Budget 2021 – Reaction & More detail

Budget, Capital Gains Tax, HMRC, Research & Development,

The Budget is one of those times when we really don’t know what we’re going to get. As Accountants, it’d be great to have an inside line to Rishi’s office, so we had advance warning, but instead we’re reading the small print to get to the detail today.

In advance of yesterday’s speech, there were plenty of advance announcements, to the point that the Speaker openly rebuked Chancellor Rishi Sunak. These are supposed to be presented to Parliament before the press or public.

Was this happening because there was so much to talk about? Was Rishi worried some major announcements would overshadow those items he announced early?

In fact, the Budget was fairly bland, particularly for small businesses.

The opening, relating how the economic recovery was ahead of the Office of Budget Responsibility’s original forecast, was positive. The OBR estimates that the economy will return to pre-pandemic levels by the turn of the year. Great news, but business owners need to hope that’s right, as there wasn’t that much within the speech to help businesses, and the closing statements included Rishi reminding us all that the Government isn’t there to support us through every bump in the road.

This appears to confirm the days of Pandemic support are now behind us.

What else should you be aware of?

1 Recovery Loan Scheme

The state-backed Recovery Loan Scheme, which was due to come to an end on 31 December 2021, will now be extended for a further six months.

First launched back in March in order to “help businesses rebuild after the pandemic”, the programme allowed firms to borrow as much as £10m, with the state backing 80% of the lending. From 1st January 2022, the loan amount will reduce to a maximum of £2million, while the Government guarantee will reduce to 70%.

Given that statistically more businesses fail during a period of economic recovery than during a recession, this could well be very good news for those who remain undercapitalised. More details on the scheme can be found here.

If you want to secure the best possible terms for a Recovery Loan, get your application in before the terms change!

2 Business Rates

Nearly 90% of businesses in the worst-hit retail, hospitality and leisure businesses will receive up to a 50% reduction in their business rates bills in 2022/23.

This temporary business rates relief is worth almost £1.7billion, and will help these businesses adapt and recover from the impact of Covid. These are the businesses, in many case, that were already struggling on our changing High Streets before the pandemic hit. Over 400,000 businesses should benefit.

The Business Rates Multiplier is also being frozen in 2022-23, which will offer support to all rates paying businesses, reducing bills by 3% than they would have been previously.

From 2023, a new Business Rate Relief will provide a 12 month grace period from an increase in rates resulting from any qualifying improvements made to business premises.

This wasn’t the major overhaul that was hoped for, but the reliefs will be helpful as the economy continues to recover.

3 R&D Tax Relief Restricted to Domestic Research

From April 2023 Research & Development (R&D) Tax Relief will be restricted to UK based work. The Chancellor stated that of the £48billion claimed last year, only £22billion was invested in the UK.

R&D spending is due to increase to £20billion a year by 2024/25 from £14.8billion this year, £16.1 billion in 2022/23 and £19.4billion in 2023/24.

The relief criteria is also expanding to cover cloud computing and data R&D.

The investment for R&D funding is aimed to help the UK ‘better support cutting-edge research methods’ and ‘refocus government support towards innovation’.

4 Capital Gains Tax payment window extended

The current 30 day window will extend to 60 days, with immediate effect. This applies to the reporting and payment of any CGT that may be due following the sale of a UK residential property. Recommended by the Office Of Tax Simplification, this could be taken as an indication that the Chancellor’s claims that he wants to simplify the tax system and make it ‘fit for purpose’ are genuine. Let’s hope so…

5 Road Tax Rises go ahead except for HGVs

Road tax for HGVs is to be frozen until April 2023, to support the struggling haulage industry. The HGV Road user level has also been suspended for another 12 months from August 2022. The rates for cars, vans and motorcycles will increase in line with the retail prices index from 1st April 2022.

6 Tax Relief for Creative and Cultural Industries

Three corporation tax reliefs currently make up the ‘cultural reliefs’ for theatres, galleries and other cultural organisations, and these are being increased to support the industries hit so strongly by Coronavirus. Support will increase by nearly £250million and will be tapered from 1st April, returning to previous levels from 1st April 2024.

An extra £850million over three years will be directed towards both cultural ‘hotspots’ and over 100 regional museums and libraries to enable them to be ‘renovated, restored and revived’.

The government is also funding £800million in the Live Events Reinsurance Scheme and has extended the £500m Film & TV Production Restart Scheme.

7 HMRC receives £55million to increase tax collection

HMRC has been given an extra £55million from the Budget to increase its anti-avoidance and evasion activities. An additional £468million will be invested into its IT systems over the next three years, focussing on cybersecurity and resilience.

The anti-avoidance and evasion activities will include expansion of the team tasked with pursuing those who have abused the Coronavirus support schemes, primarily focussing on the furlough scheme and bounce back loans.

A further £292million from the spending review across three years will help HMRC tackle the tax gap and ensure that as much as tax as possible is collected.

The Finance Bill 2021/22 will include further measures to clamp down on promoters of tax avoidance schemes.

These measures will allow HMRC to freeze a promoter’s assets so that the penalties they are liable for are paid, deter offshore promoters by introducing a new penalty on the UK entities that support them, provide for the closing down of companies and partnerships that promote tax avoidance schemes, and support taxpayers to steer clear of avoidance schemes or exit avoidance quickly, by sharing more information on promoters and their schemes.

 

As mentioned, we’re still working through the small print of the announcements and as we do so we’ll be in touch with clients if we feel there is anything specific they should be aware of. If you have any questions though, from any of the media coverage, or any of the materials we’ve sent out so far, please get in touch. We can’t hope to know what plans every client may have in mind, or what may have happened in the last few weeks, so please keep us up to date so we can give you the level of help we’d like to!

 

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