Former Tax & IT Partner
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Budget 2021: The dogs that didn’t bark

The Budget included more support to help businesses survive the Covid-19 pandemic and a widely trailed increase in Corporation Tax – but are there more tax increases to come?  

3rd Mar 2021
Former Tax & IT Partner
Columnist
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Chancellor Rishi Sunak sets out Covid recovery strategy at Budget 2021
Rishi Sunak_Pippa Fowles_No 10 Downing Street

I love words but am fascinated by numbers so, as always, my first move when the Chancellor sat down was to look at the Budget Red Book. 

On pages 41 to 43, the Red Book sets out the projected financial effects of the Budget policy decisions. The bulk of the net inflows arises from the increase in the CT rate and freezing of allowances and thresholds.

The first part of the speech itself was very much as I had expected: a focus on supporting still-fragile businesses. 

Included were extensions of the Coronavirus Job Retention Scheme (CJRS) and Self-Employment Income Support Scheme (SEISS). Extensions to the reduced rate of VAT for hospitality, Stamp Duty Land Tax Relief, business rates relief and other Covid-19 support measures were also included. 

There were also repeated warnings that the support would have to be paid for. What surprised me was the relatively small number of tax measures.

Budget 2021 tax measures

Looking at some of the specific tax measures that were announced, the additional two-year loss carry-back (covering losses of up to £2 million in each of 2020/21 and 2021/22) replicates a relief given in response to the 2008 financial crisis. It is a very welcome and logical measure.

The capital allowances super-deduction, though restricted to limited companies, should also help to convert cash into income generating assets, essential if productivity is to be boosted.

The increase in the Corporation Tax rate to 25% from April 2023 was hardly unexpected. While the small profits rate of 19% is welcome, it brings with it the inevitable complication of a taper effect and doubtless some interesting bonus v dividend calculations. 

A positive note

If I can pick out one technical point that particularly pleased me, it is the change to a points-based late filing penalty regime for VAT from 1 April 2022 and for Income Tax Self-Assessment (from 6 April 2023 for those within MTD for Income Tax and 6 April 2024 for other ITSA taxpayers). 

The devil is in the detail though and the exact mechanics need to be thought through carefully

Fiscal drag, but little more

Apart from the Corporation Tax rate increase, most of the heavy lifting was down to fiscal drag resulting from the freezing of allowances and thresholds. 

There was nothing from the Office for Tax Simplification review of Capital Gains Tax. No significant change to relief for pension saving (beyond freezing the Lifetime Allowance). 

No wealth tax and nothing on “levelling the playing field” between employees, the self-employed and those operating through limited companies. 

But how long will those dogs that didn’t bark remain silent? Might we hear some growls when the promised batch of consultation documents and calls for evidence is published on 23 March? 

Budget 2021

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