Budget 2020 – the UHY view

11 March 2020

The new Chancellor of the Exchequer, Rishi Sunak, today presented his first Budget.  Whilst opening comments focused on the coronavirus outbreak, there were also significant announcements on benefits, tax, and the wider economy.

Our experts from around the UK watched the announcement and below are our immediate reactions to some of the proposals.

Corporate Tax maintained at 19%

“The decision not to reduce Corporation tax is going to cost businesses £4.6bn in 2020-21, rising to £7.5bn in 2024-25.

Whilst that is not a surprise it is still a disappointment, I think the Chancellor may have missed an opportunity here to attract inward investment into the UK following Brexit. Ultimately, it could end up costing the Exchequer more than it raises.

The plan was that low corporation tax was going to be the UK’s real strong selling point to businesses from abroad. Now it is less certain what the UK’s tax advantage is as they have given away that blockbuster corporation tax decrease, piecemeal in a series of smaller tax reductions.”

Nikhil Oza, Corporate Tax Director

Drinks sector benefits from freezing of duty

“It is really good to see that the drinks sector benefits from a freezing of the beer, cider, wine and spirits duty. This, together with the business rates discount of £5,000, should help pubs and drinks businesses keep being the heart of the community.”

James Simmonds, head of drinks sector 

Improvements to Electric Vehicle charging infrastructure

The Government has announced further investment in Electric Vehicle (EV) charging infrastructure so that all drivers will be within 30 miles of a charging station.  This is a welcome and much-needed step if the Government is to go ahead with its plan to ban the sale of petrol and diesel cars by 2035.   EV charging points are still very limited, so any measure taken to improve access to charging infrastructure is positive.  It will be interesting to see in practice how the Government plan to deliver it . ”

David Kendrick, head of automotive 

VAT – supplies of digital copies of specified publications

“The Chancellor announced that supplies of digital copies of specified publications will no longer be subject to VAT from the end of 2020.  This follows a December 2019 tribunal loss for HMRC who have been granted leave to appeal. The Chancellor has taken a view that reading should not be taxed.  It is hard not to agree and this was the view of the courts. ”

Sean Glancy, VAT partner

Increase in Research & Development Tax Relief

“The Chancellor has announced an increase in the Research & Development Expenditure Credit (RDEC) rate from 12% to 13% from 1 April 2020. This measure will mostly benefit those companies which are not SMEs, ie. the larger enterprises, although the effective tax saving increases from 9.72% to 10.53%, so hardly ground-breaking.

I was surprised that there was no increase in the R&D uplift or the repayable tax credit available to SMEs, given that the Government is trying to encourage tech start-ups and other innovative businesses in the UK.  The only slight saving grace is that they have delayed the implementation of the PAYE cap by one year, so this measure will now come into effect from 1 April 2021.”

Nikhil Oza, Corporate Tax Director

Statutory sick pay for “all those who are advised to self-isolate” even if they have not displayed symptoms

“The subtle changes to Statutory Sick Pay (SSP) (ie. refunds to employers from day one of sickness or self-isolation irrespective of whether the individual is ill or not), could cause an issue.  Employers/payroll service providers will now need to know if those off sick are in self-isolation or off for another reason, because different SSP rules appear to apply.”

Brian Carey, Tax partner

A full summary of all Budget 2020 announcements

We will  be issuing a complete summary of the 2020 Budget tomorrow, which will offer a clear and concise commentary of the main Budget proposals, focusing on the issues pertinent to you, your family and your business.

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