Satago’s Key Points on the 2020 Budget for businesses
Having originally been scheduled to take place in November, the Budget was put back to March due to December’s 2019 general election. While the result of the general election finally provided clarity on Brexit, and resulted in a clear government majority, the new Chancellor Rishi Sunak had to significantly alter the planned Budget to incorporate emergency measures to deal with the emerging threat of Covid-19.
The total amount of funds pledged was £175bn over the next five years, the most substantial spending commitment since Norman Lamont delivered the 1992 Budget.
Overall the measures were relatively encouraging for small and medium sized businesses. Announcements included government support to ease the strain put on the cash flow of companies, increasing the employment allowance and new funds allocated for lending and R&D.
Deferral of tax payments
To cope with disrupted supply chains businesses will be able to delay payment of their tax liabilities.This will be supported by HMRC employing an extra 2,000 call centre workers in their Time To Pay service unit.
Coronavirus business interruption loan scheme
£1.2bn of funds have been earmarked for lenders to support businesses accessing lending and overdrafts. This will be delivered by The British Business Bank, with the government guaranteeing 80% of the value of each loan.
The scheme is designed to give lenders continuing confidence to lend to SMEs during the pandemic, and it is expected that it will temporarily replace the Enterprise Finance Guarantee (EFG) scheme.
Statutory Sick Pay
Businesses employing up to 250 staff will be refunded Statutory Sick Pay (SSP) for employees on sick leave related to coronavirus. Companies will be able to reclaim this from day one of the illness, but it is currently unclear how long they will have to wait to be reimbursed.
Business rates holiday
As a temporary measure over the next 12 months (from 1 April 2020), business rates will be removed for small businesses (those with a rateable value under £51,000) in the leisure, retail and hospitality sectors.
The monetary value of this is on average worth around £25,000 to each business.
Grants for small businesses
Many small businesses are already exempt from business rates, so these companies are being offered a grant of £3,000 to help tide them over during coronavirus.
This will be applicable to 700,000 small businesses and represents a cash injection of £2bn.
Widely tipped to be scrapped altogether, entrepreneurs relief, which allows business founders to pay capital gains tax on an exit at a reduced rate of 10%, instead had its lifetime limit reduced from £10m to £1m.
It is expected that the change will raise £6.3bn over the next five years. While it is disappointing that this tax cut to encourage new business creation has been cut so drastically, it is unlikely to affect most business owners.
The employment allowance, which entitles employers £3,000 off their National Insurance bill for staff, has been increased to £4,000. This should further encourage firms to take on more staff and will allow them to take on up to four full-time employees on the National Living wage without having to pay any NIC contributions.
Despite lobbying by the business community IR35, also known as the off payroll tax, will be introduced to the private sector from April. This will require employers to ensure that contractors they engage with are legitimately self-employed as opposed to being disguised employees. If these individuals fall within the scope of IR35 their engaging companies will be liable for any additional HMRC penalties and taxes owed.
While this will force many businesses to reassess their working relationships, IR35’s introduction to the private sector will be a soft landing with penalties being waived for the first 12 months.
The government has committed to publishing a consultation on enhancing the remit of the Small Business Commissioner.
It is hoped that this will give them more power to fine businesses who do not pay their invoices on time.
This legislation, which results in HMRC being given creditor preference when a company goes into administration, has been put back from April to December.
Upon its introduction businesses will have to be extra diligent when monitoring the financial health of their business customers in order to make sure that they are fully paid for delivering their goods and services.
Funding and investment
The chancellor reiterated the government’s commitment to invest £5n to roll out gigabit broadband by the end of 2025.
This will be focussed on some of the hardest to reach areas of the country and will make it easier for both businesses and consumers to participate in the digital economy.
An extra £130m of public funds has been allocated to Start Up Loans. This will be delivered over 2021 and 2022 and is hoped that it will encourage 10,000 entrepreneurs to start their own business.
In recognition of UK startups attracting more venture capital than any of their European neighbours, the British Business Bank has been given an additional £400m to invest into businesses which are scaling up.
Health and life sciences
An extra £200m has been ring fenced by the British Business Bank to make equity investments in the health and life sciences sector. It is hoped that this will attract £400m of private investment and continue to allow the UK to be a world leader in innovation within the industry.
Nick Levine is a chartered accountant and journalist, with a particular focus on SME and fintech. He was formerly the Advisory Lead at Deloitte’s Propel and the Head of Enterprise for ICAEW. His writing portfolio includes The Times, Wired and Real Business.