2021 Spring Budget: What do businesses need to know?
5th March, 2021
The Spring Budget has always been a key date in my diary, but for myself and many others, this year’s speech was more important than ever.
As a corporate finance lawyer, I support clients with financial transactions such as buying and selling businesses, shareholder arrangements and business finance where I act for both companies and for lenders or investors. This year I’ve seen first-hand some of the devastating impacts, and also the unique opportunities that this pandemic has caused but with the easing of lockdown restrictions over coming months, this year’s Budget was the time for the government to outline the UK’s road to recovery.
The government has had to face balancing protecting people’s health, with saving jobs and supporting the economy and as a result, borrowing is at the highest level it’s been since wartime. We know that money is needed by the government, but after such a challenging year it felt too soon to be raising taxes.
In a recent survey, people were asked “raise taxes” yes or no, “cut spending “yes or no” – and unsurprisingly they said no to both! Having considered this year’s speech, I believe the Chancellor has steered a good line in the circumstances, but the best help is going to be getting the vaccine out, lockdown over and the economy back open.
What can we take from this year’s Budget?
During his speech, Rishi Sunak outlined a three-part plan towards economic recovery which focused on supporting British people and businesses, fixing the public’s finances and building the UK’s future economy.
The Chancellor announced a raft of new measures during his speech, but these are the ones I believe to be the key takeaways.
Financial support for businesses
As the pandemic has evolved, so has the financial support provided by the government. At Aaron and Partners, we’ve personally helped several businesses secure finance through the Future Fund scheme as well as through the Coronavirus Business Interruption Loan Scheme (CBILS) over the last few months and we know they have successfully provided support to many businesses across the country.
However, the current government-backed loan schemes finish on 31 March, and ahead of the Budget, many had called for further financial support to help in the coming months.
As a result of this, the government announced a new “Recovery Loan” which will be available to businesses of any size with the goal of helping them get back on their feet.
I was pleased to also see the government take a tapered approach to increasing income tax, capital gains tax, and corporation tax. I believe that the timelines set out will give businesses a long enough horizon to provide much-needed certainty and stability.
Additionally, the investment “super deduction” of 130% against corporation tax is a great way to support businesses who are investing in modern equipment and will bring long term benefits.
It was also positive to hear that there would be no change to the capital gains tax regime, particularly around Entrepreneur’s Relief. Rewarding business owners for the risk they take in growing their businesses, employing people, contributing to the economy – so that they pay only a 10% tax rate on sale gains up to £1m (and then 20% on anything over that) makes sense to me. I don’t see that capital and income rates should necessarily be synchronised. It may be that this is changed in Autumn this year or Spring next year, but it does give time for people who are looking to sell their businesses to benefit from the current regime.
We also do a lot of work on share option schemes – particularly enterprise management incentive (EMI). There is no change to this, but a review has been announced, so we will wait and see what the outcomes are from this.
Stamp Duty Extension
Whilst many anticipated it would happen, the extension of the stamp duty holiday was positive and will give buyers, sellers and solicitors time to get property deals over the line. Our property team (including our new residential conveyancing expert Jo Parsons) have had a huge amount of work recently and will definitely welcome this extra time.
Business immigration changes
The new simplified process for high-skilled applicants will be welcomed by many and is definitely a positive step forward. We are a bit ahead of the game at Aaron and Partners, having recruited a new partner to join us last year, Ikram Malik. Ikram specialises in business immigration – not just for the high-skilled area, but also for businesses typically reliant on seasonal workers.
Extension to the furlough scheme
Our employment team has been perhaps our busiest team over the last 12 months and Ben Mason and his colleagues have done a huge amount in supporting businesses through furlough, which has now been extended until September. They have also had to deal with redundancy schemes but I think the furlough extension, combined with the expected end of lockdown on 21 June should hopefully mean fewer redundancies in the long term.
It is worth noting that there is a moratorium stopping insolvency processes, however, this expires at the end of March, but may yet still be extended. Of course, this is good news for any business in difficulty but it ignores those who are owed money. Mark Davies and our Insolvency team have been doing a lot of work in supporting creditors through this.
Help to grow
I think the help to grow management training for SMEs is great, and I’m sure we will see lots of people making use of that. The boost for apprenticeships and traineeships is also good news. We need to continue to support getting people into work at the beginning of their careers, as this will play a key part in our economic recovery.
So, in the round, not too bad – at least in immediate consequences.
Corporate & Commercial
You might also be interested in...
9th May, 2022
Chester-based law firm Aaron & Partners will host delegates from all over the world in its home city... Read More »