The Chancellor of the Exchequer, Rishi Sunak, has announced the budget statement and 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
Find our Tax teams Brighter Thinking budget comments below:
Budget comments from our Tax specialists:
VAT Reduced rate extension:
The extension to reduced rating for supplies in the hospitality sector will be a welcome boost to the sector, as it starts to reopen and to take advantage of what for many will be, the year of staycations.
Not only will the reduced VAT rate of 5%, which was due to go back up to 20% after 31st March, stay at that rate until 30th September, but initially it will only go up to 12.5% for the period from 1st October to 31st March 2022. The chancellor estimates that this will give a £5bn boost to the sector,
The supplies which are subject to the lower rate of VAT are food and non-alcoholic drinks from restaurants, pubs, bars, cafes and similar, UK hotel and holiday accommodation and admission to attractions including theatres, amusement parks, museums, zoos, cinemas, exhibitions and gardens, though not to sporting events and not attractions which are already exempt under the cultural exemption.
Following on from the recent consultation, the Chancellor announced in today’s budget, that eight Freeports will be located at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool, Plymouth, Solent, Thames and Teesside.
Freeports will mean that businesses in the area may trade outside the UK customs regime, with import taxes not applying. The Chancellor said that Freeports will benefit from favourable tariffs, VAT or duties and lower taxes, including tax breaks to encourage construction, private investment and job creation and added that, the zones would ‘make it easier and cheaper to do business’.
It is hoped that Freeports will boost employment, create billions for the economy and assist industrial regions. Detractors however, say that it will create an opportunity to avoid taxes, creating UK tax havens.
Sector specific budget comments:
Chris Maloney, Head of Hospitality and leisure
Hospitality and Leisure sector summary
I think this is a fair budget for the sector, to help support Hospitality and Leisure businesses to get back up and running.
What is important is for the situation for the sector to be continually reviewed until the pandemic is well behind us!
Great news about:
- The extension to the business rates relief until July, then a 66% discount through to December
- The extension of the 5% reduced rate of VAT until the end of September, increasing to 12.5% through to March, then the going back to the normal rate of 20% in April.
- The extension of the furlough scheme until the end of September
- The introduction of a Recovery Loan Scheme, in which businesses can apply for loans from £25,000 up to £10 million through to the end of this year, guaranteed by the Government up to 80%
- Grants, of up to £18,000 per premises, including gyms
I also like the way losses can now be carried back 3 years, this will be a real benefit to the Hospitality and Leisure sector.
Roberto Lobue, Head of Retail & Wholesale
Retail sector summary
Generally I think it was a positive Budget from the perspective of the Retail sector. Whilst more could have been done, I welcome initiatives like the extension of the furlough scheme and the business rates relief.
The re-start grants and recovery loans will also help and previously successful retail businesses should review whether claims can be made under the extended loss carry back rules to recover corporation tax previously paid.
Adding to this, I think the reduced VAT rates for the Hospitality sector will likely have a good impact on the retail sector by attracting people back out to the high street and hopefully spending money.
Also, and a little less short term, but there at £15bn in bonds, including for retail investors, to help the country reach a net zero omissions by 2050. This could be a good way to incentivise investment into retail business that need some assisting to rebuild when the highstreets reopen, and could also set them apart from potential competitors who are not looking at their omissions usage.