Business Advisor Andy McKenna looks at how the Spring Budget will impact this region’s businesses.
“I listened to the Chancellor Rishi Sunak’s Spring Budget earlier this week with great interest. Following a very challenging year for the economy, my question was; how would he keep supporting businesses, yet look to pay back some of the debts accrued by schemes such as Furlough?
The Office for Budgetary Responsibility released its economic forecast which anticipates economic recovery from November, with the economic output back to pre-Covid levels by mid-2022. Hardly surprisingly, it does, predict a negative impact to economic growth due to the virus.
Unemployment is expected to reach its peak this year at 6.5%, which is a better indicator as it reached almost 8% in November 2020, however it is worth bearing in mind that pre-COVID times, it was down to 4%.
One of the stand-out items of this budget was the increase in Corporation Tax. The rate of which will increase to 25% on profits of £250k and more from April 2023. Businesses with profits of less than £50,000 will continue to pay 19% Corporation Tax
Extension to the Coronavirus Job Support Scheme.
The Chancellor announced an extension to the Coronavirus Job Support Scheme or CJSS, more commonly known as Furlough, which will be extended to 30th September 2021. This means that any employee on Furlough will continue to receive at least 80% of their current salary for hours not worked. Aside from NICs and pension contributions, employers will not be required to pay a salary contribution to furloughed workers from April to June. However, from July, employers will have to contribute at least 10% of the salary cost and 20% of the salary cost in August and September.
Extension to the Self-Employment Income Support Scheme.
It was welcome news for the self-employed that the SEISS scheme has been extended to 30 September 2021. The announcement means that, for the first time, individuals who became self-employed in 2019/20 will be able to benefit. Self-employed individuals whose turnover has dropped by more than 30% will continue to receive full support (80% of three month’s average monthly trading profits, capped at £7,500). Individuals whose turnover has dropped by less than 30% will receive a grant worth 30% of three month’s average monthly trading profits, capped at £2,850. This can be claimed from late July.
Recovery Loan Scheme
The Chancellor also announced a new Recovery Loan Scheme for businesses. This will replace the current Bounce back and CBILs loan schemes and will provide a guarantee to lenders to enable them to issue loans to businesses from £25,000 up to £10m. The scheme will be open to all businesses, including those who have received previous support from the current loan schemes.
This new scheme is welcome but not as attractive as the existing schemes as only the guarantee is provided. The CBIL and Bounce Back schemes will remain in place until the end of March, so businesses with immediate or known cashflow requirements should consider trying to access the existing schemes as soon as possible so they can take advantage of the terms the new scheme will not have. The new scheme does not offer 12 months interest and the establishment fee paid by the Government.
Good news for the retail, hospitality, accommodation, leisure, personal care businesses and gyms, who have undoubtedly suffered more than most in the past 12 months. From April, Mr Sunak announced that they will be able to receive a Restart Grant to help them to re-open their business. Non-essential retail are eligible for a grant of up to £6,000 per premises. Hospitality and leisure businesses are eligible for a grant of up to £18,000 per premises. Any business owner requiring guidance on this should contact the Growth Hub.
VAT Reduction and Deferral.
More welcome news from the Spring Budget as the temporary reduced rate of VAT at 5% for businesses in the tourism and hospitality sector will be extended until 30 September when the VAT rate will increase to 12.5% before returning to the standard rate of VAT from April 2022. Businesses that took advantage of the VAT deferral on VAT returns from March to June 2020 can now opt to pay the deferred VAT in instalments from March 2021, rather than pay the deferred VAT in a single payment. Businesses that wish to pay in instalments must apply for the VAT Deferral New Payment Scheme. VAT thresholds will not change before 1 April 2024. If businesses require further guidance on this, please speak to our team at the Growth Hub, who will guide you through.
Business Rate Relief Extended and Discounted.
Business rate relief has also been extended in the Spring Budget, which is relevant to some retail, hospitality and leisure businesses and nurseries, who will continue to receive 100% Business Rate Relief from April to the 30 June 2021. From July, Business Rates for these businesses will be discounted by two thirds (66%) until 31 March 2022, capped at £2m per business for properties that were forced to close on 5 January 2021 and capped at £105,000 for all other businesses.
Apprentice and Traineeship Incentives for Businesses.
An incentive was introduced to encourage businesses to employ new apprentices and provide 16-24 year olds with work placements in the 2021/22 academic year. They will be able to claim incentives of £3,000 per apprentice of any age and £1,000 per trainee on a work placement.
Two new Help to Grow Schemes for Businesses were announced. These include:
- Help to Grow: Management This will fund management and leadership training for small and medium sized businesses and mentoring and peer learning support to help business owners grow their firm. The Government will subsidise the costs of training and support through the scheme by 90%.
- Help to Grow: Digital. This scheme will provide small and medium sized businesses with free advice and a voucher worth up to £5,000 to cover the cost of new, approved software to help them to go digital in their business.
Introduction of a new Super-deduction Capital Allowance for Business Investment.
The Chancellor announced that for the next two years businesses that invest in plant and machinery for their businesses will be able to reduce their tax bill through a 130% upfront capital allowance super-deduction. This may lead to further investment in plant and equipment and will be a welcome boost for many.
There was also something in the budget for Communities with the launch of the Community Ownership Fund. This is a £150m fund to help communities to take ownership of pubs, theatres or sports clubs. The fund help ensure that communities across the UK can continue to benefit from the local facilities and amenities that are most important to them. From the summer, community groups will be able to bid for up to £250,000 matched funding to help them to buy local assets to run as community-owned businesses.
The Chancellor also gave details of the Community Renewal Fund (renamed from UKSPF)
This will support communities to pilot programmes and new approaches ahead of the UK Shared Prosperity Fund. It has a budget of £220 million for 2021-22. 100 priority places based on an index of economic resilience have been identified. It includes Barnsley, Doncaster and Rotherham, but not Sheffield.
o Investment in skills
o Investment for local business
o Investment in communities and place
o Supporting people into employment
The scheme offers up to a maximum of £3m per place for submission to UK government.
Mr Sunak also announced more details on the Levelling Up Fund.
Levelling Up Fund (LUF)
The LUF will invest in infrastructure that improves everyday life across the UK. The £4.8 billion fund will support town centre and high street regeneration, local transport projects, and cultural and heritage assets. Areas are categorised using an index of three categories with ‘category 1’ receiving the highest priority. South Yorkshire areas are categorised as:
o Category 1: Doncaster and Rotherham
o Category 2: Sheffield and Barnsley
Education and Skills
There was also funding set aside in the budget for training – with £126m of new money made available to triple the number of traineeships.
In addition, further support will help tens of thousands of small and medium sized businesses to benefit from world-class management training. Dozens of business schools across the UK will offer a new executive development programme with mentoring and peer learning, and government will pay 90% of the cost.
There is a lot take in here about the changing nature of the support available to businesses – this is why it is important to keep checking the Growth Hub website for the latest updates.
Our advice to business leaders is don’t go it alone. Get in touch with the Growth Hub team and we can help to guide you through the various levels of support available, contact our team on 03330 00 00 39 or Email: email@example.com”