FI NA NCE
Trevor Cook and Anne Cowley, directors at Stockton-
based chartered accountancy firm Baines Jewitt, on the
Budget 2020, this spring’s unprecedented economic
challenge and the effect on business in the Tees Valley…
“
Security today” and “prosperity
tomorrow” – that’s how
Chancellor Rishi Sunak
announced the government’s
Budget 2020.
As financial followers will know, it was
the first budget since Brexit, the first for
the North-East MP who took over the
reins at the Exchequer just a few short
weeks ago and also the first budget
since the autumn of 2018 – due to
Brexit and the General Election.
Crucially, it came at a time when the
country is in the grip of emergency
planning to halt the spread of COVID-19,
an infection which has caused major
disruption to worldwide economies and
suspended usual working practices.
The chancellor said the economy was
sound and public finances robust, but
also that forecasts predicted COVID-19
would disrupt the economy and could
affect one in five of the workforce.
In an unprecedented move, the
Bank of England slashed interest rates
to 0.25% on the very morning of the
chancellor’s announcement.
So, how to make sense of it all and
just how will Rishi Sunak’s budget
impact your business?
Stockton-based chartered
accountancy firm Baines Jewitt
provided their clients with a Year
End Tax Planning Guide and prior to
the budget, advised clients of any
anticipated changes that may impact on
their immediate plans.
Within hours of the chancellor’s
statement, they had prepared and
published their own report on the major
issues covered by the announcement
and made it available in print and online.
On the whole, directors Trevor Cook
and Anne Cowley’s initial reaction is
that there were lots of positives and a
step in the right direction for SMEs and
the north.
A £30bn stimulus package to support
the economy through COVID-19
contagion took centre stage – and
rightly so, they say.
Noteworthy points from a business
point of view include the support given
on Statutory Sick Pay, allowing it to
be paid from the first day of sickness
absence for all those employees
told to self-isolate, and this will be
reimbursed by the government. For
the self-employed and those in the
gig economy, there will be quicker and
easier access to benefits.
SMEs, particularly those in the
retail, hospitality and leisure industry
were also given a helping hand with
business rates relief for properties
with a rateable value below £51,000. A
cash grant of £3,000 will be provided
to each business eligible for the small
business rates relief, worth £2bn in
total to the UK’s 700,000 smallest
businesses. Employment Allowance was
also increased by £1,000 to £4,000,
again a measure that helps smaller
businesses.
Tax relief on Research and
Development expenditure was
increased, another positive point – and
measures were also taken to improve
the country’s infrastructure by providing
funding for charging points for electric
cars, broadband, railways and roads.
“Offering a tax benefit for electric
vehicles is a positive step but you’ve
also got to have the infrastructure there
to make the change work,” says Anne.
Fuel duty was also frozen –
something Trevor believes is a
positive move, especially for anyone
in the haulage industry, where a small
percentage change to one of their main
operating costs can have a big effect
on profitability.
Higher earners received a tax boost
on their pension contributions as a
result of a change aimed at easing
the workforce pressures on the NHS.
At present, the annual allowance on
pension contributions of £40,000
reduces for those earning more than
£110,000. From April, the earnings limit
increases by £90,000 to £200,000.
The reduction in entrepreneurs’
relief from £10m to £1m may not be
welcomed by all. The government said
the change was intended to encourage
genuine risk-takers and entrepreneurs
in a fair way, leaving over 80 per cent
of those using the relief unaffected.
The savings achieved will be invested
straight back into innovative business
and technology.
“If the rumours about the chancellor
wanting to remove some of the UK
treasury jobs to the north are true, that
has to be welcomed by everyone in
this area. Moving the jobs to Teesside
would certainly support regeneration in
this area,” says Trevor.
The government’s new catchphrase
is, “This government gets things done.”
However, as always, the devil is in the
detail. What will really change and when
it will take effect?
It’s a mantra Trevor and Anne both
echo when it comes to their work at
Baines Jewitt.
“We can help to ensure financial plans
remain effective, even as personal and
business circumstances change,”
Trevor adds.
BUDG E T H IGH LIG H TS :
> A reduction in Entrepreneurs’ Relief
lifetime limit From £10m to £1m.
> An increase in Employment Allowance
This provides business and charities
with rate relief from National Insurance
Contributions costs. It will increase from
£3,000 to £4,000 from April 6.
> An increase in the rate of Structures and
Building Allowance Capital allowances for
investments to build new or renovate old
non-residential structures will increase
from 2 per cent to 3 per cent.
> An increase and extension of business
rate discounts Aimed at the retail, leisure
and hospitality sectors who might be hit
hardest by the spread of coronavirus,
this measure suspends business rates for
a year for qualifying businesses with a
rateable value below £51,000.
> Extended access to Statutory Sick Pay
Sick pay will be paid from the first day of
sickness absence rather than the fourth
for people who have Covid-19 or who
have to self-isolate in accordance with
government guidelines.
> An increase in National Insurance
thresholds.
> A freeze on fuel duty for the tenth
consecutive year.
Emergency measures
tackle pandemic fallout
A
t the time of publication,
additional emergency
measures were being put
in place by the chancellor to help
businesses and individuals cope
with the rapidly changing financial
implications of the Covid-19
pandemic.
They included £330bn in loans,
£20bn in other aid, a business rates
holiday and grants for retail and
hospitality businesses over the
coming months. Help for airlines is
also being considered.
“There is no doubt this is and will
continue to be an unprecedented era
for businesses and individuals across
the Tees Valley,” said Anne.
“We are working hard to ensure
we stay as well prepared as possible
and thanks to the technology we
employ within our practice at Baines
Jewitt, our clients can enjoy a
continuity of service from us.
“The chancellor has pledged to
take further economic measures if
the post-budget measures are not
enough and this has to be welcome
advice for businesses large and small
across the Tees Valley.”
The voice of business in the Tees region | 51