The Chancellors’ budget didn’t contain the swingeing tax rises that many were predicting. There had been significant speculation regarding changes to the corporation tax and the capital gains tax regime however what we actually got was a change in the corporation tax rate scheduled for two years’ time and a deafening silence regarding capital gains tax.
There were a number of positives; the previously announced extension to the furlough scheme, the measures to assist the self-employed and extension to grants and loans. Business rates continue to be put on hold until the end of June 2021 with a discounted payment regime for the following six months, however what the Chancellor didn’t address was the continuing rumblings of unfairness that plague business rates and the perceived advantage enjoyed by online businesses.
The hospitality and entertaining industries will have welcomed the continued reduction in VAT rates, once the country is allowed out to play again, with a staged return back to the standard rate. The extension of the reliefs, grants and loans are very much a lifeline for those businesses unable to reopen for some months to come.
There was also good news for those areas nominated as freeports and the additional benefits they will be able to offer businesses such as enhanced capital allowances, stamp duty reliefs etc, very much playing into the governments’ rebalancing of the north initiatives. Our belief is that they weren’t innovative enough. These measures will be great for businesses already within these regions looking to expand, but the idea that they will incentivise businesses to gravitate from the south seem fanciful. If the Chancellor had been bold and introduced reduced rates of business tax in the freeports (the benefit enjoyed by freeports across the globe) this would have been much more of an incentive for successful businesses to relocate their operations to the northern regions.
There was good news for the property sector with the extension to the stamp duty holiday which will benefit homeowners as well as investors. It was also great to see the government assisting first time buyers with a government backed mortgage guarantee arrangement. However, first time buyers will need all the financial help they can get with the fiscal drag measures that the Chancellor also introduced by freezing the personal allowance, higher rate threshold, CGT and IHT allowance.
Those who have been in business for a while will have had a ‘Back to the Future’ moment with the return of marginal relief and a small business threshold. The ability to carry back corporate losses for three years for those businesses that have been horrendously affected by the pandemic will be welcome.
There was also a very stark warning given by the Chancellor to those businesses who may have claimed furlough incorrectly by the recruitment of 1,000 ‘investigators’ who will look to apply the new furlough fraud rules which can levy penalties of 100%.
All in all, a tepid budget that failed to address the elephant in the room regarding how the ballooning national debt will eventually be paid for.
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Disclaimer
The information was correct at time of publishing but may now be out of date.
