UK Chancellor’s Budget offers short-term fix but no longer-term vision.
The Scottish Licensed Trade Association has welcomed the decision by UK Chancellor, Rishi Sunak, to extend the current furlough arrangement until the end of September but warned that the increased employee contributions required by employers from July will cause severe difficulties for many businesses.
While welcoming an extension of the Coronavirus Job Retention Scheme, the SLTA said the increased costs would add to the “already overburdened” financial hardship facing pubs and other hospitality businesses and had hoped the furlough scheme would be further extended well into 2022.
Confirmation that the VAT rate for hospitality firms is to be maintained at a reduced 5% rate until September was “excellent news”. However, with this then increasing to 12.5% for another six months then returning to 20% in April 2022, it was only a “temporary fix”.
SLTA media spokesman Paul Waterson said:-
It’s a game of two halves for the licensed trade and hospitality industry – good news in the short term but not such a sunny longer-term outlook although it does buy us a bit of time. The fortunes of our sector in Scotland will also depend on how our road map out of lockdown looks. The furlough extension is, of course, to be welcomed but the costs incurred after employers are asked to contribute 10% in July then 20% in August and September may be prohibitive for some at a time when many are struggling to survive and waiting to see when hospitality can start to open up north of the Border.”
Discussing VAT, Mr Waterson added:-
Looking at our longer-term prospects, we will be at a disadvantage when the sector does open up and people start travelling to Scotland – we’ll be competing against other countries where the VAT rate for hospitality is lower. As we try to rebuild our industry, we really need VAT to remain at 5% permanently if we are to attract tourists.
It’s absolutely vital that policymakers take a long-term view and we urge the Scottish Government to look closely at today’s announcements and give further consideration of long-term support if Scotland is to lag behind England in the reopening of the hospitality industry.”
Other measures announced today and welcomed by the SLTA included a freeze on alcohol and fuel duty. However, while welcoming that changes to Corporation Tax won’t come into effect until 2023, the SLTA expressed concern that the increase would be substantial.
Waterson added:-
The key thing that we require now is clarity. We expect to be operating within the local authority-based tier system when we do start to reopen in the spring and we really need urgent answers now on how that might look – will there be a relaxation of some of the level 3 restrictions, for example?
If not, then for many it won’t be viable reopening at all. Yes, social distancing will have to continue but we need everyone to reopen – breaking it down into regions just won’t work as it leaves our industry in limbo.”
The following is a breakdown of the Chancellor’s key supportive measures:-
Protecting jobs and livelihoods
- An extension of the Coronavirus Job Support Scheme to September 2021 across the UK.
- An extension of the UK-wide Self Employment Income Support scheme to September 2021, with 600,000 more people who filed a tax return in 2019-20 now able to claim for the first time.
- An extension to the temporary cut in Stamp Duty Land Tax in England and Northern Ireland until September will support the housing market and protect and create jobs.
- A new mortgage guarantee scheme will enable all UK homebuyers to secure a mortgage up to £600,000 with a 5% deposit.
- £5 billion for new Restart Grants – a one off cash grant of up to £18,000 for hospitality, accommodation, leisure, personal care and gym businesses in England.
- A new UK-wide Recovery Loan Scheme to make available loans between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, to help businesses of all sizes through the next stage of recovery.
- Extension of the Film & TV Production Restart scheme in the UK, with an additional £300 million to support theatres, museums and other cultural organisations in England through the Culture Recovery Fund.
- Six-month extension of the £20 per week Universal Credit uplift in Great Britain, with the Northern Ireland Executive receiving additional funding to match the increase. A one-off payment of £500 to eligible Working Tax Credit claimants across the UK.
- Extension to the VAT cut to 5% for hospitality, accommodation and attractions across the UK until the end of September, followed by a 12.5% rate for a further six months until 31 March 2022.
- 750,000 eligible businesses in the retail, hospitality and leisure sectors in England will benefit from business rates relief.
- Extension of the apprenticeship hiring incentive in England to September 2021 and an increase of payment to £3,000.
- £7 million for a new “flexi-job” apprenticeship programme in England, that will enable apprentices to work with a number of employers in one sector.
- Additional £126 million for 40,000 more traineeships in England, funding high quality work placements and training for 16-24 year olds in 2021/22 academic year.
- More than doubling the legal limit for single contactless payments, from £45 to £100
- £10 million to support veterans with mental health needs across the UK.
- £19 million to tackle domestic abuse in England and Wales, with funding for a network of ‘Respite Rooms’ to support homeless women and a programme to prevent reoffending.
- £90 million funding to support our government-sponsored national museums in England due to the financial impact of Covid-19.
