Rishi Sunak announces further measures to support businesses as he looks towards recovery from the coronavirus crisis
More support for businesses affected by the Covid-19 crisis has been announced by the Chancellor in the Budget as he extends the furlough scheme until September with employers to pay more as the economy reopens.
Rishi Sunak also extended support for the self-employed until September.
The VAT cut for hospitality and tourism businesses to 5 per cent will be extended for six months with an interim rate of 12.5 per cent introduced until April next year.
The business rate ‘holiday’ will also be extended until the end of June, with a two third discount for the following nine months.
Mr Sunak announced a £5bn in ‘restart grants’ to shops, restaurants, hotels, hair salons, gyms and other non-essential businesses.
There was also extra support for businesses hiring apprentices, with Mr Sunak doubling the amount given to businesses hiring new apprenticeships as well as expanding traineeships.
He also announced the launch of a UK infrastructure bank to invest in the ‘green industrial revolution’.
There was also a £150m fund to be made available to help people buy struggling pubs to keep them at the heart of towns and villages.
Mr Sunak pledged to protect the jobs and livelihoods of the British people.
“I will continue doing whatever it takes to support British people and businesses through this time of crisis,” he said.
He also set out some longer term plans, announcing a rise in corporation tax from 2023. Corporation tax paid on profits will rise to 25 per cent, although will remain at 19 per cent for smaller businesses.
He added they would also maintain the inheritance tax threshold and the VAT registration threshold.
He highlighted the Office for Budget Responsibility was expecting a swifter and more sustained recovery, with a return to pre-Covid levels by the middle of next year.
But he highlighted the longer term impact.
“In 5 years time, our economy will be 3 per cent smaller than it would have been.”
NFU President Minette Batters said farm businesses can play a key role in the investment-led recovery the Chancellor set out.
“With an ambition to reach net zero by 2040, British farming can be a pivotal part of meeting our climate ambitions and increasing productivity,” she said.
Ms Batters added farm businesses and diversifications would welcome the reduced VAT rate, business rates relief, grants for the self-employed and the recovery loan scheme and restart grants.
“These are all measures that will support rural businesses to recover from the impact of Covid-19.”
She added the UK Infrastructure Bank could be a crucial tool in stimulating investment and driving green economic growth with the launch of the Levelling Up Fund potentially positive to narrow the urban/rural divide.
“However, we are disappointed that the ‘super-deduction’ on machinery investment is only applicable to limited companies and not available to all businesses, especially when significant investment in new farm technology is required,” she said.
She added it was incredibly important the needs of rural businesses were accommodated in these schemes and highlighted their ‘Levelling up rural Britain’ which showed how investment in British farming and rural Britain can bring huge benefits to the entire nation.
CLA president Mark Bridgeman said the the extension of the 5% VAT rate was a lifeline for many small tourism and hospitality businesses who have ’faced crippling consequences of the Covid-19 pandemic’.
"It will allow tens of thousands of businesses breathing space to begin their recovery in 2021, further boosted by hopes of a bumper summer season as lockdown restrictions are eased further.
“But the extension is a short-term crisis response. Government should now begin thinking of how the UK’s tourism and hospitality sectors can thrive in the long term. If we are to compete with other major tourism destinations in Europe – all of whom have VAT rates far below 20 per cent - the UK’s VAT rate should remain at 5 per cent permanently. We estimate this move would add £4.5bn to the national economy, leading to more demand, more investment and more good jobs being created.”
He also welcomed the news on business rates.
“The past 12 months has led to huge changes in the performance of many rural businesses especially in the leisure, hospitality and tourism sectors, with reduced turnover combined with extra costs of sanitisation.
"Therefore, an extension of the Business Rates holiday until the end of June is welcome news for the sector and is something the CLA has been lobbying intensively for.”
Sean McCann, Chartered Financial Planner at NFU Mutual, said the budget had some ‘softeners’ but included an explanation on how it would be paid for.
“Personal allowances and income tax bands together with national insurance contributions will be increased from April but will then be frozen until 2026,” he said.
“Inheritance tax and Capital Gains Tax exemptions will be frozen at current levels for the next five years - which means the Chancellor is letting inflation do his job for him.
“As wages naturally increase over time, this would mean more tax collected, so it is really important people take advantage of the reliefs available to them.”
He said the hike in Corporation tax would hit large farms with profits over £250,000 a year trading as limited companies and start to have an impact on those with profits over £50,000 a year.
“Farming companies will be wary of this rise in Corporation Tax coming down the line during the transition period from the EU’s Basic Payment Scheme,” he added.
Rebecca Davidson, Rural Affairs Specialist at NFU Mutual, said how much would be felt by farmers would be in the detail but his plans for environmental schemes was ‘good news’.
“There’s also a big incentive for farmers to invest in their business. Companies investing in qualifying plant and machinery between 1 April 2021 and 31 March 2023 will get a 130 per ent first year capital allowance. This will allow companies to cut their tax bill by up to £25 for every £100 spent and will make it much more attractive for farm businesses to invest.
“We also hope that the drive to encourage apprenticeships will assist farmers to grow talent in their businesses and provide opportunities for new entrants to start a career in agriculture.
“The government-guaranteed mortgages may also help younger generations who struggle to find affordable housing to remain in rural areas.
“As always, the details of the new measures rather than the headlines will determine if the big announcements on support can deliver for rural areas.”
Martyn Dobinson, partner, Saffery Champness, and a member of the firm’s Landed Estates and Rural Business Group said the extension of the furlough scheme was ‘critical to allow businesses to retain jobs’.
He added it was really good news those self-employed who had filed their 2019/20 tax return by midnight on March 2 would qualify for the extended self-employed income support scheme.
For the hospitality and tourism sectors, he said it was welcome news the current reduced VAT rate would continue to the end of September.
“There will then be an interim rate of 12.5% for a further 6 months, before the standard rate will be reinstated from April 2022,” he said, with those in the hospitality and leisure sectors able to benefit from a ‘Business Restart Grant’ of up to £18,000 from April, with non-essential retail benefitting from grants of up to £6,000.
“The Chancellor also announced that the business rates holiday will continue to the end of June,” he added.
On tax, Mr Dobinson highlighted income tax, national insurance and VAT rates will not be increased.
“However, the planned increase in the personal allowance and increase in the higher rate tax threshold from April next year will be frozen at those levels until April 2026.
“Also, the IHT nil rate band, pensions lifetime allowance and CGT annual exemption will be frozen. Despite all of the noise and nervousness around potentially significant changes to CGT, there were no announcements by the Chancellor. The VAT registration threshold will also be frozen through to April 2024.”
Possibly the most significant announcements in this Budget were round Corporation Tax. Martyn Dobinson said for businesses with taxable profits exceeding £250,000, there will be an increase in the rate of Corporation Tax to 25 per cent, but not until April 2023.
“However, to protect those businesses less able to afford an increased Corporation Tax bill, there will be a new small business band,” he said, adding where taxable profits were less than £50,000 rates would remain at 19 per cent with tapering between £50,000 and £250,000.
“In addition, there will be a more generous relief for carry back of corporation tax losses.
“Also, potentially very valuable for businesses is a new ‘super deduction’ for the next 2 years, allowing a deduction of 130 per cent, for tax purposes, of eligible investment expenditure.”
There were announcements of a new investment bank to help fund investment in the green agenda as well as help to grow schemes and the announcement of eight new freeports.
Mr Dobinson added the devil would be in the detail and they would be ‘digesting’ the announcements in the coming days.