Budget 2021: Chancellor uses Budget Day to announce further Covid support measures
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Service: Tax Sector: Financial services
Coronavirus Job Retention Scheme or ‘furlough’ schemeThe Scheme has now been running in its various forms since March 2020. Data shows that at the end of January around 4.7 million employees are on furlough and over 11.2 million jobs have been supported by the scheme, the majority of which are in the hospitality sector. The furlough scheme will now run for a further 5 months from the end of May to September 2021. Employees will continue to receive 80% of their current salary, capped at £2,500, for hours not worked. There will be no employer contributions beyond the National Insurance and pension contributions required in April, May and June. 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, as the economy reopens.
Self-Employment Income Support Scheme (SEISS)There has been a significant extension to the scheme – good news for an estimated 600,000 individuals who now have access to SEISS. To qualify, individuals must have filed a 2019-20 Self-Assessment tax return by midnight on 2 March 2021.
The fourth SEISS grant, worth 80% of three months’ average trading profits, is paid out in a single instalment and capped at £7,500. The grant covers the period February to April 2021, and can be claimed from late April.
A fifth and final SEISS grant covering May to September 2021 will also be available, the value of which will be determined by a turnover test. Individuals whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. Individuals whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. This can be claimed from late July. Further details of both grants will be announced in due course.
For the 2018-19 tax year, 3.4 million self-employed individuals were identified as potentially eligible for the SEISS scheme. By 31 December 2020 1.9 million people had claimed a third SEISS grant with the value of these claims totalling £5.4bn.
Tax exemptionsThe following exemptions have been extended to cover the 2021-22 tax year:
- Amounts reimbursed to an employee in respect of home office equipment expenses do not incur a charge to tax or National Insurance. These are expenses incurred by the employee in respect of equipment obtained for the sole purpose of enabling them to work from home during the pandemic, for which there must be no significant private use.
- The provision of coronavirus antigen tests (but not antibody tests) to employees by employers.
Recovery Loan Scheme and Restart GrantsAll businesses of any size, including those which have already received support under the existing COVID-19 loan guarantee schemes, will have access to the new Recovery Loan Scheme. It will run from 6 April 2021 to 31 December 2021 and will provide lenders with a guarantee of 80% on eligible loans. Term loans and overdrafts will be available between £25,001 and £10m per business. Invoice finance and asset finance of between £1,000 and £10m per business will be available. No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
In addition, a £5bn support package has been put together by the government to help businesses back to work. ‘Restart Grants’ in England of up to £6,000 per premises will be provided for non-essential retail businesses, which in line with the government road map are due to open no earlier than 12 April. In addition to this there will be up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.
Your business may be eligible if it is based in England, pays business rates on a property it occupies, and had to close because of the national lockdown from 5 January 2021 onwards, or between 5 November and 2 December 2020, and has been unable to provide its usual in-person customer service from its premises. To apply for the Restart Grant scheme you must visit your local council’s website.
All local authorities in England are also being provided with an additional £425m of discretionary business grant funding, on top of the £1.6bn already allocated. The total cost of cash grants provided by the government now stands at £25bn.
Statutory Sick Pay (SSP) Rebate SchemeSmall and medium-sized employers across the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee. This scheme is a temporary COVID-19 measure intended to support employers while levels of sickness absence are high. Further details are to follow.
VAT – Deferral New Payment Scheme and Rate ReductionAny business that took advantage of the original deferral on VAT returns from 20 March 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. The cumulative amount of VAT deferred in the period to 30 June 2020, stood at a huge £33.5bn.
For the hospitality and tourism sectors, the 5% reduced VAT rate for goods and services supplied has been extended until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
Business RatesThe retail, hospitality and leisure industries will have the 100% business rates holiday that was introduced last year extended until the end of June. This will be followed by 66% relief for the period from 1 July 2021 to 31 March 2022, capped at £2m per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.
When combined with Small Business Rates Relief, this means 750,000 retail, hospitality and leisure properties in England will pay no business rates for 3 months from 1 April 2021, with the vast majority of eligible businesses receiving 75% relief across the year.
Some major supermarkets and other retailers which had been allowed to stay open as essential businesses have stated that they will repay the rates relief they received last year. It is thought that this will give back around £2bn of the estimated £11bn that the measure has cost. Legislation will also be brought in to ensure that the business rates relief repayments that have been made by certain businesses are deductible for Corporation Tax and Income Tax purposes.