Autumn Statement 2012: predictions

George Osborne will make his Autumn Statement this Wednesday

George Osborne will make his Autumn Statement this Wednesday

Chancellor George Osborne will discuss the state of the UK economy during his Autumn Statement this Wednesday. Brian Palmer, AAT’s Tax Policy Adviser, talks through what he’d like to hear, what will benefit the SME community and the topics the Chancellor is likely to avoid.

It is widely accepted that the Chancellor’s debt targets will be missed, according to the National Institute of Economic and Social Research. George Osborne will need bigger spending cuts if he wants to hit those targets; there is a rumour the Government will abandon its debt reduction target.

And while unemployment has recently fallen and ‘Olympic fever’ provided an initial lift, there is a general consensus that times ahead will still be tough. Youth unemployment is still a major problem and overall growth has been slower than expected from the Budget forecast.

What we would like to see in the Autumn Statement

1. Tax avoidance of corporation tax

It’s a topic that can’t really be missed off the agenda. We need a clear message that the avoidance of tax by multi-nationals won’t be tolerated. An action we would like to see announced is a move to work with foreign governments through the Organisation for Economic Co-operation and Development (OECD) to reduce the ability of multi-nationals to move their profits around the globe to low tax countries.

2. A reduced rate of VAT

This would stimulate business growth in the SME market. We know that many businesses operate below the current VAT threshold and therefore their expenses have been pushed up by the 20% standard rate, without the ability to pass them on to customers.

3. An increase in the personal allowances above the rate of inflation

This was already pre-announced in the 2012 Budget.  It is a commitment and a fundamental part of the 2010 coalition agreement. This will reduce the squeeze on household budgets and be of major benefit for everyone including those starting up businesses and entrepreneurs.

4. The 3p Fuel Duty increase set to be postponed

In an economic climate where fuel costs are already one of the highest in Europe, if there was an increase, it would only serve as another burden on the economy with a disproportionate effect on the SME community.  Also the fuel costs will feed to high until costs of production making UK manufactures less competitive than their foreign neighbours.

What we think the Chancellor won’t mention in the Autumn Statement

1. The introduction of Real Time Information (RTI)

The majority of small businesses will incur costs associated with the implementation of real time information and will feel the full impact of the changes more acutely than larger organisations. While advice is out there, HMRC do need to offer more services and support in order to help smaller businesses prepare for the changes in order to avoid hefty penalties.

2. The re-launch of business record checks

These have already caused dismay throughout sectors of the SME community. While it is reasonable for HMRC to carry out compliance checks, the reality is that many small businesses’ feel ‘targeted’ incurring penalties of up to £3,000 which may force many small business owners into bankruptcy.

3. Capping of reliefs

We do not anticipate that the proposed introduction of legislation to cap unlimited tax reliefs at £50,000 or 25% of income announced in the 2012 Budget (due to be implemented in April 2013) will be postponed. The fact that loss relief for start-up business is likely to still be including in the capping provisions is likely to deter budding entrepreneurs as they will be left particularly vulnerable.

Brian Palmer, AAT Tax Policy Adviser, will be providing live commentary via the AAT Twitter feed during the Chancellor’s Speech at 12.30pm this Wednesday, so follow us to join the debate.

Brian Palmer is the tax policy adviser for AAT.

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