The ‘Pandemic’ Budget: What The Coronavirus Means For Small Businesses
As the coronavirus pandemic plays havoc with our lives, the authorities are scrambling to limit the financial impact.
A week that started with the worst one-day fall for British stocks since the financial crisis in 2008 was followed by a Bank of England interest rate cut, the first Budget of the new Government and more record-breaking stock market drops. All this, meanwhile, overshadowed by the growing threat from the pandemic
Much has changed for your finances in the past few days alone. Rishi Sunak, the Chancellor, used his first Budget to present a major package of support for anyone affected by the virus, but he also outlined the Government’s plans for the future.
Here are the details of the measures the Chancellor has introduced to protect and support the UK’s SMEs:
Statutory sick pay
If you operate as a limited company and you or your employees become infected by the virus and have to self-isolate, the company can pay the affected staff SSP for up to two weeks, which you can reclaim in full from the Government.
This relief applies as long as your business employed fewer than 250 workers as of February 28, 2020. This could provide a welcome cash boost, however small, to your business, as SSP cannot be reclaimed in normal cirumstances.
Unfortunately, if you’re a sole trader or your business is a partnership, you won’t be able to claim SSP for yourself, although you could claim for any employees you may have. If you become infected and have to self-isolate, the rules regarding certain other state benefits have been relaxed, but these won’t be of use to SME owners who do not claim benefits.
Coronavirus Business Interruption Loan Scheme
SMEs affected by the virus will have the option to apply for a loan under the temporary CBILS. This scheme will enable banks and other lenders to make loans to affected businesses of up to £1.2m per loan, with a maximum of 80% of each loan backed by a free government guarantee.
Retail, hospitality and leisure industry business aid
Small businesses in the retail, hospitality and leisure industries will be exempt from business rates for the rest of the year. Furthermore, many will also be eligible for a £3,000 cash grant to help meet their costs.
Certain late payments and fines waived
For businesses that are struggling to pay their tax liabilities, HMRC’s Time to Pay service will be scaled up to give firms affected by coronavirus more time to pay their dues. HMRC will also waive late payment fines and interest when a business is unable to contact HMRC, due to the virus.
Increase in Employment Allowance
The Employment Allowance, which reduces the amount of National Insurance particular firms pay, will be increased from £3,000 to £4,000 as of April 2020. The Primary Threshold, the level at which National Insurance kicks in, will also be increased to £9,500, and the same will apply to the Lower Profits Limit, the level at which Class 4 National Insurance starts.
Entrepreneurs’ Relief lives on
Rumours abounded that Entrepreneurs’ Relief, which reduces the rate of Capital Gains Tax to 10% on the sale of part or all of a business, could be abolished wholesale.
Fortunately, this did not happen, although the relief has been radically pruned. Instead, individuals will be able to claim ER on a maximum of £1m worth of eleigible gains during their lifetime, down from £10m. The reduction took immediate effect from March 11, 2020.
Working from home rate increased for employees
HMRC used to ask for proof of any working from home costs of more than £4 per week, if you operated your business through your own limited company. This figure will rise from £4 to £6 per week, as of April 6, 2020.
Corporation Tax rate holds steady
The rate at which limited companies pay CT was originally planned to fall from 19% to 17% on April 1, but this plan has been shelved. The rate of CT will remain at 19%.
IR35 changes will go ahead
The changes in the way IR35 operates for large and medium-sized private sector businesses who use the services of freelancers will involve the switching of compliance requirements from the contractor to the client, and will go ahead as planned from April6, 2020.
So, a SME-friendly Budget? To be frank, no, not really. There is little practical support for self-employed traders who do not have business premises and for whom self-isolation effectively means a two-week business shutdown. Although the measures to support businesses through the pandemic will be welcome.
It is also surprising that the IR35 changes will go ahead, despite the ongoing House of Lords review and concerns raised by many contractors and representative organisations.