Spring Budget 2021 – Business Perspective, Part 1

On the face of it, not ground-breaking but a huge amount of planning to be done.

By Tom Davies | Accounts Senior, Business Services.

What support continues to be available? Will any further support be made available to see us through to the end of the tunnel? How are we going to pay for the unprecedented levels of support the country has received? Just some of the questions being asked prior to Rishi Sunak’s 2021 budget, one of the most eagerly anticipated in recent times.  In two separate articles, I am covering the key points for businesses to consider. Part one is Business Support.

Coronavirus job retention scheme – CJRS or furlough scheme

One of the biggest lifelines to businesses of all sizes over the last 12 months has been the CJRS. The news (that, perhaps unsurprisingly, was leaked ahead of the budget!) that the scheme is being extended beyond the previous 30 April deadline will be welcome news to many businesses of all sizes.

The extension to 30 September means that it now goes beyond Boris Johnson’s current 21st June ‘normality deadline’ and that businesses will hopefully have a period of time to utilise the scheme while they re-build their operations back to full capacity.

The 30 September deadline will soon be here however and it is critical that business owners who are considering using the scheme until the very end have suitable plans and projections in place to ensure their business can support its wage costs in life after Furlough. The fact the support will reduce from 80% to 70% from 1 July and to 60% from 1 August, must also be carefully considered.

Self-employed income support scheme – rounds 4 and 5

It has been widely publicised over the last 12 months that a huge number of self-employed people were excluded from receiving any support, regardless of what impact the pandemic has had on their business.

The Chancellor announced that the next, and hopefully(!) last two rounds of the SEISS will capture 600,000 people that were previously excluded. However, sadly, some still will miss out.

The eligibility criteria for the scheme has been updated to take into account trading profits for the 2019/20 tax year, which means the fourth round will be open to those who became self-employed in tax year 2019 to 2020, provided a 2019/20 personal tax return was submitted by 2 March 2021.

The monetary value of support also remains unchanged in round four, with 80% of average trading profits (now including the 2019/20 profits in the calculation) being available up to a maximum of £2,500 per month for three months. You will have had to experience a drop in turnover of more than 30% to secure 80% in round five however, with only 30% of average profits available otherwise.

If you qualify for the fourth round, HMRC will contact you directly in mid-April with instructions on how to apply.

Re-start grants

As well as the extremely generous Furlough scheme, the huge levels of Government grants awarded this year have also provided many businesses with a much-needed lifeline through the pandemic.

Some of the hardest hit businesses are in the retail, leisure and hospitality industry and therefore the announcement of additional ‘re-start grants’ worth £6k per premises for retail businesses and £18k per premises for hospitality businesses will come as welcome news, despite some saying this is not sufficient.

Although, after an extremely tough year, many businesses in this industry will still be shocked following their lack of trade, I would urge all business owners to not be short-sighted with this cash and, wherever possible, use it to future proof their business to maximise future wealth.

Recovery loan scheme

Although perhaps not as generous as the CJRS and the various grants that have been made available, the Bounce Back Loan (BBL) and Coronavirus Business Interruption loan (CBIL) schemes have also provided a huge level of security to businesses during a time when cashflow management has been so important.

Although these schemes will come to an end on 31 March 2021, they will be replaced by the Recovery Loan (RL) scheme on 6 April 2021.

With extremely favourable terms relating to repayments, interest, and security this could provide a great deal of comfort to business owners who are worried about their cashflow as we enter the mid-term of this pandemic and start on the road to recovery.

Careful cashflow management, including current, short, medium and long term projections are essential as businesses move forward to a world beyond Covid and a BBL, CBIL or RL may help considerably when planning and making decisions for the future.

Business rates cut

The elimination of business rates for the year to 31 March 2021 was something that many people were asking the chancellor to extend as we begin to emerge from the pandemic.

I am beginning to see businesses’ accounts for accounting periods that span the pandemic and it is evident what a huge lift this has given to all businesses when compared with prior periods.

The 100% deduction being extended to June 2021 for retail, leisure, and hospitality businesses as well as nurseries will be welcomed by all and from 1 July 2021 – 31 March 2022 only 33% of full rates will be payable by these businesses.

It is paramount that the additional savings are factored into cashflow and profit projections for periods through 2021 and early 2022.

Reduced hospitality VAT

Further to the re-start grants the Chancellor has announced that the reduced, 5%, rate of VAT applied to the hospitality and tourism sectors will continue until the end of September, with an interim rate of 12.5% for the 6 months ended 31 March, before returning to the standard rate of 20% on 1 April 2022.

Although this is brilliant news for the sector, it does leave business owners with a tough decision to make. Do they pass on the VAT saving to their customer, thus lowering the prices of their products? Or do they maintain their selling price and pocket the VAT saving themselves?

There is a trade-off here, with benefits to both approaches however I would suggest a business’ wider business strategy may determine what approach is best for them.

Digital commitment

To my surprise, the Chancellor announced on Wednesday that the UK has a "relatively low adoption" of digital tools and software compared to other developed countries” and his budget introduced measures that will begin to narrow this gap.

By announcing his “help to grow digital” programme, which will launch in the Autumn, he aims to help 100,000 SME’s enhance their productivity and profitability by enabling access to software that will vastly improve operation. Part of the scheme will allow qualifying SME’s to claim a 50% discount on such programmes.

As well as offering a discount on software products to SME’s, Mr Sunak also introduced grants available to equip SME staff members with the skills and qualifications needed to be able to operate such programmes.

Being digitally competent is absolutely paramount in today’s ever-changing business landscape and this section of the budget will have come as welcome news to SME’s that are perhaps in a period of digital transformation or looking to change their digital strategy in the short to medium term.

Here to Help

If you have any questions relating to business support measures covered in the Budget, please contact us – hello@wrpartners.co.uk