The government announced changes to the Private Finance Initiative (PFI). It has decided that, at a time of high government debt, the previous funding model requiring the private sector to provide major funding for large numbers of projects such as schools and hospitals, in return for payments from the public sector, is no longer appropriate. Under the plans announced by the Chancellor, the taxpayer will take a share of up to 49% in new projects. It is intended that the new scheme, known as PF2, will be quicker, more transparent and better value for money.

The PF2 scheme is set out in detail in the policy document, A new approach to public private partnerships (December 2012), published alongside the Autumn Statement. In particular, the policy document highlights:

The policy document notes that long-term debt markets remain constrained in the wake of the financial crisis. As the cost and lack of availability of long-term debt and the cost of short-term finance does not represent value for money, so the policy document states that PF2 will be structured in such a way that it:

(For more, see Chapter 8, Future debt finance, A new approach to public private partnerships (December 2012).)

To achieve these, the policy document notes that the tender process will require bidders to develop a long-term financing solution where bank debt does not provide the majority of the financing requirement. Consequently, it is hoped that institutional investment will become an important source of finance for PF2.

Accompanying the policy document is detailed draft guidance for PF2 (Standardisation of PF2 Contracts: Draft (December 2012)), which sets out the approach to be taken to structuring PF2 contracts, allocating risks between the public and private sector and promoting a common understanding of the revised model in the market.

For more on the PFI reform announced in the Autumn Statement, see Legal update, 2012 Autumn Statement: PFI reform.

For background on the government's earlier review and consultation on the reform of the existing PFI model, see Legal update, PFI reform: call for evidence published. For more on PFI and PPP generally, see Practice note, PPP/PFI in the UK.

As foreshadowed in previous announcements (see Legal update, 2011 Autumn Statement: finance implications: Government support for municipal bonds), the Autumn Statement reiterates the government's intention to provide a guarantee to support £1 billion of borrowing at preferential rates to fund the extension of the Northern Line to Battersea and to enable the commercial redevelopment of Battersea Power Station and the surrounding site. It appears that the existing UK Guarantees scheme (announced in July 2012) will be used for this purpose (see Legal update, Government announces boost for infrastructure investment and credit support for UK exporters).

In addition to announcements on investment in major road schemes (including the A1 and M25), the government is assessing the feasibility of new ownership and financing models for the strategic road network. It will report on progress in the new year. For more information, see Legal update, 2012 Autumn Statement: construction implications: Investment in roads and public transport.

In addition, the government will make a new concessionary public works loan rate available to infrastructure projects nominated by Local Enterprise Partnerships (excluding London), with total borrowing capped at £1.5 billion.

The Autumn Statement includes an update on the National Infrastructure Plan (NIP) (which sets out plans to attract private sector investment in infrastructure), in particular, the update sets out the progress made on the priority infrastructure investment identified in the NIP. For more information on the NIP, as updated for 2012, see Legal update, 2012 Autumn Statement: property implications: National Infrastructure Plan: update 2012. For more on the NIP generally, see Practice note, National Infrastructure Plans: construction, environment and property implications.

The government intends to establish a state investment bank, known as the Business Bank, to help SMEs who have struggled for credit since the financial crisis.

The Business Bank will use £1 billion of additional capital "to address structural gaps in the supply of finance to SMEs and stimulate the provision of long-term capital, including by leveraging in substantial private sector finance". It will also rationalise existing government schemes aimed at supporting access to finance for businesses under a single organisation.

The Secretary of State for Business, Innovation and Skills will announce further details later in December 2012.

The government announced measures to enable UK Export Finance (UKEF) to provide up to £1.5 billion in loans to finance small firms' exports. The scheme will be operated by UKEF and run for three years, focussing mainly on transactions below £50 million. The scheme will act as a backstop to finance UK export transactions when no other suitable finance is available. The scheme will run until the end of 2015-16.

