Budget  

How are Budget plans expected to support economic recovery?

  • Explain how businesses will benefit from Covid relief schemes
  • Explain tax changes announced by the Chancellor
  • Explain how the recovery loan scheme will work
CPD
Approx.30min
How are Budget plans expected to support economic recovery?
 Credit: Jason Alden/Bloomberg

The Chancellor has repeatedly stated that protecting jobs and livelihoods remains a top priority until the country is out of current restrictions.

The CJRS or furlough scheme has protected over 11 million jobs since the pandemic began, as such it was no surprise when he announced that the furlough scheme, which was due to end on 30 April 2021, will be extended for five months to 30 September.  

While the scheme will continue in its current form to 30 June an employer contribution will be required for a proportion of the hours not worked by their employees from July onwards.  

Employees will continue to receive 80 per cent of their current salary until the scheme ends however, on July employers will have to pay 10 per cent rising to 20 per cent in August and September towards the costs of hours not worked. 

Employers will continue to be obliged to pay National Insurance contributions and pension costs in respect of hours not worked.

The phasing out of this scheme post the expected end of restrictions is reasonable as there will inevitably be a lag between restrictions lifting and businesses and wider economy gradually returning to normal. 

The obvious unknown for this significant grant is whether the Chancellor is expecting too much too soon from the recovery. 

Cash flow has been decimated for businesses, big and small, as is seen by the scale of business closures which has not respected business size. 

Furthermore, many SME businesses, which present the backbone of the economy, operate under seasonal demand and these could be particularly vulnerable.         

Self-Employment Income Support Scheme (SEISS) 

By announcing an extension to the SEISS to September 2021 via the award of two further grants the Chancellor has continued to support the self-employed.  The first new grant will cover the period from February to April 2021 and the fifth and final grant will cover the period May to September 2021.  

The eligibility criteria for these grants includes an assessment based on submission of a Self-Assessment tax returns for the period 2019-20 which must have been filed by 2 March 2021. 

To be eligible, individuals must be able to show they were trading in all relevant periods but were/are temporarily unable to due coronavirus.  Capping rules will apply, and the fifth grant will be targeted to offer support for those businesses which have been hardest hit.    

By expanding the scheme to incorporate tax returns for 2019-20, the Chancellor has extended the grant to include the newly self-employed, who were previously not eligible.

However, the Chancellor’s statement continued to exclude support for over 700,000 limited company director/shareholder businesses.  Such directors typically receive most of their remuneration through dividends, an acceptable practice under existing tax rules, and as such continue to receive no support under either the CJRS or the SEISS rules.