Corona Virus, The Budget and Business

We now know what the Budget will bring in the short and medium term. As predicted, emergency measures were put in place ready for the height of the Corona Virus (Covid 19) which was declared officially as a pandemic yesterday.

The first hint we had that there would be significant measures to deal with the fall-out of the virus was the surprise cut in interest rates from the Bank of England to 0.25 per cent. Sure enough measures are being put in place to try to help SMEs deal with the possible of impacts of self-isolation, school closures and so on. These measures included a £12bn plan which promised to do a number of things including: 

• The business rates retail discount will be increased from 50% to 100% for 2020-21 and expanded to the hospitality sector. The business rates discount for pubs will be temporarily increased from £1,000 to £5,000.
• Temporary coronavirus business interruption loan scheme - delivered by the British Business Bank, the scheme includes £1.2bn in bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan. 
• Deferral of tax payments - a dedicated helpline will be set up for those who need a deferral period on their tax liabilities. 
• Statutory Sick Pay - the government will refund Statutory Sick Pay (SSP) costs related to coronavirus for businesses employing up to 250 staff. The refund is limited to two weeks per employee.

For people not eligible for SSP, such as the self-employed, the following measures were announced:

• “New style” Employment and Support Allowance will be payable for people directly affected by COVID-19 or self-isolating according to government advice from the first day of sickness, rather than the eighth day.
• People will be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 (or self-isolating), without the current requirement to attend a Jobcentre.

However the prediction this would impact on plans for a ‘landmark’ Budget did not come to fruition. On the face of it, it was all spend, spend, spend and much was promised though in some cases detail was thin. There was repetitive rhetoric of ‘this government gets it done’ or ‘this Budget gets it done’. Clearly a deliberate linguistic catchphrase to ram home that message for the Conservatives. 

There was much promised around spending on new roads – including the A303 around Stonehenge, spending on rail services, spending on housing, the NHS, education and freezing of fuel and alcohol duty. There were also some key omissions, little was said about social care which is under huge strain, nothing was said about IR35 apart from a vague hint about what HMRC would do. However on closer inspection of the documents IR35 will go ahead despite huge lobbying from those freelancers across many sectors including the media, IT, care etc. Also was little said about the child care sector – and that might really matter if Covid-19 reaches the predicted peak. 

We’ve asked some of Swindon’s business owners for their reactions to the Budget. 

Jamie Martin, of Correct Careers Coaching, said: “It's great to see the Budget's emergency investment regarding Corona Virus to help with personal lives and the impact COVID-19 will have on a business. It’s also positive to see the extra NHS funding and emergency response support to help with the UK's wellbeing. The refunded sick pay payments (two weeks) to firms with less than 250 staff is a great addition to supporting small businesses.” 

Hadi Brooks, owner of Rays Ice Cream, said: “The reimbursement of SSP if staff are forced to self-isolate is a huge relief. It’s feasible staff will have to do it simultaneously so to know the cost won’t be borne by the business, particularly when sales are likely to be adversely affected, is great.

“The availability of loans to help small businesses with the effects of the virus if needed is also welcome. Although I’ve not yet seen details of these loans.

“The suspension of business rates for smaller businesses is very welcome too and will hopefully go some way to helping fill empty town centre units.”

Chris Goodchild, of SupportWise IT Support, said: “I am very happy to hear about the £5bn investment for Gigabit broadband across the hardest to reach parts of the UK. In an ever connected world, everybody should have access to high-speed internet. 

“As a small business, the abolishment of business rates is great news. This will help stores on high streets and with the extension of the retail discount to certain other sectors (such as museums and small B&Bs) will help those hardest hits.

“Corona virus - giving the NHS what it needs, no matter what the cost is the right attitude to take. This, with the £500m invested for councils who have been the most affected will allow us to recover more quickly. 

“The continued investment in Science (with the Science Institute being granted a £1.4b finance boost) as well as an extra £900m dedicated to Space, Nuclear Fusion and Electric Cars shows the current government are committed to UK being at the forefront of future technologies. 

“While light on green measures, a plastics tax and a levy on firms who have less than 30% recyclable materials will hopefully push businesses to change the way products are presented to the consumer. With a rise in shops offering the option to refill containers with their products, could this become more of a norm such as in Canada/US and France?”

Nicki Kinton, of Swindon-based business Confident Cashflow, was less impressed and felt the Budget didn’t seem to address longer term support for small businesses, especially around late payment. She said: “It was a budget of spending. With commitments on infrastructure, environment and science, which naturally all impact on businesses big and small. But the big focus was on responding to Corona Virus, which, aside from some temporary relief on business rates for some sectors and the very welcome rebate on Statutory Sick Pay for small businesses, has trumped any potential action that could have been taken to stimulate growth and improve the cash flow of the nation’s small businesses.”

Optimum Professional Services Account Director, Michael Blaken, said:

“In the main it was interesting, and nothing too alarming, but we need to see the detail, particularly around the offers for business, as regards helping them to get through the Corona virus.

“National Insurance threshold for employees increasing was talked about but employers’ National Insurance wasn’t mentioned so we’re keen to see the fine print for this.

“Reforming Entrepreneurs’ Relief is a sensible measure, and will still help people selling their businesses. Research & Development relief is good news, but beware because HMRC is getting more curious about what is – or, more pertinently, is not – R&D.

“We also welcome the move to reinstate the time to pay arrangements that were originally introduced after the financial issue of 2008/09.”

Martin Gurney, tax partner with Haines Watts Swindon, said: “As with all Budget announcements, the devil is in the detail and therefore we will see further information and commentary emerging over the next few days.  

“The core of our client base is owner-managed business and high wealth individuals.  For those groups, there were a few important measures:

• Support for the business costs of coronavirus. 
• Maintaining the rate of corporation tax – chargeable at 19%
• Increase in the Employment Allowance – an increase from £3,000 to £4,000
• Reduction in annual  pension contribution “tapering” – the threshold for tapering will increase from £110,000 to £200,000
• Increase in Research and Development Expenditure Credit (RDEC) – an increase from 12% to 13%
• Business rate relief in retail, leisure and hospitality sectors – for property with a rateable value of less than £51,000
• Reduction in Entrepreneurs’ Relief for Capital Gains – the gains upon which Entrepreneurs’ Relief may be claimed is reduced from £10m to £1m
• Removal of red diesel relief –removed across various sectors with protection for farming and other industries.

“The Chancellor suggested Entrepreneurs’ Relief was not actually an incentive to, or being significantly accessed by, entrepreneurs.  I would disagree.  We will be looking at the measures closely and also at how we can best protect our clients’ wealth and ability to access and maximise the relief.

“There will be lots more detail to come in the next few days.  In the meantime, we are focussing on safe working practices to protect staff and clients from the impact of coronavirus in order to provide an uninterrupted service.” 

Our own founder Liz Hutchings said: “I think many SMEs will be breathing a sigh of relief. With Corona Virus already having an impact and potentially having staff on 14 days’ isolation, the government’s plan to scrapping business rates for those with a rateable value of less than £51,000, refunds on SSP, £3,000 grants for SMES and the scaling up of HMRCs Time to Pay service should alleviate some panic.

“Non Coronavirus announcements were also welcome; with the NI threshold increasing, staff will see a direct positive impact in their salaries and will benefit from the cash boost for affordable homes. Total Guide to…will benefit directly from the confirmation of investment in broadband (providing this is rolled out quickly), the £500m in supporting electric vehicle charging and this will incentivise us (and others we hope) to continue to have electric vehicles for our fleet.”