Budget 2021 response and summary: Working toward recovery in a ‘post-Covid age of optimism’
Businesses are being advised to make the most of the fiscal incentives and reliefs to assist in their recovery as the economy recovers from the pandemic and growth forecasts show signs of improvement.
Chancellor Rishi Sunak, established in his Budget Statement that the Office for Budget Responsibility (OBR) has reviewed upward growth forecasts for the economy, which it assumes will return to pre-Covid levels by the end of the year.
The Chancellor has chosen to place an emphasis on increasing spending in key areas that will drive economic growth, allowing the government to increase the tax take in a hope to re-balance the economy in the aftermath of the pandemic.
Retail and business rates reform
The Chancellor revealed plans to continue with improvements to the business rates system by guaranteeing more frequent rent re-evaluation i.e. once every three years from 2023. As of 2023, he also announced that businesses making property improvements will not have to pay anything extra in regard to business rates for a period of 12 months.
For the retail and hospitality & leisure industries, the Chancellor revealed a new 50% business rates discount up to a maximum of £110,000. These changes could make a huge difference in helping to kickstart redevelopment of the high street as retailers in particular start to feel more confident about investing in improvements to their properties, without incurring a hefty business rates penalty for doing so.
The implementation of Incentives for manufacturing and capital investment
In addition, the Chancellor also revealed that the Annual Investment Allowance (AIA) will not drop to £200,000 at the end of this year and will stay at the much higher level of £1 million until March 2023.
This will give businesses the ability to plan ahead with more certainty when looking to make investments over the next 18 months. It will also help to boost confidence at a time when rising costs and supply chain disruption are a significant concern.
Some businesses that had been planning to invest in new equipment and machinery before the end of year had been worried about being able to complete them in time, due to the current supply shortages. This will allow them more time.
Moving forward with innovation
Strategies to expand the scope of R&D tax relief to include investments in cloud computing and data costs was also announced by the Chancellor. Furthermore, he also announced plans to adjust the system to stop activity taking place outside the UK from qualifying for R&D tax relief. In addition to this he announced an extra £22 million funding for R&D activity, separate from the Government’s investment in R&D tax credits.
This move will look favourably on businesses across the industry sectors who are investing in innovation, with more of their investment activities qualifying for R&D tax relief post April 2023. Although, this scheme is not utilised to its full potential, businesses should seek professional advice about the likelihood of submitting future claims.
Strengthening skills and education
As part of a package of funding for skills and education, the Chancellor introduced a significant increase in funding for apprenticeships. The Government claimed that it is planning to introduce an improved recruitment service to support SMEs in finding new apprentices. In addition to this, the Chancellor has also decided to extend the £3,000 apprentice hiring incentive to the end of January 2022 from the previous end date of 30th November 2021
Employers have been hiring more apprentices and take up of the £3,000 apprentice hiring incentive has been strong. Extending the incentive for a few more months will allow businesses more time to take advantage of the support available and help with sourcing suitable candidates will also be helpful.
Attracting investment to the UK
The Government is seeking to reposition the UK economy to attract global talent and inbound investment. As such, it is starting to exercise its independence as it is no longer part of the EU.
“The Budget included a number of measures that are part of this repositioning package. In particular, the new ‘Scale-up, High Potential Individual and Global Business Mobility’ visas will help to attract highly-skilled people and encourage investment in the UK. The decision to form a new Global Talent Network to seek out talented people in the US and India and bring them to the UK to work in key science and technology sectors is also a creative step forward.”