The Chancellors Autumn Statement – Our Comment

The Chancellor’s autumn statement focused on managing the UK debt burden as a means of keeping the interest cost for the country down. The measures looked to balance the economy and make sure that the UK remains competitive in the challenging economic environment. Key to all the numbers is economic growth and therefore has he done enough to encourage growth of UK business and particularly SMEs?

The announcement that caught our eye was a new relief for investment into start-up companies. Very few details are currently available and should be announced on 6 December. Under a new Seed Enterprise Investment Scheme (SEIS) will be introduced that will attract 50% income tax relief for individuals who invest in shares in qualifying companies, regardless of the rate they normally pay. The scheme will be subject to an annual investment limit of £100,000 for individuals, with a cumulative investment limit for companies of £150,000. There will also be a one year CGT exemption on gains realised in 2012/13 which are invested in SEIS in the same year. With the lack of bank financing many SME’s have looked to private investors for additional capital. For the private individual they have looked for other places to get a return for their money given the poor returns from traditional investments such as bank deposits. These proposals change the balance of risk and reward for these private investors and should encourage further investment, particularly when set along side the cap on annual pension contributions.

The Chancellor also announced his intention to simplify the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) rules. This will include a relaxation of the connected party rules as well as excluding companies ‘set up for the purposes of accessing the relief.’ In addition the statement confirms the intention to remove the £1m investment limit per company for VCTs.

The plans for credit easing worth £21bn that will see the taxpayer underwriting lending to small businesses and their will be the creation of an SME company bond market. The problem with the credit easing proposal is that it still leaves lending to SME’s in the hands of the banks who, on the whole, have showed a lack of support and understanding of this sector and in some cases have failed SME’s woefully.

Other announcements included the business rate holiday for small businesses being extended to April 2013. The Government has committed to introducing an ‘above the line’ tax credit in 2013 to encourage research and development but this will be more beneficial for large companies.

Please click here to view  the facts and figures from the Chancellors 2011 Autumn Statement.