Little to aid job creation or help a return to work, says SME champion
The Chancellor said the UK has a “business-friendly government” and a “pro-business tax regime” as he unveiled a raft of measures aimed at helping the SME sector recover from the devastation of three lockdowns.
This included a recovery loan scheme of between £25,000 to £10m to replace support such as CBILS, and guaranteed by government by up to 80%.
The Business Rates holiday will extend to the end of June, followed by a two-thirds discount for the following nine months, which Mr Sunak said is a £6bn tax cut for business.
For businesses in the hospitality and tourism sector the five per cent VAT rate is extended to September 30, after which it will increase to 12.5% for another six months before returning to normal from next April.
Support for training and increasing skills among SMEs has been increased through two specific schemes. Help to Grow Management will provide training for SMEs, with the Government meeting 90% of the cost, while Help to Grow Digital will offer training and 50% discount on new productivity-enhancing software for SMEs, which will benefit an estimated 100,000 small firms.
Also, through a ‘Super Deduction’ measure companies will be able to offset 130% of the cost of new machinery over the next two years, the biggest business tax cut this century, according to Mr Sunak, and one that is expected to boost business investment by 10%, according to the Office of Budget Responsibility.
But, the Chancellor said more than £100bn of support for business must, at some point, be repaid, and from 2023 corporation tax on company profits will rise from 19% to 25%.
However, SMEs with profits of less than £50,000 will continue to pay 19%, which means that 70% of companies will be unaffected.
Mr Sunak also confirmed there will also be a doubling of incentive payments for companies to employ apprentices, up to £3,000.
John McCaffery, tax partner at Chartered Accountants Alexander & Co, said the key themes in the Budget were to support the economy out of lockdown, free up cash and investment, and protect and seek to increase employment with an eye to the fact that this will all need to be paid for.
In terms of SME businesses, he said the news was largely positive, though it is noted that a significant corporation tax hike will take effect from April 2023.
Mike Cherry, Federation of Small Businesses (FSB) national chairman, said: “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.
“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.
“Thousands of small businesses are on the brink of collapse and thousands more are suffering from low confidence as cash reserves dwindle. They will welcome both the extension of flagship support schemes that have kept them going over the hardest year they have ever faced, as well as confirmation of new support measures around taxation, employment and cash grants.”
He said the continuation of Business Rates and VAT discounts is critical, and it’s important that those in supply chains benefit from them, not just those that neatly fit the definitions of frontline retail, leisure and hospitality.
He added: “The new Super Deduction option sounds very promising, and we look forward to further detail on the investments it will cover – it should be made accessible to the smallest firms.
Mr Cherry said there is now a question of how to help small firms with substantial debt – a student loan model for repayments and support to adopt employee ownership both mark constructive ways forward, he said.
“Maintaining the £85,000 threshold for VAT registration is positive. However, it will not resolve the bunching issue, where firms near that turnover level and stop growing. We hope policymakers will look again at the OTS’ proposal for a smoothing mechanism.”
Paul Cherpeau, chief executive of Liverpool Chamber of Commerce, said: “The extended support for business announced by the Chancellor is a positive sign that he is listening.
“British Chambers have pushed hard for the extension of the furlough scheme and the announcement yesterday has come as a huge relief for so many businesses.
As well as providing guaranteed financial support it also provides greater clarity and confidence to enable businesses to plan for the future. The £5bn of ‘restart’ grants will also provide a lifeline for many businesses in the retail and hospitality sectors.
“We stated that a Budget for stimulating growth was essential. The commitment for the Super Deduction investment tax relief suggests that recapitalisation of businesses and an infrastructure-based recovery is at the core of the economic strategy.
“The decision to raise corporation tax will be concerning to UK businesses, coming on top of what has been a really challenging year on so many levels.
“Our fear is that it will inhibit business growth and slow down our economic recovery when it is introduced in 2023. Ensuring such a policy is reviewed to be commensurate with the state of the economy is important to a sustainable recovery beyond the immediate short term.
“As we emerge from the pandemic the Government must look at using a range fiscal stimulus measures to help unlock private investment and encourage innovation.”
He added: “The news that Liverpool City Region’s bid to be a Freeport has been successful is very much welcomed by all partners and provides the opportunities to really capitalise on our strengths, attracting inward investment to our region and building upon our net zero credentials and future opportunities.
“Locally businesses must be at the heart of the development of the Freeport and we look forward to working with partners to make sure they have a voice.
“The overall verdict? Good news in the short term for many businesses affected by COVID-19, but we must also keep our focus on the longer term and make sure that the Government delivers on their commitments to level up the economy.”