow management and accessing different sources of finance.

However, the business group has warned that banks will need to deliver on their pledge to increase lending if the scheme is to make any real difference to firms.

The FPB is also calling for firms to be proactive, by providing thorough financial projections and accurate financial information to lenders.

Alex Jackman, FPB Senior Policy Adviser, said, “The Forum is still calling for greater collaboration between banks and businesses and a return to proper relationship banking. This would help ease the punitive risk criteria lending we have seen in recent years, and subsequently bring down lending costs”.

We can help with cash flow planning – please contact us for further advice and assistance.

Online shoppers warned of unexpected tax bill

Online shoppers have been warned that they could face an unexpected tax bill when ordering gifts from outside the EU.

HM Revenue & Customs (HMRC) is reminding consumers that while they may think they have found a bargain, many people fail to factor in VAT and customs duty.

“We know many people like to go abroad at this time to buy their Christmas gifts, or buy online from non-EU countries, and think that the ‘cheaper’ price they see is always the price they finally pay,” said Angela Shephard, Head of Customs Policy at HMRC.

She continued: “HMRC is keen to remind the general public how much they can actually bring back from abroad or buy from an online overseas seller without having to pay import duty or VAT.

“You don’t want to be faced with unexpected extra charges, when you thought you had found a bargain.”

Goods valued at more than £15 that are purchased over the internet or by mail order from outside the EU are liable to VAT.

Customs duty might also be due for goods valued at more than £135, although this will depend on what they are and where they have been sent from.

If someone receives a gift from outside the EU, import VAT will be due if the package is valued at over £40. To qualify as a gift, the item must be sent from one private individual to another, with no money changing hands.

Calls for extension to national insurance ‘holiday’ scheme

The Government is being urged to extend the scope of its regional employer national insurance (NIC) ‘holiday’ scheme, as figures reveal continuing low levels of take-up by small businesses.

The scheme, which was announced by Chancellor George Osborne in the 2010 Emergency Budget, allows new businesses outside London, the South East and the East of England an employer NIC holiday worth up to £5,000 for each of the first ten qualifying employees, in the first year of business.

However, with fewer than 9,000 businesses signing up to the scheme in the 16 months following its launch – far below predicted figures – the Government has been urged by opposition members to extend the scheme nationwide, in a bid to encourage more firms to take on staff.

The scheme is open to new businesses set up on or after 22 June 2010 and is scheduled to end on 5 September 2013.

Small businesses ‘hit by record levels of late payment’

The UK’s late payment culture is getting worse, with the amount owed to small and medium-sized enterprises reaching record levels, a new report has revealed.

The latest research, from payment organisation Bacs, shows that late payments have now reached an all-time high of £33.6 billion.

The average amount owed to each firm is also at its highest ever level of £39,000 and firms are also having to wait longer to receive their payments.

Half of all UK SMEs are affected by the problem of late payment, and are waiting on average 28 days longer than their original payment terms to have their invoices settled.

Large companies account for nearly half of all late payments, with many blaming their internal systems for the delay.

Commenting on the research, Mike Hutchinson from Bacs said, ‘The issue of late payment is continuing to get worse for SMEs in the UK at a time when they need to be able to plan ahead for growth and ensure a strong cash flow’.

Small businesses are advised to make sure that they agree payment terms upfront, and to work to promote a culture of prompt payment throughout their business.

We can help with your cash flow planning needs – please contact us for further assistance.