Budget 2020 – not just crisis measures

The Budget on 11 March was rapidly overtaken by the progression of the Covid-19 crisis, with many of its economic forecasts set aside and further announcements made subsequently. S peaking before ‘lockdown’, Chancellor Rishi Sunak focused on the economic response to the coronavirus outbreak, with cuts to business rates, a temporary coronavirus business interruption loan scheme and extensions in eligibility for benefits for employees and self-employed people who cannot work.

Tax measures took second place to crisis announcements, but some of the tax changes that were announced have important implications for businesses. The most major was perhaps the cut from the £10 million lifetime limit for entrepreneurs’ relief to £1 million with immediate effect. That corporation tax stayed at 19% was no surprise as Prime Minister Boris Johnson had previously announced that the planned cut to 17% would be put on hold to help fund ‘national priorities’.

The Budget did however include two increases in business tax reliefs from April 2020:

  • The structures and buildings allowance (SBA) annual rate has risen from 2% to 3%.
  • The research and development expenditure credit rate has gone up from 12% to 13%, and the introduction of a cap on the payable research and development tax credit for small companies has been delayed by a year until April 2021.

Also postponed until April 2021 are changes to the IR35 tax rules for off-payroll working in the private sector. The reforms pass responsibility for determining a contractor’s status from the individual to the organisation employing their services, as already happens in the public sector. The delay is aimed at helping businesses affected by Covid-19.

Some of the reliefs from business rates announced in the Budget to also help deal with the financial fall-out from the pandemic were subsequently fleshed out. These include (with levels varying in the devolved governments):

  • A 12-month business rates holiday for retail, hospitality, leisure and nursery businesses.
  • Cash grants of up to £25,000 for businesses in the hospitality and leisure sectors for properties with a rateable value over £15,000 and under £51,000 (in England).
  • A one-off grant of £10,000 to help businesses that already pay little or no business rates because of existing rate reliefs.