by Dawn Ford
51 weeks ago, Rishi Sunak delivered his first Budget to the House of Commons, with much fanfare and big promises about the levelling up agenda. It was 11th March 2020 – the first confirmed Coronavirus death in the UK had come but a week before and the concept of a national lockdown was still something that we thought could only happen in other countries.
Against the backdrop of what has happened since, yesterday’s Budget held few surprises. In part because many of the key announcements had been trailed in the press for weeks in advance and in part because the twin needs of continuing to support people through Covid and needing to recoup the billions of pounds that have funded that support were always likely to be front and centre.
But for the lack of big surprises, it has delivered some much needed certainty in a number of key areas.
As was much expected, IR35 is going ahead as planned on 6 April 2021. The Government has provided some welcome amendment to the previous drafting which does now make clear that umbrella companies which had inadvertently become included in the definition of intermediary are now once again removed from it (subject to their treating their contractors as employees for tax purposes). Logically, this was always going to be the case, since the purpose of IR35 is to ensure that PAYE and NICs are appropriately paid and if they are already being paid, that was not HMRC’s target for reform. You can find the details of the new legislation at section 16 here: https://publications.parliament.uk/pa/bills/cbill/58-01/FinanceDocuments/BudgetResos0321.pdf
For clients who have yet to get their business in order with respect to IR35, that means there is now a scant 4 ½ weeks to get SDS in place for those contractors who will still be working through intermediaries from 6 April 2021 onwards. If you need help with this, or indeed just to track down all your in scope contractors in your business, do contact our specialist team: firstname.lastname@example.org
More generally, as well as for IR35 specifically, there is a clear drive towards enforcing better compliance of taxation legislation. There was a Targeted Anti-Avoidance Rule (TAAR) introduced specifically to avoid circumvention of the definition of intermediary to gain tax advantage within IR35, but more broadly, money was set aside for taxation compliance and enforcement. So it’s a good opportunity for businesses to
re-assess taxation compliance across the board – as many of us are only too aware not all of our taxation law is as user friendly as it could be.
For the national workforce generally, it was welcome news that the furlough scheme would now continue through until 30 September 2021 (an extension from the previous expected end date of 30 April 2021) with employer contributions starting to increase from 1 July (employers were already paying employers NI and pension contributions on furlough pay). The comparable Self Employment Income Support Scheme, which attempts to provide equivalent support to the self employed was extended for the same period. One of the major complaints about this latter scheme has been that those who had only recently become self employed when the pandemic started, got little or no support, but with another year of tax returns now recently filed, the Government estimates another 600,000 will now be eligible under this scheme.
Of course even with these measures in place, there has still been a 700k increase in the unemployment figures; but this figure of course would have been many multiples higher without the investment of these schemes and many employers will be relieved that this extension does not force them into wide scale redundancies at this point.
Those who are in work will be pleased that the National Living Wage is being increased to £8.91 per hour and this rate will also be available to those aged 23 and above (it is currently those aged 25 and above). The National Living Wage is also becoming compulsory for those aged 23 and over so it has effectively morphed into the National Minimum Wage for this age group.
Those in work may, however, be less pleased that the personal tax threshold will rise to £12,750 and then be frozen until April 2026 (the higher rate being subject to a similar freeze at £50,270). While this will mean with every pay rise (where the employee earns more than £12,750 per annum), the employee will have to pay more tax, this at least only has an impact in circumstances where the employee has an uplift in pay.
For employers, there was confirmation that SMEs will continue to be able to claim up to two weeks eligible SSP costs per employee, although it was re-inforced that this is a temporary measure and will be rescinded in due course. And for those businesses which do or could make apprenticeships part of their hiring and development strategy there is extra funding of £3k per hire between 1 April and 30 September 2021 (up from £1.5k currently, or £2k for apprentices aged 24 and under). Since the introduction of the Apprenticeship Levy there has been a significant fall in the number of apprenticeships, especially lower end apprenticeships, offered and it is to be hoped, although remains to be seen, if this boost will reverse that trend.
For those still struggling with access to sufficient good candidates in the wake of the reduced net immigration post Brexit, it’s good news that an unsponsored points based system for STEM candidates as well as an improved visa process for scale-ups are en route, but we will have to wait until next year for them.
And then more generally there was a swathe of more commercial good news stories for companies with the business rates holiday continuing until June, grants for many business types that have been forced to close through lockdown, continuing reduced VAT in the hospitality sector for the next year and tax deductible investment costs.
The proposed increase in corporation tax from 19% to 25% in April 2023 has caused some controversy but is only applicable for company profits over £250k, so those companies for which the recovery will take longer, won’t face those increases until they return to robust profitability. And while those who already post significantly higher profit figures than this, there is at least time to budget for it.
Overall, the Budget provided a balance between the immediate ongoing coronavirus support and the longer term needs to re-balance the books. And for all those discussions that will follow in the about what should have been included, but wasn’t, when the pubs re-open, you can at least enjoy your drink at pre-lockdown prices, with alcohol duties frozen for the second year running.