Budget 2021-22 Briefing: Business rates holiday extended, restart grants for retailers and reduced VAT
Posted on in Business News, Cycles News, Political News
The 
Chancellor presented his Budget to Parliament today setting out the Government's fiscal measures and response to the on-going Coronavirus (COVID-19).
Key highlights include an extension to the business rates holiday and furlough scheme, as well as new £6000 "restart" grants for non-essential retailers.
This briefing outlines the most relevant Budget policies for the retail sector.
The full Budget is available here.
TAX
Business Rates
"Eligible retail, hospitality and leisure businesses pay no business rates for 3 months"
The 100% business rates relief has been extended for three months until 30th June. For the next nine months of the financial year, business rates relief will be set at 66% with a cap of £105,000 per business. Businesses can choose to opt out of the relief. The business rates multipliers have been frozen at 49.9p for small businesses and 51.2p for larger businesses. Local authorities are being provided with £425m of discretionary business grant funding to distribute against their own criteria.
Super Deduction Corporation Tax
"The Government is investing £25bn in the UK's future growth & prosperity with the biggest 2 year business tax cut in history."
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This measure will allow companies to claim 130% in-year relief for main rate capital expenditure on plant and machinery and 50% in-year relief for special rate capital expenditure, excluding operating leases, second-hand assets and cars from 1 April 2021 to 31 March 2023.
Corporation Tax
"Only 10% of companies will pay the full higher rate of corporation tax."
The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. A Small Profits Rate (SPR) of Corporation Tax (CT) at 19% for companies with annual profits below £50,000 and a main rate of 25% for all other companies, so that they pay less than the main rate.
VAT
"I can confirm that the 5% reduced rate of VAT will be extended for six months to 30th September. And even then, we won't go straight back to the 20% rate"
The Government has extended the temporary reduced rate of 5% VAT on supplies of accommodation, food and beverage services excluding alcohol until 30th September. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31st March 2022.
DUTY RATES
Fuel
"I'm not prepared to raise the price of a tank of fuel"
The planned increase in Fuel duty will not go ahead, and fuel duty will remain frozen for the eleventh year in a row. However, future fuel duty rates will be considered in the context of the UK's commitment to reach net-zero emissions by 2050.
COVID-19 SUPPORT
Furlough and Statutory Sick Pay
"We will protect the jobs and livelihoods of the British people through remaining phases of this pandemic"
The Coronavirus Job Retention Scheme has been extended until 30th September. Furloughed colleagues will continue to receive 80% of their current earnings under the scheme for hours not worked. Employers will contribute 10% of the cost of unworked hours from July and 20% in August and September, in addition to existing pensions and national insurance contributions. The Covid-19 Statutory Sick Pay Scheme has been extended indefinitely to allow SME employers to reclaim up to two weeks of eligible costs per employee.
Other Business Support Measures
A Recovery Loan Scheme has also been announced to provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million from 6th April.
The Self-Employment Income Support Scheme has also been extended with a fourth grant to cover February - April, worth 80% of average trading profits up to £7,500. Applications will be open from late April. A fifth grant will be available from July, which will be subject to a turnover test to ensure that support is targeted at those who need it most as the economy reopens. Retailers with a turnover decline greater than 30% will be subject to 80% grants capped at £7,500 and those with a lesser turnover decline a 30% grant, capped at £2,850.
The Government has announced a new UK-wide management programme for 30,000 SMEs over the next three years. The twelve-week programme, delivered through business schools, will be 90% subsidised by government.
OTHER STORIES
Low Pay Commission Remit Confirmed
"We reaffirm our commitment to end low pay, increasing the National Living Wage to £8.91 from April - an annual pay rise of almost £350 for someone working full time on the National Living Wage".
The Government has confirmed its remit for the Low Pay Commission (LPC) for 2021/22. The LPC will be responsible for making UK-wide recommendations with the aim of reaching a National Living Wage (NLW) of two-thirds of median earnings by 2024, for workers aged 21 and over, if economic conditions allow. The National Living Wage (NLW) is set to rise to £8.91 from 1st April 2021 for workers aged 23 and above. The rate is projected to increase to £9.40 in 2022, £9.85-£9.94 in 2023 and £10.32 in 2024 with eligibility extended to 21- and 22-year-olds from either 2023 or 2024. The LPC will be able to recommend changes to the NLW target and has been tasked to gather additional evidence this year on the impact of wage rates on workers with protected characteristics.
BEIS: National Minimum Wage and National Living Wage: Low Pay Commission remit 2021
Contactless Limit Rising to £100
The Government has approved an increase to the contactless payment limit from £45 to £100 per transaction. Customers will be able to make cumulative contactless payments up to £300, without the need to input chip and pin details. The new limits are expected to be implemented later in the year but exact dates may vary according to card payment hardware providers and contracts.
Transport and Net-Zero
Alongside the Budget, the Government has published the summary of responses to its consultation on Red Diesel, setting out the next steps on these tax changes. As previously announced, the Government will remove the entitlement to red diesel from April 2022, except for use in agriculture, rail and non-commercial heating. The Government's response confirms that exceptions to the ban will be extended to those using red diesel to power vessels for commercial purposes, including fishing and water freight, travelling funfairs and circuses, amateur sports clubs as well as golf courses and non-commercial power generation. The Budget also announced investment in green energy innovation schemes to cut carbon emissions and accelerate near-to-market low-carbon options. The Government will provide £4.8 million to support the development of a hydrogen hub in Holyhead in Wales. The hub will pilot the creation of hydrogen from renewable energy and its use as a zero-emission fuel in HGVs, supporting up to 500 jobs.
Office for Budget Responsibility Projections
‘Swifter and more sustained recovery than expected in November'
The Office for Budget Responsibility (OBR) has projected that the UK economy will return to its pre-pandemic state by the middle of 2022, 6 months earlier than previously projected. The economy is expected to grow by 4% in 2021 and 7.3% in 2022. The OBR judges that the Budget's investment package will boost business investment by around 10% at its peak in 2022-23. Finally, the OBR now expects that the peak in unemployment will be 340,000 lower than that assumed in their November 2020 forecast, highlighting that the Governments' efforts to keep people in work have been successful. The full OBR analysis and forecast are available here.
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