A far reaching budget for businesses and individuals

It was always going to be an unusual Budget. The last year has taught us that. And the rest. And when Rishi Sunak stated that this Budget was delivered to “protect the jobs and livelihoods of the British people”, we knew the scope was going to be far-reaching.

With a further ‘Tax Day’ flagged on 23 March, he also pre-empted all those wondering where any reference to Capital Gains Tax and the like had gone.

So, what was the Chancellor’s top line for businesses and individuals amongst the Spring announcement?

– A welcome extension to the Coronavirus Job Retention Scheme, the Self-Employed Income Support Scheme and another temporary cut in SDLT
– A six month extension to £20 per week Universal Credit uplift
– Help for retail, hospitality and leisure sectors with business rate relief and lower VAT rates maintained until September.

Adding that “it’s going to take this country – and the rest of the world – a long time to recover from this extraordinary situation”, the Chancellor also outlined ways to strengthen the public finances, by:

– Freezing personal allowances, as well as higher rate and inheritance taxes for 4 years from April 2022 – so called ‘fiscal drag’
– Increasing the Corporation Tax rate to 25% from April 2023. Interesting timing with the next general election due in 2024. Will the government reverse this or perhaps soften nearer the time when the recovery is better understood?

In many ways, it’s super clear that this will be an investment-led recovery, with:

– The introduction of a ‘super deduction’ for investment in new equipment
– Eight new English Freeports created, including East Midlands Airport
– A review of R&D tax reliefs to make sure UK remains competitive for cutting-edge research.

Rishi Sunak covered a lot more besides – from sports and the arts to vaccination rollouts and contactless payment increases.

This is a detailed summary, split in to three sections, you can use the buttons below to jump to the place you need to be…

BUSINESS

EXTENDING THE FURLOUGH SCHEME. PROTECTING JOBS

As anticipated, the furlough scheme has been extended to 30 September 2021. There will be no change to what individuals receive under the scheme – that being 80% of their usual wages for hours not worked. However, employers will be required to contribute to the cost from 1 July, where they will pay 10% of wages, increasing to 20% from 1 August until the scheme ends.

CORPORATION TAX INCREASING

Corporation tax is set to rise from 19% to 25% from April 2023 – but who knows what could happen before then?

Companies with profits of £50,000 or less will remain subject to a 19% rate and there will be a marginal rate for those with profits between £50,000 and £250,000.

GREATER FLEXIBILITY FOR BUSINESS LOSSES

In 2020-21 and 2021-22, businesses (both incorporated and unincorporated) will be able to carry losses back three years rather than the usual one year, potentially providing a much-needed cash injection of up to £760,000 (adjustments may apply to groups of companies).

‘SUPER DEDUCTION’ FOR COMPANIES BUYING PLANT & MACHINERY

To spur investment, companies can get a 130% deduction for expenditure incurred on plant and machinery and a 50% deduction for ‘special rate’ assets between 1 April 2021 and 31 March 2023.

HOME OFFICE EXPENSES & REIMBURSED COVID TESTS

The temporary Income tax and National Insurance exemption announced last year on home office expenses has been extended to the end of the 2021/22 tax year. In addition, this also applies to employer provided/reimbursed coronavirus antigen tests for employees.

IR35 & OFF-PAYROLL WORKERS

In line with previous announcements, it has been confirmed that the new ‘off-payroll worker’ rules in the private sector will come into effect from 6 April 2021.

STAMP DUTY LAND TAX (SDLT)

The £500k 0% SDLT rate band will now end on 30 June 2021, rather than 31 March 2021. From 1 July 2021, the band will be £250k before finally returning to £125k in October 2021.

VAT

In the Hospitality & Tourism sector the 5% reduced rate of VAT was extended for a further 6 months until 30 September 2021.

It will then increase to a temporary rate of 12.5% VAT before returning to the full rate in April 2022.

No increase to the 20% standard rate of VAT.

The current VAT registration thresholds will not increase for 2 years from April 2022, but the expansion of Making Tax Digital for VAT will apply to smaller businesses from April 2022.

EXCISE DUTIES

The planned duty increase for spirits, wine, cider and beer have been cancelled and therefore frozen for a second year in a row. In addition, the planned increase in fuel duty has also been scrapped.

BUSINESS RATES

Eligible businesses with properties in the retail, hospitality and leisure sectors in England will be entitled to 100% business rates relief from 1 April 2021 to 30 June 2021, and 66% business rates relief for the period from 1 July 2021 to 31 March 2022.

