It seems that budgets full of exceptional features have become the norm of late. Certainly Rishi Sunak's first outing with the red briefcase adheres to this trend. But where to begin?

Let us start with the context. The backdrop to this Budget is a triptych of truly exceptional events: Coronavirus, Brexit and a slump in oil prices. In less interesting times, any one of these alone would have tested the mettle of a seasoned finance minister, let alone our new Chancellor.

And yet, despite being the focus of national attention for three years, Brexit barely merited a mention; a passing reference in the abolition of the "tampon tax". Coronavirus - and the Government's response - was rightly front and centre with £30 billion of measures announced to combat the public health and economic threat it presents.

On the health side, the NHS was handed a blank cheque, and Statutory Sick Pay (SSP) was extended, with smaller employers awarded an entitlement to a rebate too. On the economic side, a number of temporary tax cuts such as business rates reliefs were included.

Next up, the timing. Not only was this Budget delivered late, in the absence of a preceding Autumn Budget, but it was delivered after the Scottish Budget for the same fiscal year. This means that the Scottish Government had the unenviable task of setting its tax and spending policy in the absence of any information about how the UK Budget would affect devolved finances. (Though, it seems unlikely that any revision to the Scottish Budget will be required).

Third, we have the rather exceptional politics. Mr Sunak stated that the people had voted for change in December's General Election. But this was an election at which neither the Government nor the sitting Prime Minister were changed.

And yet, this Budget was delivered after what seems like a period of real political upheaval: the first majority government in a decade; a consolidation of power behind the doors of Number 10; and the surprise promotion of Mr Sunak himself.

Finally, on to the policy itself. The change in approach is clear - austerity is out - low tax and high spend is in. This is doubly surprising since: one, tax rises normally occur immediately post-election, when there is political capital to spare; and two, only borrowing can plug the gap (estimated by the Office of Budget Responsibility (OBR) as 0.9% of GDP on average over the next five years) between income and spending commitments.

In the present context, it's a wonder there was room for any tax announcements at all. Indeed, what wasn't included in this Budget is as interesting as what was. No major changes were announced to income tax, capital gains tax or inheritance tax - though these could have been deferred until later in the year.

On the tax rises - the biggest tax saving measure in the Budget was the cancellation of the planned decrease in corporation tax from 19% to 17%. By freezing the rate at 19%, the Government projects it will save around £33 billion. Rumours of Entrepreneurs' Relief's demise were once again exaggerated - but only just. While the relief survived, it is much reduced with the lifetime allowance reduced to its 2008 level of £1 million.

Offshore buyers of English or Northern Irish residential property will also face an additional SDLT surcharge of 2% (lower than the 3% which was trailed). Green taxation was also a theme, with a new plastics tax being consulted on.

On the tax cutting side - the threshold for National Insurance contributions was raised to £9,500 for employees and the self-employed (though not for employers), and a relief was introduced for employers hiring veterans from the armed services.

A temporary 100% relief from business rates was also announced for many small business properties in England. A tweak to pensions tax reliefs (reversing the trend to restrict) was also introduced to facilitate NHS doctors taking on additional shifts without losing relief.

Over in anoraks' corner, some technical changes to corporation tax will be introduced - some good and some bad - those interested can read more below.


For anyone who has opened a newspaper in recent weeks, tried to buy toilet paper or found themselves casting increasingly worried glances at a sneezing stranger on the bus, coronavirus will not have failed to capture your attention.

Wednesday's Budget was no exception to the virus' headline-grabbing power, with Chancellor Rishi Sunak announcing a range of measures worth £30 billion intended to combat the potential economic impact of an outbreak in the UK.

The Government's approach is broken down into three core areas: support for the NHS and public services, support for individuals and support for business.

A 'COVID-19 response fund' worth £5 billion has been established to ensure that the NHS and other public services such as social care providers have adequate resources to deal with the pressures of a sudden increase in people contracting the illness.

Should additional funding be deemed necessary, the Government has made assurances that this will be provided. Additional funding for research and diagnostic testing has also been made available.

For individuals, the Government has announced the extension of Statutory Sick Pay (SSP) to anyone unable to work due to self-isolation. This will apply to those who have been advised to self-isolate and those caring for others affected.

Individuals will be able to certify using an online certification form rather than the traditional sick note from a GP. Importantly, SSP will be paid from the first day of absence, rather than the fourth day, as is currently the case.

For those ineligible for SSP, the Chancellor announced that Employment & Support Allowance will be available for persons self-isolating from day one rather than day eight. In addition, people will be able to claim advance payments of Universal Credit without being required to attend a job centre.

