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Here we have provided a summary of the support measures announced as part of Budget 2021 to protect businesses.
In 2020, the government introduced a number of government-guaranteed coronavirus loan schemes. In December 2020 the Chancellor extended, until the end of March 2021, access to the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme.
Budget 2021 announced a new loan scheme to be introduced to replace those coming to an end.
From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and£10 million to give them conﬁdence in continuing to provide ﬁnance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.
In addition Restart Grants will be provided in England of up to £6,000 per premises for non-essential retail businesses and up to£18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses. This will provide the cash certainty needed to plan ahead and safely relaunch trading over the coming months.
Budget 2021 has conﬁrmed details of a fourth grant. This will be 80% of three months’ average trading proﬁts to be claimed from late April 2021. Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who have ﬁled a 2019/20 self assessment tax return prior to 3 March 2021. This means that the newly self-employed from April 2019 now qualify subject to satisfying the other conditions.
A ﬁfth and ﬁnal grant was announced and can be claimed from late July 2021 to cover the period May to September 2021. This grant will be determined by a turnover test. Where the self-employed business turnover has fallen by 30% the grant will be worth 80% of three months’ average trading proﬁts capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.
Business rates have been devolved to Scotland, Northern Ireland and Wales. All four nations have introduced 100% business rates relief mainly aimed at retail, leisure and hospitality businesses. Such businesses have not had to pay business rates from 1 April 2020 to 31 March 2021.
In a Scottish Budget update statement on 16 February, the Scottish Government proposed an extension to the relief for the retail, hospitality, leisure and aviation sectors until 31 March 2022.
The Chancellor has now announced a continuation of 100% business rates relief for eligible retail, hospitality and leisure properties in England to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.
Following the Chancellor’s announcement, the Welsh Finance Minister has extended the rates holiday for the retail, leisure and hospitality sectors in Wales for a further 12 months.
In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions. In September 2020 the Chancellor extended the reduced rate to 31 March 2021. The government has now announced an extension of the reduced rate until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to25% for companies with proﬁts over £250,000. The 19% rate will become a small proﬁts rate payable by companies with proﬁts of£50,000 or less. Companies with proﬁts between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.
A temporary extension of the period over which businesses may carry trading losses back for relief against proﬁts of earlier years to get a repayment of tax paid will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020/21 and 2021/22 for unincorporated businesses.
Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years ﬁrst.
For companies, after carry back to the preceding year, a maximum of £2 million of unused losses will be available for carry back against proﬁts of the same trade to the earlier two years. This £2 million limit applies separately to the unused losses of each 12month period within the duration of the extension.
For individuals a separate £2 million cap will apply to the extended carry back of losses made in each of the tax years 2020/21 and2021/22.
The £2 million limit applies separately to the unused losses of each tax year within the duration of the extension. Income Tax payers will not be subject to a partnership-level limit.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will beneﬁt from new ﬁrst year capital allowances.
Under this measure a company will be allowed to claim:
This relief is not available for unincorporated businesses.
The Government also announced a temporary increase in the Annual Investment Allowance (AIA) from £200,000 to £1,000,000 for expenditure on plant and machinery incurred during the period from 1Janaury 2021 to 31 December 2021.
Budget 2020 announced the extension of 100% ﬁrst year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021.
CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the ﬁrst year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of writing down allowances(WDAs) for business cars.
In 2020 the government consulted on proposals to create up to ten Freeports across the UK. The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.
A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a sea port, airport or rail port. East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.
The government is working with devolved administrations to establish Freeports in each of the nations.
Within the Freeport there will be a primary customs site and perhaps custom subzones. A customs site or subzone provides customs and tariff beneﬁts such as:
Freeports may also have one or more tax sites within which tax reliefs will apply. The aim is for a single site and up to three tax sites may be allowed but the total area of the site(s) must not exceed 600 hectares. The tax site will likely be located on primarily underdeveloped land to generate new, additional productive activity in Freeport locations.
The intention is to offer:
In addition, a 0% rate of employer NICs on the salaries of any eligible employee working in the Freeport tax site is proposed. The relief is intended to be available for up to 9 years from April 2022.
A cap on the amount of R&D tax credit which can be paid to a loss-making small or medium-sized enterprise (SME) will be introduced for accounting periods which commence on or after 1 April 2021.
Prior to the introduction of the cap, loss-making SMEs incurring qualifying expenditure on R&D activities are allowed to make a claim to surrender the unrelieved loss for a payable tax credit of up to 14.5%. For accounting periods commencing on or after 1 April 2021,payable tax credits are restricted to £20,000 plus three times the company’s relevant expenditure on workers.
Relevant expenditure on workers is the company’s PAYE and NICs for the period and importantly this is the company’s whole PAYE and NIC liability. In addition, if the company is supplied with workers by a connected company the relevant workers’ expenditure is extended to include a proportion of those worker costs.
Some companies which create or manage intellectual property and spend less than 15% with connected persons on R&D qualifying expenditure will be exempt from this cap.
If you need assistance or advice related to any of the measures announced as part of Budget 2021, please contact us to arrange an initial discussion.
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