02 Feb A Budget for: Prosperity tomorrow, Security today
As if leaving the EU and stepping up to the expectations set in the new government’s election manifesto were not enough, the first budget produced by the new Chancellor of the Exchequer, Rishi Sunak, also had to take account of the ongoing coronavirus crisis. Acknowledging at the outset that COVID-19 would have a significant impact in the short term, the Chancellor was also at pains to highlight the temporary nature of the crisis. Accordingly this was a budget of two halves, looking to deliver security today and prosperity tomorrow.
With this in mind let’s look at some of the measures announced starting with those which aim to alleviate the immediate impact of the coronavirus on business.
- Interest rate reduction. Announced in advance of the budget, base rate has been reduced by 0.5% to 0.25%.
- Business rates. The business rate discount which applies to retail properties with a rateable value of less than £51,000 has been extended to cinemas and music venues and increased to 100% for 2020/21. The government had already announced a business rate discount of £1000 for pubs with a rateable value below £100,000. This is to be increased to £5000 also for the 2020/21 tax year.
- Small business grant funding. Local authorities are to receive funding which will enable them to provide £3000 in funding to small businesses currently eligible for small business rate relief or rural rate relief.
- Statutory sick pay. Recognising the costs to employers of statutory sick pay, particularly as this is now paid from the first day of absence, where the absence is related to COVID-19 employers will have up to 14 days of statutory sick pay costs refunded by the government. This only applies to employers with fewer than 250 employees.
- Coronavirus loan scheme. A new temporary coronavirus business interruption loan scheme will be delivered by the British Business Bank. This will support businesses in accessing bank lending and overdrafts up to £1.2 million.
- HMRC help. A dedicated HMRC COVID-19 helpline has been set up to provide support to businesses which are either late in submitting returns or paying taxes due to the coronavirus.
Alongside these more short-term measures, the Chancellor also unveiled a raft of initiatives in areas such as technology, homes, schools, health, infrastructure, flood defences, energy and the green economy. These longer-term ambitions are designed to deliver the ‘prosperity tomorrow’ section of the budget with some project being nationwide whilst others target specific areas of the UK.
Other measures introduced in line with the election manifesto include an increase in R&D expenditure credit allowance from 12% to 13% as well as an increase in structures and building allowance from 2% to 3%. The employment allowance is also to be raised from £3000-£4000.
Entrepreneurs’ relief, which was the subject of speculation prior to the budget has been retained. However the lifetime limit has been reduced from £10 million £1 million in order to better target the relief towards SMEs.