The government reported in the 2013 Budget that there are currently 39 banks and building societies (who make up over 80% of the stock of loans) participating in its Funding for Lending Scheme (FLS), the aim of which is to encourage banks and building societies to increase their lending to UK households and non-financial companies. The government contends that the FLS has contributed to an increase in the availability of credit and a reduction in wholesale funding costs, reducing the borrower's lending cost.

The government also announced that HM Treasury and the Bank of England are actively considering whether there are potential extensions to the FLS.

For more on the FLS, see Practice note, Government finance initiatives: Funding for Lending Scheme.

(See 2013 Budget Report, paragraphs 1.32 to 1.36.)

Last year, the government announced it would establish a state investment bank, known as the Business Bank, to help small and medium-sized enterprises (SMEs) access finance.

The government published the first business strategy for the Bank on 21 March 2013 (see BIS: Building the Business Bank: Strategy Update). This sets out an accelerated timetable for how it will deploy £1 billion of new capital to improve access to existing SME support schemes and develop a lasting new institution to support SME growth by the end of 2014.

The government also announced that the Bank will (among other things):

For background on the Bank, see Legal update, 2012 Autumn Statement: finance implications: Business Bank. For information on the Enterprise Finance Guarantee scheme, see Practice note, Government finance initiatives: Enterprise Finance Guarantee Scheme.

(See 2013 Budget Report, paragraphs 1.151 to 1.153 and paragraph 2.245.)

The government announced that £30 million of additional funding has been given to expand the Start-Up Loans scheme in England and the age limit has increased to 30, up from 24.

For more on the Start-Up Loans scheme, see the Start up loans website.

(See 2013 Budget Report, paragraph 2.246.)

The government announced that it will investigate options for improving access to credit data on SMEs to make it easier for new lenders to assess prospective loans to small businesses.

(See 2013 Budget Report, paragraph 2.259.)

While the FLS aims to increase lending to households (see Funding for Lending Scheme), the government has announced that it will create a mortgage guarantee scheme to increase the availability of mortgages on new or existing properties for those with small deposits of between 5% and 20%. The Help to Buy: mortgage guarantee scheme will be a temporary scheme that will run for three years from January 2014. It aims to increase the supply of high loan-to-value residential mortgages to individuals by offering a government guarantee to certain lenders who offer mortgages that meet particular criteria (see Mortgage eligibility and Lender eligibility).

HM Treasury provided a technical paper outlining how it intends the scheme would work (see Scheme mechanics). However it cautioned that the scheme, as outlined, was not in its final form and will be developed following further analysis and discussion with the industry.

(See 2013 Budget Report, paragraphs 1.103 to 1.104 and 2.19 and HM Treasury: Help to Buy: mortgage guarantee scheme - Scheme outline.)

The government reiterated a theme of recent Budgets in targeting the taxation of transactions involving certain property held by non-natural persons. For changes announced in the 2013 Budget to the way such transactions are taxed, see:

For background on real estate finance, see Practice note, Real estate finance (investment): overview.

The government announced various measures to stimulate property development, predominantly house building and the long-term supply of housing stock. Finance lawyers advising property developers and their funders may find the proposals of interest.

For more information on the government initiatives, including industry comment from the construction and property sector, see:

(See 2013 Budget Report, paragraphs 1.101 to 1.117 and paragraphs 2.20, 2.26 and 2.28.)

Following the theme of recent Budgets and Autumn Statements, the government announced an increase in capital spending on infrastructure projects in line with its National Infrastructure Plan (NIP). The government also intends to implement reforms to improve the planning and delivery of major infrastructure projects, to encourage investment.

For background on the NIP, see Practice note, National Infrastructure Plans: construction, environment and property implications.

For more information on the 2013 Budget announcements as to infrastructure, see:

(See 2013 Budget Report, paragraphs 1.87 to 1.89 and paragraph 1.96 and paragraphs 2.230 to 2.233.)

The 2013 Budget included measures to encourage private investment in the energy sector, particularly low-carbon energy and carbon capture and storage projects.

The government also announced initiatives to promote investment in the UK shale gas industry including tax support and planning guidance.

For more information on these initiatives, see:

(See 2013 Budget Report, paragraphs 1.90 to 1.94 and paragraphs 2.129 to 2.133.)

The government will include legislation in the Finance Bill 2013 to implement the UK-US agreement to improve international tax compliance and to implement the US Foreign Account Tax Compliance Act (FATCA). Final regulations will be issued shortly. The Isle of Man, Guernsey and Jersey have agreed to enter into similar automatic exchange agreements with the UK (see also Offshore tax evasion).

For more information, see Legal update, 2013 Budget: key business tax announcements: UK-US FATCA agreement: implementation.

For background on FATCA, see Practice note, A guide to PLC's FATCA resources.

(See 2013 Budget Report, paragraph 2.196.)

The 2013 Budget Report confirmed that, to take account of the benefit to the banking sector of the additional reductions in corporation tax, the rate of the bank levy will increase to 0.142% (for long-term equity and liabilities) and 0.071% (for short-term liabilities) from 1 January 2014. This increase was announced before 2013 Budget.

In addition, as announced in the 2012 Autumn Statement, the Finance Bill 2013 aims to clarify that foreign bank levies do not qualify for UK tax deductions.

For more information, see Legal update, 2013 Budget: key business tax announcements: Bank levy: increase in rates.

For background on the bank levy, see Practice note, Bank levy.

(See 2013 Budget Report, paragraphs 2.114 and 2.115.)

