A quick look at some of the changes in the Autumn Statement - supply-side info:

 

Slim pickings for SMEs

Small firms will be feeling underwhelmed by the Autumn Statement

SOME SMALL COMPANIES MAY STRUGGLE TO COPE WITH THE RISE IN THE MINIMUM WAGE

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mall businesses hoping for extra support from last week’s Autumn Statement may have been disappointed. While the Chancellor unveiled several eye-catching initiatives, small and medium-sized enterprises (SMEs) can be forgiven for feeling underwhelmed.

Take “full expensing”, the Chancellor’s centre-piece announcement. It makes permanent a tax break that enables SMEs to claw back 25p of corporation tax for every £1 they invest in areas such as IT, machinery and equipment, by deducting the cost of these items from the profits they declare to HM Revenue & Customs.

That sounds generous, but most small businesses won’t make use of full expensing. That’s because there is already an annual investment allowance that offers exactly the same benefits on investment of up to £1m a year – more than most SMEs are likely to invest. If you are using the AIA, however, remember that this tax break can only be claimed in the year in which the asset is purchased.

SIMPLIFIED R&D REGIME

Similarly, the Chancellor’s announcement that he is to merge the two schemes offering tax reliefs to businesses that spend money on research and development (R&D) will simplify this system. 

But it is larger businesses that will benefit, since they will now also qualify for the 20% tax credits that only smaller enterprises previously claimed. Moreover, the merged schemeis more complex than the previous arrangement for smaller businesses, which will mean an extra administrative burden for some. 

That said, SMEs that are currently loss-making will still qualify for more generous payouts from the R&D tax-credits scheme. And the Chancellor has announced a relaxation of the rules on this part of the scheme, which should help more businesses to claim.

Other announcements also look pretty modest. For example, the Chancellor reiterated his determination to crack down on late payments, which continue to cause many smaller businesses major problems with cash flow. In practice, however, the only changes here are that the state will require businesses bidding for large public-sector contracts to show they pay their own invoices within an average of 55 days. That will only help smaller firms at the margins.

Meanwhile, the announcement that the minimum wage will increase to £11.44 an hour for workers over 23, and be extended to include 21- and 22-year-olds for the first time, will raise costs for all employers. Smaller firms may find it harder to cope with the 9.8% increase, which is well ahead of both inflation and the current rate at which national average earnings are increasing. However, the Chancellor did at least offer more support for the self-employed. The abolition of Class 2 national insurance contributions will save the average self-employed worker £192 a year – and simplify their taxes. And a one-percentage point reduction in the Class 4 rate of national insurance will be even more valuable when it comes into effect in April 2024.

Some self-employed workers will also benefit from the fact that the government won’t now extend the Making Tax Digital system to those earning less than £30,000 a year. The scheme requires self-employed workers and small businesses to file tax returns through software and digital platforms approved by HMRC. But those earning more modest sums won’t now have to switch to digital returns unless they want to.