Budget 2012 - Our View

The 2012 budget has now been announced, including a number of changes that will impact businesses. Whilst there are several positive moves, there are also some areas that you should be aware of that could have a negative impact. We asked our experts for their views on the key points.

Corporation tax has been reduced by 2% with effect from 1st April 2012, 1% more than anticipated for this year. Following this there will still be two further 1% reductions in 2013 and 2014. This means that by 2014, it will be down from 26% to 22 %.
Our view: “Great news for businesses, this will help to keep costs to a minimum which is essential when many are still bouncing back from the recession.”

The Carbon Floor Price has been set at £9.55 per tonne for 2014-15, in line with previous expectations. Did you know – the carbon floor price increases the costs incurred by electricity generators, this increase will ultimately be passed to businesses and consumers, via increased bills.
Our view: “Businesses need to take this into account when arranging their energy contracts, now may be the time to look into 2-3 year fixed deals to avoid nasty shocks when renewal time arrives!”

Business Loans - The government will allocate £100 million of the Business Finance Partnership to invest through non-traditional lending channels that can be accessed by smaller businesses. On top of this, the level of loans guaranteed under the Enterprise Finance Guarantee scheme is being raised significantly from 13% to 20%.
Our view: “Although the impact will not be particularly significant, this is great news for businesses, particularly smaller businesses looking to grow who will now have a better opportunity to access finance.”

Fuel duty – No major change in this area, vehicle excise will continue to increase by inflation only with road hauliers exempt from rises. The existing Fair Fuel Stabiliser is still in place, this is currently preventing above inflation rises due to high oil prices. There are still enhanced capital allowances available for green fleets.
Our view: “OK news, it is positive that businesses are still protected from rises in fuel duty, but a freeze or even cuts to fuel duty would have been welcomed.”

Carbon Reduction Commitment – This legislation primarily has an impact on major energy users, the government is looking at reviewing the administrative elements of the scheme.
Our view: “Any move to reduce administration for businesses is good news, although the scheme is still in force and the situation is ‘business as usual’ until any changes are announced in Autumn.”

Electricity Generation – Generators with less than 2MW capacity will not be penalised by the Carbon Price Floor on their fuel, similarly CHP (Combined Heat and Power) plant operators will not have to pay rates increased by the Carbon Price Floor on the fuel used to generate heat.
Our view: “As we aim to decentralise electricity generation and encourage local independent generators, this is great news. Independent generators may otherwise have struggled to remain competitive alongside larger players in the market. On the other hand, larger CHP operators may struggle to run profitably, as they will also be losing their entitlement to LECs (Levy Exemption Certificates).”

Research & Development – The ‘Patent Box’ has been confirmed, effective from April 2013 this will provide a 10% cut in corporation tax for profits attributed to patents.
Our view: “This will be a great boost for certain innovative businesses and should encourage more innovation which is positive for the UK as a whole.”

We hope you have found this information useful. Remember, Inenco Direct is committed to helping businesses like yours to keep energy costs to a minimum.

If you are looking to renew your energy contract to avoid the impact of the Carbon Floor Price, or would like some advice relating to your energy costs, please get in touch with us by calling 08451 442244.