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.

As an adviser to many small to medium sized businesses across the UK the Autumn Statement includes very little to get really excited about. There are some benefits for larger businesses, but if the chancellor thinks this will be enough to really stimulate growth from the ground up, he may be disappointed.

Expenditure

The Bribery Act 2010 (Bribery Act) came into force on 1 July 2011. Under the Bribery Act an offence is committed by a commercial organisation if a person associated with it bribes another person with the intention of obtaining or retaining business or an advantage in the conduct of business for that organisation.

On 9 October 2012 the Serious Fraud Office (SFO) published revised policies on corporate self-reporting, facilitation payments and business expenditure which will take immediate effect and supersede all previous statements of policy.

There has been concern within corporate organisations as to what constitutes legitimate business expenditure, leading to many organisations halting all business expenditure on corporate hospitality. This concern has not been eased with the recent announcement that the SFO had withdrawn its previous guidance on the Bribery Act, leading to speculation that it would be taking a more aggressive approach to enforcement following the appointment of its new director, David Green QC.

However, the revised policies published by the SFO states: 'Bona fide hospitality or promotional or other legitimate business expenditure is recognised as an established and important part of doing business' and legitimate corporate hospitality should therefore continue to be permitted under the Bribery Act. The SFO have clarified that they will only prosecute those who disguise bribes as business expenditure.

A recent case has highlighted the importance of company directors understanding and complying with their duties as directors of a company. Two directors of a Blackburn-based company, BCP (NW) Limited, have been suspended from acting as directors of any company for five and six years respectively. The sentence includes a suspension in managing or controlling a company in any way.

The directors failed to ensure the company paid £598,547 owed in tax to HM Revenue & Customs (HMRC). In addition, the directors also failed in their statutory duty to ensure the company maintained adequate accounting records and provided investigators with computerised records which were insufficient to verify the company's financial dealings.

The Companies Act 2006 (Act) sets out the general duties that directors must comply with:

? to act within powers;

? to promote the success of the company;

? to exercise independent judgment;

? to exercise reasonable care, skill and diligence;

? to avoid conflicts of interest;

? not to accept benefits from third parties; and

? to declare an interest in a proposed transaction or arrangement.

In addition, directors have certain duties under common law. The general duties are owed to the company and therefore only the company will be able to enforce them, although in certain circumstances shareholders may be able to bring a derivative action on the company's behalf.

Remedies for breach of the general ?duties may include an injunction or setting aside of the transaction or restoration of company property held by the director and potential damages.

The importance of ensuring you abide by your duties as a director cannot be underestimated; the consequences for breach of your duties can be severe, ?as seen above.