Starting his Budget announcement on 3 March 2021, the Chancellor, Rishi Sunak, confirmed that the economy has shrunk by 10% but that more than £280 billion in support has been offered so far. At LWA, we have summarised the key points from the Budget relevant to businesses to ensure you make the most of what’s being offered to help the economy recover.
The Coronavirus Job Retention Scheme (CJRS or the furlough scheme)
The furlough scheme has been extended until the end of September 2021. There will be no change for employees who will continue to receive 80% of their wage/salary for hours not worked until the end of the scheme. For employers, the scheme will continue as is until July when they will be asked to contribute to the cost of paying furloughed employees starting from 10% in July and 20% in August and September.
A ‘loan recovery scheme’ will be introduced (after the 31 March deadline for CBILS and the BBLS) for businesses to apply for funding between £25,000 and £10 million until the end of 2021 and the government will provide a guarantee to lenders of 80%.
The VAT registration threshold will remain at £85,000 until April 2026. For the hospitality and tourism sector, the 5% reduced rate of VAT will be extended until the end of September 2021. From 1 October 2021 it will increase to an interim rate of 12.5% then back to the main rate six months later on 1 April 2022.
Corporation tax rates will increase to 25% in April 2023. However, struggling businesses (i.e. loss-making business) will not be affected as they will usually not have a tax liability. In addition, marginal rates of tax will see a return as small businesses with taxable profits of £50,000 or less continuing to pay corporation tax at 19%. For taxable profits of £50,001 up to £250,000 a taper will be introduced. Therefore, only businesses with taxable profits of £250,000 or more will pay corporation tax at the full 25% rate. For the next two years, the treatment of losses will be made more generous by allowing businesses to carry back losses of up to £2 million for up to three years. There will be a ‘super deduction’ for businesses investing in assets for the next two years, which could allow a company to reduce their tax bill by 130% of the cost of the investment.
100% business rates holiday for all eligible businesses in the retail, hospitality and leisure industry has been extended for the first three months of the tax year until the end of June with up to 66% relief for the rest of the year. For closed businesses, rates will be discounted up to two thirds up to a value of £2million for the remaining nine months.
Additional grants and funding
£700 million worth of grants will be made available in ‘restart grants’ to arts and sports organisations, including £400 million to help arts venues in England, to help them reopen, and a £300m recovery package for professional sports and £25 million for grassroots football. A new ‘restart’ grant will be made available for non-essential businesses which will open according to the Prime Minister’s ‘roadmap’. Non-essential retail are due to open first so they will receive a £6,000 grant per premises. Those which will open later, such as hospitality and gyms, will receive grants up to £18,000 per premises to compensate those entities that are subject to a further delay in opening. There will be funding available for apprenticeships of £3,000 for each new apprentice hired between 1 April to 30 September 2021.
Self-Employed Income Support Scheme (SEISS)
A fourth SEISS grant will be paid covering the period February 2021 to April 2021. This will equate to 80% of the average trading profit for the three-month period up to a maximum of £7,500. A fifth and final grant from May 2021 will also be paid and applications for the fifth grant will open in July 2021. The SEISS grant will be based on the 2019/20 self-assessment income tax return information provided the taxpayer has submitted their 2019/20 tax return with HMRC by midnight on 2 March 2021. This is expected to allow an additional 600,000 individuals who became self-employed last year to claim the fourth and fifth grants. Self-employed individuals whose turnover has fallen by 30% or more will continue to receive the 80% grant. Self-employed individuals whose turnover has fallen less than 30% will receive a 30% grant.
If you need support as a result of the Chancellor’s Spring Budget, please contact a member of our team – we’re here to help. Call 0161 905 1801 in Manchester or 01925 830 830 in Warrington, or you can email us via firstname.lastname@example.org