The Chancellor of the Exchequer, Rishi Sunak was never going to be able to please everyone with his autumn budget and there were always going to be winners and losers, but let’s have a look at the key points for businesses from his budget statement.
The Chancellor confirmed that the Office for Budget Responsibility (OBR) anticipates that the UK economy will grow by 6.5 per cent this year and return to pre-Covid levels by the end of 2022.
Following unprecedented economic times, the Chancellor has avoided increasing taxes and has elected to target increasing spending in the key areas that will stimulate economic growth and therefore, deliver greater tax revenues. Businesses are being encouraged to make the most of fiscal incentives and reliefs to help their recovery as the economy continues to improve.
Business rates reduction
Business rates are a sensitive subject and the Chancellor spoke about plans to reform the business rates system. This will be achieved through increasing the frequency of the re-evaluation process, from five years to three years and beginning in 2023.
Sunak also stated that from 2023 businesses will not have to pay any extra in rates for 12 months for any qualifying improvements made to their properties. This is aimed at encouraging businesses to adopt green energy, such as solar panels and thereby help the government in its pledge to meet net zero targets.
Many industry experts were hoping for a complete overhaul by replacing the business rates system and implementing a new one that would level the playing field between traditional bricks and mortar businesses and their online competitors. There are plans however, for a consultation into an online sales tax.
The retail, hospitality and leisure sectors which have suffered more than most as a result of the pandemic will benefit from a 50 per cent discount in business rates, capped at a maximum of £110,000. This reduction is worth £1.7 billion and Sunak stated:
“This is the biggest single year tax cut to business rates in over 30 years.”
Business rates are devolved, so Wales and Scotland will receive additional funding through the Barnett formula.
Next year’s planned increase in the business rates multiplier has been cancelled and the bank surcharge will be cut from eight to three per cent. The Annual Investment Allowance (AIA) will stay at £1,000,000 until March 2023 and not fall to £200,000 as feared. This gives companies looking at investing in new machinery and equipment greater leeway with the current supply issues.
Recovery loan extension
The Recovery Loan Scheme will be extended for a further six months until 30 June 2022. Although only just over 5,000 businesses have taken advantage of the loan it is hoped the extension will create additional demand. Businesses can apply for a loan of up to £2 million and 70 per cent of the loan will be repaid by the government.
Business investing in research and development (R&D) are set be rewarded with extra investment by the government in R&D tax credits. The R&D tax relief will be open to new sectors including cloud computing and data costs. Measures will also be taken to prevent activity taken outside of the UK qualifying for R&D tax relief. This area is much underutilised and maybe awareness needs to be raised so that more businesses can take advantage of the scheme. Although the Government has pledged to spend £20 billion a year on R&D investment in 2024/25 this is £2 billion less than a previous commitment.
Investing in the future
The Chancellor announced a considerable increase in funding for apprenticeships under the funding for skills and education programme. There will be a new enhanced recruitment service to enable SMEs to find and attract new apprentices. The £3,000 incentive for businesses hiring apprentices has also been extended until the end of January 2022.
The National Living Wage as expected will rise from £8.91 to £9.50 per hour for workers over 23 years old from 01 April 2022. This is another step towards reaching the government’s objective of two-thirds of median earnings by 2024. This is great news for workers but could prove difficult for small businesses to absorb.
The Chancellor announced £1.7 billion of funding as the initial grant from the Treasury’s Levelling Up Fund. This will be distributed for towns and cities across the UK including Leicester, Doncaster, Leeds and Stoke-on-Trent. There will also be a tax relief extension on museums and galleries.
In the leisure industry, Air Passenger Duty for UK domestic flights will be reduced and financial support for English airports will be extended for a further six months.
Angel investor scheme
The British Business Bank has launched a Regional Angel Programme for businesses outside of London. This is an angel investor scheme with the objective of helping to reduce any regional imbalances for smaller businesses throughout the UK in accessing early stage equity finance. The government is giving the programme £150 million and is great news for young businesses in all sectors.
Chancellor of the Exchequer, Rishi Sunak explains the importance of the scheme:
“As we level up the country it’s vital that we harness the skills and talents of everyone, not just those who live in London and the South East.
“Small businesses are the lifeblood of our towns and cities up and down the UK, but all too often those based in the regions miss out on the backing of the investors they need. This extra funding will help budding entrepreneurs and develop networks of angel investors across the UK.”
All of this sounds very promising but SMEs are still facing challenges ahead. With corporation tax set to rise to 25%, employers’ NI contributions increasing by 1.25% and VAT rates returning to pre-pandemic levels in April 2022 there is still a long way to go. As mentioned at the beginning of this blog, there will be winners and losers but at least the latter are in the minority.
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