Budget 2020: Creating a business friendly tax environment

Budget 2020 has introduced various measures to help ‘unleash business’ potential. Whilst the reversal of the original intended cut in the corporation tax rate from 19% to 17% from April 2020 has already been announced, we were reminded that the current rate of 19% is still the lowest in the G7 and the G20.

One particular area that has received attention is Research and Development (R&D) tax relief for companies. To recap on the headlines, this valuable relief enables Small and Medium Enterprises (SMEs) to claim a valuable uplift of 130% x the amount of qualifying expenditure on innovative activities. Where a company is loss-making, a repayable tax credit can be claimed as an alternative. There had been a previous announcement imposing a restriction on the claim for relief from April 2020, capping this at three times the PAYE liability where a company is in a loss making situation. This has now been delayed until April 2021.

An alternative scheme applies for large companies and certain SME expenditure enabling a claim for relief at 12%. This relief known as Research & Development Expenditure Credit (RDEC) has now been increased by 1% to 13%. This change takes effect from 1 April 2020.

Many companies are still unaware that they can make these claims and we frequently find opportunities to help our clients access this tax break.

Further support to encourage the UK to be an innovation-intensive and technology-driven economy will be given by way of access to grant funding in this area.

Other tax measures for businesses include an increase to the recently introduced structures and building allowance rate from 2% to 3%. This relief is available for qualifying investment to construct new or renovate old non-residential structures and takes effect from 1 April 2020 for companies and 6 April 2020 for unincorporated businesses.

Relief for businesses hit generally by the effect of COVID-19 include relief for business rates for some, refunds of statutory sick pay payments and a dedicated helpline to deal with Time to Pay applications.

Generally there were no significant changes but Budget 2020 was more about increases in tax relief for businesses. This may not make up for the reduction in the amount of Entrepreneurs’ Relief available to stakeholders looking to exit but at least a stiff whisky will cost them no more!

If you require more information or would like to discuss the tax reliefs available for your business please contact me or a member of our team.