Compared to the ‘omnishambles’ budget in March, the 2012 Autumn Statement is likely to be more about the patent box initiative and property tax than pasty taxes. Of particular interest to many UK business owners worried about trying to compete on an equal footing with big global corporates will be measures to tackle tax avoidance. There is likely to be a swipe at global organisations with a high UK presence but low tax bills, although it is probably too early to see concrete measures announced. We can also expect refinements to the General Anti-Abuse Rule (GAAR), issued a few months ago, designed to challenge the more aggressive forms of tax planning.
On this note, we already know there are plans to introduce special tax rules around intellectual property (the 'patent box') and to increase UK competitiveness (the 'controlled foreign company' rules) from 2013. However, we have also seen a falling corporation tax for several years in a row. Will the Chancellor be paving the way for another cut of the mainstream rate? And if so, how will he pay for it? We should get some indication of whether this issue is going to be notched up another time.
Successful business owners and high earners will also be keeping an eye on any potential changes that may affect them personally, and we expect the chancellor to respond to a number of the proposals consulted on over the summer. In particular, there may be further announcements in relation to residential property, although it doesn’t look like the Liberal Democrat-favoured ‘mansion tax’ will not appear itself in the statement.
There are also rumours that the government may limit pension tax relief to the basic rate (currently 20%) rather than the taxpayer’s highest rate. However, while we have seen this type of speculation many times before, any further changes (the coalition government made significant changes to the pensions regime in last year's Finance Act) are likely to be unpopular as they would be administratively burdensome.
With the UK attracting a burgeoning number of entrepreneurs and small business owners from overseas, many may be affected by expectation that the UK is about to introduce a formal statutory residence test to help taxpayers determine if they are resident or not in the UK. This will provide much needed certainty to them in relation to their tax affairs after a number of difficult years when changing HMRC guidance and a number of long running tax cases have muddied the rules. The final version of the test will show what the key criterion are that will determine UK residency, and we are hoping to see clarity on some issues that were highlighted in the consultation process.
Given the current economic difficulties that many businesses are facing, this year’s Autumn Statement has a lot riding on it. However, the Government has a tricky task ahead of it, in trying to balance the books and encourage economic growth. While measures such as the ‘patent box’ may help, we’ll have to wait to see exactly how the Government is planning on achieving this growth.
Francesca Lagerberg is head of tax at business and financial adviser Grant Thornton UK LLP.