Overall Government spending will stay higher than expected for at least the next two years as a result of the ‘gift in the tail’ of Rishi Sunak’s 2021 budget.
Here is a summary of the business specific measures that we have heard today which will affect our SME community from April and through the next 5 years at least:
- Furlough Scheme – extended from April to end September 2021 at 80% of wages for employees; employers’ contributions at 10% for July and 20% in August and September
- SEISS – 5th period of Self Employed support from May to September 2021, including additional 600k that filed self employed tax returns for the first time in the 2019-20 year – level of payment driven by ‘30% threshold’ of fall in business compared to pre-Covid levels
- Government Backed Loan Schemes – existing Bounce Back Loan (BBL) and Coronavirus Business Interruption Loan Scheme (CBILS) Replaced April 1st to 31st December 2021 with a new ‘Recovery Loan’ scheme. 80% government guarantee, open to all businesses and for term loan amounts from £25,000 to £10,000,000 / invoice and asset finance loan amounts from £1,000 to £10,000,000
- Kickstart Scheme – One off incentive payment doubled to £3,000 for companies to hire an apprentice from the scheme
- Sector Specific Support –
£700m Arts, Culture and Sports funding – incl. 2030 joint bid with Ireland for the 2030 FIFA World Cup
Hospitality and Tourism – VAT reduction extended at a 5% rate to 30th September 2021, and at a rate of 12.5% until 4th April 2022
- Local Authority Grants – Existing local authority grants replaced from April 1st with a one off cash ‘Restart Grant’:
Non-essential retail eligible for grants up to £6,000
Hospitality, gyms and indoor recreation and personal care eligible for grants up to £18,000
- Business Rates – Existing business rates holiday remains 100% in place until 30 June 2021, and until 2022 at up to a 2/3 discount to standard rates
- Corporation Tax – Remains at the 19% level until April 2023, and then:
Companies with profit at £50,000 and below remains at a rate of 19%
Tapered tax rates between £50,000 and £250,000, where a top rate of 25% will start to apply
(Government headline: only 10% of companies will pay the 25% top rate / 1.4m companies will not pay more than the existing 19% rate band)
Up to £2,000,000 losses can be carried forward for up to 3 years to offset against future profits
- R&D Tax Relief – A review of the scheme and its effectiveness
- Free Ports – Tax, customs tariff, investment and planning incentives for 8 English region free ports announce
(The new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.)
- ‘Help To Grow’ – Two areas of specific support for SMEs:
Management Training – Government to pay 90% of the cost of training
Digital Training – 50% discount on expert training software for SMEs
Register for these schemes at https://helptogrow.campaign.gov.uk
- ‘Super Deduction’ – A 2 year scheme to incentivise investment by UK companies – particularly targeted at those business who have retained cash in a cautious approach to the future to date:
130% of capital investment by companies will be deductable against their tax bills for two years from April 2021 – a tax break the government estimates will be worth £25bln over the two year life of the scheme to companies that make investment in their business
While writing the scale of the Corporation Tax rises (being described as ‘eye watering’) is being balanced against the ‘Super Deduction’, which is receiving plaudits by the pundits that I am half listening to.
If Rishi Sunak has got the balance right, then getting businesses to throw caution to the wind and unlock investment funds may outweigh the dampening of enthusiasm or activity that the Corporation Tax rises may cause.
As usual with a budget, time will tell.