Senior figures from Duncan & Toplis have analysed some of the most significant announcements on the day of Chancellor Rishi Sunak’s first budget to explain what it means for East Midlands businesses.
Head of Tax, Nicholas Smith explains that one of the biggest announcements on the day actually came earlier from the Bank of England:
“One of the most significant announcements today came independently of Rishi Sunak’s budget with the Bank of England’s emergency move to cut the bank's interest rate from 0.75% to 0.25% - equalling the lowest level it's ever been.
While this is disappointing news for savers, it will be welcome news for many businesses which should soon be able to access loans at exceptionally low interest rates, especially following the further announcement of the Bank Of England’s SME term funding scheme.
Cutting interest rates as an economic crisis looms can be an effective way to reinvigorate the economy because it encourages companies and individuals to spend rather than save.
There could be some disruption following this rate change but hopefully - paired with some of the announcements in the budget - it might go some way in countering the worst economic consequences of coronavirus.”
Nicholas further considers the chancellor’s measures to supported businesses affected by coronavirus:
“With coronavirus likely to cause significant disruption to the economy, with up to a fifth of the working age population expected to need time off at any one time, the chancellor announced several steps to mitigate its likely impact on UK businesses.
Now, statutory sick pay will be paid from day one, even for those who are medically advised to self isolate without showing symptoms, and the government is to pay the cost of statutory sick pay for all SMEs (with fewer than 250 employees) for up to 14 days.
Businesses will be allowed to defer tax payments so they can have more time to pay and the chancellor announced a temporary coronavirus business interruption loan scheme up to £1.2m, and government guaranteed to cover up to 80% of loans advanced as a result of coronavirus.
Any company eligible for small business rates relief will be allowed a £3,000 cash grant and a wide range of small to medium sized leisure and hospitality businesses - which will be among the hardest hit by the virus - will be exempt from paying business rates for the whole year.
As the scale of the coronavirus has become more clear over the last few weeks, we’ve been hoping for some kind of support package to be announced, but I don’t think many of us expected this level of support. For business owners that are worried about the impact the virus could have on their finances, this is very reassuring news which will hopefully go a long way to helping their businesses survive what is to come.”
Tax Advisory Director, Mark Taylor explores the government’s commitment to invest in infrastructure:
“With interest rates now so low, the government is also able to borrow at much more favourable rates than before and that’s certainly something the chancellor is taking advantage of, pledging to raise infrastructure spending to its highest level in decades.
The expected £600bn which is to be spent over the next five years will hopefully lead to improvement in the road and rail networks, helping many businesses in the long term, but it also means more opportunities for businesses which help to deliver these projects.
Whether they’re companies in construction, civil engineering or the railways - as well as the organisations which support them - government spending on infrastructure can directly or indirectly benefit employers across the country.”
Tax director, Graeme Hills writes that - despite rumours - fuel duty has not been increased:
“As the budget approached, many haulage and logistics firms - as well as motorists - were worried that fuel duty will no longer be frozen, leading to the first increase in ten years.
Luckily for them, the duty remained frozen, meaning that tax on petrol, diesel or fuel for domestic heating won’t be increased in line with inflation.
While freezing fuel duty may not seem to be in line with the targets of reducing greenhouse emissions and pollution, the fuel duty amounts to a major cost for businesses whose employees cover long distances or which rely on haulage and logistics.
However, the future for the duty is still in doubt as I noticed the chancellor stressed the words “this year” in his speech, implying that the freeze may not last much longer
Better news for the agricultural industry was an exemption from the removal of the lower fuel duty on red diesel. Rail, domestic heating and fishing will also be unaffected.”
Tax director, Kevin Edwards writes about the changes to Entrepreneurs’ Relief to Capital Gains Tax:
“Currently, when an individual sells an asset which is used in their business, or sells company shares, they can claim Entrepreneurs’ Relief in certain circumstances.
This relief reduces the rate of Capital Gains Tax on the gain from 20% to 10%, subject to certain limitations.
Although there are very specific circumstances where Entrepreneurs’ Relief can be used, it was first introduced to allow business owners to dispose of shares and assets without a large tax payment which may have delayed their decision.
Since it was introduced, this relief has been widely criticised and it was clear that the chancellor agrees with many of the concerns that it can be unfairly exploited and that it only helps a minority of business owners.
Instead of removing the relief altogether, the chancellor has chosen to reform it, reducing the lifetime limit from £10m to £1m.
While it’s still a generous relief, this will mean more, wealthier individuals having to pay the 20% Capital Gains Tax making it a much less lucrative tax relief.”
Head of agriculture, Mark Chatterton, explains there was positive news for agricultural businesses:
“It was rumoured that the government may change the rules on what assets are exempt from the current taxable estate thresholds for inheritance tax, potentially changing business property relief and even scrapping agricultural property relief.
The concern was that business assets, including farmland, would no longer be exempt from the calculation of taxable worth, increasing the amount that has to be paid on death and making agricultural land a less attractive asset for some landowners.
Thankfully, this wasn’t mentioned at all and farms also had a close escape from the abolition of the red diesel duty reduction. Unlike other sectors, the relief remains in place for agriculture, which saves a significant sum on the cost of running agricultural machinery.
One of the most positive announcements in the budget was that the government is making £120m available to repair all of the damage from flooding, which has affected many farms, particularly in Lincolnshire and North Nottinghamshire.
An extra £200m is to be spent in certain areas to build flood resilience in future and the government is to double its spending on flood defences, which is good news for flood-hit farms.”