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Recovery budget 2021- a once in a generation fiscal intervention

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Today Rishi Sunak, Chancellor of the Exchequer, set out a once in a generation budget with very far-reaching ramifications, priming the UK business sector to recover from the economic damage caused by the Covid-19 lockdown.

The key points for the business sector are:

Corporation Tax

In April 2023 corporation tax will rise to 25 per cent from its current 19 per cent rate. If profits are £50,000 or less then the rate will remain at 19 per cent. A new “super-deduction” will allow companies to reduce their tax bill by up to 25 per cent if certain investments criteria are met.

Recovery Loan Scheme

Following the closure of the Coronavirus Bounce Back Loans and Coronavirus Business Interruption Loans (CBILS) schemes in January the Government announced a new Recovery Loan Scheme, with the Government set to guarantee 80% of the finance to the lender. The scheme opens on 6 April 2021.

Future Fund: Breakthrough

Companies with high levels of R&D will be able to apply for government investment when aiming to raise at least £20million.

UK Infrastructure Bank Launched

The Leeds-based bank will have £12 billion to invest in projects that support the government’s “green industrial revolution”. Tom Pemberton's blog on the new bank is available here.

EMI Share Options

The Government announced a review of the EMI scheme aimed at ensuring the scheme provides the right support for high-growth companies, and to review whether EMI options should be extended to a wider range of companies.  There is a suggestion that the Government may look at the current restriction which precludes companies with more than 250 employees from granting EMI options.  In addition the protections for EMI option holders who cease to meet the working time requirements by reason of being furloughed will be extended to 5 April 2022.  The protections were originally intended to last until 5 April 2021.Jessica Nugent's guide to EMIs is available here.

Housing Sector

In a boost for the housing sector the current stamp duty land tax holiday will be extended by three months to the end of June. From July until September the cap will fall from £500,000 to £250,000.

New home buyers who cannot afford large deposits will also benefit from government mortgage guarantees meaning that retail mortgages of up to 95 per cent will be available from April.

Arts Sector

A further £400 million to help arts venues in England, including museums and galleries, has been added to the Covid Recovery Fund.

Summer Sports package

A further £300 million funding package for the professional sport sector in England has been announced alongside £25 million to support grassroots football.      

Business Rates Holiday

The Business Rates Holiday has been extended to the end of June at the same 100% rate. From July 2021 to March 2022 the rate cut will be two thirds and capped at £2million of relief per business. The cap will be lower for businesses that continued to trade.

Freeports

Eight “special economic zones to make it easier and cheaper to do business” with tax cuts and simpler planning rules have been announced, they will be located at East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames, and Teesside.

Hospitality and Tourism  

Reduced rate of 5% VAT for the hospitality and tourism sector has been extended until September.

Visa Reforms

Visa reforms have been announced to attract top talent, including a new unsponsored points-based visa for science, research and tech workers, and an expansion of the existing visa programme for scale-ups and entrepreneurs.

Small Business Support

Management training, free digital technology advice and discounts on productivity software will be made available to 30,000 small business. Charlotte Moorhouse's guide to the scheme is available here.

Apprentices

Incentive grants for apprenticeships will rise to £3,000 and £126 for traineeships.

Furlough Scheme

The Furlough Scheme has been extended by five months, to the end of September 2021. The government will continue to fund wages for furloughed employees of up to 80 per cent of their wages (for hours not worked), to a maximum of £2,500 a month. The Government’s contribution towards furloughed employees’ wages will however reduce and employers will be required to pay 10 per cent of these wages in July and 20 per cent in August and September. Clare Gilroy-Scott's guide to furlough has been updated here.

Income Tax

A "stealth" rise in income tax has been introduced by freezing the personal allowance thresholds.

Self-employment grants

Grants for the self-employed will be continued with a fourth grant covering February to April. The grant provides of up to 80 per cent of average trading profits, capped at £7,500. A fifth grant will be made available from July.


Goodman Derrick LLP

A London law firm focused on delivering an exceptional service to ambitious businesses and entrepreneurs.

More information

This guide is for general information and interest only and should not be relied upon as providing specific legal advice. If you require any further information about the issues raised in this article please contact the author or call 0207 404 0606 and ask to speak to your usual Goodman Derrick contact.