A good budget for business?

Craig Blackmore, Director of Verde Corporate Finance, which is part of the GS Verde Group, considers whether Chancellor Rishi Sunak’s budget announcement or a good thing for businesses in Wales and beyond.

Rishi Sunak has been in the Chancellor’s seat for just 28 days but he has already made the big headlines with Budget announcements which dwarf spending plans seen for over 50 years. Throwing out the austerity measures that have been impacting the economy for the last ten years, the Chancellor is looking to increase borrowing to fund investment in infrastructure projects, provide emergency funding in reaction to the Corona Virus outbreak and increase money available for innovative UK Businesses. Whilst most reports focus on personal spending, I wanted to pick out some of the detail which affects business that often gets overlooked.

Business and enterprise support

Supporting enterprise is an important part of the government’s ambition to level up opportunity across the UK. The government will do this directly by extending the funding of the British Business Bank’s Start-Up Loans programme to the end of 2021-22, supporting up to 10,000 further entrepreneurs across the UK to access finance to start a business.

To ensure that all businesses have access to high quality support and advice in their region, the government will invest £10 million to increase Growth Hub capacity and provide high-quality, core business advice and guidance across all 38 Growth Hubs. In addition, the government will invest £13 million to expand the British Library’s network of Business and Intellectual Property Centres to 21 cities and 18 surrounding local library networks across England, providing entrepreneurs with business support, free access to market intelligence, IP workshops and one-to-on.

Backing businesses to innovate and grow

The Budget will support and encourage innovation by increasing the rate of Research & Development Expenditure Credit from 12% to 13%. The government will also consult on whether qualifying R&D tax credit costs should include investments in data and cloud computing.

The Life Sciences Investment Programme will provide the British Business Bank with additional resources to make up to £200 million in equity commitments to support the UK’s most innovative health and life sciences firms over the next five years. Invested alongside private sector capital, this is expected to enable £600 million of finance to create high-quality jobs and help UK patients benefit from more ground-breaking treatments and care. This funding will build on the £350 million of finance to life sciences firms currently supported by the British Business Bank by supporting large-scale venture growth funds. The programme will launch within a year. The government will also provide the British Business Bank with the resources to make up to £200 million of additional investment in UK venture capital and growth finance in 2020-21.

The British Business Bank will also be making emergency loans via high street banks with an 80% guarantee from the UK government to help small businesses in the virus crisis.

Entrepreneur Relief changes

This is a measure that reduces the capital gains tax rate from 20% to 10% on eligible share sales, up to a maximum of £10 million in gains. The limit will be reduced to £1 million as from 11 March 2020, affecting around 5,000 taxpayers, but not the average business share sale or business asset sale that meets the conditions, such as holding shares or business assets for over two years. Subject to complex conditions and the need for professional advice it will still be possible to plan exits from businesses on retirement, to save possible Inheritance tax charges or changes in circumstances in a tax efficient way.

Changes to pension tax relief for the higher paid

Chancellor Rishi Sunak said today that the tapered allowance threshold for pension tax relief will increase to £200,000. The pension annual allowance is the maximum amount of tax-relieved pension savings that can be accrued in a year

Sunak increased the two tapered thresholds for pension tax relief by £90,000 today. This means that from 2020-21 the so-called threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an adjusted income above £240,000. 40% and 45% tax relief will therefore apply to a significant number of taxpayers who have been badly hit by the rules in recent years, leading to early retirements or refusals to work longer hours by senior NHS staff.

Temporary help due to the Corona virus.

Business rates are abolished for 2020-21 for many small businesses – nearly half of all premises covered. £3,000 cash grants may be made to small businesses who already pay no business rates.

Statutory sick pay –Small business can reclaim SSP from day 1 from HMRC – until now no reclaim has been possible for a number of years.
Reduced business taxes

Increase in the NIL band for Employers National Insurance from £8.632 to £9,500. This will save employers around £120 a year in reduced Employers NIC per employee

Increase in the Employer Allowance from £3,000 to £4,000. This will save up to an extra £1000 a year off the Employer National Insurance payments for small employers where the total paid under this heading in 2019-20 was under £100,000.

In summary, is this a good Budget for UK business? Well, to give a politician’s answer, there is some good and some bad in there. But largely, this is a notable point where the end of austerity could be in sight and much needed stimulus and investment is brought in. Excuse the pun in the current environment but my hope is that the Government doesn’t catch a cold in the process!

Craig Blackmore is a Director of Verde Corporate Finance, part of the GS Verde Group.

If you have questions for Craig on how the Budget might affect your organisation, please get in touch by calling 029 2240 3445 or on email cblackmore@verdecf.com