In his first Budget as Chancellor, Rishi Sunak attempted to suppress fears over coronavirus by offering refunds to employers for statutory sick pay (SSP), but George Hay Chartered Accountants says that, despite a few timely measures that appear to support small businesses on the surface, a cut to Entrepreneurs’ Relief will not be welcomed.
Barry Jefferd, Partner at George Hay Chartered Accountants said that the £12 billion of measures to combat the economic impact of coronavirus made many of the forecasts and economic assumptions a waste of time.
“The biggest tax change was the reduction of the lifetime allowance for Capital Gains Tax Entrepreneurs’ Relief, from £10m to £1m, with effect from Budget day.
“Changes to this relief had been trailed and, in a disgraceful move, the government announced they were proposing legislation to wipe out more pre-Budget tax planning.”
This was the first Budget that has been delivered in 499 days and expectations were high based on the Government’s promises in its manifesto.
Mr Sunak announced that £2 billion would be allocated to cover firms’ sick pay bills, to help with Coronavirus. This funding, which will cover up to 14 days of an employee’s statutory sick pay (SSP), will be available to businesses with fewer than 250 employees.
Barry Jefferd said: “The Chancellor dedicated a third of his speech to the Government’s preparations for the economic impact of coronavirus and the provisions that it would be making to help small businesses shoulder the costs likely to be incurred as a result.
“However, in reality, these changes will make little difference in supporting a business.”
As well as offering a refund on SSP, the Government announced that business rates will be abolished this year, for businesses in the retail, leisure and hospitality sectors with a rateable value below £51,000.
The Government will also offer a £3,000 cash grant for businesses that are currently eligible for small business rates relief.
Other measures included increasing the rate of Research & Development Expenditure Credit from 12 per cent to 13 per cent, increasing the Structures and Buildings Allowance from two to three per cent, a rise in NIC Employment Allowance to £4,000; again, none of these really help businesses in a significant way.
Individuals will also benefit from the National Insurance threshold increasing from £8,632 to £9,500 next month, while a commitment to increase the National Living Wage to two-thirds of median earnings by 2024 will mean more take-home pay for the lower paid but must lead to a risk of unemployment, as employers face higher staff costs.
The Chancellor also announced that the tapered annual pensions allowance thresholds will be increased by £90,000 to £200,000, to help mainly high-earners in the health service.
Barry Jefferd said: “In all my years of looking at Budgets, I cannot remember a Budget with so few statements about tax changes.
“Considering this is the first Budget of a new government, it is astonishing. I can only assume the late appointment of the new Chancellor and the Coronavirus outbreak had led to a change of plans.
“I expect many more changes in the Autumn 2020 Budget.”