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Less than a week remains until Chancellor Rishi Sunak delivers his first Budget speech, despite being only 27 days into the job.
Sunak, a relative unknown in ministerial terms, parachuted into the top job at the Treasury after his experienced predecessor, Sajid Javid, refused to sack his team of advisers and resigned.
Javid didn’t get the chance to deliver his speech following the cancellation of Budget 2019, which was pencilled in for 6 November but ended up making way for the general election.
A lot of water has gone under the bridge since that autumnal day. After three-and-a-half years of huffing and puffing that cost two Prime Ministers their jobs, Britain has formally left the European Union.
The Government’s manifesto ahead of last December’s election contained no more than 59 pledges to the UK’s 5.9 million businesses, including the promise to “make Britain the best place in the world to start a business”.
They also vowed to “keep costs down for small businesses – rather than hiking their taxes and crushing Britain’s prosperity”.
Next week’s Spring Budget could, therefore, be a big deal for the business community and the changes announced will kick in exactly a month later when the 2020/21 tax year gets under way on 6 April.
To the Government’s credit, they have already got the ball rolling on a manifesto pledge to reduce business rates. Back in January, a plan was hatched to cut business rates by £1,000 for 18,000 small pubs in the UK.
Pubs relief is in addition to an extended retail discount, which smaller pubs are also eligible for. Those eligible for both reliefs could get up to £13,500 off their annual bills in 2020/21.
Other measures to support local high street businesses are coming in from April, too. The retail discount, which currently provides a 33% business rates reduction, will rise to 50% and also apply to music venues and cinemas.
As it stands, business rates in England will increase by 1.7% from 1 April 2020 and net the Treasury an estimated £425m in 2020/21, according to Deloitte.
In light of retailers having their worst-ever year in 2019, it wouldn’t be a surprise to see the Chancellor announce a fundamental review of the business rates system, further reduce business rates for retailers perhaps in the form of a transitional relief, or maybe even a one-year holiday supplemented by the future introduction of an online sales tax.
Employers can get £3,000 off their secondary (class 1) National Insurance bill in 2019/20, and Javid seemed likely to increase this discount. Whether or not Sunak increases it is anyone’s guess.
The Government’s manifesto states that a higher employment allowance will only apply to small employers. Using the House of Commons’ definition of a small employer, that probably means firms with less than 49 workers.
This is a particular bee in the bonnet of the Federation of Small Businesses (FSB), which claimed last year that “late payments and poor practices are a scourge that leads to the closure of 50,000 small businesses a year”.
We can expect further plans to crack down on bigger businesses with poor payment practices that affect smaller businesses further down the supply chain. Whether that’s in the form of handing more powers to the small business commissioner or something different remains to be seen.
Businesses that are either starting out or seeking to grow can apply for government-backed startup loans of between £500 and £25,000.
Interest on these unsecured personal loans is fixed at 6% and repayments can be made over a period of between one and five years.
These startup loans, which the Government claim are popular with female entrepreneurs and ethnic minorities, are set to be expanded.
Mike Cherry, chairman of the FSB, is under no illusions as to what role the UK’s small businesses have to play in a post-Brexit era. "Small businesses are already the backbone of the UK's domestic economy,” he said.
"For our country's future prosperity, we now need to see their share of global [trade] start to catch up”.
The US, Germany and France are the best individual markets for SMEs to trade with in 2020, according to the FSB, although the EU remains the most important trading bloc.
The Government has already pledged to help SMEs become exporters, although (as ever) the devil will be in the detail.
Prime Minister Boris Johnson said last month that “it seems that the changes to entrepreneurs' relief could be more drastic and more imminent”.
The Government already stated it will “review and reform entrepreneurs’ relief”, and it’s possible that Sunak could reveal more instant changes to this capital gains tax break.
Sunak could feasibly increase the existing capital gains tax rate of 10%, reduce the £10 million lifetime limit or tweak the rules around eligibility, such as raising the holding period.
Companies that currently pay the main rate of corporation tax at 19% can expect the planned reduction to 17% not to go ahead, despite being written into law in Finance Act (2016).
Johnson said in the run-up to the December election that this will no longer go ahead, and that it will save the Treasury around £6bn in 2020/21. Confirmation of that should be in the Spring Budget.
We also know the VAT-registration and deregistration thresholds should remain frozen at £85,000 and £83,000 respectively for the next two tax years, although a “smoothing mechanism” – whatever that is – could be included after divorcing the EU.
Business rates reduction will be welcome