Chancellor Rishi Sunak has clearly turned his mind to how the economy starts to trade its way out of the mountain of debt accrued to support businesses during the Coronavirus pandemic.
Whilst we will all be paying more tax, some sooner than others, the Chancellor has embarked on the balancing act of paying down the debt while helping businesses to recover. There is a lot in the Budget for small businesses to be pleased about. Here is what you need to know.
Seeing out Coronavirus
At the end of March 2021, many government-backed coronavirus loan schemes come to an end.
In an effort to stop the gap, the Recovery Loan Scheme comes into effect from 6 April 2021. It enables lenders to provide finance to UK businesses with a government-backed guarantee of 80% on loans between £25,000 and £10 million.
To help businesses with the task of reopening, Restart Grants will be available with effect from April 2021.
£18,000 is available on a per premises basis for hospitality, accommodation, leisure, personal care and gym businesses. Non-essential retail businesses are eligible for £6,000.
Business rates relief has been extended in Scotland and Wales until March 2022, whilst in England, 100% business rates relief has been extended until 30 June 2021. From 1 July 2021, businesses in England will be entitled to 66% business rates relief until March 2022.
The temporary 5% reduced VAT rate for the hospitality and tourism sectors has been extended until 30 September 2021. From that date until 31 March 2022, the rate of VAT for those businesses will be 12.5%.
The Coronavirus Job Retention Scheme (furlough scheme) will continue until September 2021. However, from 1 July 2021, employers will be required to contribute 10% to the cost of employees’ wages and 20% in August and September. Flexible furloughing will still be allowed, as will the topping up of wages.
Eligibility for the Self-Employment Income Support Scheme (SEIS) has been widened for the fourth and fifth grants. Self-employed people who submitted a tax return by midnight on 2 March 2021 are eligible for the scheme. The fourth grant (covering February to April 2021) pays up to 80% of average trading profits for three months up to a cap of £7,500. The fifth grant covers May to July 2021 and pays 80% of average trading profits if turnover has dropped by 30% or more.
Looking to the future
Corporation tax is going up but not until April 2023 when it increases to 25% for companies with profits in excess of £250,000. A small profits rate of 19% will apply to companies with profits of £50,000 or less. For those companies that fall between £50,000 and £250,000, marginal relief will be available so that the increase in corporation tax between the upper and lower limit is gradual.
Further relief is available in trading loss carry-back rules which will be temporarily extended from one year to three years. This means that businesses can carry trading losses arising over the pandemic back to relieve profits in earlier years. This relief has effect for accounting periods ending in the period 1 April 2020 to 31 March 2022.
In an effort to encourage investment and promote growth, companies investing in new plant and machinery will be entitled to a “super-deduction”. These come in the form of capital allowances which enable a company to claim:
- A super deduction of 130% on new plant and machinery that would ordinarily qualify for the 18% main rate; and
- A 50% allowance on new plant and machinery that would ordinarily be eligible for the 6% special rate
The new Help to Grow scheme will make £520 million available to small businesses in an effort to improve productivity. The scheme will provide access to management training, technology advice and access to software.