Chancellor Rishi Sunak set out the Spring Budget on Wednesday, announcing the government’s tax and spending plans for the year ahead. Alongside measures to support the UK’s long-term economic recovery, he set out plans to help business and jobs through the pandemic, as well as a series of tax-raising initiatives to help rebalance the public finances.
In terms of areas of interest for businesses, we would recommend paying close attention to the changes implemented for R&D tax relief which may influence how you hire staff and the 130% super deduction for qualifying plant and machinery (not including cars sadly!). This is a particularly generous relief for those looking to buy new equipment for their business, essentially for most smaller business, this amounts to a 6% cost subsidy from the government for profit making businesses.
In addition, a recovery loan scheme is available which, like CBILS and the bounceback loan, is guaranteed by the government up to 80% and if you can still take one out if you’ve had a bounceback loan or CBILS. A potential source of low cost capital for those that qualify. If you are interested in this loan scheme, please contact us later in the month when we hope to have more detail in terms of how this support will be structured.
There have been increases to grants for developing skills and productivity, such as apprenticeships and purchasing productivity software.
We’ve highlighted the key areas affecting business below. If you have any questions, the team would be happy to help.
Business support headlines
- The extension of the Furlough scheme until the end of September at the 80% rate, although employers are required to cover 10% in July and 20% in August and September;
- Business rates holidays for retail, hospitality and leisure will continue to the end of June and at a discount of up to 67% for the remainder of the year;
- Recovery loan scheme providing loans from £25,000 to £10,000,000 that will be 80% guaranteed by the Government;
- A super deduction allowance for businesses investing in new plant and machinery from 1st April 2021 to 31st March 2023, giving a deduction of 130% against profits in the year of acquisition or 50% on special rate assets.
The Chancellor outlined details of his sector-specific support measures.
- The reduced VAT rate of 5% for the hospitality sector will continue until 30th September 2021. It will then increase to 12.5% until 31st March 2022 before returning to the full rate of 20% on 1st April 2022;
- The construction sector is being supported by the Stamp Duty Land Tax nil rate band extension for residential properties. The temporary £500,000 nil rate has been extended to 30th June 2021. It will then be reduced to £250,000 until 30th September 2021 and then return to the standard band of £125,00
- Support for the self-employed also to be extended until September 2021. The 4th tranche of Self-Employed Income Support Scheme (SEISS) will be at 80% of the 3-month average profits and can be claimed from late April;
- A 5th tranche of SEISS is available for May to September but at a reduced rate depending on the reduction in profits of the business.
As expected, there will be increases in Corporation Tax, but not yet and only for larger companies. Company owners will be relieved that there are no imminent increases in CT rates until April 2023.
From 1st April 2023, there will be two rates of CT.
- Taxable profits up £50,000 will continue to be taxed at 19% under the new Small Business Profits Rate
- Taxable profits in excess of £250,000 will be taxed at 25%
- Profits between £50,000 and £250,000 will be subject to a marginal tapering relief. This would be reduced for the number of associated companies and for short accounting periods
Capital Gains Tax (CGT)
Any attempt to align CGT rates with Income Tax rates seems to be off the table for the time being.
- Apart from anti-avoidance changes, the only announcement on this tax that has general relevance is capping the annual exempt amount;
- This will be fixed at £12,300 from April 2021 to April 2026 for individuals, personal representatives and some types of trusts for disabled people; and £6,150 for trustees of most settlements.
- The period over which trading losses can be carried back is to be temporarily extended from 12 months to three years.
- This temporary extension applies for trading losses incurred by companies in accounting periods ending between 1st April 2020 and 31st March 2022 (tax years 2020/21 and 2021/22 for unincorporated businesses).
- Restrictions apply (more detail to follow).
Research & Development (R&D)
- As expected, the R&D tax credit cap has been introduced, limiting companies claim to £20,000 plus three times the company’s total PAYE and NI liability. This will apply for periods beginning on 1st April 2021 onwards.
- Companies with R&D performed by subcontractors, as opposed to their own employees, should consider reviewing the structure of their workforce to ensure they make the most of the R&D tax credit.
Enterprise Management Incentives (EMI)
- The government will legislate in Finance Bill 2021 to extend the time-limited exception that ensures that employees who are furloughed still continue to meet the working time requirement for EMI scheme purposes. The measure will take effect until April 2022.
- Further consultations regarding a review into the EMI and R&D tax credits schemes in general are expected to be released later this month. Any suggested changes off the back of the consultations are expected to take effect in Finance Bill 2022.
Other business measures
- Tax breaks for firms to “unlock” £20bn worth of business investment.
- Firms will be able “deduct” investment costs from tax bills, reducing taxable profits by 130%.
- Incentives for firms to take on apprentices to rise to £3,000 and £126m for traineeships.
- Lower VAT rate for hospitality firms to be maintained at 5% rate until September 2021.
- Interim 12.5% rate will then apply for the following six months.
- Business rates holiday for firms in England to continue until June with 75% discount after that.
- New visa scheme to help start-ups and rapidly growing tech firms source talent from overseas.