On The Spot Blogs
Budget 2021 - Help To ReGroup & Grow
Today we've had a whistle-stop tour of initiatives which the government hopes will encourage growth. From saving existing skills with furlough and SEISS scheme extensions, a new super tax deduction on equipment, through to funding high quality training schemes (if you have at least 5 employees).
Here are the main headlines of interest to small and growing businesses...
Help To ReGroup
Corporation Tax and Self Employed Losses - Carried Back 3 Years
A bit like after the financial crisis, the usual 1 year loss carry back is extended to 3 years, meaning that tax paid on previous profitable years, will generate much needed cashflow through a tax refund.
This applies from 1 April 2020 to 31 March 2022 which helpfully covers the worst of Covid's effects. Get your 2021 tax returns in early to receive your tax refund as soon as possible.
SEISS 4.0 & 5.0, Furlough Extension, VAT Rate Cut Extension, Business Rates
SEISS 4.0 covers February, March, April and will now include those who've traded in both 2019/20 and 2020/21 and submitted 2019/20 before today. Claims can't be made for a while - late April.
SEISS 5.0 will look at your turnover reduction in the year April 2020 to April 2021 with a similar £7,500 cap if your turnover reduced by 30% or more, but a much smaller cap of £2,850 if your turnover reduced by less than 30%.
The furlough extension to the end of September tapered down to 70% for July and 60% for August & September is something for small limited company directors, as well as larger businesses, the main aim to help ensure employees stay in the jobs market.
The 5% VAT rate extension to the end of September and 12.5% to 31 March 2022 will be valuable to eligible businesses and is another reason to become voluntarily VAT registered! With the current compulsory threshold remaining at £85k, you may need to be registered sooner than you think.
Continuing with £NIL business rates for April, May, June is a much welcome cashflow saving until all property-based businesses can fully open.
Help To Grow
Management Training & Digital, Other Grants, Recovery Loan Scheme
New management training and digital schemes for businesses with over 5 employees are aimed at improving productivity, an elusive goal for many governments, will be 90% funded by the government. New restart grants were also announced for non-essential retail, hospitality, leisure, personal care and gyms. Plus, picking up from the end of BBLs and CBILs, a new Recovery Loan Scheme will be available with 80% government backing.
With so many different existing grants around available to all sorts of businesses, it must be worth most checking whether there might be something available to them. Check the State Aid rules, though.
Investment - Super-Deduction - Companies
Increasing the tax deduction when purchasing plant & equipment from 100% to 130% from 1 April 2021 to 31 March 2023. At a corporation tax rate of 19%, £1,000 of investment, currently saves £190 of corporation tax, with the 130% super deduction, it saves £247, an increase of £57. Don't forget to bring in 130% proceeds if you sell that equipment one day!
If the plant is purchased through hire purchase there will be some further requirements, unlike under the current 100% deduction.
Corporation Tax Rate Increase - 19% to 25%
Happily, this is delayed until 1 April 2023 and with a taper from £50k to £250k profits, the effective rate on those profits will be between 19% to 25% for many small businesses. Apart from helping out the country's finances, higher corporation tax rates arguably encourage investment. The more you invest, the more you save... Interesting the start date is at the same time as the super deduction mentioned above comes to an end which mathematically seems to come to a similar answer: £1,000 @6% = £60
It'll be interesting to see whether fewer sole traders/partnerships will incorporate or at least delay doing so, although the freezing of tax free personal allowances and the higher rate tax bands through to April 2026 might encourage more incorporations. Each case will be different. In any event, ambitious businesses can easily incorporate later.
Enterprise Management Incentive - EMI and Research & Development - Consultations
Are these working? Should they be extended? etc etc. Let's hope these come to quick conclusions so businesses can benefit from any improvements. The maximum repayable credit of £20k plus 3x PAYE bill won't be disturbed.
UK Infrastructure Bank, Grants
There doesn't seem to be any minimum sized business, so small green or local growth projects might be eligible.
What Didn't We See?
Interesting the things that weren't mentioned:
- Business rates fundamental reform
- Long term care funding ideas, perhaps through the national insurance system
- Capital gains tax changes, but there have been several in recent years!
- Pension tax relief, ditto! Although freezing the lifetime allowance will affect some.
The focus has been on growth as the way to pay our way out of the enormous debt, with some important taxpayer help from corporation tax and freezing tax allowances.