Coronavirus support schemes will be extended to provide protection to U.K. businesses and individuals who are still affected by public health restrictions, Chancellor of the Exchequer Rishi Sunak confirmed as he delivered his budget.
Fuel and alcohol duties will be frozen to help people with the cost of living as the economy recovers. Business rate reliefs, a VAT cut for tourism and hospitality businesses, and reduced rates of stamp duty land tax will also be extended, HM Treasury said in the March 3 budget report. For those in need of direct income support, the government said it will extend a temporary increase in universal credit.
Since March 2020 the government has announced over £280 billion of support aimed at “protecting jobs, keeping businesses afloat, [and] helping families get by,” Sunak said as he presented the budget. “Despite this unprecedented response, the damage coronavirus has done to our economy has been acute,” he said, adding that over 700,000 people have lost their jobs.
“Our economy has shrunk by 10 percent — the largest fall in over 300 years. Our borrowing is the highest it has been outside of wartime. It’s going to take this country — and the whole world — a long time to recover from this extraordinary economic situation,” Sunak said.
The coronavirus job retention scheme (CJRS), also known as the furlough scheme, will be extended until the end of September, Sunak said. The move was announced late on March 2. “For employees, there will be no change to the terms — they will continue to receive 80 percent of their salary, for hours not worked, until the scheme ends. As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask [employers] for a small contribution of just 10 percent and 20 percent in August and September,” he said.
“The extension of the scheme brings stability and peace of mind to employees after a dreadful year of uncertainty. There is still a worry that it will place unnecessary pressure on fragile businesses just as they are beginning to get back to their feet, though,” Kate Nicholls, chief executive of UKHospitality, said in a statement.
Support under the self-employment income support scheme (SEISS) will continue until September with “a fourth grant covering the period February to April, and a fifth and final grant from May onwards,” Sunak announced.
“The fourth grant will provide three months of support at 80 percent of average trading profits. For the fifth grant, people will continue to receive grants worth three months of average profits, with the system open for claims from late July,” Sunak said.
Further details on the fourth and fifth grants, which will be available to many of the “newly self-employed,” were set out in the budget report.
The fourth grant, capped at £7,500 in total, can be claimed starting in late April, Treasury said. “Self-employed individuals must have filed a 2019-2020 self-assessment tax return to be eligible for the fourth grant. This means that over 600,000 individuals may be newly eligible for SEISS, including many new to self-employment in 2019-2020. All other eligibility criteria will remain the same as the third grant. Further details will be published in due course,” it added.
The fifth grant will be targeted by reference to a turnover test. "People whose turnover has fallen by 30 percent or more will continue to receive the full grant worth 80 percent of three months’ average trading profits, capped at £7,500. People whose turnover has fallen by less than 30 percent will receive a 30 percent grant, capped at £2,850,” Treasury said.
Directors ‘Left Out Yet Again’
“This budget will help many small firms with their final push through to September, but there is little here to aid job creation or help people return to work,” said Mike Cherry, national chair of the Federation of Small Businesses. “Ensuring the newly self-employed can now access support marks a big step forward — we’re pleased our campaign has been heard — but directors, who appear to have been left out yet again, will be incredibly disappointed." (Prior coverage.)
The Resolution Foundation estimates that “despite the welcome extension of eligibility” for SEISS grants to those filing a 2019-2020 tax return, “over two-thirds of those workers who have taken an income hit, but been excluded from support, remain in that position.”
“To be eligible for future grants under the SEISS, individuals will need to have filed their self-assessment tax return by midnight on 2 March 2021. Anyone who has not yet filed their return is therefore prevented from making a claim,” said Jeremy Coker, president of the Association of Taxation Technicians. “Those who moved from employment to self-employment partway through tax year 2019-2020 may also struggle to meet the requirement of having trading profits which are at least equal to their non-trading income. For example, an individual who left a job in December 2019 and then started a self-employed business in January 2020 could easily find that their salary in the tax year exceeded their trading profits, meaning they are not entitled to a SEISS grant,” Coker added.
Investment in HMRC
To tackle fraud and error in coronavirus support packages, including the CJRS and the SEISS, the government will invest over £100 million in a “taxpayer protection taskforce” of 1,265 HM Revenue & Customs staff. This is “one of the largest responses to a fraud risk by HMRC,” Treasury said.
The government will also invest a further £180 million in additional resources and new technology for HMRC. This is forecast to bring in over £1.6 billion of additional tax revenues between now and 2025-2026 by enabling HMRC to invest in IT systems, recruit additional compliance staff, help modernize the business rates system in England, and continue to fund compliance work on “the loan charge, historic disguised remuneration cases, and early intervention to encourage individuals to exit tax avoidance schemes,” Treasury said. (Prior coverage of the loan charge and disguised remuneration schemes.)
The Low Incomes Tax Reform Group welcomed the announcement of extra funding but said that to use the money most effectively, HMRC “needs to become fully conversant with the intricacies around the [CJRS] and the loan charge.” These are “one-off initiatives in the system that present complex, technical, and often knotty issues,” said Victoria Todd, the group's head.
“HMRC needs to use the money wisely — to invest in education and training of their staff, which could help them direct their energy and resources most efficiently and effectively,” Todd said.
Tax Measures
There will be an extended loss carryback for businesses and a super deduction for business investment.
“To help otherwise-viable UK businesses which have been pushed into a loss-making position, the trading loss carryback rule will be temporarily extended from the existing one year to three years. This will be available for both incorporated and unincorporated businesses,” Treasury said.
Among other measures to support businesses, Treasury confirmed that any business that took advantage of the original VAT deferral can now opt to use a new deferral scheme “to pay that deferred VAT in up to eleven equal payments from March 2021.”
The government will also extend the temporary 5 percent VAT rate for goods and services supplied by the tourism and hospitality sector until September 30. “To help businesses manage the transition back to the standard 20 percent rate, a 12.5 percent rate will apply for the subsequent six months until 31 March 2022,” Treasury said.
The government will continue to provide eligible retail, hospitality, and leisure properties in England with 100 percent business rates relief from April 1 until June 30. “This will be followed by 66 percent business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties,” Treasury noted.
The budget report also gave further details of the “restart grants” in England, which Sunak announced on February 28. The grants are intended to help businesses plan ahead and “safely relaunch trading over the coming months,” it said. The government will pay “up to £6,000 per premises for nonessential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care, and gym businesses,” and it will also provide further funding for discretionary grants to be paid by local authorities, the report said.
Clarification March 4, 2021: The quote from Jeremy Coker has been expanded from an earlier version to provide more context.