Budget 2020: The fallout for accountants (part 2)
Last week we brought you the first part of our analysis on what accountants need to know to be up to speed following the Chancellor’s Budget announcement on 11th March. […]
Last week we brought you the first part of our analysis on what accountants need to know to be up to speed following the Chancellor’s Budget announcement on 11th March. A lot has happened since then, so this week we’re combining part two of our analysis with some of the latest updates on how accountants can best support businesses during these difficult times.
Combatting an economic emergency
Hot on the heels of his Budget statement, last week Chancellor Rishi Sunak unveiled a package of financial measures to shore up the economy against the coronavirus impact.
It includes £330bn in loans, £20bn in other aid, a business rates holiday, and grants for retailers and pubs.
Mr Sunak said: ” I want to reassure every British citizen this government will give you all the tools you need to get through this.
“That means any business who needs access to cash to pay their rent, their salaries, suppliers or purchase stock will be able to access a government-backed loan or credit on attractive terms. And if demand is greater than the initial £330bn [for loans] I’m making available today, I will go further and provide as much capacity as required.”
The chancellor said he was extending the business rates holiday to all firms in the hospitality sector and funding grants of between £10,000 and £25,000 for small businesses. Mortgage lenders will also offer a three-month mortgage holiday for those in financial difficulty.
The act of offering £330bn in state-backed loans for all businesses through the banking system, with the help of the Bank of England, has proven very reassuring to many, and is quite an unprecedented move. £330bn equates to 15% of the value of the economy. Normally economic announcements are worth a fraction of a percent of national income.
Companies and trade bodies welcomed the announcement, but said they needed to work through the fine print, and we encourage you to do the same – though it may be some days before many details are finalised.
Johan Lundgren, chief executive of Easyjet, said Mr Sunak’s measure were welcome, but added: “Airlines are facing significant pressure and without government action there is a real risk to the industry. It will be important to work through the detail, but we are already talking to government.”
Retailers, too, have warned the future looks grim without help. The British Retail Consortium (BRC) said the new measures would help ease the burden. BRC chief executive Helen Dickinson said: “The business rates holiday, together with the announcement of a loan package, represent a vital shot in the arm for a sector facing enormous uncertainty. We still need to see the details, but it is a welcome and necessary first step to protect jobs.
Adam Marshall, chief executive of the British Chambers of Commerce, said the size of the grants and loans were good news for smaller businesses. “But what’s going to be hugely important is that cash actually gets to the front line and gets there quickly,” he said.
Visit the gov.uk website to find out exactly how to apply for emergency funding and support for business.
Many businesses will be worried about their staff at this time, though the Chancellor is hoping to ease this burden somewhat by enabling statutory sick pay to be paid from the first day of sick leave to anyone advised to self-isolate, regardless or whether they are showing virus symptoms or not.
The government has also pledged to refund the cost of providing statutory sick pay due to coronavirus to businesses under 250 employees, for 14 days. Please visit the government website (above) for more details.
Budgeting for the future?
Commentators generally agreed that the government’s budget aimed to show a sense of taking back control after leaving the EU. Certain legislations such as the abolition of the tampon tax and the reading tax – all of which were governed by European law – showed that they were trying to make a point.
But despite a number of policies initiated to encourage growth among SMEs, some suggest the Budget still falls short for many businesses.
For example, there was no reintroduction of PAYE cap for SME tax credits, while the PAYE cap introduction has been delayed by 12 months until April 2020.
The statement also revealed no increase to the SME scheme. The increase to R&D investment, will likely benefit some large businesses, but considering the disproportionate number of R&D Expenditure Credit (RDEC) claimants, the majority of businesses won’t see any immediate benefit.
However, the government did announce a £3,000 cash grant for businesses, aimed at small businesses rate relief, as part of its key initiative in supporting businesses in times of low working capital. Though how this pans out is very much up in the air at the moment.