Budget statement 2020
The new chancellor of the exchequer, Rishi Sunak, has been in post for less than a month following the resignation of his predecessor. He has been catapulted into the hot seat just as the government attempts to deal with the triple whammy of coronavirus, the effects of several major winter storms and the ongoing negotiations on our post-Brexit relationship with the European Union.
But coronavirus could prove the biggest challenge. The NHS is already groaning under the weight of normal demand and the travel sector has taken a big hit. And, if large numbers of people start to ‘self isolate’, it won’t be long before thousands of smaller businesses are on life support too. So while the traditional government remedy of boosting demand (“build more infrastructure”) and dropping interest rates (which are already at rock bottom) helps in the long term, it will do nothing for people whose cashflow has already dried up.
So, what did the ‘new kid on the block’ announce for businesses?
Budget 2020 announcements
- Statutory sick pay: employers with fewer than 250 employees will be refunded their eligible SSP costs. Costs are limited to 14 days per employee and include those who self isolate.
- Additional support for those ineligible for SSP: ‘new style’ Employment and Support Allowance payable to those directly affected by COVID-19 and those self isolating from the first day of sickness or isolation. The Universal Credit minimum income floor will be removed for the duration of the outbreak.
- Fit notes: it will be possible to obtain a fit note by calling 111 avoiding the need to visit a doctor.
- Time to pay: a dedicated HMRC helpline for those affected by COVID-19 who may need time to pay HMRC liabilities. Late payment penalties and interest may be waived for businesses experiencing financial difficulties due to COVID-19.
- Coronavirus Business Interruption Loan Scheme: new guarantee to support up to £1 billion of lending (with loans of up to £1.2m) on top of current support offered through the British Business Bank.
- National insurance holiday for employers of veterans: from 2021/22 the holiday will exempt employers of veterans in their first year of civilian employment from NICs on a salary up to the Upper Earnings Limit.
- Employment allowance: increasing to £4,000 from April 2020.
- Corporation tax: frozen at 19%
- Digital services tax: new 2% tax on the revenue of certain digital businesses from 1 April 2020.
- VAT: 5% ‘tampon tax’ abolished from 2021. VAT on digital publications including books and newspapers to be scrapped from 1 December 2020.
- Entrepreneurs’ relief: lifetime allowance reduced to £1 million from £10 million with immediate effect, for business owners selling their companies.
- Capital allowances: structures and buildings allowance rate will increase from 2% to 3% from 1 April 2020 for corporation tax and from 6 April 2020 for income tax.
- Business rates: fundamental review of business rates, due to report back in the autumn.
- Business rates: business rates are being temporarily abolished (via 100% relief) for businesses in the retail, hospitality and leisure sectors with a rateable value below £51,000.
- Business rates: public houses in England with a rateable value below £100,000 will receive a business rates discount of £5,000 from 1 April 2020.
- New small business grant funding: businesses eligible for small business rate relief or rural rate relief can apply for a grant worth £3,000 to meet ongoing business costs.
- Communication: £5bn to bring the fastest broadband into the hardest to reach places and £510m of new investment into the rural mobile phone network.
- R&D tax relief: research & development expenditure credit (RDEC) rate will increase from 12% to 13% from 1 April 2020.
- Stamp duty land tax: additional 2% surcharge for non-UK residents who purchase residential property in England and Northern Ireland from 1 April 2021.
- Vehicle excise duty: increasing in line with RPI. All zero emission vehicles registered until 31 March 2025 to be exempt from the ‘expensive car’ supplement.
- Company car tax: all new cars registered from 6 April 2020 will benefit from a 2% reduction on CCT in 2020/21.
- Van and fuel benefit charges: increasing in line with CPI in 2020/21.
- First year allowances on company cars: first year allowances will be extended from April 2021 to zero emission vehicles. The main rate writing down allowance (WDA) of 18% will apply to cars with emissions up to 50g/km and the special rate WDA of 6% will apply to cars with emissions above 50g/km.
- Fuel duty: frozen for tenth consecutive year.
- Red diesel: tax relief to be abolished for most sectors from April 2022.
- Air passenger duty: increasing in line with RPI for 2021/22 meaning short haul rates remain frozen.
- Aggregates levy: frozen for 2020/21.
- New plastic packaging tax: from April 2022 those importing or producing packaging with less than 30% recycled plastic will pay £200 per tonne.
- Carbon capture and storage: £800m to establish two or more carbon capture and storage clusters by 2030.
- Climate Change Agreement (CCA) scheme: extended for a further two years.
- Sin taxes: all alcohol duties will be frozen, tobacco duty will increase by the RPI plus 2% and duty on hand-rolling tobacco will increase by RPI plus 6% from 6pm on 11 March 2020.
- National minimum and living wage: new target for NLW to reach two thirds of the national median wage by 2024. NLW to be extended to workers aged 21 and over by 2024 (if the economy allows).
The chancellor barely paused for breath during his speech, but the spending didn’t end there – much to the approval of many business support organisations. He also announced the biggest ever single investment in the UK’s road network with £27b for over 4,000 miles of new roads and a £2.5b fund to tackle potholes. And, in acknowledgement of one of the other pressing concerns facing some communities, he also made £120m available immediately to repair defences damaged in the winter floods.