Budget 2021: Rishi Sunak’s VAT and business rates freeze hailed by small companies

Rishi Sunak unveiled a raft of measures aimed at helping small businesses today.

The Chancellor targeted high street firms with a business rate holiday extension until June, followed by a two-thirds reduced rate for the rest of the financial year.

He also confirmed a freeze of VAT at 5 per cent for hospitality firms until June, and to stagger a return to the 20 per cent regular rate with an interim 12.5 per cent step until April 2022. Business leaders had called for another year at the 5 per cent rate.

He also unveiled an extension of the furlough scheme until September – albeit with increasing employer contributions set at 10 per cent in July and 20 per cent from August.

Support for self-employed also goes on until September.

There was money in the form of a £5billion fund for Restart Grants for businesses. Retailers will get up to £6,000 per site from April, while hospitality and leisure businesses that open later in May will be able to claim up to £18,000 to reflect the longer period closed.

There was also a new recovery loan scheme for businesses, with payouts of between £25,000 and £10million, 80 per cent guaranteed by the Government.

Apprentice grants for employers have also been doubled to £3,000. 

Small businesses will also miss out on the impact of an increase in Corporation Tax in 2023. The planned raise from 19 per cent to 25 per cent will not affect firms with profits of £50,000 or less.

He also added a taper above £50,000 to ensure only businesses with profits of £250,000 or greater will be taxed at the full 25 per cent rate. 

There will be a ‘super deduction’ for companies when they invest, reducing their tax bill by 130% of the cost for the next two years. 

Mr Sunak said that the UK will have a ‘pro-business tax regime’ but more needs to be done to encourage immediate investment. 

Mike Cherry, the national chairman of the Federation of Small Businesses, said the Budget would ‘will help many small firms with their final push through to September, but there is little here to aid job creation or help people return to work’.

He added that the VAT and business rate announcements were ‘critical’ and welcomed the furlough announcement, but added: ‘Small employers are still struggling due to high national insurance contributions and the removal of the job retention bonus.’

Here is what a series of small business owners have said about the Budget today: 

Paul Asbridge, founder of live entertainment firm Jam Hot in the West Midlands

 

‘For the Chancellor to stand up and say this Budget protects businesses and that he has done whatever it takes to support everyone in the economy is an insult to millions of small company directors like myself who have received very little help at all. 

‘The self-employed may have received £33billion in grants, but small company directors have been kicked into the long grass. We’re being offered more loans but that’s more debt that we just cannot afford to take on. 

‘As for companies with profits of less than £50,000 continuing to be taxed at 19 per cent, that’s all well and fine but a lot of those companies won’t be around to pay that level of tax because they’ve not had any support to date. 

‘The Chancellor is lucky that small business owners like me love what we do, although to an extent he’s probably playing off the back of that knowing we’ll just take it on the chin. 

‘He also seems unable to understand that not all businesses have a commercial premises. It’s mind-boggling. Overall, it’s been brutal for the past 12 months and Melissa and I, as small company directors, have managed to fall through pretty much every crack going in terms of Government support. 

‘We’ve taken out a bounce back loan but that’s it. We’ve basically been living off savings, while re-investing every last penny into our business to keep it afloat. 

‘The pandemic has been really hard on both of us, our two kids under six and our mental health as a whole. It feels like we’ve been hung out to dry, even though we’re legitimate taxpayers and run businesses that have healthily contributed to the British tax system.’ 

Helen and Ralph Skripek, co-founders of caterer The Butlers Pantry in Derby

 

Helen Skripek said: ‘As a catering firm, there are good bits and bad bits in the March Budget. I’m certainly disappointed to hear that the business rates holiday will only apply until the end of June. 

‘This should have been extended for retail and hospitality for 2021 to 2022 to help us recover. 

‘However, for the furlough scheme to be extended until September is very welcome for our industry. 

‘We’re hoping to be able to bring our staff back before then but may not be in a position to offer them all full time work initially, so flexible furlough support is crucial. 

‘News of the restart grants for hospitality businesses is also welcome. The continuation of VAT at 5 per cent for hospitality is great, but disappointingly this does not include outside catering events. 

‘To help the wedding and events industry recover, the Government should have expanded the discounted VAT rate to this specific sector, too. 

‘On a positive note, though, tiered corporation tax from April 2023 based on profits is a much fairer system for small businesses like ourselves.’ 

Amit and Keisha Shah, co-founders of education firm Teddö Play in Milton Keynes

 

Amit Shah said: ‘The corporation tax reliefs for smaller businesses are great on the surface but have been massively undermined by the fact that the Chancellor has just made the UK far less attractive to the world’s largest companies. 

‘Big businesses and small businesses exist in the same ecosystem and penalising the former will impact the latter, as fewer people will be employed and have money to spend in the real economy. 

‘I’m gutted that the Government can’t see the wood for the trees. With Brexit behind us, this Budget was our opportunity to send a message to blue chips globally that we are open for business, but the message that has gone out is quite the opposite. 

‘The Government has failed to see the bigger picture. Reduced corporation tax for smaller businesses means nothing if there are fewer people spending money in the broader economy because big businesses have taken their money elsewhere.’ 

Robert Kincaid, director of Birmingham-based office catering company, Trenchers

‘Clearly the devil is in the detail but on the whole I feel relatively upbeat. 