The government will launch a pilot scheme enabling businesses to obtain additional non-bank lending through trade credit using the existing Enterprise Finance Guarantee Scheme (EFG Scheme). The pilot will begin in early 2013. No further detail is provided on this initiative.

For background on the EFG Scheme, see Legal update, Government finance initiatives: Enterprise Finance Guarantee Scheme.

The rate of the bank levy will increase to 0.130% from 1 January 2013.

For more information, see Legal update, 2012 Autumn Statement: business tax implications: Bank levy: increase in rate. For details of the bank levy, see Practice note, Bank levy.

HM Revenue & Customs (HMRC) has published draft legislation, for inclusion in the Finance Bill 2013, clarifying that foreign bank levies do not qualify for UK tax deductions. The UK rules make provision to avoid double taxation under the UK levy and either the French or the German equivalent levy by giving credit for the foreign levy against the UK levy (for more, see Practice note, Bank levy: Double taxation).

For more information, see Legal update, 2012 Autumn Statement: business tax implications: Bank levy: double tax relief.

The Autumn Statement reiterates the government's intention to introduce a General Anti-Abuse Rule (GAAR) to provide a deterrent to abusive avoidance schemes and strengthen HMRC's means of tackling them. Guidance and draft legislation on the GAAR will be published later in December 2012. For more on the GAAR, see PLC Tax, Practice note, Tax legislation tracker: miscellaneous: General anti-abuse rule.

The government is also consulting on the introduction of new information disclosure and penalty powers to target the promoters of aggressive tax avoidance schemes.

The government will consult on extending the disclosure of tax avoidance schemes regime to include significant new information disclosure and penalty powers. For more information, see Legal update, 2012 Autumn Statement: business tax implications: Disclosure of tax avoidance schemes (DOTAS): new powers.

HMRC has published draft legislation, for inclusion in the Finance Bill 2013, to ensure that the corporation tax rules on property total return swaps are not used to produce losses that are unrelated to real exposures to movements in property prices. These provisions have effect for accounting periods beginning on or after 5 December 2012, with periods straddling that date being split for these purposes.

For more information, see Legal update, 2012 Autumn Statement: business tax implications: Property total return swaps.

HMRC has announced that it is closing a tax avoidance scheme seeking to exploit the loan relationship and derivative contract rules (see PLC Tax, Practice notes, Loan relationships and Derivatives: tax) to obtain a tax advantage by creating mismatches. The rules have effect for schemes entered into on or after 5 December 2012.

For more information, see Legal update, 2012 Autumn Statement: business tax implications: Tax mismatch schemes.

HMRC has announced that it is closing a tax avoidance scheme that exploits the stock lending manufactured payments rules (see Practice note, Stock lending: tax: Manufactured interest and Manufactured dividends) by the stock borrower providing other benefits to the stock lender (including releasing all or part of any liability to pay an amount). The changes have effect for cases in which a dividend or interest is paid on or after 5 December 2012.

For more information, see Legal update, 2012 Autumn Statement: business tax implications: Manufactured payments.

The government has confirmed that it will be looking to enter into enhanced tax information sharing agreements with other jurisdictions in a form similar to the agreement that it concluded with the US in September 2012 implementing the US Foreign Account Tax Compliance Act (FATCA) (as to which, see Legal update, UK and US sign agreement to implement FATCA). The confirmation in the 2012 Autumn Statement mirrors that contained in previous announcements made by HM Treasury and HMRC.

For links to further PLC content on FATCA, see Practice note, A guide to PLC's FATCA resources.

The government announced plans to exempt all newly built commercial property completed between 1 October 2013 and 30 September 2016 from empty property rates for the first 18 months (up to the EU state aid limit and subject to consultation). This measure is designed to promote further private investment in commercial property.

We expect the government to publish responses to a large number of tax consultations and draft legislation for the Finance Bill 2013 on or before 11 December, see PLC Tax, Practice note, What to expect in draft Finance Bill 2013: key business tax measures. PLC Finance will report on those aspects of interest to finance lawyers once the draft legislation is published.