17 Mar 2020 / Back to latest updates

The Budget, Coronavirus and Business

1. Budget Highlights (relevant for businesses)

• Corporation tax rate will remain at 19% for the next two financial years 
• A new digital services tax will be introduced this year as announced in the 2018 Autumn Budget 
• The research & development expenditure credit will be increased from 12% to 13% 
• The Employment Allowance, which reduces employer’s national insurance contributions, will increase from £3,000 to £4,000 from April, saving businesses an extra £1,000.
• Employers will be able to reclaim expenditure for any employee who has claimed Statutory Sick Pay (SSP) (according to the new eligibility criteria) as a result of COVID-19. This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19 and Employers with fewer than 250 employees will be eligible.
• The Government announced building of around 70 million homes to cost around £1.1bn – good news for builders and their suppliers.
• Entrepreneur’s relief to be scrapped by the government – saving the government money but not so good for business owners (please see below comments). 

Comments

• The Employment Allowance will only assist the smallest businesses so the impact on the UK’s overall business may be a stretch.
• The newspaper the City.AM announced this month’s budget as “the biggest since 1992” (13.3.2020 Ed.).
• The Entrepreneur’s relief being scrapped saves the Government money but also creates a bigger tax liability for the business owners (creates more problems for new owners).
• No specific assistance for manufacturers (for many see as a backbone of the UK Economy) 

2. Current Concerns and other issues for Businesses in the UK

• Bank of England cut rate to 0.25% to help small businesses and property owners as a temporary measure.
• Companies reporting profit loss warnings such as WH Smith, BA and Cineworld
• Stocks markets around the world yesterday dropping to their lowest since 1987 in the UK and the USA.
• These show a lot of big businesses are struggling which impacts on their suppliers, employees and customers.

3. Coronavirus

The government has introduced through the Budget various incentives for small businesses which is welcome news.

A Coronavirus Business Interruption Loan Scheme, allow banks to offer loans of up to £1.2m to support SMEs

A temporary Business Interruption Loan Scheme of up to £1.2m is being introduced, which will be delivered by the British Business Bank. This will enable affected businesses to gain access to emergency funding. In addition, an 80% guarantee will be given by the Government to give lenders confidence for additional lending up to a cap on £1bn.

To support businesses in England, the Government will provide a cash grant of £3,000 to around 700,000 business currently eligible for Small Business Rates Relief or Rural Rate Relief, to help meet their ongoing business costs.

4. HMRC – the bad and the good

HMRC now preferential status as a creditor – not welcomed by some such as Duncan Swift, president of insolvency trade body, R3, who said: “The return of HMRC’s preferential status in insolvencies is a badly-timed and ill-considered blow to the UK’s enterprise culture”.

The ‘Time to Pay’ HMRC arrangements previously extended in response to the flooding and financial crisis have been further extended to businesses and the self-employed affected by COVID-19. 

What your business can do to plan in advance:

• keep speaking with customers and suppliers – give reassurance that you have a plan in place and that you will adequate safety nets if worse was to happen.
• If struggling speak with suppliers and customers to allow payment plan – some amount of payment being made or received, is better than not receiving any payment. Once businesses are back to ‘normal’ then you can pay more or receive more from others.
• Look at your books at all debts owed even historic and start to call payments in – talk to us for further information on how we can assist you and your business to collect debts at a competitive rate and with high level of service from qualified legally trained staff.
• Make use of various schemes that are available from business rates relief to loans and help with HMRC liabilities.
• Speak to your accountant or an insolvency practitioner for further finance or insolvency advice.

Conclusion

Most of the announcements in the March 2020 Budget will be welcomed by small businesses. We will have to see in the coming weeks the impact the Coronavirus has on the UK’s economy.