Tax holidays and cash support for businesses

The Chancellor has set out a package of temporary measures to support businesses through the period of disruption caused by COVID-19.

The package of measures for businesses offered by the Chancellor includes a job retention scheme (JRS), tax holidays, and grant funding for hard hit sectors and small businesses.

Some of sectors which have been heavily affected so far are food, manufacturing, retail, leisure and hospitality, financial, automotive and travel.

The Chancellor’s support package includes:

  • A Coronavirus Job Retention Scheme 
  • Deferring VAT and Self-Assessment payments
  • A Self-employment Income Support Scheme 
  • A Statutory Sick Pay relief package for SMEs
  • A 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
  • A small business grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • The Coronavirus Business Interruption Loan Scheme offering loans up to £5 million for SMEs through the British Business Bank 
  • A new lending facility from the Bank of England to help support liquidity among larger firms
  • The HMRC Time To Pay Scheme 

Taxation

There are few changes in the current budget in regards to taxation, however some notable amendments include slight increases in R&D expenditure credit and buildings allowances, and new taxes on digital services and plastic packaging.

Under budget proposals, the corporation tax rate is maintained at 19 percent from April 2020. There are no changes in to the income tax, dividend tax or capital gains tax rates, and no changes to the value added tax (VAT) rates or thresholds.

For business taxpayers, the budget proposes the following:        

  • Beginning from April 2021, large business would have to notify HM revenue and customs (HMRC) of tax treatments relying on an uncertain legal interpretation which HMRC is likely to change.
  • The digital services tax (to be imposed at a rate of 2 percent) would be introduced from April 2020.
  • The rate of the research and development (R&D) expenditure credit would increase to 13 percent from April 2020.
  • The annual rate of relief for structures and building allowance would increase to 3 percent from April 2020.
  • Tax relief would be available for acquisitions from July 2020 of pre-April 2002 intellectual property from overseas companies.
  • Plastics packaging tax of £200 per tonne would apply from April 2002.

Temporary changes on investment allowance

The government introduced temporary measures from April 2020 to extend business rates relief, primarily applying to smaller businesses.

The temporary change in the Annual Investment Allowance (AIA), whereby companies will be able to claim £1 million as AIA or expenditure incurred between 1 January 2019 and 31 December 2020 on fixed assets such as plant and machinery. The allowance is expected to reduce to £200,000 on 1 January 2021.

Business rates for retail, hospitality and leisure

Businesses in the hard-hit retail, leisure and hospitality sectors, operating from premises with a rateable value of less than £51,000, will not pay any business rates in the year. This includes hotels, restaurants and coffee bars.

The discount that pubs receive on their business rates will increase from £1,000 to £5,000, as long as their rateable value is below £100,000 in England.

 

Leeradh Ali, R&D Tax Consultant at FI Group, spoke at the French Chamber’s webinar ‘Financial support and advice: limiting the impact of COVID-19 on your business’ on 6 April.

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