Wednesday 11^th March 2020 will undoubtedly be a day to remember, not only the first Budget of the decade and the first to take place outside of the EU in nearly 50 years. It was also the day that Mark Carney, the governor of the Bank of England announced that the interest base rate has been reduced from 0.75% to 0.25%, the lowest level in history. In an attempt to help the UK economy through challenging times caused by the Coronavirus, the move will make borrowing more affordable in the short-term.

The day was also marked with the Budget announcement and it was inevitable that COVID-19 would heavily dominate, the Chancellor of the Exchequer Rishi Sunak outlining spending plans to manage the impact of the virus, with more support to the NHS and businesses alike. However, in his address to the House of Commons, he also spoke of the future plans for the UK, in terms of investments in roads, rail and digital technology, outlining a plan for the UK to underpin growth into the next decade.

Here are some of the key points at a glance:

• £30bn package unveiled to combat the Coronavirus with a £5bn emergency response fund to support the NHS and other public services in England
• Businesses with less than 250 staff will be refunded eligible statutory sick pay payments for up to 14 days
• Corporation Tax is remaining at 19%
• The National Insurance allowance for businesses is increasing from £3,000 to £4,000 per year
• The RDEC rate is increasing from 12% to 13% from April 2020
• The consultation on capping tax credits in line with PAYE/NIC is being postponed until April 2021
• The lifetime limit on Entrepreneurs’ Relief is being capped at £1m, down from £10m

Our Tax Team outline some advice and explanation for businesses below:

Statutory Sick Pay (SSP)

With the increasing spread of the virus it was announced that Statutory Sick Pay (SSP) would be made be available from day one of sickness, rather than day four. In an unprecedented move, the government will also cover the costs of SSP where the cause is coronavirus related up to 14 days.

Entrepreneurs’ Relief

After much speculation ahead of the Budget, Entrepreneurs’ Relief has not been abolished. Instead, the relief has been overhauled after being deemed ineffective and expensive by the Chancellor. The lifetime allowance has been reduced from £10m, down to £1m. This will apply to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020.

Deferred HMRC payments

HMRC will review time to pay arrangements which means that businesses will be able to make delayed payments of various taxes. This can help soften the impact of reduced cash flow which many businesses, especially smaller businesses may be experiencing. If you run a business or are self-employed and are concerned about paying your tax liabilities due to coronavirus, you can call HMRC’s helpline for help and advice on 0800 0159 559.

National Insurance

The National Insurance threshold increased from £8,632 to £9,500. This represents an individual tax saving of around £100 per year. While this is only a modest increase, this will be a welcomed change. In addition, the employer’s NI allowance has increased from £3,000 to £4,000; offering an extra £1,000 of relief which can be reinvested into the business.

Corporation Tax

Corporation Tax will remain at 19%. This is no surprise to industry as this was a pledge made in the Conservative manifesto. While this isn’t the 17% rate that was originally proposed in 2016, it still remains the lowest corporation tax rate in the G20.

Research & Development

The rate of relief for Research & Development Expenditure Credit (RDEC) claims has increased from 12% to 13% starting from 1 April 2020, supporting businesses investing in R&D and helping to drive innovation in the economy. This is in addition to the government’s pledge to further invest in Research and Development in the UK. Consequently, £22bn per year has been committed by 2025, but there has been little detail as to where these funds will be specifically directed. This investment would be the largest and fastest ever, taking direct support of R&D to 0.8% of GDP.

Consultation on R&D tax credit qualifying costs – The government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.

Preventing abuse of the R&D relief for SMEs – Last year the government conducted a consultation on reintroducing a cap on the payable tax credit in the SME R&D schemes in line with PAYE/NIC liabilities, this has now been delayed to 1^st April 2021. There will also be a revision on the cap’s design so that it does focus on eliminating those who abuse the scheme but also ensures that eligible businesses can access the tax relief.

Going Green

In line with the green agenda, it was promised that pollution will be taxed. To combat plastic waste, from April 2022, a levy of £200/tonne will be applied on suppliers (both production and importation) where packaging is made of less than 30% recycled plastic. Furthermore, the tax relief given on red diesel will be abolished for a number of industries. This relief will continue for two years to allow industry time to make alternate arrangements.

What to do?

The budget had some surprises and may have raised some questions, if you would like to speak to one of our tax advisors on how the announcement has or will affect your business in the near future please get in touch.