Posted March 4, 2021

Rishi’s COVID Budget

Chancellor Rishi Sunak delivered his first post-COVID today.  As expected, the government’s response to the Coronavirus pandemic has driven a lot of the changes in the budget.

Some highlights from the budget that affect our clients are as follows:

Coronavirus Support

Furlough Scheme

The furlough scheme is being extended until 30 September 2021, employees will continue to receive the same amount of money under the scheme.

Until 30 June 2021, the scheme will continue in its current form, with employers paying the employer’s NI and pension contributions.

From 1 July 2021, employers will have to contribute 10% of the employee’s salary, on top of the employer’s NI and pension contributions.

From 1 August 2021 until 30 September 2021, employers will have to contribute 20% of the employee’s salary, on top of the employer’s NI and pension contributions.

Self-Employed Income Support Scheme

A fourth and fifth grant will be paid to eligible self-employed individuals.

The fourth grant (for the period February to April) will be set at 80% of 3 months’ average trading profits, capped at £7,500. The fourth grant will be open to those who became self-employed in tax year 2019 to 2020 (providing the return was submitted by 2 March 2021). The rest of the eligibility criteria remain unchanged.

The fifth grant (for the period May onwards) will have the same eligibility criteria as the fourth grant, but the payment will be:

• 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%

New Re-Start Grants

Non-essential retail businesses will be able to claim a grant of up to £6,000 per premises from April to help them reopen.

A grant of up to £18,000 will be available to hospitality and leisure businesses to help them reopen.

These grants are the maximum available and the amount will be based on the rateable value of the property that they occupy.

Apprenticeship Incentive

The apprenticeship incentive has been increased to £3,000 to encourage businesses to offer traineeships.  This is for any newly hired apprentice starting between 1 April 2021 and 30 September 2021 regardless of the apprentice’s age.  This is on top of the £1,000 payment provided for new apprentices aged 16 to 18.

Tax Changes

VAT

The registration threshold for VAT will remain the same until 2024.

The temporary reduced rate of VAT (5%) currently applicable on certain hospitality, hotel and holiday accommodation supplies will be extended to 30 September 2021.  An interim rate of VAT of 12.5% will apply between 1 October 2021 and 31 March 2022.

Business Rates Holiday

The business rates holiday will be extended for a further three months to 30 June 2021.  For the remaining nine months of the tax year, business rates will be discounted by 2/3rds to help businesses forced to close by COVID.

Corporation Tax – Rate Change

Corporation tax will increase to 25% from April 2023, with the introduction of a small profits bracket for companies with a profit of less than £50,000.  Companies who make a profit of less than £50,000 will pay tax at 19%, this will be tapered for companies earning between £50,000 and £250,000.

When there was a small companies corporation tax rate previously, the bracket was split equally over group companies to dissuade business owners from set up multiple companies to benefit from several allowances.  There is no detail of whether this will apply to the new small profits bracket in the guidance issued to date.

Corporation Tax – Changes to Loss Relief

Loss relief is being extended for corporation tax.  For corporation tax periods beginning on or after 1 April 2021 trading losses will be able to be carried back and used against profits from the previous three years.

Corporation Tax – Super Deduction

A temporarily relief for expenditure on plant and machinery will be available for qualifying expenditure incurred between 1 April 2021 and 31 March 2023.  The new rates of capital allowances will be:

• a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
• a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances

Making Tax Digital – Smaller VAT Registered Businesses

From April 2022, all smaller VAT registered businesses will need to comply with Making Tax Digital.  This means that they will need to keep their records digitally and submit their VAT Return to HMRC through MTD compatible software.

VAT Deferral Payment Scheme

Businesses that elected to defer VAT payments that would have been payable on returns due between 20 March and 30 June would have needed to make the deferred payment by 31 March 2021.  HMRC have now given businesses who deferred the VAT payment longer to pay.  This can now be paid in 11 equal interest free instalments.

A new portal will be set up to facilitate this and payment will be made by direct debit.  Businesses will only be able to opt-in in March, April, May or June and the later they opt in the fewer instalments they will make.

If businesses do not opt to use this scheme and the VAT has not been paid in full by 30 June 2021 a penalty surcharge of 5% will be applied to the deferred VAT.

Image by Miroslava Chrienova, Gerd Altmann & mohamed Hassan from Pixabay

*The information contained above is provided for information purposes only and is not intended to amount to advice on which reliance should be placed. We therefore disclaim all liability and responsibility arising from any reliance placed on such information. Professional advice should be obtained before taking or refraining from taking any action as a result of the above contents.