Summary of the Budget Items that Impact Small Businesses – 3 March 2021

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The budget announcement on 3 March 2021 was much bigger than normal. Tim from Monty Accounting summarises the items that impact small businesses, starting with the things that are likely to impact your business soonest.

Furlough

As widely anticipated, furlough has been extended to September 2021.  Companies still need to pick up the NI/Pension payments for furloughed employees and from July we’re back to the point where you need to contribute to any furlough paid out:  10% in July and 20% in August and September.
The government has finally agreed to allow staff employed after 30 October 2020 to claim furlough.  Anyone employed after October 2020, who was on your payroll as at 2 March 2021 (with a submitted RTI), can receive furlough from 1 May 2021.  Of course, waiting until May renders it largely pointless, but for some it will be helpful.
Furlough remains flexible, so if you are bringing staff back for short shifts, you can still top them up with furlough.

Restart grants

Another round of grant funding for hospitality & retail businesses who have premises.  The current grant scheme was designed to take us through to end of March with these restart grants replacing this scheme (presumably in April).  It’s up to £6,000 for retail premises and £18,000 for hospitality premises.  Once again, it will be administered by local councils so check your local authority website for details on how to apply.  Full details are not yet published,  but we expect it will be a few weeks before this is live and much like the last round of funding, will be based on the rateable value of your premises, with more expensive sites getting the larger grants.

5% VAT rate

As we expected, the 5% VAT rate has been extended to 30 September 2021.  In addition to this, from October 2021 to March 2022 the rate will only increase to 12.5% which is very welcome news.

Business rates

Rates relief for hospitality and retail is set to continue, with 100% rates relief from April 2021 to June 2021.  From June 2021 to March 2022 the relief will fall to 66% of business rates.  If you look at it on an annual basis, total rates payable for the 2021/22 year will be 25% of the normal business rates.

There is a cap of £2m per business on this relief and how this is to be calculated is not clear, although we do not expect this to impact the majority of our clients.

National Minimum Living Wage

Min wages rates were already published, but were included in the budget yesterday, with the headline rate increasing from £8.72 to £8.91 from 1 April 2021.  This is a 2% increase, which is the lowest annual increase since the NMLW came into force.

Recovery Loan Scheme

From 6 April 2021 a new recovery loan scheme will be available, replacing bounceback loans and CBILS (Coronavirus Business Interruption Loan Scheme).  These loans will still be 80% guaranteed by the government and are available from £25,000 to £10m.  Interestingly, these loans have a wider use than the CBILS and Bounceback loans, which were intended to be used for business survival.  These loans are available for “any legitimate business purpose, including growth and investment.”
  
Essentially, these loans are there to make it easier for banks to lend to businesses.  Note the word, ‘easier’, not ‘easy’.  Currently all hospitality and retail businesses are assessed as risky by banks due to the restrictions that have been faced and potential future restrictions.  This may go some way to level the playing field.  If you already have a bounceback or CBILS, you will still be eligible to apply for a recovery loan.
Not many details announced by the government on this scheme yet, more to follow in the weeks to come.

Alcohol & fuel duties

Alcohol have all been frozen this year, along with fuel duties.  This will mitigate some of the price rises we would expect in April when suppliers put through their annual price rises, although we expect price rises across the board due to Brexit import costs, increases in NMLW, increased insurance costs and increased bad debt costs.

Corporation Tax

Tax Rate
From April 2023 there will be a big overhaul to corp tax rates, from a flat 19% rate to a tapered model which has a top rate of tax of 25%.
Currently all the details we have is:
Profits up to £50k – tax at 19%
Profits above £250k – tax at 25%
Profits between £50k and £250k – tax at somewhere between 19% and 25%, with the expectation that the tax rate will increase with higher profits.

The marginal rates will be released at some point in the future.

Carry Back Losses
You can now carry losses backward for up to three years.  So if you have made large losses this year and you have paid tax in the previous years, you will be in line for a tax refund once you submit your company tax return.

Super Deduction
From 1 April, when you spend on qualifying plant & machinery, 130% of the amount you spend on the asset can be deducted from your qualifying profits.  Essentially this means you get 25p your tax for every £1 you spend.  This is more generous than the previous 19p per £1.  Useful if you are planning on a large investment anytime soon – drop us a line if you want to know if the assets you are purchasing are qualifying or not.

A sting in the tail ? COVID-19 fraud task force

The government is spending £100m on setting up a taskforce of 1,265 agents to investigate fraud in COVID-19 support packages, with a note in the budget highlighting SEIS and CJRS as areas they will be investigating.   With hospitality and retail being the heaviest users of CJRS we expect a large increase in the amount of enquiries businesses are going to receive into previous claims as well as more EOTHO investigations.

Help to Grow

Subsidised training & software for SMEs (focusses on owners/managers), with the government picking up between 50% and 90% of the cost.  The scheme is split between ‘digital’ and ‘grow’ and starts in June 2021. Find more details and register you interest here: helptogrow.campaign.gov.uk

Apprenticeships

If you are thinking about apprenticeships – the apprenticeshop new hire grant has been increased from £1,500 to £3,000.

If you want more information about anything mentionned above (or anything else) please feel free email Tim at tim@montyaccounting.co.uk

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