What does the Autumn Statement 2014 mean for your business?

The Chancellor of the Exchequer,
George Osborne, delivered his Autumn Statement on 3 December 2014. Possibly the biggest announcement was the major overhaul of stamp duty, which should deliver savings to around 98 per cent of home buyers.

However, focusing on the key measures affecting companies and businesses in the UK,
the four major headlines are discussed below.

Business rates

The chancellor announced that business rates would be cut by £2.7bn over the next five years and pledged to review the controversial tax again next year. The outcome of next year’s review will be of particular interest to medium-sized businesses (SMEs) as this could result in
significant further changes to business rates.

The chancellor extended a series of measures that he first unveiled in the 2013 Autumn Statement, including doubling business rate relief for a further year and capping the inflation-linked annual increase of business rates at 2 per cent.

In addition, the chancellor said that shops, pubs, cafes, and restaurants with a rateable value of £50,000 or less will receive a £1,500 discount
on their business rates, up from a £1,000 discount last year. This should help 300,000 such businesses.

There is still strong criticism aimed at the existing structure of business rates, which are calculated according to the rental value of the property that a business uses. Some argue that
it is outdated and should be abolished altogether for smaller businesses. With an increasing number of businesses now based on the internet, many have queried why a business should still be taxed based on the amount of physical space it uses.

The UK continues to have the highest business rates of any EU member state, despite the further cuts announced.

Lending to SMEs

A number of measures have been announced
with the aim of boosting lending to SMEs:

• The Treasury has agreed to guarantee up to £500m of new bank lending to SMEs. The new lending will be allocated under the Enterprise Finance Guarantee scheme. Under the existing scheme, the government guarantees 75 per cent of an SME’s bank loan, leaving the lender to only cover the remaining 25 per cent.
• The Funding for Lending Scheme (FLS) has been extended for a further year until January 2016. The FLS aims to boost bank lending by enabling commercial banks to borrow funds from the Bank of England cheaply, so that they can pass them on in the form of cheap loans. The focus of the FLS has been narrowed to lending to SMEs only.
• The Treasury has agreed to pledge £400m to extend government-backed venture capital funds that invest in SMEs.

Google tax

High on the government’s list is dealing with the tax avoidance of some of the bigger multinational businesses based in the UK.

The chancellor announced that these businesses will have to ‘pay their fair share’, introducing a new 25 per cent tax intended
to close the loopholes that currently allow multinational businesses to extract their profits out of the UK to avoid UK tax.

Offsetting losses

The chancellor announced plans to introduce new rules to limit “the amount of profit in established banks that can be offset by losses carried forward to 50 per cent and delaying relief on bad debts”.

The chancellor said: “Under the rules we inherited, banks can offset all their losses from
the financial crisis against tax on profits for years to come. Some banks wouldn’t be paying tax for
15 or 20 years. That’s totally unacceptable.”

Boardroom diversity

Top UK businesses are on course to meet the government’s target of 25 per cent women on boards, according to a recent report by the Cranfield School of Management.

The original report was carried out by Lord
Davies in February 2011. In this report he noted that women made up only 12.5 per cent of the boards of FTSE 100 companies and 7.8 per cent of the boards of FTSE 250 companies. He recommended a target of 25 per cent female representation on the boards of FTSE 100 companies, to be implemented by the end of 2015.

The Cranfield report revealed that the number of women on FTSE 100 boards has now reached 22.8 per cent and the number of women on FTSE 250 boards has reached 17.4 per cent. The report predicted that if the current pace of change is maintained, FTSE 100 companies will hit the 25 per cent target in 2015, with FTSE 250 companies following in 2016.

Further, the Cranfield report revealed that there are no longer any all-male boards in the FTSE 100 and that only 28 of the FTSE 250 have all-male boards.

Although there has been considerable improvement in the number of women on the boards of top UK businesses, the lack of ethnic diversity continues to cause concern.

The business secretary, Vince Cable, recently launched the 2020 Campaign, which aims for there to be no FTSE 100 companies with an all-white board by 2020.

According to figures from Green Park Executive Recruitment, 62 per cent of FTSE 100 boards are all-white. Only 5 per cent of board members are from ethnic minorities, and there is not a single person of Chinese or East Asian origin on the board of any of the UK’s biggest companies.

Notwithstanding the current situation, Cable has no plans to introduce a binding quota to increase ethnic diversity. It has been seen from the progress regarding the number of women on the boards of FTSE 100 companies that a binding obligation is not strictly necessary to improve diversity.

Of the current situation, Cable said: “Black and ethnic minority representation on UK FTSE 100 boards is currently around 5 per cent, which is much lower than we would expect if the company boards reflected the population of this country [around 14 per cent]. I want us to extend the successful campaign we have led to increase female representation on FTSE 100 boards to tackle invisibility of ethnic minorities in Britain’s top companies.”

Company names

On 31 January 2015, new regulations were introduced, aiming to simplify the use of company and business names. Regulation
of company and business names requires all company names to be easily distinguishable from others, so as to ensure that the general public is not misled. However, these regulations are often complex and overly restrictive, and have therefore proved to be a source of frustration for many companies.

The regulations limit the words and expressions that a company can use in its company name. Words and expressions that are deemed to be ‘sensitive’ (for example, words that suggest a business pre-eminence, a particular status, or a specific function) or the ‘same as’ another name appearing on the registrar’s index of company names can’t be used without obtaining express consent from Companies House.

As part of the government’s commitment under the Red Tape Challenge to reducing unnecessary regulatory burdens, a number of the regulations have been reduced or replaced by new regulations from 31 January 2015.

• The list of sensitive words and expressions has been reduced. This list sets out the words that companies, LLPs and businesses need approval for in order to use them in their name. Twenty-six words have been deleted from the list, including ‘Group’, ‘National’, ‘Holdings’, ‘International’, and ‘United Kingdom’.
• The list of characters that can be used in a company’s name has been extended.
• The list of ‘same as’ words has been reduced. These are words that are disregarded by Companies House when considering whether one company name is the ‘same as’ another. Words that have been deleted from the list include ‘Group’, ‘Export’, ‘Holdings’, and ‘International’.
• Where at least six companies operate from or are registered at one office, place, or location, it will no longer be necessary to display the details of all companies at the site. Instead, the information may be held and made available for inspection on request.

The changes are likely to be welcomed by business owners and those wanting to start up
a new business, as they will be afforded greater flexibility in choosing their business name. SJ

Debbie King is a partner at Farleys

@FarleysLaw