The recent budget has wide-ranging implications for business. Paul Matthews discusses five key initiatives announced by Chancellor Rishi Sunak.
1. Time to pay can help firms facing uncertain times
At a very challenging time for many businesses, the chancellor unveiled a new scheme designed to help both businesses and self-employed individuals facing cash flow issues due to coronavirus (COVID-19).
His announcement of an extension of HMRC’s Time to Pay (TTP) programme will include 2,000 new call centre staff with a remit to arrange deals with businesses in order to defer tax payments.
In addition, there is provision for greater latitude over charging interest and imposing penalties for late payment resulting from coronavirus or, indeed, difficulties in contacting HMRC.
The extension of TTP is expected to assist businesses in much the same way as the Business Payment Support Service did after the global financial crash of 2008.
2. Entrepreneurs Relief reform is a blow for many business owners
Significant changes to Entrepreneurs Relief (ER) mean this previously generous tax break is now subject to severe limitations.
ER lowers the rate of capital gains tax (CGT) from 20 per cent for higher rate tax payers to 10 per cent when they sell qualifying assets.
However, the Budget confirmed a decision to cut the ER lifetime allowance from £10m to £1m for transactions completed after March 11, 2020, and some completed before.
Unfortunately, many owners will already have exceeded the £1m threshold and will therefore be hit instantly by the changes.
However, the announcement is not all bad news because it defied predictions that ER would be scrapped altogether. In this respect, its continuation is a positive outcome for business owners with some or all of their lifetime allowance remaining, who are looking to make an exit.
3. Encouraging developments for business rate payers
The business rate retail discount of 50 per cent will be doubled to 100 per cent for shops, restaurants, cinemas and live music venues with a rateable value under £51,000.
Further good news is that the discount will be expanded to include businesses in the hospitality and leisure sector, such as small B&Bs, gyms and sports clubs.
Moreover, the chancellor has extended the business rates holiday to all hospitality sector businesses, regardless of size, and said the government would fund grants of between £10,000 and £25,000 for small businesses.
Another fillip in the Budget for business rate payers is the chancellor’s commitment to a comprehensive review of the business rate system. The review, due to report its findings later this year, will examine possible modifications of the business rate regime, along with options for replacing the system completely.
4. ‘It’s a wrap’ for new plastic packaging tax
Among the government’s zero carbon initiatives is a new plastic packaging tax that will be introduced from April 1, 2022 as an incentive to use recycled plastic in packaging.
The chancellor’s announcement followed a consultation programme and set the rate of tax at £200 per tonne of plastic packaging that contains less than 30 per cent recycled plastic.
This will apply to both the production and importation of plastic packaging. It is expected that the rate will be kept under review to make sure it is effective as an incentive to use recycled plastic.
5. IR35 update
The Chancellor’s £330billion financial package for the UK economy also included an announcement postponing the implementation of IR35 reforms due to come into effect in April 2020 for a period of 12 months. These reforms are designed to make businesses which employ contractors responsible for assessing the tax status of contractors who operate through personal service companies, and deducting the correct tax where the arrangement can properly be viewed as a disguised employment relationship.
For further advice on what the latest Budget means for your business, or any other commercial law matter, call Paul Matthews on 0161 761 4611 or email him at paul.matthews@whnsolicitors.co.uk
