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3 March, 2021 - 16:12

Budget 2021: Protecting the jobs and livelihoods of the British people: Corporate and Business Tax Brief

This was never going to be an easy Budget for Rishi Sunak to deliver, writes Katie Varney, Corporate & Business Tax Partner at Ensors. Whilst still firmly in the midst of the coronavirus pandemic, today’s speech required a careful balance between offering continued support for people and businesses hardest hit by COVID, addressing the mounting national debt and building the future economy.

There were few surprises when it came to the first part of the Chancellor’s plan, with many of the short-term extensions to existing support measures already having been announced prior to today’s speech. 

Still, there was welcome news for retail, leisure and hospitality businesses in the region with the following key announcements:-

  • The extension to the 100 per cent business rates holiday to the end of June 2021, followed by 66 per cent business rates relief to the end of March 2022 
  • The extension of the temporary five per cent VAT rate for the tourism and hospitality sector until 30 September 2021, with a transitional rate of 12.5 per cent to apply for the subsequent six months until 31 March 2022
  • Restart Grants of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality and other sectors that are opening later.

Another important announcement to help businesses that have been pushed into a loss-making position as a result of the pandemic, was the temporary extension of the trading loss carry-back rule from the existing one year to three years. This will be available for both incorporated and unincorporated businesses, subject to a £2million cap.

Perhaps the biggest surprise of the Budget, from a corporate and business tax perspective, was the introduction of a new 130 per cent upfront capital allowances ‘super-deduction’ for investment in plant and machinery. This will apply from 1 April 2021 until 31 March 2023 and will allow companies to cut their tax bill by up to 25p for every £1 they invest.

However, in order to fund this continued support for business in the short-term, the Chancellor’s “fair approach to fixing public finances” sees him asking those same businesses for a contribution in the medium-term.

From 1 April 2023, the main rate of Corporation Tax will rise significantly from 19 per cent to 25 per cent. Small companies, those with annual taxable profits of no more than £50,000, will continue to pay at 19 per cent, with a tapered rate applying for companies with taxable profits of up to £250,000, such that the full headline rate will only apply to companies with profits in excess of this amount. 

To end on some good news for East Anglia, relevant to Cambridgeshire’s growing bioscience and technology sectors, was the announcement of the Government’s intention to launch two consultations: the first on the UK’s Research & Development Tax Relief regimes, with the objective of ensuring the UK remains a competitive location for cutting edge research; and the second on the Enterprise Management Incentive scheme, to assess how more UK companies should be able to access EMI to help them recruit and retain the talent they need to grow.  

At the other end of the A14, Felixstowe and Harwich have been designated as one of eight new Freeports in England, where businesses will benefit from more generous tax reliefs, simplified customs procedures and wider government support, which the government hopes will bring investment, trade and jobs to regions across the country that need it most.

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