'Getting it done' budget - does it deliver the safety net that businesses need?

Commenting on today’s Budget, PwC NI’s tax director Craig Harrison said:

“The intent from the Chancellor is clear: do whatever it takes to support the economy to cope with the consequences of coronavirus.

“For small and medium-sized businesses, the Budget has provided a safety net in a number of ways: they’ll be supported with sick pay, have breathing space around paying taxes through the Time to Pay arrangement, and they can access cash grants and other business disruption loans which they may need to pay salaries and meet other immediate pressures.

“But there are question marks around whether Stormont will extend the one-year business rates holiday to Northern Ireland, which SMEs in England will benefit from, and also what support will be available for larger companies.”

Levelling up

“The Government’s commitment to levelling up and rebalancing growth across the UK is reflected in the extra £162m announced as part of the City Deals fund for Northern Ireland. This is in addition to the funding already allocated in the Belfast and Derry City deals (£455m).

“However, it is disappointing that there was no action taken on Air Passenger Duty particularly in light of the demise of FlyBe and recent calls from the Northern Ireland business community. Improving connectivity is a critical part of increasing productivity which has been recognised by the Chancellor pledging significant investments in rail and road elsewhere in the UK.”

Hospitality and retail

There are reasons to cheer for many in the industry, with the alcohol duty freeze alongside increased business rates support for pubs. However, there will be a mixed reaction to the announcement around extending the National Living Wage increase to those aged 21 and above. On one hand increasing wages and putting money into the economy will be welcomed but on the other, what challenges will it pose for employers to find additional funding?”

Construction

"A major component to the NI business community is the construction sector.  It remains to be seen how the announcements around infrastructure spend and improvements will flow through. Hopefully it will help strengthen the order book.  At the same time we know that this is a sector heavily affected by heightened compliance around IR35 and supply chain tax governance.  The introduction of the reverse charge mechanism later this year and further changes to CIS as announced today will give businesses further changes to stay on top of.”

Mainstream tax changes

“The Budget was reasonably tame in terms of raising funds - the main tax increasing measures announced were around the expected adjustment to Entrepreneurs’ Relief (lifetime limit on gains reducing from £10m to £1m from today) and some adjustments to Stamp Duty Land Tax with non-residents buying England and NI residential property being subjected to a further 2% surcharge.

“Inheritance tax, in particular Business Property Relief, remains untouched for now.  One of the bigger items announced is the further tweaking to the tapering mechanism which affects the annual pension allowance for higher earners.  For many this will increase the amount of tax relief received on their pension contributions and will be a particular piece of good news for senior doctors who have been critical of pension reforms which meant they were penalised for working additional hours.  This has been seen as a barrier to tackling the waiting list crisis in our hospitals.

“The increase in the Research and Development Expenditure Credit (RDEC) from 12% to 13% is a welcome step and continues to make the UK one of the more attractive regimes globally. This is a clear sign that the Government is actively supporting investment in innovation by UK business and is serious in its ambition to increase UK investment in R&D to 2.4% of GDP by 2027.

“The credit enhances operating profits and is payable to a company irrespective of its tax position which makes it particularly attractive to business. The rate increase suggests it will be here for the long term, enabling qualifying companies to plan their future cashflow.

“Other announcements around the corporation tax rate remaining at 19%, IR35 applying from April and reverse charge changes in the construction sector later this year have all come through as expected.”

 

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