At 12.30pm on 11 March 2020, Rishi Sunak who had only been in post for four weeks when he replaced Sajid Javid, delivered his first Budget to the nation.
His message was pretty clear, it was a Budget for “getting it done”! Especially given the phrase was used over 20 times during the speech!
But how? I look at the announcements with a focus on the technology sector to see how the Budget takes effect.
From my perspective it was a Budget full of giving, including lots of funding pledges and tax cuts, but how are these going to be paid for? Two areas that stood out was the reduction in the lifetime limit for Entrepreneur’s Relief and a further clamp down on Tax Avoidance.
One thing that was clear is the government’s commitment to research and development. In the Conservative manifesto, they pledged to double investment in R&D to £18bn, however the government has gone further to increase investment in R&D to £22bn. As a percentage of GDP, this investment will be higher than the US, China, France and Japan. A major step forward in the governments pledge to increase public and private investment in R&D to 2.4% of GDP.
There were lots of announcements to combat the dreaded Coronavirus outbreak, including a £5bn emergency response fund for the NHS and firms with less than 250 staff being eligible for a refund on statutory sick pay payments for up to two weeks. Small firms will be able to access “business interruption” loans of up to £1.2m.
So, what else was announced?
Entrepreneurs Relief
Although rumours circulated that Entrepreneurs Relief (ER) could be scrapped altogether, from and inclusive of 11th March 2020, the lifetime limit for ER in which certain share and business disposals attract a 10% Capital Gains Tax rate was reduced from a lifetime limit of £10m to £1m.
Research & Development Expenditure Credit
For Research & Development claims carried out by large companies, or those with projects that are grant funded, a 12% taxable credit could be accessed on certain expenditure. From 1 April 2020, this taxable credit is rising to 13%.
The is also good news for SME companies who undertaken R&D work on behalf of large companies who can also access the RDEC regime and promotes further innovation within the sector.
To confirm, no changes have been made to the existing SME scheme.
Employment Allowance
A valuable relief for smaller companies, from April 2020, the Employment Allowance available to reduce an employer’s NIC bill is rising to £4,000 from the previous level of £3,000.
Corporation Tax Rate
As previously announced in the Conservatives manifesto, the Corporation Tax rate, previously expected to drop to 17% from 1 April 2020 has been abolished and will remain at 19%.
Structures & Buildings Allowances
Businesses that incur qualifying expenditure on the construction, renovation or conversion of non-residential structures and buildings may claim Structures and Buildings Allowances (SBA).
From April 2020, the rate has increased from 2% per annum to 3%.
Clamp down on tax avoidance
Rishi announced that to raise further funds for the NHS, he has pledged funding to HMRC to clamp down on tax avoidance, evasion and non-compliance. The Chancellor anticipates that this will raise a further £4.4bn in tax revenues.
Business Rate Relief
Business which are currently eligible for the small business rates relief will be eligible for a £3,000 cash grant per business.
This equates to a £2bn cash injection direct to 700,000 of the nation’s smallest businesses
Within the detail, the government also announced they would be consulting on potential other areas, a couple of which included:
Cloud & Data R&D
The government will consult on whether qualifying R&D tax credit costs should include investments in data and cloud computing.
Enterprise Management Incentive Schemes (EMI)
The government will review the EMI scheme to ensure it provides support for highgrowth companies to recruit and retain the best talent so they can scale up effectively and examine whether more companies should be able to access the scheme.
