Chancellor Rishi Sunak has unveiled UK’s £350 billion spending package in a series of measures to relieve the pressures of coronavirus on the economy and to save small businesses, these include a temporary exemption on business rates, ensuring the government is “doing everything” to keep the UK “healthy and financially secure”.
Business Rates and Cash Grants
There will be a 100% business rates holiday for the next 12 months to cover all retail, hospitality and leisure businesses in England – not just those up to £51k Rateable Value as announced in the Budget
There will be a £25,000 cash grant to retail, hospitality and leisure businesses in smaller premises, with a Rateable Value below £51k
There will be an Increase to the proposed £3,000 cash grant to 700,000 small businesses (those eligible for Small Business Rate Relief) to a £10,000 cash grant. We think this will also apply for those eligible for rural rates relief.
Consequential £3.5 billion funding to be provided for devolved administrations to support businesses in Scotland, Wales and Northern Ireland.
We do not know when this help will come on-stream, and the FSB are pressing the government for dates and mechanisms. They want this applied consistently and easily across local authorities, and ideally automatically issued. The costs of all the above will be met centrally, not by local authorities, so there will be no impact on your local services. If you’ve received a business rates bill you DO still need to pay it – and then get refunded. We expect more detail later this week.
With small business rates abolished, the government has taken great steps to support SMEs in a time of economic uncertainty and as Mike Cherry, the FSB’s national chairman, said: “We hope it is the start of things to come.”
Coronavirus Support
Firms with less than 250 employees will be refunded for providing statutory sick pay to workers self-isolating because of the coronavirus in a £2 billion government initiative. Business and those self-employed will be able to defer their tax payments in times of financial distress in the “Time to Pay” scheme to extend the time limit for paying tax back to HMRC.
Cashflow and Lending
The Chancellor has stated that the Government will help the economy by:
- Supporting liquidity amongst large firms, so they can pay their small suppliers, salaries and rents
- Supporting SMEs via banks through the “Coronavirus Business Interruption Loan Scheme”. to underwrite loans of up to £5m (formerly this was up to £1.2m); and with the first 6 months of that finance interest free (i.e. that the Government will pay for). The scheme will provide the British Business Bank with an additional £1bn in guaranteed lending to small businesses, granting them more access to loans and overdrafts during the coronavirus outbreak. Mr Sunak said: “The government will offer a generous guarantee on those loans, covering up to 80 per cent of losses, with no fees, so that banks can lend with confidence,”
- Confirming with lenders to provide mortgage payment holidays of at least 3 months for those facing finance issues as a result of coronavirus (there was later confirmation of future help for those that rent; but that remains unclear)
Timing-wise, the Government promises this will be available from Monday 23 March 2020
The Government has published draft legislation for these measures and some others from the Budget (e.g. emergency Sick Pay). At the very latest, this legislation is expected to pass before the Easter Recess, although could be sooner.
Entrepreneurs Relief
Mr Sunak said he’ll change entrepreneurs’ tax relief, rather than abolish it, saying he’s sympathetic to the argument that it is the UK’s “worst tax break”. The lifetime limit for relief has been changed from £10m to £1m. About 80% of small businesses will remain unaffected but it will save £6bn over the next five years.
Cutting the lifetime limit will enable start-ups to continue to attract talent, but reduce the incentive for some foreign-born founders to base their companies in Britain, according to Philip Salter, founder of The Entrepreneurs Network.
New Funding
The government will also be adding £130 million of new funding to extend start-up loans for businesses, along with £5 billion of new export loans. The chancellor also announced plans to provide £200 million to the British Business Bank to make equity investments in health and life sciences.
Tax
The rate of Corporation tax continues to be frozen at 19% for the financial year beginning 1 April 2020 despite previous announcements that it would reduce by 2%.
The Government’s Time to Pay service will be scaled up, allowing businesses and the self-employed to defer tax payments. This will create greater leg room for businesses concerned about cash flow pressure due to the impact of absent employees and supply shortages.
R&D tax credits will be increased from 12% to 15% this year.
National Insurance
The national insurance threshold for employees will be raised to £9,500 from £8,632, providing a’ tax’ cut for 31m people.
The national insurance threshold for employers will be raised to £8,788 from £8,632.
The Living Wage
The National Living Wage to be raised to over £10.50 per hour.
We advise that you contact your Accountant before taking any action as result of the information within this summary.
A good Accountant will be happy to explain the pros and cons of Government policy announcements and changes and how they affect you and your business. Here at Keen Dicey Grover our door is always open to talk you through the complexities of tax, allowances and related Government policies.
Our policy is to work closely with our clients to ensure best practice use of business structures to ensure they are operating in the most financially efficient way, now and in the future. By ensuring our clients are confident and informed about their financial business structure, we allow them to concentrate on the key activities of growing their businesses and their finances.
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