Following the budget 2021 announcement by the government on 3 March and the extension of various COVID-19 support schemes, we have summarised some key takeaways.
This blog sets out some of the key points from the budget 2021 that will impact businesses.
The stamp duty deadline has been extended until the end of June and then the nil duty threshold will be increased from £125000 to £250000 for three months until the end of September. This along with the government backing an insurance scheme for 95% of mortgages for purchase of up to £600,000 will boost the market and particularly for buyers below £250,000 until October.
Our head of Commercial Property John Mansell notes the good news for investors who wish to sell investment properties is that the rate of Capital Gains Tax has not increased.
Corporate Partner Amanda Brockwell considered that whilst the general consensus was that, were it not for COVID-19, there was likely to have been a rise in capital gains tax rates, the non-movement of the Chancellor on this front has meant that the rush to push mergers and acquisitions over the line before budget day or the end of the current tax year, may not be as much of an issue as predicted; this no doubt forms part of his thinking that he wants to encourage continued investment in businesses to assist with the overall recovery. In addition, there is a new focus on employee incentive options, known as EMI option schemes, with an evidence gathering project to look at how these schemes can be further used to promote economic growth.
We may well see an expansion of the size of companies and companies in hitherto ineligible sectors which can now promote tax efficient EMI option schemes for their staff which were previously not available. Again, these schemes are often used to incentivise employees to grow the value of their employer’s business and gives them a taste of company ownership.
Whilst the ongoing support for businesses unable to reopen until the summer and the deferral of some important predicted tax increases is obviously welcome, for me this budget does not do enough to address the involuntary increase in corporate and personal debt which COVID-19 has brought and which is a growing into a millstone against future recovery.
Larger businesses may have been hoarding cash but as things stand very many SMEs will have to focus on deleveraging their balance sheets before they can consider reinvesting profits. This budget does nothing to help landlords and other major creditors to plan for when they might be able to recover monies either. It merely helps, again, to tide business over at the cost of further borrowing. Government guarantees do not repay loans.
In terms of personal finances, the Chancellor seemed resigned to the likelihood of unemployment peaking in 2022 at 6.5%. That obviously implies that he expects many employer businesses to fail after furlough and enforcement moratoria come to an end, and yet no plan was in evidence to help businesses restructure and no commitment to working across government to take an active and supportive role in that. Instead he stressed the importance of maximising tax recoveries, which will be small comfort to struggling businesses.
On the whole, a budget of popular headlines and by no means catastrophic to those we serve in the Central South, but in many ways, it is also – as I suppose all budgets are at some level – a missed opportunity.
There is a new Recovery Loan Scheme to replace Bounce-Back Loans and the CBIL schemes as they wind down. Businesses of any size can apply for loans from £25,000 up to £10m, through to the end of 2021. The government will provide a guarantee to lenders of 80% of the loan.
Businesses will probably need to provide evidence (accounts, forecasts, business plans, details of assets etc.) to their lender that they need the loan and that they can afford to repay the loan. You can read more detail on this in our blog “New Recovery Loan Scheme launches on 6 April 2021“.
New reforms to the immigration system are designed to “help ambitious UK businesses attract the brightest and best international talent”. The reforms aim to attract and retain the most highly skilled globally mobile talent from around the world, particularly in academia, science, research and technology. This is intended to drive innovation and economic growth post-Covid and post-Brexit in order to boost the UK’s international competitiveness.
The new unsponsored elite route will help UK companies attract highly skilled migrants without the need for a sponsor licence. The Innovator route has so far been a disaster in terms of its complexity and the need for overseas entrepreneurs to be endorsed so any reform of this route to make it easier for entrepreneurs to set up a business in the UK is a step in the right direction. The modernisation of the sponsorship system to make it easier to use will hopefully reduce the burden on businesses trying to recruit talent from overseas. So, overall, these changes are to be welcomed and we look forward to the government releasing further details in due course. You can see more detail on this in our blog “Immigration System : New reforms announced in 2021 budget“.
Employers will continue to be able to claim up to 80% of employees’ wages for hours not worked (or £2,500 if lower) under the furlough scheme. From 1st July 2021 the level of grant will be reduced each month and employers will be asked to contribute towards the costs of furloughed employees’ wages as follows:
Employers do not need to have previously claimed for an employee to be eligible. Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked. For periods starting on or after 1 May 2021 employers can claim for employees who were employed on 2 March 2021, as long as they have already made a PAYE Real Time Information submission between 20 March 2020 and 2 March 2021, so the extension covers recently employed employees. You can read more here in our blog “Furlough Scheme (flexible and full) – Employers’ key questions answered“.