Weekly Insights Compilation | Focused on the Spring Budget
UK Budget 2021: Supporting Businesses and the Economy
In the UK Budget 2021, Chancellor Rishi Sunak announced a series of measures aimed at supporting businesses, the economy, and various sectors, while also focusing on the government's theme of protecting "jobs and livelihoods" in response to the ongoing Covid-19 pandemic.
One of the key highlights of the Budget was the extension of the reduced Corporation Tax rate, with the temporary cut maintained at 19% for the 2021-22 financial year. However, it was confirmed that from April 2023, the Corporation Tax rate would increase to 25% for companies with profits over £250,000. This move signifies a future tax burden increase for larger businesses, while small companies with profits under £50,000 would remain at 19% through a tapering system.
Another significant measure introduced was the Stamp Duty Land Tax (SDLT) holiday extension, which was extended until the end of September 2021 to boost the property market and related business sectors. A super deduction for capital investment was also launched, allowing companies investing in new plant and machinery to claim a 130% super-deduction on qualifying expenditures, aiming to encourage business investment and productivity enhancement.
The Budget also included extensions of business rates reliefs for retail, hospitality, and leisure sectors, sectors severely hit by COVID-19 restrictions. These measures aimed to reduce immediate costs for businesses in these industries, supporting their recovery.
In addition, the Budget 2021 did not make changes to capital taxes and around the government's green agenda. However, new funding for energy innovation was launched, indicating a focus on the energy sector without a strong emphasis on decarbonisation.
The Budget also had implications for businesses, with the planned increase in Corporation Tax signaling an increased future tax burden for profitable companies, affecting after-tax profitability and potential investment decisions. On the other hand, the super deduction significantly reduces the upfront cost of investments in machinery and equipment, encouraging companies to invest sooner, possibly offsetting some of the impact of higher taxes.
Furthermore, changes in Inheritance Tax rules require careful planning for family businesses and agricultural enterprises to optimize tax liabilities during estate transfers.
The Budget 2021 also announced changes to the new IR35 regime, including corrections to an error in the 2020 Finance Act and updates to "fraudulent documentation" measures. An unexpected announcement was made regarding tax-advantaged enterprise management incentive options, with the government seeking views on how the EMI scheme is operating and whether it should be expanded.
In the coming weeks, there will be events focusing on attracting and retaining talent in the life science and health sector, broadcast, production, and digital content in the future of TV, public procurement following the UK-EU Trade and Cooperation Agreement, and business travel after Brexit. There will also be an event discussing IR35 and avoiding traps in the new regime for contract workers.
References: [1] HM Treasury (2021). Budget 2021: Supporting the recovery of the UK economy. Available at: https://www.gov.uk/government/publications/budget-2021-documents/budget-2021-documents [2] HM Treasury (2021). Business property relief and agricultural property relief: reforms to reliefs and allowances. Available at: https://www.gov.uk/government/publications/business-property-relief-and-agricultural-property-relief-reforms-to-reliefs-and-allowances/business-property-relief-and-agricultural-property-relief-reforms-to-reliefs-and-allowances
In the UK Budget 2021, the government announced a super deduction for capital investment, allowing companies to claim a 130% super-deduction on qualifying expenditures, with the aim of encouraging business investment and productivity enhancement. Furthermore, changes in Inheritance Tax rules require careful planning for family businesses and agricultural enterprises to optimize tax liabilities during estate transfers.
In the coming weeks, events will focus on public procurement following the UK-EU Trade and Cooperation Agreement, potentially impacting employment law, and business travel after Brexit, which may have implications for finance and business operations.
