“I WANT TO GET STRAIGHT TO THE ISSUE MOST ON EVERYONE’S MINDS”
That was how Rishi Sunak opened his first Budget speech on the 11th March. It seems so long ago. At this point in time, speculation was around changes to ER and the initial impact of COVID-19 on the UK economy. Some key changes were announced SEE BELOW.
Since then we’ve had extraordinary measures announced by the government to support businesses impacted by the COVID-19 pandemic.
WHAT WAS ANNOUNCED ON MARCH 11TH?
Entrepreneurs’ Relief:
The 2020 Budget reduced the lifetime allowance with immediate effect from £10m to £1m, reducing the maximum benefit to £100k. There are also complex provisions to reduce the limit to £1m on certain historic transactions taking place after 5 April 2019 that will need to be considered. But with the main rate of CGT being maintained at its historically low level of 20%, the effective tax rate on the sale of a business should still remain attractive. The 2020 Finance Bill has since confirmed Entrepreneurs’ Relief will be renamed “Business Asset Disposal Relief”. The change of name does not have any practical impact on the operation of the relief.
Corporation Tax: Remaining at 19%, making sure the UK remains an attractive place to do business.
Enterprise Management Incentive schemes: A consultation will be held to decide whether EMI share option schemes are ‘fit for purpose’, and there are welcome suggestions that the scheme may be widened to larger companies.
Business Rates: Temporarily abolished for any business property with a rateable value of less than £51,000 for the coming year.
Measures to help with the spread of COVID-19: Statutory Sick Pay (SSP) will now be available for individuals diagnosed with COVID-19, or those who are unable to work because they’re self-isolating in line with government advice. This is in addition to the change announced by the Prime Minister that SSP will be payable from day one, instead of day four for affected individuals. As highlighted above, a range of other measures have subsequently been introduced by the government in respect of the COVID-19 challenges currently faced.
VAT: Postponed accounting for VAT on imports will apply from 2021 and legislation will be introduced on the much talked about EU Quick Fixes. Also, we can finally say goodbye to VAT on e-books, e-publications and the much maligned Tampon Tax.
Capital Allowances: Businesses incurring qualifying expenditure on non-residential structures and newly constructed or renovated buildings, on or after 29 October 2018, will be able to claim 3% instead of 2% from April 2020.
Extension of Enhanced Capital Allowances on new plant and equipment investments by businesses in Enterprise Zones until at least 31 March 2021. And Enhanced Capital Allowances giving 100% relief on zero emission cars and gas refuelling stations will be extended by 4 years until April 2025.
Encouraging research: The rate of Research & Development Expenditure Credit will increase from 12% to 13% from 1 April 2020, supporting large businesses investing in R&D (and SMEs doing work for large companies) and driving innovation in the economy.
The PAYE cap on the payable tax credit in the SME R&D schemes will be reviewed and delayed until 1 April 2021. And the government will consult on whether expenditure on data and cloud computing should qualify for R&D tax credits.
Retailers: The government has already announced the Business Rates retail discount will be increased to 50% in 2020-21. And to support small businesses affected by COVID-19 they’re increasing it further to 100%, with the relief also being extended to the leisure and hospitality sectors.
Pensions: As predicted, the Chancellor hasn’t scrapped the tapered annual allowance rules, but he has made some changes:
- From 6 April 2020, there will be an increase to the income levels triggering the tapering of the pensions annual allowance. The adjusted income level will increase from £150,000 to £240,000.
- Where total income exceeds £240,000, the pensions annual allowance of £40,000 is reduced by £1 for every £2 of income above that level.
- From 6 April 2020 for those individuals with total income of £312,000 or more, the maximum annual pension contribution is reduced to £4,000.
- The pensions lifetime allowance will be increased from £1,055,000 to £1,073,100 for 2020/21.
Stamp Duty Land Tax: As predicted, the Government have gone ahead with this quick win. But instead of the 3% previously announced by the Conservatives on 22 November 2019, the additional rate will be 2% for non-residents buying residential property in England and Northern Ireland from 1 April 2021.
‘Triple Tax Lock’: We thought he might surprise us, but the Chancellor stuck to the planned increase in the National Insurance threshold of £9,500.
Selling a property: Nothing announced in today’s Budget on changes to Capital Gains Tax rates.
Inheritance Tax: No changes announced to Inheritance Tax.
ISAs: As predicted, it’s another year of no change for the ISA allowance, which stays at £20,000. But on the plus side, the Junior ISA allowance has more than doubled from £4,368 to £9,000. And the same increase has been announced for Child Trust Funds.
IR35: Despite the Budget confirming that the new rules around off-payroll workers in the private sector would apply from 6 April 2020 the uncertainty brought by the COVID-19 pandemic has led to the government postponing the introduction of this legislation for a year until April 2021.
Plastic Packaging Tax: Consultation happening around designing a new tax applying to plastic packaging that’s made or imported into the UK that doesn’t contain at least 30% recycled plastic.
Length of speech: Because the last Budget was over 16 months ago, we thought this one might break the 1 hour mark. And it did, clocking in at 1hr 3mins.
To find out more about how the Budget affects you and any actions you may need to take, get in touch with your usual Cooper Parry contact, or our Head of Tax, Simon Baines at simonb@cooperparry.com
