Spring Budget 2021: Key Changes for Business
On 3 March 2021, the Chancellor of the Exchequer, Rishi Sunak delivered the Government’s Spring Budget 2021. We have detailed below the range of new measures for post-COVID business recovery and set out the key changes which will have the largest impact on SME’s.
COVID-19 Support
The furlough scheme will continue in its current form until 30 June 2021, ensuring furloughed workers continue to get up to 80% of their wages for the hours not worked.
From 1 July 2021, employers will contribute towards the costs of unworked hours, starting with 10% in July, then 20% in August and September. The furlough scheme is set to end on 30 September 2021.
The fourth taxable grant available through the self-employed income support scheme will cover 80% of average trading profits from February to April 2021.
Following this, a fifth and final grant will cover the period from May to September 2021. A turnover test will determine the amount of grant available and applications are expected to open in July 2021.
Self-employed people whose turnover has fallen by 30% or more will be able to claim the full 80% grant. Anyone else will be able to claim a lower grant, worth 30% of their average profits.
Business Rates
Eligible retail, leisure or hospitality firms in England with rateable values of £51,000 or less will continue to pay no business rates until 30 June 2021.
From 1 July 2021, this will be followed by 66% business rates relief until 31 March 2022. This is capped at £2m per business for properties that were forced to close on 5 January 2021, or £105,000 per business for other eligible properties.
VAT
The reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sectors has been extended until 30 September 2021.
To help these businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply until 31 March 2022.
The VAT-registration and deregistration thresholds are unchanged at £85,000 and £83,000, respectively, until 1 April 2024.
Corporation Tax
From April 2023, the main rate of UK corporation tax will increase from 19% to 25% on profits of more than £250,000.
The main rate of UK corporation tax for small profits of less than £50,000 will remain at 19%.
There will also be relief for limited companies with profits of less than £250,000, so they pay less than the main rate.
Recovery Loan Scheme
The Recovery Loan Scheme will launch on 6 April 2021, following the closure of the current COVID-19 debt schemes – the Coronavirus Business Interruption Loan Scheme (CBILS), the Coronavirus Large Business Interruption Loan Scheme (CLBILS) and the Bounce Back Loan Scheme (BBLS) – on 31 March 2021. The Recovery Loan Scheme is scheduled to run until 31 December 2021, but this is subject to review.
The new scheme aims to help businesses affected by COVID-19 and can be used for any legitimate business purpose, including managing cashflow, investment and growth. It is designed to appeal to businesses that can afford to take out additional debt finance for these purposes.
Details of the scheme include:
- Up to £10m facility per business: The maximum value of a facility provided under the scheme will be £10m per business. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
- Turnover limit: There will be no turnover restriction for businesses accessing the scheme.
- Wide range of products: Businesses will be able to choose from a variety of products: term loans, overdrafts, asset finance and invoice finance facilities.
- Term length: Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years.
- Interest and fees to be paid by the business from the outset: Businesses will be required to meet the costs of interest payments and any fees associated with the facility.
- Access to multiple schemes: Businesses who have taken out a CBILS, CLBILS or BBLS facility will be able to access the new scheme, although the maximum they are allowed to borrow will depend on their lender’s assessment and scheme requirements.
- Credit checks for all applicants: Lenders will be required to undertake credit and fraud checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders.
Future Fund: Breakthrough
Future Fund: Breakthrough, which will launch in early Summer 2021, is a new £375m scheme that will encourage private investors to co-invest with government in high-growth innovative firms. These R&D intensive companies accelerate the deployment of breakthrough technologies which can transform major industries, develop new medicines, and support the UK transition to a net zero economy.
Due to high research and development costs, breakthrough technology companies typically require more capital than other companies to fuel the later stages of their growth. Future Fund: Breakthrough will target R&D intensive companies seeking a minimum of £20m and will crowd in private sector investment to support their growth.
Future Fund: Breakthrough, will be delivered by the British Business Bank, via its commercial subsidiary British Patient Capital.
For more information on the Recovery Loan Scheme, CBILS or any other form of traditional Business Finance contact our office: 01204 398816