£500 million is being made available to local authorities in England as a hardship fund, intended to support economically vulnerable households during a wider outbreak of the virus.

Support for business is as follows. Employers with fewer than 250 employees will be able to reclaim two weeks' worth of SSP per employee from the Government, provided they meet the eligibility requirements.

Business rates relief of 100% will apply to retail, leisure and hospitality businesses in England. The Government has correctly recognised that these types of businesses will likely be hardest hit, should the wider population be required to self-isolate.

Grants of £3,000 will be available to small businesses in England to help pay ongoing business costs and mitigate against cash flow issues caused by a drop in customer demand. In addition, a 'Coronavirus Business Interruption Loan Scheme' is being established to support businesses during a time of economic uncertainty.

Lastly, the Chancellor has announced that an HMRC 'COVID-19 helpline' is being set up to allow businesses and the self-employed to arrange bespoke time to pay arrangements. It is expected that where contacting this helpline is not possible due to illness, HMRC will waive late payment penalties and interest.

It is encouraging to see the Government proactively addressing the risks arising from coronavirus. With any luck, this three-pronged cash injection will be exactly what the UK economy needs to inoculate itself against any wider economic disruption.


The news on personal tax rates is that there is no news. Following the significant pre-election hikes in 2019/20 everything from the personal allowance through the basic and higher rate bands to the additional rate threshold have been frozen, as have the rates applying to these bands.

This means that the gap between Scottish tax payers and rest of the UK taxpayers has not been exacerbated further.

The gap arises because firstly, Scottish taxpayers incur an additional 1% tax above £25,158, but the greatest gulf in tax rates arises on income between £43,430 and £50,000 where the Scottish taxpayer is into the higher rate of 41% while taxpayers in the rest of the UK pay 20% tax.

A £50,000 salary in Scotland incurs tax of £9,042 where the rest of the UK would incur £7,500.


The thresholds at which employees and the self-employed begin to pay Class 1 National Insurance Contributions (NICs) will be increased from 6 April, from £8,632 per year to £9,500 per year. This will create a saving for employees and the self-employed of up to £104 and £119 a year respectively.

In further support of the Government's commitment to support small businesses, Employment Allowance will also be increased from 6 April 2020, from £3,000 to £4,000. Employment Allowance enables eligible businesses to reduce or eliminate their secondary (Employer's) Class 1 NIC liability.

Further changes that take effect from 6 April 2020 include a restriction on eligibility to businesses with an NIC liability in the last tax year of under £100,000 and the requirement to make a separate claim for Employment Allowance every year.

At the same time, businesses will also have to consider whether the state aid de minimis rules apply to restrict the amount of Employment Allowance that can be claimed.

The Government has also announced an exemption from employer's NIC for businesses employing veterans throughout the first year of civilian employment. The exemption will apply from April 2021, in respect of earnings up to the Upper Earnings Limit (currently £50,000 a year). The design of the relief is still to be consulted upon.


Well, it happened. Pre-Budget speculation for a good few years has centred around the possibility that Entrepreneurs' Relief, dubbed the UK's worst tax break, would be significantly curtailed or abolished.

The relief, which had allowed individuals disposing of qualifying assets to reduce the rate of capital gains tax from 20% to 10% on the first £10 million of lifetime gains, had cost the Treasury around £2 billion per annum but was argued not to be influential in encouraging entrepreneurs in setting up business.

So in the context of a "big spend" Budget, it was not surprising that this was the Budget to make some changes. Rishi Sunak opted for "significant curtailment" rather than outright abolition, no doubt as a result of lobbying from those who do see it as a valuable relief and a desire to appear sympathetic to those who can help drive growth in the economy.

For disposals from 11 March 2020, the relief will be limited to £1 million of lifetime gains - back to the original limit which applied when the relief was introduced in 2008. Those who managed to complete the sale of their assets prior to 11 March in a race against time will be relieved to have done so.

For those who have concluded contracts but not completed their disposal prior to 11 March 2020, there are "anti-forestalling" measures being introduced which may operate to limit the relief. The onus will be on the taxpayer to demonstrate that the anti-forestalling arrangements don't apply.

A special claim must be made in the "white space" of the self-assessment return if the taxpayer believes the new limit should not apply. Some share-for-share transactions entered into after 6 April 2019 may also be impacted.


The new ER lifetime limit is likely to have minimal impact on holders of Enterprise Management Incentive (EMI) options.

