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Spring Budget - what it means for the UK’s SMEs

Following the series of announcements from Chancellor Rishi Sunak’s Spring Budget about the future of the UK economy, we have pulled together a short overview of what business owners can expect going forward.

Recovery Loan Scheme

The Recovery Loan Scheme (RLS) will launch on 6 April 2021 following the closure of the existing Covid-19 debt schemes:

  • Coronavirus Business Interruption Loan Scheme (CBILS)
  • Coronavirus Large Business Interruption Loan Scheme (CLBILS)
  • Bounce Back Loan Scheme (BBLS) – on 31 March 2021

The RLS aims to help businesses affected by Covid-19 and can be used for any legitimate business purpose, including managing cashflow, investment and growth. It is designed to appeal to businesses that can afford to take out additional debt finance for these purposes, and is open to all firms, including those who have already received assistance under existing COVID-19 support schemes.

Scheduled to run until 31 December 2021 (subject to review), it will provide lenders with:

  • A guarantee of 80% on term loans
  • Overdrafts between £25,000 and £10 million per business
  • Invoice finance and asset finance between £1,000 and £10 million per business

Finance terms are up to six years for term loans and asset finance facilities, while for overdrafts and invoice finance facilities, terms will be up to three years.

Super-deduction Scheme

Other areas of interest for businesses included a 130% ‘super-deduction’ for expenditure on qualifying plant and machinery, and a new three-year loss carry-back option to crystallise tax refunds for businesses struggling under Covid-19.

The Super-deduction Scheme is, in effect, an extension of the Annual Investment Allowance (AIA) regime.

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance, which will enable companies to cut their tax bill by up to 25p for every £1 they invest.

Investing companies will also benefit from a 50% first-year allowance for qualifying special rate (including long life) assets. Plant and machinery expenditure incurred under a Hire Purchase or similar contract must meet additional conditions to qualify for the super-deduction and special rate relief.

Corporation Tax

The rate of corporation tax will increase to 25% from April 2023 for businesses with profits over £250k from the current rate of 19%.

The rate for firms with profits under £50k will remain at 19%, while for those with profits between £50k and £250k there will be a taper, ensuring only businesses with profits of £250,000 or greater will be taxed at the full 25% rate

Transport Taxes

The Government will freeze fuel duty in 2021-22 for the eleventh consecutive year. The Chancellor confirmed future fuel duty rates will be considered in the context of the UK’s commitment to reach net-zero emissions by 2050.

Vehicle Excise Duty (VED) for cars, vans and motorcycles will be uprated in line with RPI (retail price index) from 1 April 2021.

For heavy goods vehicles (HGVs), VED will be frozen for 2021-22 and the HGV Levy will be suspended for another 12 months from August 2021.

From 6 April 2021, fuel benefit charges and the van benefit charges for company vehicles will increase in line with CPI (consumer price index)

Apprenticeships

 An additional £126 million will be set aside in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Employers in England who hire new apprentices between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme. This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices those aged under 25 with an eligible Education, Health and Care Plan.