The government announced that it will reduce the main rate of corporation tax by an additional 1% in April 2015, to 20%. This reduction is in addition to cuts previously announced that take the rate to 23% from April 2013 and 21% from April 2014. The small profits rate and the main rate of corporation tax will also be unified in 2015, when the main rate is reduced to 20%.

For more information, see Legal update, 2013 Budget: key business tax announcements: Corporation tax main rate reduced to 20% from 2015.

(See 2013 Budget Report, paragraphs 1.119 and 1.121 and paragraphs 2.88 to 2.90.)

The government announced that, following the conclusion of the Capital Requirements Directive IV (CRD IV), it will issue secondary legislation to confirm and ensure that banks' additional tier one debt capital instruments will be deductible in calculating the bank's profits for corporation tax purposes, whether the instrument is already in issue or has yet to be issued.

For more information, see:

For background on CRD IV, see Practice note, Hot topics: CRD IV.

(See 2013 Budget Report, paragraphs 2.116 to 2.118.)

A number of announcements were made in the 2013 Budget concerning stamp duty land tax (SDLT) including changes to certain SDLT rates and measures to address SDLT avoidance schemes.

As foreshadowed in the 2012 Budget, the government continued its initiatives to target high-value residential property owned by non-natural persons (NNPs) including companies, so-called "enveloped" property. However the government has sought to address concerns that these measures might catch properties that were held by NNPs for genuine commercial reasons, and not simply for minimising tax liability. Some reliefs reflecting commercial concerns have already been announced, but the 2013 Budget confirmed that further reliefs will be brought in, covering, among others:

For more information on the taxation of enveloped residential property, see:

(See 2013 Budget report, paragraphs 2.67, 2.185 and 2.186.)

The 2013 Budget confirms the government's intention to introduce legislation in the Finance Bill 2013 on disguised interest and on the deduction of income tax from interest on compensation payments, specialty debt and interest in kind.

For more information, see Legal update, 2013 Budget: key business tax announcements: Income tax rules on interest.

For background on the amendments to the taxation of interest, including disguised interest and withholding, see Legal update, Finance Bill 2013: implications for finance lawyers: Anti-avoidance: Ensuring amounts that are "economically equivalent to interest" are subject to income tax and Withholding from interest.

(See 2013 Budget Report, paragraph 2.64.)

The government confirmed that it intends to consult on a proposal to remove the requirement to withhold tax on interest distributions on UK-domiciled bond funds when sold via reputable intermediaries and marketed only to non-UK investors. If this proposal is taken forward, subject to the final details, this is likely to increase the attractiveness of UK bond funds for overseas investors.

For more information, see Legal update, 2013 Budget: key business tax announcements: Bond funds: withholding from interest distributions.

(See 2013 Budget Report, paragraph 2.127.)

The government confirmed that, as announced on 11 December 2012 (see Legal update, Finance Bill 2013: implications for finance lawyers: Debt cap rules), with effect from that date, changes to the debt cap rules aim to ensure that only income and expenses arising from genuine group treasury functions benefit from the exclusion from the debt cap rules.

For background, see PLC Tax, Practice note, Tax legislation tracker: finance: Debt cap: group treasury companies.

(See 2013 Budget Report, paragraph 2.107.)

The government announced that it will consult with a view to making technical changes to the Limited Partnership Act 1907 as it applies to funds, including the possibility of allowing limited partnerships to elect to have legal personality. This is in order to accommodate their use more effectively for private equity and venture capital investments.

For general information on the taxation of limited partnerships, see PLC Tax, Practice note, Limited partnerships: tax.

(See 2013 Budget Report, paragraphs 1.145 and 2.124.)

The government announced that legislation will be introduced in the Finance Bill 2013 to remove the general exclusion to first year capital allowances for expenditure incurred on railway assets and ships. These changes will have effect from 1 April 2013. The availability (or otherwise) of capital allowances is often a key factor in the choice of financing structure, such as leasing, when acquiring assets.

For more information, see Legal update, 2013 Budget: key business tax announcements: Extension of first year allowances to expenditure incurred on railway assets and ships.

For background on shipping finance, see Practice note, Shipping finance: overview. For an introduction to asset finance, see Practice note, Asset finance: overview.

(See 2013 Budget Report, paragraph 2.168.)

The Finance Bill 2013 is to include legislation allowing chargeable gains (or allowable losses) arising on disposals of ships, aircraft and interests in shares to be calculated in a foreign (that is, non-sterling) currency and the gain (or loss) then converted into sterling (using the exchange rate at the time of the disposal). The measure was originally intended to cover shares however, following consultation it has been extended to ships and aircraft.

See Legal update, 2013 Budget: key business tax announcements: Foreign currency assets and chargeable gains: extension to ships and aircraft.

(See 2013 Budget Report, paragraph 2.110.)

The government confirmed its previously announced plans to introduce a "disincorporation relief" for five years from April 2013. The relief will allow a company to transfer goodwill and an interest in land to its shareholders so that no corporation tax charge arises on the company on the transfer. The relief will be available to businesses with total qualifying assets not exceeding £100,000, which may include certain special purpose vehicles used in finance structures.

For background, see PLC Tax, Legal update, Disincorporation relief: Finance Bill 2013 draft legislation.

(See 2013 Budget Report, paragraph 2.104.)

The government continued with the theme of recent Budgets and Autumn Statements (and subsequent legislation) in targeting tax avoidance schemes. A number of the anti-avoidance and evasion measures announced will be of interest to finance lawyers who may be involved in structuring transactions, including in offshore locations.

For background on some of these measures, see Legal updates, Finance Bill 2013: implications for finance lawyers: Anti-avoidance and 2012 Autumn Statement: finance implications: Taxation of finance transactions.