11 March 2020 saw the most anticipated Budget for many years and it did not fail to surprise! The team CHW highlight the Budget issues we feel are most important and relevant to our clients.
The Conservatives had already outlined their intention to keep the tax rates static for Corporation Tax, Income Tax and VAT and as such we were expecting changes to the CGT regime. However, there was more drama than we expected.
The opening gambit by the Chancellor was the Government’s response to the growing concern regarding the Coronavirus (COVID-19) – with £30bn earmarked to mitigate the impact of the virus through business rates holidays and statutory sick pay refunds for certain businesses.
The Government had already announced that the Business Rates retail discount would be increased to 50% in 2020-21.
However, in support of small businesses affected by COVID-19 the Government is increasing it further to 100% for 2020-21 and the relief will also be expanded to the leisure and hospitality sectors.
These temporary measures, taken together with existing Small Business Rates Relief, mean that around 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020-21.
The Government has also already announced the introduction of a £1,000 Business Rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To support pubs in response to COVID-19 the discount will be increased to £5,000 and local authorities will be fully compensated for these Business Rates measures.
Many of our smallest businesses already pay no business rates, so would not benefit from this policy,” the Chancellor said. “So to support them to manage their fixed costs… I am providing, to any business currently eligible for the small business rates relief (SBRR), a £3,000 cash grant per business.”
Good news for many!
Entrepreneurs’ Relief (ER) is a capital gains tax (CGT) relief which reduces the amount of CGT payable on gains generated on the sale of a company or business.
If eligible for ER there is a reduced rate of 10% payable, up to a lifetime limit. That lifetime limit has been severely cut with immediate effect – down from £10m to £1m.
HMRC believe that this measure will help ensure that the tax system is fair and sustainable while leaving over 80% of those using the relief unaffected.
Since 2010 the Government has secured and protected over £200bn of tax that would have otherwise gone unpaid.
The budget announces further action to tackle tax avoidance, evasion and other forms of non-compliance that will raise an additional £4.7bn between now and 2024-25.
HMRC is to receive additional compliance officers and new technology which is forecast to bring in this additional tax revenue.
In the light of this we are expecting increased scrutiny of our clients from HMRC. If you haven’t already signed up to our CHW Tax Investigation Service or would like information, get in touch.
The Government will increase the Employment Allowance from £3,000 to £4,000 from April 2020. The allowance will reduce employers’ (secondary) Class 1 National Insurance contributions each time the payroll is run or until the employment allowance is used up. This will benefit around 510,000 businesses by reducing their costs of employment, with an average gain of £850 per year. The increase will take around 65,000 businesses out of paying NICs entirely and means the Government will have doubled the value of the Employment Allowance in four years.
A “Coronavirus Business Interruption Loan Scheme” was announced which will support up to a further £1bn lending to smaller businesses. The Government will guarantee bank loans to small businesses on amounts of up to £1.2m. The Government will cover bank losses of up to 80%. We are venturing into the unknown where this virus is concerned, so watch this space.
The Budget confirmed an increase in the NICs Primary Threshold and Lower Profits Limit, for employees and the self-employed from £8,632 to £9,500 from April 2020.
This will take more of the lowest paid out of the tax regime and can only be a good measure towards simplifying tax – not just for employees but the administrative teams within businesses.
Bear this new threshold in mind when deciding directors’ salaries and get in touch if you need advice.
In the 2018 Budget the Government announced that it would reform the off-payroll working rules in the private and third sectors from April 2020.
The Government has recently concluded a review of the reform, and is making a number of changes to support its smooth and successful implementation, however the fundamentals of the new legislation will remain unchanged and as such from April 2020 the new regime will be in place.
The rules known as IR35 will now apply only to payments made for services provided on or after 6 April 2020. It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020, supporting businesses as they prepare.
The Government is introducing a new Plastic Packaging Tax from April 2022. Plastic packaging is packaging that is predominantly plastic by weight. The tax rate has been set at £200 per tonne and will apply to plastic packaging that contains less than 30% recycled plastic. The tax will apply to both the production and importation of plastic packaging and imported plastic packaging will also be liable to the tax.
As with everything budget related, the details within the published reports will be trawled and the real impact assessed over the coming weeks and months.
Should you wish to talk about any of these topics, please do not hesitate to contact us and if you want to read our more detailed budget analysis please click here.