The key message of the Chancellor’s budget statement was to encourage businesses to invest now, whilst leaving a careful warning that they will have to begin paying for the costs of the pandemic in the near future (2 years) when a rise in corporation tax will take effect.
“Rather than focusing on quick tax takes now, he is encouraging businesses to plan for the long term, while making it clear that tax increases are inevitable,” said Richard Godmon, tax partner.
Super deduction and Corporation Tax
Richard Godmon, tax partner at said:
“The Chancellor’s ‘super deduction’ is a record-breaking opportunity for businesses to reduce their corporation tax liability by 130 percent of the value of any investment they are making in the next two years on qualifying plant and machinery. This equates to a significant cash windfall for businesses and will help to bolster cash flow at a critical time.”
However, the Chancellor has also warned that tax hikes for businesses are on the way, with a rise in the rate of Corporation Tax to 25% on profits over £250,000 from April 2023. Richard Godmon said:
“While the rise in Corporation Tax won’t be welcome, it has been designed in a sensitive way to hit those businesses that have generated the most profits, as oppose to those that have not. The tapering mechanism will ensure businesses with fewer profits will pay less tax and small businesses with profits of £50,000 or less will not be affected by the tax hike – the rate payable on their profits will stick at the current rate of 19%.”
Retraining and upskilling
Richard Godmon, tax partner at said:
“Many businesses have found that pandemic-related disruption has required them to retrain existing staff or invest in upskilling in areas such as digital tech. The doubling of incentives for employers hiring apprentices will encourage more businesses to consider invest in training programmes.”
New restart grants
Richard Godmon, tax partner at said:
“The new restart grants will funnel support to those businesses that have been worst hit by the pandemic – including non-essential retail businesses, with grants of £6,000 per premises, as well as businesses planning to reopen in April, such as hair salons and gyms, with grants of up to £18,000.
“These cash grants are also being supplemented by a new recovery loan scheme, to replace CBILs and BBLs. This Government-backed scheme is available to businesses of all sizes, providing loans from £25,000 to £10 million through to the end of the year. We are expecting take up of this scheme to be high and businesses should move quickly to take full advantage of the scheme.”
Stamp Duty Land Tax and new mortgage guarantee scheme
Rebecca Wilkinson, tax partner and property and construction sector specialist said:
“As widely anticipated the temporary £500,000 SDLT nil rate band has been extended until the end of June 2021. After this the nil rate band will be phased out, decreasing to £250,000 until the end of September 2021 and returning to normal levels from October 2021. This will be welcome news for anyone currently caught in the middle of a purchase transaction which, due to logjams in the market, will not be able to complete before the end of this month.
“SDLT receipts in the final quarter of 2020 were significantly higher than in the previous quarter due to a push to complete transactions before the planned end to the SDLT holiday on 31 March. Maintaining the increased nil rate band may therefore actually increase SDLT takings for the government over the next few months, generating much-needed revenue.
“A new mortgage guarantee scheme has also been announced for first time buyers, with the Government guaranteeing mortgages of up to 95% loan to value. Together with the extended SDLT holiday, this measure should help to keep the housing market buoyant, providing continued employment and revenue for those in the supporting supply chain.”
Help for tourism and hospitality
Richard Godmon, tax partner said:
“The 5% reduced rate of VAT has already helped cash-strapped businesses to keep going during the lockdown restrictions. The Chancellor’s decision to go a step further and extend the reduction through to the end of September would have been welcome enough, but his decision to add on another six months at an interim rate of 12.5%, before returning to the standard rate next April, has allowed hospitality & leisure and tourism businesses much-needed breathing space and it could save some from bankruptcy.”
Posted in Blog, Hospitality & leisure, Property & construction