Spring Budget Review 2021
Beesley’s Director of Business Recovery, Kevin Aston, shares his thoughts on some key points from the Spring Budget 2021 and how they may affect the insolvency industry over the course of the year.
Extension of the Furlough Scheme to 30th September 2021
Although it is welcome news that the furlough scheme has been extended to the end of September, the employer contributions expected from July (10%) and August and September (20%) may have a significant impact on businesses.
If trading conditions do not return to normal levels in the coming months, businesses cash flow will be faced with the added pressure of contributions to the furlough scheme, which for some may not be achievable. In these situations, we may start to see an increase in liquidations as businesses realise they cannot afford the contributions required to furlough staff or, for those with long-term serving employees, afford the statutory redundancies to enable them to reduce their workforce.
New Restart Grant to help businesses reopen
The introduction of the new restart grants for non-essential retail, hospitality & leisure, gyms and personal care will provide an incredible level of support for businesses that have been forced to close for so many months. Many businesses still have costs to endure, without bringing in any income, such as rental payments, pension and national insurance contributions and payments towards the furlough scheme. These vital funds are going to be paramount to protecting businesses and jobs and ultimately may help to avoid potential insolvencies as we come out of lockdown.
If however, the grants do not cover all expenses incurred over the last year due to lockdowns and restrictions, insolvency advice must be taken as early as possible to have access to more options and more time to implement a recovery strategy.
Business rates relief continued
It was announced in the Budget that business rates relief will be continued at 100% for the first 3 months of this fiscal year – until the end of June – and the remaining 9 months of the year will have business rates discounted by 2/3.
Business rates can be a huge overhead and we hope that this continued support is going to be sufficient to enable businesses to recover. Even when the relief is reduced from the end of June, we do not see this as a significant challenge to businesses’ cashflow.
As the relief is phased out heading into the next fiscal year, businesses, in particular in the services sector, who have adapted their working practices throughout the pandemic will no doubt be assessing their need for the current premises that they are in.
Capital Gains Tax and Business Asset Disposal relief remain unchanged
For the on-going Members Voluntary Liquidations (MVLs) we are receiving it is welcome news that Capital Gains Tax (CGT) and Business Asset Disposal relief have been left alone, for now at least.
We may start to see an increase in MVL enquiries in the run up to the autumn budget, or even next years Spring budget, as the rumour mill begins to churn once more in regard to potential changes to CGT tax rates and the Business Asset Disposal relief.
If you are a professional adviser seeking peace of mind for your clients or a director or major stakeholder and are concerned about the financial challenges you may now be facing this year, we are here to help.
Contact us for advice and support.