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Spring Budget 2021 | An overview of the Key Announcements

Chancellor Rishi Sunak has this afternoon delivered his 2021 Spring Budget.  We summarise below the key announcements ranging from COVID-19 support announcements to tax changes.  Our supplemental budget analysis will follow once we have digested the finer details of the Chancellor’s announcements.

Coronavirus Job Retention Scheme extended

The ‘furlough’ scheme will be extended and gradually phased out at the end of September 2021. The government’s contribution of 80% of furloughed employees’ wages will continue until the end of June 2021, with employer contributions starting in July 2021 at a rate of 10%, rising to 20% in August & September 2021.

Self Employed Income Support Scheme – Grant 4 Details & Updated Eligibility Criteria 

Largely the eligibility criteria for support under the SEISS remains unchanged, importantly however, self employed individuals who were previously ineligible for financial support under Grants 1-3 (as a result of not having filed tax returns for the 2018/2019 period) will now be eligible for Grants 4 and 5, providing they have filed a tax return for financial year 2019/20 by midnight of 2 March 2021.

The fourth SEISS grant will be available to claim from April, calculated at 80% of three months’ average trading profits up to a maximum of £7,500.

The Chancellor also confirmed there would be a fifth SEISS grant available for the months of May to September 2021, which will be available to claim in July 2021.  The amount of this final grant will be determined by how much an individual’s turnover has been reduced in the year April 2020 to April 2021 and will be either:

  • 80% of 3 months’ average trading profits, (capped at £7,500) for those with a turnover reduction of 30% or more
  • 30% of 3 months; average trading profits, (capped at £2,850) for those with a turnover reduction of less than 30%

Further details of the fifth grant will be announced in due course.  A reminder that grants under the SEISS are treated as income and are therefore subject to tax.

Re-start Grants

From April 2021  grant funding will be available to businesses in England who have been forced to close as a result of the pandemic as follows:

  • Non essential retail businesses will be eligible to claim up to £6,000 per business premises
  • The Chancellor acknowledged that businesses within the hospitality, accommodation, leisure, personal care and gymnasium sectors have had to close for longer periods of time during the pandemic and therefore will be eligible to claim up to £18,000.

Further details of the grant scheme are awaited.

New Recovery Loan Scheme

The Chancellor announced the successor to the Bounce Back Loans (‘BBLs’) and the Coronavirus Business Investment Loan Scheme (‘CBILS’) in the form of a new Recovery Loan Scheme (RLS) which will allow businesses to borrow between £25,000 and £10 million, and asset and invoice finance between £1,000 and £10 million, up to the end of 2021.  The new RLS will be government backed up to 80% of the loan amount.

VAT cut for hospitality and leisure companies

The VAT rate reduction to 5% for hospitality, accommodation and attractions introduced last summer will remain until the end of September 2021 and will then increase to 12.5% for the following six months.  It will return to the standard rate of 20% on 1 April 2022.  This will be welcome news for the sector that has been hit so hard by COVID-19.

It has also been announced that the VAT registration (£85,000) and deregistration (£83,000) thresholds will not change for a further two years from 1 April 2022.

Business rates holiday/relief

The existing business rates holiday for businesses in the retail, hospitality and leisure sectors in England of 100% will continue to the end of June 2021, and thereafter will be reduced by two-thirds.

‘Help to Grow’ Schemes announced

With the objective of supporting SMEs to further develop their management and digital skills, the Government will provide subsidised support to businesses in the form of a 12 week ‘Help to Grow Management’ scheme, and ‘Help to Grow Digital’ scheme, including tuition delivered by business schools, the provision of a business mentor, and money off vouchers to part fund the cost of new software.

For further details, eligibility criteria, and to register for the Help to Grow scheme please visit www.gov.uk/helptogrow

Support for Apprenticeship Schemes

  • An extension of the apprenticeship hiring incentive in England to September 2021, and an increase of the apprenticeship incentive payment from £1,000 to £3,000
  • £7 million has been announced to support the creation of a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector
  • A further £126 million investment to provide an additional 40,000 traineeships in England with high quality work placements and training for 16-24 year olds in 2021/22 academic year.

Boost for Culture, Arts & Sports

The Chancellor confirmed an extension to the Culture Recovery Fund with an additional £300 million in funding, together with extending the TV & Film restart scheme.

Research & Development Relief Capped

The amount of which an SME can reclaim Research & Development tax relief can receive in any one year has been capped at £20,000  (plus three times the company’s total PAYE and NICs liability).

Income tax freeze

The income tax personal allowance and the higher rate threshold will rise next year as planned, and will then be maintained at the same level until 2026.

Corporation Tax Changes

The rate of corporation tax will rise from 19% to 25% from April 2023.  A tapered rate will be introduced for profits above £50,000, meaning that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.

An introduction of a new Small Profits Rate will see businesses with profits of £50,000 or less continue to be taxed at 19%.

Temporary extension to the Loss Carry Back Rules

To support incorporated and unincorporated businesses wo have suffered adverse economic impact as a result of the COVID-19 pandemic, this move will allow businesses to claim additional relief for trading losses against profits of up to £2million for 3 years, meaning companies can claim additional tax refunds of a maximum of £760k.

Super Deduction Tax Relief

A new temporary tax relief on qualifying capital asset investment, the Super Deduction Tax Relief, will will cut companies’ tax bill by 25p for every £1 invested in new equipment meaning they can reduce their taxable profits by 130% of the cost.  The temporary relief will apply to expenditure on plant and machinery between 1 April 2021 and 31 March 2023.  The relief cannot be backdated to purchases made prior to 3 March 2021.  Certain expenditures will be excluded – we will provide further details once known.

Liverpool City Region declared a ‘Freeport’

The Chancellor confirmed that together with seven other areas in the UK Liverpool City Region will be declared a ‘Freeport’, bringing with it tax advantages including enhanced SDLT relief when purchasing qualifying land and buildings, and Capital Allowances for plant and machinery, subject to qualifying criteria.  We will provide further details once known.

Stamp duty exemption until June 2021

  • £500k nil rate band extended until 30th June
  • Then nil rate band on property purchases up to £250K until end September 21
  • Usual rate of £125K returns on 1 October 21

Statutory Sick Pay

Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.

Other/miscellaneous:

  • Inheritance Tax Thresholds to remain at their current levels until April 2026
  • From April 2021, support for homebuyers in the form of a new mortgage guarantee scheme will enable all UK homebuyers secure a mortgage up to £600,000 with a 5% deposit
  • Limit for contactless payment to rise to £100
  • Freeze on fuel and beer duties continues
  • Universal credit uplift of £20 per week to remain in situ until end of September/further 6 months
  • Working tax credit payments continue for 6 months with a one off payment of £500.

Reminder:

A reminder that we are hosting a post-Budget Webinar on Friday 5th March at which delegates will have the opportunity to put questions to Tax Manager Phil Hartley. Book your place here.

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