In the Government’s latest Budget 2021 announcement, a number of measures have been set out that are designed to help business owners. Speaking at the House of Commons, Chancellor Rishi Sunak outlined plans for the coming months and years. This article will outline the main changes, as well as some of the challenges that businesses may face.
What support is the government giving to hospitality business owners?
There are a number of extensions and additions that Rishi Sunak announced today as part of Budget 2021. Many of these will provide new opportunities as well as funding for those in the hospitality sector.
Here’s an overview of how the 2021 Budget announcement will impact businesses:
Business rates holiday extended
The 100% business rates holiday will be extended until the end of June for hospitality and leisure firms that operate premises on high streets, in shopping centres and retail parks. After this, a discount scheme will come into effect for the remaining nine months of the tax year, with business rates being discounted by two-thirds, up to £2 million for closed businesses, with a lower cap for those who have remained open throughout lockdowns due to their ‘essential’ status.
A ‘new restart grant’ of up to £18,000 per premises will be available in April to hospitality businesses, helping them to reopen as the phased lockdown exit plan ramps up.
New town deals
Sunak announced that there would be more than £1 billion for 45 new town deals. He added: “We’re creating a £150 million fund to help communities across the UK take ownership of pubs, theatres, shops or local sports clubs at risk of loss, putting more power in the hands of local people.”
Extension to reduced VAT rate
As part of Budget 2021, the hospitality and leisure industry will benefit from a six-month extension to the reduced 5% VAT rate. This means it will last until September, before moving up to 12.5% until April 2022; still a significant reduction from the typical 20% rate.
Alcohol Duties will be frozen for the second year in a row in a bid to help pubs and bars.
Furlough scheme extended
The furlough scheme will be extended until the end of September, with employees continuing to receive 80% of their salary for hours they cannot work. Rishi Sunak explained that the furlough scheme will remain the same until July, then businesses will contribute 10% towards their employees’ wages in August and 20% in September.
Recovery Loan Scheme
This will replace the former COVID-19 loan packages, enabling businesses of all sizes to apply for loans between £25,000 and £10 million until the end of 2021. As part of the Recovery Loan Scheme, the government is providing lenders with an 80% guarantee.
Increased incentives for apprenticeships
The incentive payments for business to hire apprentices has risen to £3,000 and is applicable to all new hires of any age.
Minimum wage increase
It was also announced that minimum wage will increase in April to £8.91 per hour.
Corporation tax rise
In 2023, corporation tax will increase from 19% to 25%, however this will only impact businesses that have profits of £250,000 or more. A new ‘small profits rate’ will mean that businesses with profits of £50,000 or less will continue to pay the 19% rate. This rate would then taper above £50,000.
What the industry has to say
Many in the pub industry have voiced their concerns about the expiration of rules that prevent landlords from evicting tenants for non-payment this month. Rent bills from commercial landlords and large pub companies are expected to be the largest threat that businesses face in their ongoing fight for survival.
Boss of Greene King, Nick Mackenzie, said: “There’s a big cliff edge for the hospitality sector on rent that hasn’t been addressed at government level.”
CEO of Carlsberg Marston’s Brewing Company, Paul Davies, added: “More support will be needed and ongoing financial support directly targeted at the brewing industry will be essential if our industry is to recover financially. We remain hopeful that the Government will review beer duty within the Alcohol Duty Review to further support brewers and pubs.”
James Simmonds, Partner and head of UHY Hacker Young’s drinks practice commented: “The extension to the VAT cut is excellent news for the drinks industry. While drinks manufacturers don’t necessarily get a direct benefit from it, it will play a big role in getting consumers back spending in pubs, bars and restaurants when the lockdown ends. The continuation of the business rates holiday will also be welcomed but it will unfortunately do nothing for pubs and bars that are already in rent debt. Restart grants are quite limited in size but even smaller pubs and bars should be able to claim around £8,000, which will be a help as they open their doors again.”
To see the 2021 Budget in full, click here to see all supporting and related documents.