COVID-19 support measures
Looking ahead to this year’s Budget, I expect to see on-going support for small businesses and the self-employed into the summer months.
The furlough scheme is currently set to finish at the end of April but with many businesses likely to be affected by the tiered restrictions that will almost certainly come back into place, it is likely that the scheme will be extended in one form or another, possibly with a gradual reduction in support each month as was the case in the autumn.
Currently the ‘final’ round of the Self-employment Income Support Scheme covers the months of February, March and April, so it is likely that a subsequent scheme for May, June and July will be announced which would be welcome news for self-employed workers.
The business rates holiday for retailers and the leisure and hospitality sector closes at the end of March and I would expect some sort of support to continue into the new tax year to reflect the fact that these businesses still remain closed.
If a business deferred VAT between March 2020 and June 2020 they can now opt into the new VAT deferral payment scheme and instead of paying the full amount by the end of March 2021, they now have up until March 2022 to repay this interest free. However, there is currently no automatic deferral of VAT, PAYE and Corporation Tax payments and although HM Revenue & Customs (HMRC) are being supportive of payment plans, some further support with regards to the timing of tax payments and a reduction in the late payment interest charged, would be well received by business owners.
With certainty as to the type of support they can expect to receive, businesses can focus on planning their spending and looking critically at their cash flow forecasting.
I expect to see on-going support for small businesses and the self-employed into the summer months.
VAT
Post-Brexit the UK has more freedom to change VAT rates on products and services although a change in the standard rate seems unlikely.
The current 5% VAT rate for the tourism and hospitality sectors could well be extended beyond March 2021, however it remains to be seen if they will expand the reduced rate to other business sectors that have been severely affected by the pandemic.
Tax increases
There has been a lot of speculation that the Chancellor will increase taxes to start to claw back some of the huge payments the Government has had to make to deal with the pandemic.
Under the spotlight are both Corporation Tax rates, which could potentially move from the current rate of 19% up to 23% over the next few years and Capital Gains Tax (CGT) rates, which the Chancellor may decide to equalise with Income Tax rates.
It will of course be tempting. If a rise in CGT rates from April 2022 is announced, this could create a short-term boost to tax revenues as many would be tempted to realise gains before the increase and the CGT on UK property must now be paid within 30 days.
However, the Chancellor may take the view, with the pandemic still creating significant issues for so many and with and with a lot of businesses still digesting the impact of the Brexit deal, that any changes are likely to be detrimental.
He may therefore decide to do nothing, particularly as he will not want to put any negative pressure on consumer spending.
For business owners to have the certainty of static tax rates while they focus on re-building their livelihoods, this would be very welcome.
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