Update | Company: new government proposals for SMEs and legitimate business expenditure and situations

The Autumn Statement for 2012 was announced by Chancellor the Exchequer George Osborne on 5 December 2012. The main points that might affect SMEs across the UK are set out below.

The chancellor has announced a further cut in the main rate of corporation tax from April 2014 by an extra one per cent to 21 per cent. This cut will apply to companies with profits in excess of £300,000. Disappointingly, there has been no comparable cut for SMEs with profits below £300,000, with the small profit rate remaining at 20 per cent.

As of 1 January 2013, the Annual Investment Allowance has increased ten-fold from £25,000 to £250,000 for two years, in a measure principally designed to encourage and support investment by SMEs in plant and machinery. Although this is a significant increase, the impact it will have for SMEs is questionable given that many small to medium businesses are unlikely to be able to afford such levels of investment in the current climate. Opposingly, the Small Business Rate Relief scheme has been extended for a further 12 months until April 2014. There is no commitment beyond this date, but this does currently help more than half a million small firms, which pay the small business rates of tax and another 350,000 businesses which pay nothing at all. In a bid to apparently encourage businesses, subject to state aid approval, an exemption from empty property rates will be available for 18 months on all newly-built commercial properties that are completed between 1 October 2013 and 30 September 2016.

For business vehicle users, the 3p a litre fuel duty increase that was planned for January 2013 has been scrapped. However, from 2013/14, there will be further tax increases for some company car drivers as the car fuel benefit charge multiplier will see another increase from £20,200 to £21,100. The van fuel benefit charge will also increase from £550 to £564.

Falling short

In September 2012, it was announced that the government would create a Business Bank. This bank will have £1bn of additional capital to stimulate the private sector market for long-term capital and address structural gaps in the supply of finance to SMEs. It is now understood that the Business Bank will be operational from spring 2013, with the institution becoming fully operational in autumn 2014.

In a bid to reduce the burden on businesses and make the tax system clearer and more efficient, the government will apply a new voluntary cash basis for calculating tax for SMEs for self-employed businesses with receipts of up to £77,000 from April 2013.

It has long been considered that banks are not doing enough to help SMEs. The £2.5bn Business Growth Fund (introduced by Barclays, HSBC, Royal Bank of Scotland and Lloyds TSB to invest in small business equity) is budgeting to substantially increase its level of investment to £200 million in 2013. In addition, the government will provide £72m of follow-on funding for start-up loans.