Budget 2020 - The headlines

March 2020 Update - Off-payoll working legislation delayed until April 2021 due to COVID-19

Off-payroll working, entrepreneurs' relief and coronavirus

In the first UK Budget since Spring 2018, the new Conservative Chancellor of the Exchequer, Rishi Sunak, today had to factor in the major financial, business and societal disruption caused by the outbreak and threat of the COVID 19, or coronavirus.

With announcements around the financial contingencies which are needed to support the NHS, individuals and businesses through the coming weeks and possibly months, the ‘normal’ elements of the Budget were somewhat overshadowed.

However we have picked out some of the headline tax and financial aspects of what the Chancellor described as a ‘getting it done’ approach by his Government: 

• Off-payroll working - As expected the changes to off-payroll working in the private sector are included in the Finance Bill published today. This follows a review of the reform and a number of changes implemented to help the transition.
• Entrepreneurs' Relief - For those limited company contractors looking to close their companies because of the impact of the off-payroll working rules there was relief that the predicted abolition or restrictions in Entrepreneurs’ Relief were confined to a reduction in the lifetime limit on eligible gains from £10m to £1m. This is effective for qualifying disposals made on or after 11 March 2020. The Government estimate that this change will not affect 80% of those looking to access the relief.
• Pension Tax Relief - Before every Budget there is talk that Pension Tax Relief will be restricted or reduced in some way. It came as a surprise then, that the tapered annual allowance thresholds will each be raised by £90k from tax year 2020/21. The minimum tapered annual allowance will be reduced from £10k to £4k. This means that for those with higher income levels looking to pay into pension pots, their threshold limit, the point at which they are assessed for the taper, will be £200k and the adjusted income limit, the point at which the annual allowance begins to reduce, will be £240k. Although these changes were announced by the Chancellor in the context of NHS staff we believe that they will apply across the board to all taxpayers but we will let you know if our understanding is not correct.
• National Insurance Contributions - An announcement on National Insurance Contribution thresholds made before the Budget was confirmed by the Chancellor. The employee threshold is to rise to £9,500 a year. This should benefit both limited company and umbrella contractors in the next tax year.
• Fuel Duty - Those contractors whose work involves significant travel by car will be relieved to hear that Fuel Duty will remain frozen for another year.
• Alcohol - The same applies to duty on spirits, cider, beer and wine – no changes to duty this year.
• R&D Expenditure - In a bid to encourage scientific and technological developments in business, the tax allowance for Research & Development Expenditure is to increase from 12% to 13%
• Other Tax Reductions - Again some predicted changes came to pass with the announcement of the abolition of VAT on female sanitary products and the zero rating of digital books, papers and magazines. These changes are made possible by the UK’s departure from the EU after the transition period ends on 31 December this year.
• Contractor Loan Schemes - The legacy of contractor loan schemes and the perceived injustice of a failure to tackle those promoting and selling the original schemes, is to be addressed by the drafting of legislation enabling HMRC to bring these persons to book along with others peddling aggressive tax avoidance schemes. The Treasury is to provide additional funding to HMRC to make this happen.
• Other investments - On the spending side Chancellor Sunak announced a range of infrastructure capital spends and investment in habitat and carbon capture, green technology projects, more funding for devolved regional ‘levelling up’, rail and road investments, a higher spend on further education and funds to help with the removal of dangerous cladding which caused the Grenfell disaster.
• Corporation Tax - The Corporation Tax rate is to remain at 19% as was expected and those receipts will undoubtedly help to fund some of the aforementioned expenditure although it is clear that the Government will have to borrow considerably to meet its promises on spending.

In summary the Chancellor has arrived at a difficult time and his tax and spend plans have undoubtedly been severely impacted by the current health emergency. We think it is likely that Mr Sunak will be rolling out another Budget in the Autumn of this year as we get back to the round of Autumn Budget and Spring Statement in the coming 18 months.