- £300 million for major spectator sports, supporting clubs and governing bodies in England as fans begin to return to stadia.
- Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay (SSP) costs per employee from the Government.
- To further support the cashflow of businesses, the government is extending the loss carry back rules worth up to £760,000 per company.
- £100 million for a new Taxpayer Protection Taskforce to crack-down on COVID fraudsters who have exploited UK Government support schemes.
Strengthening the public finances
- Maintaining the income tax Personal Allowance and higher rate threshold from April 2022 until April 2026.
- To balance the need to raise revenue with the objective of having an internationally competitive tax system, the rate of Corporation Tax will increase to 25%, which will remain the lowest rate in the G7. In order to support the recovery, the increase will not take effect until 2023. Businesses with profits of £50,000 or less, around 70% of actively trading companies, will continue to be taxed at 19% and a taper above £50,000 will be introduced so that only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
- Maintaining inheritance tax thresholds at their current levels until April 2026.
- Fuel duty will be frozen for the 11thconsecutive year.
- Alcohol duties will be frozen across the board for the second year running saving drinkers £1.7 billion.
- Capping the amount of SME payable R&D tax credit that a business can receive in any one year at £20,000 (plus three times the company’s total PAYE and NICs liability).
- Maintaining the Lifetime Allowance at its current level of £1,073,100 until April 2026.
- The adult ISA annual subscription limit for 2021-22 will remain unchanged at £20,000.
An investment-led recovery
- Beginning April 2021, the new super-deduction will cut companies’ tax bill by 25p for every pound they invest in new equipment. This is worth around £25 billion to UK companies over the two-year period the super-deduction will be in full effect.
- Eight new English Freeports will be based in East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.
- The £375 million UK-wide ‘Future Fund: Breakthrough’ will invest in highly innovative companies such as those working in life sciences, quantum computing, or clean tech, that are aiming to raise at least £20 million of funding.
- Reforms to the immigration system will help ambitious UK businesses attract the brightest and best international talent.
- A new Help to Grow scheme to offer up to 130,000 companies across the UK a digital and management boost.
- £2.8 million to support a UK and Ireland bid to host the 2030 World Cup and £25 million investment in UK grassroots sports, enough for around 700 new pitches.
- Launching a review of Research & Development tax reliefs to make sure the UK remains a competitive location for cutting-edge research.
- £20 million to fund a UK-wide competition to develop floating offshore wind demonstrators and help support the government’s aim to generate enough electricity from offshore wind to power every home by 2030.
- £68 million to fund a UK-wide competition to deliver first-of-a-kind long-duration energy storage prototypes that will reduce the cost of net zero by storing excess low carbon energy over longer periods.
- £4 million for a biomass feedstocks programme in the UK to identify ways to increase the production of green energy crops and forest products that can be used for energy.
- Publication of the government’s ‘Build Back Better: our plan for growth’.
- Over £1 billion funding for a further 45 towns in England through the Towns Fund, supporting their long-term economic and social regeneration as well as their immediate recovery from the impacts of COVID-19.
- £135 million to progress A66 Trans-Pennine upgrade.
- £28 million to fund the Queen’s Platinum Jubilee celebrations in 2022, delivering a major celebration for the UK.
- Plans for at least £15 billion of green gilt issuance in the coming financial year, to help finance critical projects to tackle climate change and other environmental challenges, fund important infrastructure investment, and create green jobs across the UK.
- £150 million Community Ownership Fund will allow communities across the UK to invest to protect the assets that matter most to them such as pubs, theatres, shops, or local sports clubs.
- £18.8 million to transform local cultural projects in Hartlepool, Carlisle, Wakefield and Yeovil.
- Publication of the prospectus for the £4.8 billion UK-wide Levelling Up Fund, providing guidance for local areas on how to submit bids for the first round of funding starting in 21-22.
Scotland
- Individuals and businesses in Scotland, Wales and Northern Ireland continue to be supported by the UK Government through the Coronavirus Job Retention Scheme, self-employment grants, loan schemes and VAT cuts. Devolved administrations have received Barnett funding to provide support in areas of devolved responsibility.
- The Budget confirms an additional £2.4 billion for the devolved administrations for 2021-22 through the Barnett formula. This is an additional £1.2 billion for the Scottish Government, £740 million for the Welsh Government, £410 million for the Northern Ireland Executive.
- The devolved administrations will also receive £1.4 billion of funding in 2021-22 outside the Barnett formula.
- £27 million in the Aberdeen Energy Transition Zone and £5 million in the Global Underwater Hub in Scotland, the first stage in delivering the North Sea Transition Deal.
- Three Growth Deals in Scotland – Ayrshire, Argyll & Bute, and Falkirk – will receive funding more quickly.