‘There are more grants going, the ability to take out Government-backed loans has been extended and, most importantly of all, corporation tax for the smallest businesses will remain at 19 per cent. 

‘The Chancellor has done the right thing in making the biggest businesses shoulder more of the tax burden as we hopefully emerge from the pandemic.’

Luke Davis, founder of seafront restaurant and bar Rockwater Hove in East Sussex

‘As a business owner, the freezing of alcohol duties is welcome news, and it provides a key incentive for guests to return to venues confidently.  Furthermore, the Restart Grants do offer venues much needed support for getting the ball rolling on April 12.

‘However, we would have liked to have seen more from the Chancellor to help businesses get back on their feet.  As he quite rightly pointed out, there are 150,000 businesses in hospitality that have been heavily affected by the pandemic. 

‘We need a seismic response that will incentivise cash injections into the sector. One way of doing this would have been to reopen hospitality to EIS (Enterprise Investment Scheme) investment. 

‘EIS has a track record of injecting huge levels of capital into the private sector, and with breweries and pub groups leading several investment rounds to stay afloat during the pandemic, increasing the threshold for eligible businesses.’

Will Broome, chief executive of pub and restaurant payments app Nomm in London

‘With the periods of lockdown closing the industry, it has come to the attention of many publicans and restaurateurs that in order to meet client demand in a safe manner post-Covid, the implementation of technology will be an essential.

‘The ensuing consequences of the pandemic, has meant that guests are also looking for their favourite venues to host technology that will minimise contact, protecting both guests and servers.

‘While the recovery grants that are being reported do provide significant relief for venues, the sector cannot be put in a similar position where they are expected to take on so much debt for inactivity, but not receive the requisite funding for ensuring every guest is safe. 

‘With previous schemes from the Chancellor undoubtedly helping the sector in times of need, they have raised concern for public safety. 

‘We therefore call upon the Chancellor to look to further funding for venues to have the budget to install protective measures, which will be essential in protecting new team members that are coming out of furlough.’

Mat Megens, founder of money management app HyperJar in London

‘As the Chancellor of the Exchequer announces grants of up to £6,000 for non essential retail and up to £18,000 for hospitality, recovery loan schemes and the extension of the business rates holiday, it’s looking hopeful for businesses who are able to reopen after what has been one of the most challenging years to date.

‘Supporting our local businesses and SMEs is of paramount importance, not only to save the economy but to preserve the UK’s culture. 

‘For every £100 spent in local shops, around £65 of it finds its way back into the community; these SMEs donate a higher percentage of revenue to community groups, charities, and sports clubs than national chains; local businesses generally contribute less to sprawl, congestion, pollution and habitat loss.’

Nic Redfern, UK finance director of personal finance firm NerdWallet in Norwich

 

‘The Government had little choice but to extend the business rates holiday, along with the furlough scheme and VAT cuts. 

‘Given the understandably cautious route out of lockdown, it is only right that businesses – particularly those within the hospitality, retail and leisure sectors – continue to receive financial aid. But these extensions will only go so far.

‘The Government must go further to steer this recovery. The revival of the Eat Out to Help Out scheme, for example, would be a positive step in reigniting the hospitality sector. 

‘Mr Sunak could also consider offering incentives to encourage businesses to take on new staff to tackle the UK’s escalating unemployment issue.

‘The Chancellor’s continued support to businesses is worthy of praise. But today’s short-term measures aside, it is the next steps that will be crucial in shaping the UK’s post-COVID recovery, so he mustn’t be afraid to be bold with his policies. 

‘Given the current state of the economy, it is clear that significant action is needed – the support schemes will have to end in the months ahead, so broader investment and reform will be necessary.’

Atul Bhakta, chief executive of One World Express in Hayes, West London

‘The Chancellor has lived up to his promise by prioritising emergency support for UK businesses.

‘Ongoing pressures caused by Covid-19, not to mention the additional challenges posed by Brexit, have meant that as many as 25 per cent of British companies fear they will not survive until the end of the year, according to a recent study by One World Express. 

‘So, the extension to the furlough scheme, coupled reinforced with support for the self-employed and prolonged VAT cuts, offers some welcome relief.

‘That said, the Government still has scope to go further. Realistically, businesses will not bounce back to their pre-Covid operational capacity for some months, or even years. 

‘So, the Chancellor must look to develop a more long-term recovery plan, as opposed to relying on further extensions to temporary schemes to re-stimulate growth. Otherwise, the UK’s economic recovery could stagnate.’

Andrew Megson, chairman of My Pension Expert in Doncaster, South Yorkshire

‘The Government’s lack of consideration for pension planners is concerning. The lifetime allowance has seen dramatic cuts since 2011 – the Chancellor’s decision to slash the allowance even further merely penalises people who have diligently planned and saved for their retirement.

‘Freezing income tax thresholds is a further blow to pensioners as it will have an inevitable knock-on effect of pension tax relief. The only saving grace is that Mr Sunak has refrained from tinkering with the state pension triple lock – for now, at least. However, such respite could be short-lived, with a series of new tax consultations set to be unveiled on March 23.

‘Now, it is vital that the Chancellor exercises transparency with any further changes to pension policy. This will, at the very least, allow savers to adapt their retirement strategies accordingly. Failure to do so could jeopardise many Britons’ financial futures.’