Spring Budget 2020: What the outcomes mean for businesses

The Spring Budget 2020 was delivered on 11 March 2020. Many of the headline announcements were responses to the outbreak of coronavirus (COVID-19) and businesses are being offered significant help in anticipation of hardship.

The announcements were followed later by additional measures from the chancellor, as the severity of the impact on businesses became clearer.

There aren’t many tax changes for most businesses outside of coronavirus measures and little mention of preparations for the end of the Brexit transition period. Nonetheless, below we take a look at what’s new or updated for businesses in the budget.

The first half of this article looks at the coronavirus measures, while the second half looks at the more general budget provisions for businesses.

Don’t forget that a handful of previously announced changes come into effect in April 2020, outside of the budget provisions:

• Landlord tax relief reaches completion following its introduction in 2017.
• The soft-landing period for Making Tax Digital (MTD) for VAT also comes to an end for those businesses that were mandated into MTD in April 2019, prohibiting certain kinds of copy/cut and paste for VAT records and requiring correct digital linking of data and systems.

And it’s worth noting that IR35 rules that were due to come into effect for contractors, and medium and large businesses, have been postponed until 2021.

Coronavirus response for businesses

The government has announced help for businesses that might be suffering because of the coronavirus outbreak.

Statutory Sick Pay

Prior to the budget, the government had already announced that Statutory Sick Pay (SSP) would apply from day one of sickness for employees due to coronavirus, rather than day four, and that self-isolation would be covered too.

This will be mandated via emergency legislation, most likely on a temporary basis.

The budget adds additional temporary rule changes. While employers are usually required to pay SSP, if an employee is off work because of one of the following situations then new rules apply:

• Actual coronavirus infection of the individual.
• Self-isolation because of suspicion of infection.
• Caring for those within the same household who display coronavirus symptoms and have been told to self-isolate.

If these cases, the government will cover up to two weeks of SSP for each eligible employee. The business will pay the SSP and then reclaim it from the government.

This SSP cover only applies to UK businesses with fewer than 250 employees, and the government has not yet announced the repayment mechanism, noting only that it will not be via existing mechanisms.

You should keep records of staff absences because of coronavirus but employees will not need to provide a GP fit note (formerly known as a sick note) for the employer to reclaim the SSP.

Whether you require one is left by the government to your discretion, although it will soon be possible for people to receive an alternative to the fit note by calling NHS 111.

What this means for your business

Your business will still have to pay the initial two weeks’ sick pay in order to be able to reclaim it, and there is then the additional administrative burden of reclaiming it from the government, via a mechanism that isn’t yet clear. You should prepare for this.

The government says in its COVID-19 budget guidance that the repayment mechanism will be in place in the “coming months” following the budget announcement in March 2020.

Following the application, there will be a wait until the money is remunerated, during which the government could implement anti-fraud protections that could add to the administrative burden.

For larger businesses, in particular, issues such as this could represent a cash flow impact, albeit temporary. Again, preparation is key.

Rates relief and grants because of coronavirus

Businesses in the retail, leisure and hospitality sectors are likely to be hit hard by a lack of trade during the coronavirus outbreak. In response, the government has introduced two schemes:

1. Reducing to zero the amount of business rates payable for all such establishments (note that this provision was initially limited by rateable value in the budget announcement, but this limit was subsequently abandoned).
2. Offering cash grants of up to £25,000 per business for retail, hospitality and leisure businesses that have a rateable value of between £15,000 and £51,000.

The chancellor said the following: “Every single shop, pub, theatre, music venue, restaurant – and any other business in the retail, hospitality or leisure sector – will pay no business rates whatsoever for 12 months.”

The rate reduction is actually a significant extension of the existing retail discount scheme that, even if the outbreak had not arisen, would have seen some shops have their rates reduced to 50% in the 2020/21 financial year. But because of coronavirus, the relief has been increased to 100% and many more businesses included.

Pubs with a rateable value of below £100,000 were to be able to claim £1,000 relief from their business rates as of April 2020. However, in the budget this has been boosted to £5,000 due to the virus outbreak.

Smaller pubs with a rateable value below £51,000 could already claim £13,500 off their business rates according to the existing legislation as of the 2020/21 tax year.

What this means for your business

The rate relief and grant scheme will be welcomed by small businesses, who should speak to their local authority to take advantage of them.

You may have already received a rates bill from your local authority, but this will be reissued to take into account the relief.

In the budget statement, the government also reminded non-retail small businesses that they can already take advantage of the existing small business rates relief – provided their rateable value is less than £15,000 and the businesses only uses one or two properties.

