Rob Wardle, Head of Tax at Azets in the North West, one of the UK’s largest regional accountancy and business advisors to SMEs and Top 10 accountancy firm, comments on the measures introduced in the Chancellor’s Budget and their impact on the North West economy.
The extension to furlough, hospitality grants (£6k per site to a total of £18k), continued rates holiday and reduced business rates moving forward together with frozen duties for alcohol will support the badly affected North West hospitality sector as it really needs the help. However, there is no guarantee this will be enough for some businesses depending on the timeline for release of lockdown.
Further measures such as the ability to carry losses back for 3 years will enable additional relief for a loss making year during Covid (this can help to accelerate relief and reclaim tax paid in prior years) and the super deduction for capital investment (130% of expenditure against taxable profit) which can only be beneficial for North West businesses and drive investment.
However, with this comes the expected increase in corporation tax (CT) rates for businesses which puts even greater reliance on utilising reliefs such as R&D tax credits. The North West, like many other regions, still does not have the expected uptake in such claims and with CT rates increasing to potentially 25% by 2023 this should be reviewed. There will be a small profits rate which will enable businesses with profits under £50k to continue paying CT at 19% which means a large number of North West businesses will not be affected by the increased CT rate and will help those new business start-ups which are much needed.
Jobs were a big part of the recovery plan and the news of the Liverpool City Region Freeport will create a regional hub for trade, innovation and commerce.
The proposed freeport and associated reductions in custom duties and VAT will help stimulate the North West economy and could provide solutions to EU/UK distribution problems. However, further detail is needed on how it will work in practice, the levels of support that will be available and which types of businesses will benefit. The freeport announcement coupled with the investment allowance of 130% will make the UK more attractive for inward investment. This will provide strong short term tax relief for inward investors to set up in the UK. This in turn may provide additional international jobs in the region.
Continuing the jobs theme, the announcement of flexible apprenticeship grants of £3k per apprentice of any age taken on between 1st April and 30 September 2021 should hopefully help to increase employment both regionally and nationally especially for young people who have been hit by the pandemic.
Preston, Workington, Bolton, Cheadle, Carlisle, Leyland, Southport, Staveley and Rochdale will receive £211 million from the Towns Fund. The Greater Manchester Combined Authority will receive £8.6 million in capacity funding to support preparations for intra-city transport settlements; Liverpool City Region will receive £5.6 million.
Income tax will remain at current rates and while this means the personal allowance will not increase above £12,570 until 2026 keeping net wages the same, it also means that the planned increases in individuals’ take home salary with increased PA will not occur. As a poorer area this could affect workers in the North West more disproportionately than other regions. No CGT and IHT changes (with the exception of freezing of the nil rate bands) were implemented at this time however the Chancellor mentioned further tax implications and policies for a number of years so I would expect this to be picked up in future budgets. For completeness the CGT annual exemption will remain at £12,300 for individuals. Private clients are now in a position to carefully consider their assets in the round to make decisions when selling their assets or passing their wealth on to the wider family.
As expected from pre-Budget leaks, the Chancellor has not introduced a wealth tax.
This is good news and leaves wealthy taxpayers with more funds to stimulate economic growth through investment. The Chancellor has clearly recognised the draining nature of wealth taxes, which can place an undue burden on asset-rich, but cash-poor taxpayers.
Lastly, SDLT will remain at 0% up to £500k property value and £250k from 1 July-30 Sept which will hopefully mean the property sector in the North West remains buoyant for the next 6 months at least.
For more member news, click here.