The importance of continued support for businesses as the economy reopens over the next few months was reiterated in some of the budget announcements made by the Chancellor this week.
Last week, CLA Public Affairs Manager Eleanor Wood highlighted some of the measures we had lobbied the government for, to ensure that rural businesses could survive and recover from the effects of Covid-19 restrictions. Read her blog.
The extension of the 5% reduced VAT rate for the hospitality industry until September 30, followed by an interim rate of 12.5% for another six months, is welcome. Whilst this recognises that tourism businesses will take some time to get back on their feet and start to recover, we want the government to go further. Therefore, we will continue to lobby for a permanently reduced rate of VAT for tourism and hospitality businesses so that they can compete with similar businesses in Europe that can charge lower rates of VAT (e.g. 13% in Greece; 10% in France and Spain).
The extension of business rates relief, the Coronavirus Job Retention Scheme (furlough scheme) and the Self-Employed support scheme were widely predicted and called for by many, including the CLA, and together will the new restart grants that are available from April, will provide much needed financial support. Businesses that suffer losses in the current and next tax year (2020-21 and 2021-22) can carry these back for three years rather than one year. The prepayment of tax previously paid may help your cash flow.
As with any Budget, there are plenty of rumours circulating in the preceding weeks as to what the Chancellor may decide to do. This year, a lot of speculation focused on what tax rises may be announced to start paying back the £400bn cost of the coronavirus crisis. Speculation that the income tax allowances and higher rate bands would be frozen proved correct and will raise significant sums for the Exchequer as a result of fiscal drag, with more taxpayers falling into higher rates of tax.
The pre-Budget speculation that capital gains tax rates will be increased to align with income tax rates thankfully did not materialise. But we did see an increase in corporation tax, although this has been delayed for two years to enable companies to recover with an inducement to invest in the form of the temporary super-deduction capital allowances. It is disappointing that unincorporated businesses (sole traders and partnership) have been excluded from this at a time when there are calls for increased productivity in farming and elsewhere. We will be raising this with government.
Normally, we would see several tax policy papers and consultation documents published on Budget day, but this year the government has decided that these will be published on 23 March. Some of these will deal with administrative matters to modernise the tax system, but we cannot rule out consultations on wider policy issues. Rest assured, we will review all the documents published and continue to work to defend members’ interests in all tax matters.