Coronavirus Business Interruption Loan Scheme

The British Business Bank will support businesses affected by coronavirus by underwriting loans and overdrafts.

This will provide existing lenders you might use with up to an 80% loan guarantee, independent of your company’s circumstances, giving lenders the confidence to loan where they might not ordinarily because of the economic situation.

Initially, the chancellor said that loans of up to £1.2m would be underwritten in this way by the British Business Bank, but this has since been increased to £5m. He also subsequently added that the government will pay the interest for the first six months, so businesses don’t have to.

Eligibility is limited to UK businesses with a turnover of no more than £41m per annum. There are also other British Business Bank eligibility criteria, such as operating within an eligible industrial sector.

What this means for your business

Taking a loan to cover a dry period can be vital to your company’s cash flow. This new loan guarantee system should create a better chance of you staying on top of your finances.

Of course, the decision to provide finance still lies with the lender, of which there are 40 that are accredited for British Business Bank lending under this scheme.

If your business already has significant debt then you might have trouble making a case for further financing – and you may still have to provide collateral to support the 20% of the loan that’s not guaranteed by the government.

The chancellor is providing £330bn for loans under this scheme, but says there could be even more funding in future.

Although lenders are theoretically capped on how much they can access from this pot, it’s perhaps unlikely any of them will reach that cap. Nonetheless, if you intend to apply you may want to do so as soon as possible.

Coronavirus local authority grants

For businesses claiming the existing Small Business Rate Relief, or the Rural Rate Relief, local authorities in England can provide grants of £10,000 in order to help meet ongoing business costs (initially this was £3,000 in the budget, but was raised later).

This could be spent by businesses on rent payments, for example, but there’s no direction on what the cash can be spent upon.

What this means for your business

If you’re claiming either of the rate relief schemes mentioned above, you will receive this grant. It will be welcome even if your business isn’t affected by coronavirus – although it’s likely that it will be in some fashion.

The government says that your local authority will get in touch with you about the grant. You will not have to apply.

Longer times to pay, plus a coronavirus helpline

HMRC already has a Time to Pay scheme, which means some businesses can request longer to pay their tax bills. This request isn’t always granted by HMRC, of course, and there has to be a very good excuse.

For example, recent disasters such as local flooding meant that businesses successfully used the Time to Pay scheme.

In the Spring Budget 2020, the chancellor announced that HMRC would listen sympathetically to those businesses affected by coronavirus and the Time to Pay scheme could be used in such cases.

Additionally, there’s a new coronavirus helpline run by HMRC, staffed by an additional 2,000 experienced call handlers. The number is 0800 0159 559.

Businesses and individuals can use this if they believe they will have trouble paying their taxes because of coronavirus.

What this means for your business

It’s always vital to speak to HMRC if you’re experiencing issues that might affect your ability to pay tax. You should certainly speak to HMRC if you think you might be affected by coronavirus to the extent that any of your existing tax payments – corporation, VAT, capital gains or Self Assessment – will be impacted.

It’s worth remembering, however, that HMRC still applies Time to Pay help on a discretionary basis. There is no guarantee, and HMRC will ask questions to identify whether your business is effectively insolvent.

This is again why speaking to HMRC sooner rather than later is best.

COVID-19 Corporate Financing Facility (CCFF)

Larger businesses such as corporations are eligible for the new Covid-19 Corporate Financing Facility. Under this scheme, the Bank of England will purchase debt from these companies for one year (known as purchasing commercial paper).

More information can be found on the Bank of England’s website.

This scheme is for large businesses. It is not available to small or medium-sized enterprises.

Spring Budget 2020: Wages and National Insurance increases for 2020/21

Two headline figures from the Spring Budget 2020 revolved around increases to the National Living Wage, and the National Insurance threshold (the point at which employee National Insurance payments kick in).

In fact, there are increases across the board as of 6 April 2020 with regard to the least you’re legally required to pay employees, along with most types of workers. The hourly rates are as follows:

• National Living Wage (for people aged 25 and over): £8.72 (£8.21 in 2019)
• National Minimum Wage for people aged 21 to 24: £8.20 (£7.70 in 2019)
• National Minimum Wage for people aged 18 to 20: £6.45 (£6.15 in 2019)
• National Minimum Wage for people under 18: £4.55 (£4.35 in 2019)
• Apprentice rate for those aged under 19, or those over this age but in the first year of their apprenticeship: £4.15 (£3.90 in 2019)

As of April 2020, the limits and thresholds for employee National Insurance contributions (also known as Class 1 NICs) rise, as follows:

• Lower earning limit: £6,240 per year (£6,136 in 2019)
• Primary threshold (PT): £9,500 per year (£8,632 in 2019)
• Secondary threshold (ST): £8,788 per year (£8,632 in 2019)

Other thresholds and limits (e.g. Upper Secondary Threshold) are unchanged from 2019.

