Spring Budget 2021 main announcements for Businesses

Measures relating to grants and loans were some of the first business-oriented measures to be announced. Cash ‘Restart’ grants will be available for business in April: non-essential retail, which should be able to reopen in the coming weeks under the Government’s current lockdown easing plans, could receive up to £6,000 per premises; hospitality and leisure businesses, which will reopen later and which are likely to continue to be hit harder by COVID restrictions, could receive a grant of up to £18,000.00.

As to loans, the Coronavirus Business Interruption Loans (CBILs) scheme will come to an end, replaced by a new ‘Recovery’ loans scheme allowing business to borrow between £25,000-£10 million. These loans will be available to businesses until the end of the year and they are once more supported by an 80% guarantee from the Government.

In a further welcome announcement the current 100% business rates holiday was extended until June. For the rest of the financial year beyond that, business rates will be discounted by two thirds (subject to limitations). The reduced rate of 5% VAT for some of the sectors hardest hit by pandemic restrictions was also extended, with an interim rate of 12.5% applying from October until next April when the usual 20% rate will return.

Following this slew of generally positive announcements was the largely anticipated corporation tax increase. Rumours had indicated that this was an area in which we could expect to see an increase, and indeed that was the outcome, but this knock to companies was softened with the announcement that the increase to a rate of 25% corporation tax will not take effect until 1 April 2023. A further ‘small profits’ rate of corporation tax will also take effect at that date, allowing companies to only pay corporation tax at a reduced rate of 19% (the current rate) on profits up to £50,000.00. The Chancellor added that only profits of more than £250,000 will be taxed at the full 25% rate, with some sources suggesting that these changes to corporation tax might only mean that 10% of all companies will pay corporation tax at the new, highest rate of 25% when it comes into effect.

With the expected increase in corporation tax out of the way, the Chancellor proceeded to announce some taxation changes which might be more palatable to businesses. Notable inclusions were the ability to extend ‘carry back’ losses for taxation purposes and the announcement of a somewhat unprecedented (and intriguingly named) ‘Super Deduction’, encouraging businesses to invest in new equipment by allowing 130% of the costs of those investments to be set off against their tax bill. With the latter announcement there is a very clear message that the Government is trying to encourage businesses to invest and to grow (or, as they have put it in the past, to ‘level-up’) following the woes of the Coronavirus and Brexit controversy. The numbers quoted by the Chancellor here were impressive, but it will be interesting to see how this does benefit businesses in the future.

Overall this Budget seemed to be a continuation (in spirit) of the measures put in place at the height of the pandemic last year, and one could argue that might say more about the Government’s predictions of the mid-to-long term recovery of the economy than any Coronavirus briefing has or will. Corporation tax increases, while never welcome, were largely predicted and have even been eased somewhat by the other announced measures. Nonetheless this was the first real indication we have had as to how the spending necessitated by the Coronavirus will be repaid in the future.