Article by Laura Walshe of The Business Debt Advisor
The Chancellor, Rishi Sunak, has today announced sweeping changes in the first budget since the UK left the EU.
There is encouraging news for small businesses, particularly in relation to the COVID-19 outbreak, but less welcome news in relation to a reduction in the lifetime allowance for Entrepreneurs Relief, and of course the planned changes to IR35.
Some of the key points for business are summarised below.
Business Rates to be abolished for small shops this year
The chancellor said, “Our manifesto promised that for shops, cinemas, restaurants and music venues with a rateable value of less than £51,000, we would increase their business rates retail discount to 50%… Today I take the exceptional step, for this coming year, of abolishing their business rates altogether.”
Although this will be welcome news, it is a temporary measure. A fundamental review of business rates will now take place and be reported this Autumn.
Impact of the Coronavirus on UK Businesses
This budget was delivered against the backdrop of the coronavirus outbreak, and unsurprisingly the Chancellor set out plans to support public services and businesses that may be adversely affected, including a £3,000 cash grant promised for small businesses.
Support is also offered for businesses that experience increased costs or disruption to cashflow, via a Coronavirus Business Interruption Loan Scheme. The scheme will support £1 billion of lending to SME’s.
There was more positive news in relation to Statutory Sick Pay (SSP). For businesses with fewer than 250 employees the government will fund SSP for two weeks, limited to two weeks per employee. The size of an employer is to be determined by the number of people employed as at 28 February 2020. Employers will need to maintain records of staff absences and the government has promised to work with employers to set up a repayment mechanism as soon as possible.
Measures were also announced to ensure that businesses and self-employed individuals in financial distress receive support with their tax affairs. HMRC has set up a dedicated helpline and may be able to agree bespoke Time to Pay plans. These tailored arrangements will give businesses the time needed to pay taxes whilst navigating temporary financial challenges.
Entrepreneurs Relief – Reduction in Lifetime Limit
Entrepreneurs’ Relief provides for a lower rate of Capital Gains Tax (10%) to be paid when disposing of all (or part) of a business, where certain criteria are met.
Today’s budget confirms the government “will continue to use the tax system to support genuine creativity where it is proven to be effective.” But in response to evidence that the relief primarily benefited a small number of affluent taxpayers it will reduce the lifetime limit from £10 million to £1 million on qualifying disposals made on or after 11 March 2020.
There will be special provisions for disposals entered into before 11 March 2020, which have not been completed. But overall, small business owners will continue to benefit, with approximately 80% of those using the relief being unaffected by today’s announcement.
HMRC – Return to Preferential Status Delayed
In 2018 the government announced that it would introduce legislation in the Finance Bill 2019-20 to make HMRC a secondary preferential creditor for certain debts relating to taxes paid by employees and customers.
Today’s budget delays the introduction of this measure from 6 April 2020 to 1 December 2020. The reforms will only apply to taxes collected and held by businesses on behalf of other taxpayers, including PAYE income tax, employee NICs and CIS deductions, and VAT. The changes will not apply to taxes owed by businesses themselves, such as corporation tax.
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