Rishi Sunak, the newly minted Chancellor of Exchequer has made a statement to the House of Commons outlining his budget for the coming year. We summarise some of the measures he announced that will likely have an effect on the merchanting industry.
Although most of the budget is likely to have been planned by his predecessor, Sajid Javid, the rising concerns linked to the rise of the Coroanvirus epidemic means that Sunak has had to make some last minute changes.
In order to try and cushion the country from the impact a wide-spread pandemic could have on its people and its economy, the Chancellor has announced a £30 billion economic stimulus, the vast majority of which revolves around sickness and sick pay benefits.
The Prime Minister has already announced that Statutory Sick Pay will be paid from day one, rather than day four but it will now also be available for all those who are advised to self-isolate – even if they haven’t yet presented with symptoms. And rather than having to go to the Doctors people will be able to obtain a sick note by contacting 111.
Estimates are that 20% of the workforce could be unable to work at any one time. The cumulative cost of this would hit small and medium sized businesses hard. To mitigate this, Sunak has announced that, for businesses with fewer than 250 employees, Statutory Sick Pay to any employee off work due to coronavirus will, for up to 14 days, be refunded by the Government in full.
At the same time HMRC has been asked to scale up the Time To Pay service, allowing businesses and the self-employed to defer tax payments over an agreed period of time. Sunak also announced a new, temporary Coronavirus Business Interruption Loan Scheme, whereby banks will offer loans of up to £1.2 million to support small and medium sized businesses in paying salaries, bills, or buying new stock. These loans will be guaranteed by government, up to 80% of losses, with no fees.
Retail businesses with a rateable value of less than £51,000 will see their business rates abolished altogether for the coming year, while businesses currently eligible for the small business rates relief, will receive a £3,000 cash grant per business.
The Research and Development Expenditure credit will be increased from 12 to 13% - a tax cut worth £2,400 on a typical R&D claim.
The Structures and Buildings Allowance will be increased from 2 to 3%, giving an extra £100,000 of relief if you’re investing in a building worth £10 million.
And, the Employment Allowance will increase by a third to £4,000.
The Chancellor announced a review into the long-term future of business rates, which is due to be concluded at the Autumn Budget.
While the fuel duty will remain frozen for another year, Sunak announced the end, for most sectors, of the tax relief attached to so-called red diesel in recognition of its impact on pollution levels. The scheme, which allows selected users to pay duty of just over 11p per litre for diesel, compared to almost 58p per litre for everyone else, has been a £2.4 billion tax break for pollution that has also hindered the development of cleaner alternatives.
Although domestic heating will not be affected, construction does not appear to be one of the sectors that will benefit from an exemption in this, although the change will not take effect for two years, giving businesses time to prepare, and Sunak left the door open for consultation with economic sectors over the summer.
A package of tax and spend reforms is to be introduced to make it cheaper to buy zero or low emissions vehicles.
Tax on pollution
Continuing on the theme of pollution, and in advance of the Treasury’s Net Zero Review setting out the Government’s strategic choices ahead of COP26 later this year, the Chancellor announced further changing to taxation.
The Climate Change Levy, paid by companies, taxes electricity at a higher rate, although it is now a cleaner energy form than gas. From April 2022, the levy on electricity will be frozen while that on gas will rise.
The Climate Change Agreements scheme will be extended for a further two years to support the most energy-intensive industries to transition to Net Zero.
A new Plastics Packaging Tax is to be introduced. From April 2022, manufacturers and importers will be charged £200 / tonne on packaging made of less than 30% recycled plastic.
This aims to increase the use of recycled plastic in packaging by 40% - equal to carbon savings of nearly 200,000 tonnes.
The National Skills Fund will receive £2.5 billion of new money to improve the technical skills of adults. Ministers will look at how to improve the workings of the Apprenticeship Levy.
Moving on to infrastructure, the Chancellor announced a £27 billion investment in strategic roads and motorway due to pay for work on over 20 connections to ports and airports, over 100 junctions, 4,000 miles of road.
A new £2.5 billion pothole fund (£500m a year until the end of this Parliament) will aim to fill 50 million potholes.
£5 billion have been allocated to support the rollout of gigabit-capable broadband in the most difficult-to-reach districts. The Government also wants to legislate to ensure that new homes are built with gigabit-capable broadband as standard.
The Chancellor confirmed nearly £1.1 billion of allocations from the Housing Infrastructure Fund to build nearly 70,000 new homes in high demand areas across the country, and a new £400 million Fund for the Mayoral Combined Authorities to build on brownfield sites. Reforms also to the planning system are to be announced shortly.
There will be a consultation on a new grant scheme from April 2022 for homes and small firms to invest in heat pumps and biomass boilers backed by £100 million of new money.
Ministers will extend the Domestic RHI until 31 March 2022. There will also be a new allocation of flexible tariff guarantees to the Non-Domestic RHI in March 2021.
£96 million have been confirmed for the final year of the Heat Networks Investment Project that ends in March 2022. After that, ministers will spend a further £270 million in a Green Heat Networks Scheme to connect new and existing networks to sources of otherwise waste heat.
The BMF's recent representations for investment in the zero carbon economy appear to have remained unheeded, so were the points made by the recently revived Get Britain Building campaign.