In his Budget speech, Rishi Sunak highlighted the dramatic effect of the pandemic on the UK economy, as well as reminding us of the breadth of support measures the government has put in place (and the associated costs).
04 March 2021
Alongside retaining and improving support, the Chancellor set out how the country might begin to fill the considerable hole in the Treasury finances.
The rate of corporation tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19% and there will be relief for businesses with profits under £250,000 so that they pay less than the main rate.
This is obviously a huge increase in CT, partially offset for many businesses by the super-deduction below. The Chancellor provides short term hep followed by a medium-term hammer.
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This upfront super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest. Investing companies will also benefit from a 50% first-year allowance for qualifying special rate (including long life) assets.
The ‘give’ to balance the ‘take’ of the CT hike, it will be interesting to see how broad the qualifying definition of ‘plant and machinery’ will be.
R&D tax relief
The government has launched a consultation into R&D tax reliefs. This review will consider all elements of the two R&D tax relief schemes, with the objective of ensuring the UK remains a competitive location for cutting edge research, that the reliefs continue to be fit for purpose and that taxpayer money is effectively targeted.
ABGI will, of course, be contributing to the consultation and we will be reaching out to you over the coming weeks to ensure we reflect your views. More information on the consultation is here.
The government is considering bringing data and cloud computing costs into the scope of R&D Tax Relief as part of this review.
Preventing abuse of the Research and Development (R&D) relief for SMEs
For accounting periods beginning on or after 1 April 2021, the amount of SME payable R&D tax credit that a business can receive in any one year will be capped at £20,000 plus three times the company’s total PAYE and NICs liability, in order to deter abuse.
Coronavirus Job Retention Scheme (CJRS)
the government is extending the CJRS for a further five months from May until the end of September 2021. Employees will continue to receive 80% of their current salary for hours not worked. There will be no employer contributions beyond National Insurance contributions (NICs) and pensions required in April, May and June. From July, the government will introduce an employer contribution towards the cost of unworked hours of 10% in July, 20% in August and 20% in September, as the economy reopens.
Recovery Loan Scheme
From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.
The government will provide ‘Restart Grants’ in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses, giving them the cash confidence to plan ahead and safely relaunch trading over the coming months. The government is also providing all local authorities in England with an additional £425 million of discretionary business grant funding, on top of the £1.6 billion already allocated.