The Chancellor started his speech emphasising the support that had been given to the economy before announcing the extension of many of the schemes to later in the year which should, hopefully, be after the restrictions can be eased. The support is being tapered away to try to avoid any “cliff edge” scenarios.
The certainty that this presents should help businesses plan for their reopening. The overall cost of the support is expected to be £407bn and, unsurprisingly, later in his speech, the Chancellor addressed how he plans to start rebalancing the books.
Job Retention Scheme
The Coronavirus Job Retention Scheme (CJRS), which was due to end in April 2021, has been extended to the end of September 2021. The scheme will provide the same level of support until June 2021. From July, the Government will introduce an employer contribution towards the cost of unworked hours of 10% in July, 20% in August and 20% in September. Employees will continue to receive 80% of their current salary, capped at £2,500 per month, for hours not worked. The employer contributions are to reflect the fact that the economy is expected to be picking back up at that stage.
- A fourth and fifth Self-Employment Income Support Scheme (SEISS) grant will be available. The eligibility for the grants and the calculation will become more complicated.
- The fourth grant will cover February to April 2021 and will be paid out from late April 2021 with the fifth grant available to claim from July until September. The fourth grant is calculated at 80% of three months of their average trading and partnership profits for the last four years and capped at £7,500. The fifth grant will be subject to a Financial Impact Declaration that determines whether applicants are eligible for either a higher or lower grant amount based on how much their turnover has reduced in the year April 2020 to April 2021 and will be calculated either at 80% of three months of the claimant’s average trading or partnership profits for the last four years, capped at £7,500, or at 30% and capped at £2,850.
- It is expected that 600,000 more individuals may be newly eligible for SEISS due to these individuals now having filed a 2019-20 Self- Assessment tax return.
- Businesses occupying eligible retail, hospitality and leisure properties and nurseries in England will be granted a 100% business rates discount for 3 months from 1 April 2021. For the remainder of the financial year, these properties will receive a 66% discount with a cap of £2 million per business for those that were required to close as at 5 January 2021 and a cap of £105,000 per business for those that were not required to close. Businesses can choose to opt out of the relief.
- Legislation will be introduced to ensure that the business rates relief repayments that have been made by certain businesses are deductible for corporation tax and income tax purposes to ensure that these businesses are no worse off from a tax perspective than if they had paid the business rates in the first place. This will apply for repayments made to the devolved administrations as well as to those made in relation to England.
Extension of VAT deferrals and reductions
- The temporary reduced rate of VAT of 5% on supplies of accommodation, food and beverage services excluding alcohol, and specified attractions has been extended for 6 months from 1 April 2021 to 30 September 2021; this is followed by a 12.5% rate until 31 March 2022.
- Any business that took advantage of the original VAT deferral on VAT returns from 20 March through to the end of June 2020 can now opt to use the VAT Deferral New Payment Scheme to pay that deferred VAT in up to eleven equal payments from March 2021, rather than one larger payment due by 31 March 2021, as originally announced.
Recovery Loan Scheme
- 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.
The Treasury has come under criticism for the design of the support packages including their susceptibility to fraud. To combat this threat the Government will invest over £100 million in a Taxpayer Protection Taskforce of 1,265 HMRC staff. This represents one of the largest responses to a fraud risk by HMRC. In addition, the Government have stated they will raise awareness of enforcement action in order to deter fraud and will significantly strengthen law enforcement for Bounce Back Loans. The support schemes can be complex to implement and there will be more complexity as the schemes taper away. It is essential that businesses ensure that they are fully conversant and compliant with the rules so that they can deal with any HMRC enquiries.
Get in touch
If you have any queries on the topics covered in our UK Budget 2021 report, please contact Johnny Hanna, partner in change, KPMG in Belfast.
KPMG in Northern Ireland