Relief is capped at £2 million per business for properties if they were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

RESTART GRANTS

Restart grants will be available as follows:

– Up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses; or
– Up to £6,000 per premises in all other cases.

In addition, the Government will be providing local authorities in England with an additional £425 million of discretionary business grant funding.

RECOVERY LOAN SCHEME

This new loan scheme will provide businesses with the ability to borrow between £25,000 and £10 million, whilst providing lenders with a guarantee in respect of 80% of the loan capital.

The ability to access the scheme is unaffected by any previous loans taken out under the predecessor loan schemes introduced by the Government in response to the pandemic.

FREEPORTS

The Government announced an ambitious plan to introduce 8 new English Freeports, including East Midlands Airport, with the plan to support international trade in a post-Brexit world. The aim will be to allow businesses to create a free trade infrastructure, likely to be supported by a lower customs cost with reduced rates of duty and VAT.

Freeports will provide concessions and reliefs, that will run from 9 March 2021 to 30 September 2026, including:

– Simplified planning requirements;
– Access to infrastructure funding;
– Simplified Customs procedures;
– National Insurance reliefs;
– Enhanced Structures & Buildings Allowances;
– Enhanced Plant and Machinery Allowances;
– Stamp Duty Land Tax relief on purchases of land for commercial use within the Freeport area; and
– Full relief from business rates for all new businesses and certain existing businesses where they expand.

RESEARCH & DEVELOPMENT (R&D)

The Government will review R&D tax reliefs to ensure the UK remains a competitive location for cutting-edge research. This will include launching a new R&D Tax Reliefs consultation, seeking views on the current schemes to ensure they are fit for purpose.

The Future Fund: Breakthrough was announced – a £375m investment to support the scale-up of the most innovative, R&D intensive businesses. And the Government will also publish a summary of the responses to their data and cloud computing costs consultation, exploring whether such costs could be claimable in the future.

INDIVIDUALS

SELF-EMPLOYED INCOME SUPPORT SCHEME (SEISS)

The Chancellor announced that he is extending the SEISS with two further grants:

– A fourth grant covering the period from February to April 2021, equal to 80% of average profits, up to a maximum grant of £7,500.
– A fifth grant covering the period from May to July 2021, the amount being dependent on the impact that the pandemic has had on an individual’s profits:

– If profits have reduced by 30% or more, then the grant is 80% of average profits, up to a maximum grant of £7,500.
– In all other cases, the grant will be limited to 30% of average profits, up to a maximum grant of £2,850.

Previous restrictions on who can claim, such as it not being available to those with profits of £50,000 or more, will continue to apply.

FREEZING OF ALLOWANCES, EXEMPTIONS & TAX BANDS

– Personal allowance increased to £12,570 from 6 April 2021 then frozen until April 2026
– Higher rate threshold increased to £50,270 from 6 April 2021 then frozen until April 2026
– IHT nil rate bands, Capital Gains annual exemption and pensions annual and lifetime allowances frozen until April 2026
– Savings allowance remains unchanged for 2021/22.

SAVINGS & INVESTMENT

The ISA investment limits remain unchanged for 2021/22 at £20,000, and unchanged for Junior ISAs/ Child Trust Funds at £9,000. A new NS&I green fixed income product will be launched during summer 2021, closely linked to the government’s issue of its first green sovereign bond.

OTHER

COMBATTING COVID-19 FRAUD

£100 million is being invested to create a Taxpayer Protection Taskforce to crack-down on fraudulent exploitation of COVID-19 Government support packages, including the job retention scheme and SEISS.

PENALTY REFORM

The penalty regime for VAT and Income Tax Self Assessment will be reformed to make it fairer and more consistent.

A new late submission regime will be points-based, and a financial penalty will only be issued when the relevant threshold is reached. A new late payment regime will introduce penalties proportionate to the amount of tax owed and how late the tax due is. And a new approach will be introduced to interest charges and repayment interest to align VAT with other tax regimes.

These reforms will come into effect:

– For VAT taxpayers, from periods starting on or after 1 April 2022;
– For taxpayers in Self Assessment with business or property income over £10,000 per year, from accounting periods beginning on or after 6 April 2023; and
– For all other taxpayers in Self Assessment, from accounting periods beginning on or after 6 April 2024.

SO, WHAT DOES ALL THIS MEAN FOR YOU?

To get the low-down on how the Budget affects you and any actions you need to take, get in touch with your usual contact here at CPW, or book a no obligation meeting by clicking here.