Budget Breakfast 2021 Report
Secretariat consultant of the LSCA Taxation Committee Gayton Jordan reviews the annual Budget Breakfast.
The LSCA’s annual Budget Breakfast event was of necessity in a very different format than usual, being held online via Zoom (so attendees had to make their own breakfast arrangements!). However, this by no means diminished the value of the useful summaries of the most important points given by our two speakers.
Setting out the economic context and implications of the budget, Warwick Lightfoot reminded the audience that budgets were political events, not economic seminars, and encapsulated political choice and moral issues going to the heart of the way we run societies. He continued that Rishi Sunak had had to cope with an economic crisis on a scale beyond anything experienced in probably the past 200 to 300 years.
He said “The Chancellor has rightly responded to the Covid shock with unprecedented relief and help for people and businesses. He has been right to allow Government borrowing to take the strain in an environment of low interest rates and inflation. The immediate direction of the economy remains unclear, policy makers will have to be nimble in either providing more fiscal support or tightening monetary policy if inflation emerges as a problem. To raise future productivity and the trend rate of growth, an ambitious agenda of future tax reform will be needed to improve the functioning of the economy”.
Warwick continued that traditional ways of measuring the economy, particularly things such as price data, were not really possible in the present circumstances.
In addition, the patterns of consumer and business spending had changed and it was difficult accurately to judge the labour market. It was also uncertain what would happen when the current pandemic ended; it was unlikely that everything would go back to how it was before.
He then discussed the rationale of the tax increases, the creation of the free port areas and the general structure of the tax system.
Warwick concluded by considering the difference between things such as business rates that companies had to pay whether or not they had the money to do so, and the corporation tax increases announced.
He said he thought that it was right that the bulk of the increases should be placed on the largest companies, but was concerned that the tapers and thresholds introduced additional complexity in an already over complicated tax system.
Summarising the key practical tax points, Rebecca Benneyworth started by saying that it had been harder to work through the Budget pack this year.
At one stage there used to be numbered press releases, originally issued by both the Revenue and Customs, detailing each proposed measure. These had been replaced by the Overview of Tax Legislation and Rates (OOTLAR) a substantial pdf document covering all the changes.
However, this year’s OOTLAR was a 25-page html document, with hyperlinks that one needed to follow to see the details for each measure.
Rebecca then turned to the biggest change, that of corporation tax, with a top rate higher than had been expected.
She said “By signalling a substantial future rise in corporation tax, the Chancellor has given businesses and their advisers plenty of food for thought”. For example, if a large company had a valuable asset marked for future disposal, it would be advantageous to realise it sooner rather than later.
Rebecca continued “The move to extend loss relief in the interim is very helpful. Other measures, such as a ‘super’ capital allowances deduction, should ensure that when businesses are ready to invest, they may be tempted to delay until they can benefit from savings at higher rates of corporation tax. Re-introducing a small profits rate of corporation tax with tapered bands does add complexity, but will be welcomed by smaller companies.”
Rebecca highlighted a number of other areas, such as the increase in the cap on R&D relief to try to protect genuine claimants, the introduction of free ports, and the benefits-in-kind rates on company cars.
There was not much to say on income tax measures, but she concluded by looking at how the SEISS grants were going to be taxed and in particular the claw back arrangements under which the payments were made for particular months, so if someone had ceased their business within that time they were caught. It was important that advisers made their clients aware of this.
The event was held on 4 March 2021 with a brief introduction and welcome by Vicky Andrew, the current LSCA President, and was chaired by Adrian Mansbridge, Chairman of the LSCA’s Taxation Committee.
For further details about the LSCA Taxation Committee, please contact Gay Jordan.
Gay Jordan is Secretariat Consultant of the LSCA.