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  • By AJ
  • 11th March 2020

Budget Commentary

Budget Commentary

Budget Commentary 150 150 AJ

This was the first Budget of the new government, the first Budget for 18 months, and the first Budget of the new Chancellor, Rishi Sunak. It followed a Bank of England interest base rate cut from 0.75% to 0.25% (50 basis points) announced earlier in the day.

Whilst the first Budget of a new Parliament usually sets the tone for the next few years, often gets rid of “bad news” well before the next election, and possibly takes some longer-term decisions that will gradually impact over the lifetime of the Parliament, this one was focused on one main issue – the coronavirus impact which the Chancellor went straight into in his first sentence. But the Chancellor also said that the Budget would deliver on the change that was promised at the General Election and was a Budget for prosperity. He then set out massive spending plans and promises. I will leave it to you to work out how this is all going to be paid for!

As always, much of the tax detail was not announced and was only apparent when reading the Treasury Press Releases and other documents which were released as soon as the Budget Speech ended. But the real detail will not be known until the Finance Bill is published on Thursday 19 March. From a first look, however, other than the measures discussed below there is very little to get excited about and certainly no major surprises.

This summary focuses on the key tax changes and does not consider the public spending and investment announcements that were made (and there were many of them!).

Here are the key points which we know so far.

The headlines (further detail below)

  •  Entrepreneurs’ Relief major change.
  •  R&D tax credit PAYE cap delayed until 2021.
  •  Off-payroll working/IR35 to proceed with effect from 6 April 2020.

Help for businesses in response to coronavirus

  •  “Time to Pay” service to be ramped up with immediate effect to ease burden for businesses affected by COVID-19, which may be able to agree a bespoke Time to Pay arrangement. To ensure ongoing support, HMRC have made a further 2,000 experienced call handlers available to support firms when needed.
  •  New temporary coronavirus business loan scheme.
  •  Business rates for this year to be abolished for many businesses in the retail and leisure sector.
  •  Any business eligible for small business rates relief will get £3k cash grant as a one-off payment

Entrepreneurs and innovation

  • Major reform to Entrepreneurs’ Relief (ER). Lifetime limit on gains eligible for Entrepreneurs’ Relief to be reduced from £10 million to £1 million from today (ie with immediate effect). This will affect all eligible CGT disposals carried out from today. Whilst this is unwelcome, and fails to address the structural complexities of ER, it is a “quick fix” way of addressing many of the concerns and pressures that the Chancellor faced. It is claimed that 80% of those using the relief will be unaffected.
  •  Review of the Enterprise Management Incentive Scheme (EMI) to see whether more companies should be able to access it.
  •  Research & Development Expenditure Credit (RDEC) rate to increase from 12% to 13% from 1 April 2020.
  •  Consultation on whether expenditure on data and cloud computing should qualify for R&D tax credits.
  •  SME R&D scheme PAYE cap to be delayed until 1 April 2021 (was to be 1 April 2021). Consultation on the design of this to ensure that eligible businesses are not penalised.

Business tax

  •  Corporation tax rate to remain at 19% (as expected).
  •  Structures and buildings allowance to rise to 3% from 1 April 2020.
  •  Reforms to Intangible Fixed Assets regime.
  •  Off payroll working/IR35 proceeds from 6 April 2020 subject to some minor changes.

Personal taxes

  •  Savings tax and ISA limits unchanged.


  •  Extra funding for HMRC to secure £4.7 billion of additional revenue over period to 2024-25.


  • All alcohol and fuel duties frozen.

Other issues

  •  Additional 2% SDLT for non-residents purchasing residential property in England and NI from (1 April 2021).

Our immediate thoughts

This was a Budget full of spending promises but very light on tax policy changes or addressing some of the complexities/inequalities in the tax legislation.

Changes to Entrepreneurs’ Relief were expected, but the proposal is a very crude attempt to address the issue. Whilst we have yet to see the small print of the Finance Bill, at this stage it appears that little has been done to make the relief easier to understand and qualify for. Maybe, with only £1 million of relief now available, the Chancellor didn’t think that detailed legislative changes were necessary. To put this into context, the relief is now only going to be worth £100,000 maximum (10% x £1 million). In my view, this is hardly an incentive to take entrepreneurial risk. Far better, in my opinion, would have been a reintroduction of some form of retirement relief which rewarded longer-term investment in entrepreneurial businesses.

Another missed opportunity is in the area of R&D tax credits. Whilst the delay to the introduction of the PAYE cap is welcome, ditching the idea completely and increasing the rate of enhanced relief from 130% to 150% would have been far more welcome.

As for off payroll working/IR35, we appear to be stuck with it, subject to some minor tinkering.

Given the times that we’re in I was maybe hoping for too much. Perhaps the Autumn Budget when, hopefully, COVID-19 is not so high on the agenda, will be the time for more radical legislative change. Let’s hope so.

And as a final point, what about life after Brexit (remember it?!). It was barely mentioned…

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