Budget 2020 – some things you might have seen and some of the things lost in the details
Having had an opportunity to revisit the recent Budget, it really can be seen as being a mix of direct responses to the COVID-19 outbreak, as well as planning for the future (including in a post-Brexit world!).
Business Loan Scheme
Of the measures designed to help with the current situation, one of the most talked about so far has been the creation of the Coronavirus Business Interruption Loan Scheme (CBILS).
The scheme is open to almost every UK-based business with a turnover of £45m or. Interestingly, whilst the budget documentation indicated a maximum loan amount of £1.2m, this has now increased to £5m.
The loans are designed for “healthy” businesses who would otherwise be viable business concerns, were it not for the short term effects of the COVID-19 outbreak.
Whilst the Government has indicated that there is no limit to the funding, the facility is initially only available for six months and, therefore, anyone who qualifies and wishes to benefit from this should consider utilising it sooner rather than later
Time to Pay
In comparison to the offer of business loans, one of the measures highlighted under the Budget for immediate effect – HMRC’s “Time to Pay” Scheme – has received less attention. However, for businesses in immediate difficulties, this may be a much more practicable offering.
Time to Pay was successfully used in response to flooding and the financial crisis, giving businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back. Given that tax liabilities can be a major cost, this may be a real life-line for companies who could benefit from freeing up cash. Time to Pay arrangements are tailored solutions and, in our experience, can effectively lead to much better cash flow conditions than having to meet third party loan repayment terms.
Entrepreneurs’ Relief (“ER”)
In terms of changes with longer term impact, the decision to amend Entrepreneurs’ Relief was perhaps unsurprising – although it will have been a real disappointment for those who following the introduction of this Relief around the time of the last economic downturn have been steadily growing their businesses over the last 10 years.
It should be noted that the £1m rate was similar to the levels of the old “Retirement Relief” which it replaced and one would hope that with this reduction, ER will remain safe from further future cutting. Importantly, the retention of the connection of ER with awards of EMI Options continues to make these important tools in retaining and attracting good people.
Finally, it would appear that, as part of the post-Brexit landscape, EMI Options will be used to encourage further levels of innovation and enterprise in the UK economy.
It will be interesting to see how these conversations develop and MM&K will participate fully in any Government consultation on this topic. Changes that we would certainly encourage would be the extension of the plan to larger organisations and to a wider range of businesses. It would be particularly beneficial to the increasing numbers of companies being financed and owned by Private Equity, Venture Capital and the wider Alternative Investment community,
For further information about the issues raised in this article or to discuss any questions you may have, please contact Stuart James