The employee and employer rates have also not changed compared to 2019.

Statutory payment rates, such as maternity or sick pay, increase as usual based on the consumer price index (CPI).

The maximum weekly Statutory Sick Pay (SSP) rises to £95.85, for example, compared to £94.25 for 2019. The government’s website lists all rates and thresholds for employers for 2020 to 2021.

What this means for your business

Any employees or workers within your business who receive the National Living Wage, or one of the minimum/apprentice wage rates, should be given a pay rise in April 2020, matching the new rates.

These are the minimum hourly rates that you’re allowed to pay qualifying employees or workers. If you don’t, the employee or worker has the right to take you to an employment tribunal.

If you use cloud payroll software, you should find it automatically updates to take into account the new National Insurance thresholds and limits.

Spring Budget 2020: Corporation tax in 2020/21

There’s no change in corporation tax for the 2020/21 tax year, compared to 2019/20, with the rate remaining at 19%.

What this means for your business

There is no requirement to change the way you calculate or pay corporation tax in 2020/21.

Spring Budget 2020: VAT in 2020/21

VAT rates do not change for 2020/21.

However, the government confirmed that postponed accounting for VAT will apply to all imported goods, from the European Union (EU) or elsewhere, following the end of the Brexit transition period on 31 December 2020.

This means that – as of 1 January 2021 – the VAT payable on imported goods won’t be due immediately when the goods enter the UK.

Instead, businesses will add the amounts to their VAT return, and it can therefore be offset against input VAT, meaning there will be no cash outflow.

A handful of other small VAT changes were announced.

Grocery retailers and pharmacies should note that women’s sanitary products become zero-rated as of 1 January 2021.

Additionally, e-publications such as ebooks and e-magazines become zero-rated from 1 December 2020. This brings them in line with how their print counterparts have been taxed for many years.

What this means for your business

The postponed VAT accounting announcement is a relief for many businesses who feared that a requirement to pay VAT at the time of import following the end of the Brexit transition period would hit their cash flow.

For those who already import from outside the EU, it’s a cash flow gift. Implementing postponed accounting isn’t complicated, with marginal changes within your VAT accounting and returns, and cloud accounting software will be updated in time.

But if you’re in any confusion then speak to your accountant or a VAT specialist.

Spring Budget 2020: Startups and entrepreneurs

Those who create new businesses can, when they come to sell or pass on that business, take advantage of Entrepreneurs’ Relief. This significantly reduces capital gains tax.

As of 11 March 2020, the lifetime limit for gains eligible for the relief fell from £10m to £1m.

What this means for your business

This is a blow for serial entrepreneurs, who create and then sell businesses (or who invest in startups). However, for those who are simply selling a business they’ve created from scratch then this change should not make much difference.

In fact, the government claims that 80% of those using the Entrepreneurs’ Relief won’t be affected.

Spring Budget 2020: Capital allowances for 2020

Capital allowances mostly remain the same as in 2019. The exception is the Structures and Buildings Allowance (SBR) rate, first introduced in 2018.

This allowance can impact both corporation and income taxes, and takes effect on 1 April for the latter, and 6 April for the former.

It allows companies and individuals to claim allowances for investments to construct new, or renovate old, non-residential structures.

What this means for your business

Those businesses or individuals renovating buildings other than homes should take advantage of this allowance.

Speak to your accountant (if you have one) if you believe it applies to you.

Spring Budget 2020: Transport for businesses

Fuel duty is frozen once again, making this the 10th year in which there won’t be an increase.

Vehicle excise duty (VED, or road tax) for cars, vans and motorcycles will increase in line with inflation as of April 2020, the Heavy Goods Vehicle VED is once again frozen, as is the HGV Road User Levy.

What does this mean for your business?

Hauliers or those needing to transport goods via HGVs will welcome the duty and VED freeze but business transport is clearly an area of government interest from an environmental perspective.

In the budget policy document, the government issues what is effectively a warning: “Future fuel duty rates will be considered alongside measures that are needed to help meet the UK’s net zero commitment.”

In other words, 2020/21 could be the last year of this kind of largesse from the government.

Conclusion on the Spring Budget

While this budget had been anticipated to have focused on Brexit, the impact of coronavirus resulted in a revision of priorities.

The measures introduced by the government will aim to make things easier for businesses during this period of uncertainty.

Outside of the extraordinary coronavirus measures, this has been a remarkably quiet budget from a business perspective, with few outcomes likely to raise eyebrows.