The Treasury estimates that a total of 120 individuals are likely to have gains above the new lifetime limit and, as previously blogged , we are sceptical whether low CGT rates are the reason why companies grant EMI options in the first place.

Of more interest is the announcement that the Government will review the EMI regime to ensure it provides support for high-growth companies to recruit and retain the best talent so they can scale up effectively, and examine whether more companies should be able to access the scheme.

At one level, the review could simply recommend increasing the limit on the number of eligible EMI employees (currently set at 250); increasing the EMI limits (individual: £250,000; total £3 million); increasing the gross asset test (currently £30 million); or relaxing the rules on what types of businesses qualify.

But at another level, a far more interesting and wide-ranging proposal would be to remove or relax the EMI independence requirement. This currently prohibits companies that are controlled by other companies, from operating EMI.

Changing that requirement really would turbo-charge access to EMI as it would allow, for example, UK subsidiaries in large corporate groups and investee companies to operate EMI.

If the Government really wants to help solve the UK's productivity puzzle, promote employee share ownership, and help businesses to recruit and retain the best talent, improving EMI is an excellent place to start.


Measures to combat concerns about "punitive" pension taper rates were announced. There is a limit of £40,000 on which individuals can claim pensions tax relief each year, but this is reduced or "tapered" if your income exceeds limits, currently £110,000 (threshold income) and £150,000 (adjusted income). Senior doctors and consultants were said to be refusing extra shifts, with some even reported to be taking early retirement, to avoid having their pensions hit by the taper. Concerns that the taper rates were compounding issues with NHS staffing levels prompted the Conservatives to make their manifesto pledge to hold an "urgent review".

With the aim of facilitating the delivery of public services, high earners are now set to enjoy a higher income threshold before the pension taper will kick in.

Increase in taper thresholds in 2020-21

The thresholds that trigger the taper are both being increased with effect from 6 April 2020. So for the 2020-21 tax year, "threshold" and "adjusted" income will go up by £90,000.

The threshold increase means that those who earn under £200,000 will no longer be affected by the taper. The adjusted income threshold will also be increased to £240,000.

Once in effect, the changes mean that 98% of consultants and 96% of GPs will be outwith the scope of the taper.

Decrease in minimum annual allowance to £4,000 from April 2020

The annual allowance of individuals with adjusted income above a certain level starts to taper down, currently to a minimum of £10,000. The minimum amount to which an individual's annual allowance can taper down will also be reduced from April this year to £4,000.

This is a reduction in pensions tax relief, but will affect only those with the highest incomes (in excess of £300,000).


As previously announced during the General Election campaign, the planned decrease in the corporation tax rate from 19% to 17% will not go ahead. After the reduction in the Entrepreneurs' Relief lifetime limit from £10 million to £1 million, this is the largest tax saving measure in the Budget, which the Government predicts will save £33 billion.

Other corporation tax measures were thin on the ground, and technical in nature:

An increase in the Research and Development (R&D) Expenditure Credit from 12% to 13% should assist smaller R&D heavy companies with cash flow, as does the prospect of extending R&D allowances to cloud computing. The Government will, however, be consulting on a crackdown on R&D tax relief abuse.

An anomaly in the tax treatment of intangibles - which required companies with goodwill or IP to distinguish between those which were pre- and post-2002, and apply different rules to each - is partly removed. This should produce relief for IP heavy industries - as older IP is brought within the newer rules (which it will be if acquired after 1 July 2020) then its cost can be written off over a period for tax purposes. It will also produce occasional headaches for those restructuring IP heavy businesses - for whom the anomaly has helped avoid major problems.


Inheritance tax is not going to be reformed - yet. The status quo is that of a tax regime which is long-standing. Under the current rules, careful and tried and tested planning can minimise the tax.

The existing inheritance tax regime is generous to those owning businesses and farms, allowing you to pass on those assets without the payment of tax. You should now take advantage of the existing regime, as part of your succession planning, as some had expected the tax to be reformed - and not in favour of the taxpayer.

In the run-up to the Budget, there were four reports on inheritance tax which together recommended reform to the rules on gifting, and restriction if not abolition of reliefs for businesses and farms on death, which costs the Treasury a reported £1billion a year.

It's time to seize the day and do your inheritance tax planning now.


New additions to zero-rated VAT tampons and e-publications

As the Chancellor reminded us, this Budget is the first in 50 years to be delivered with the UK outside the EU. As an EU member state, the UK was bound by EU VAT rules requiring member states to enforce certain rates for specific categories of goods - including women's sanitary products - and this continues to apply during the transition period.

The colloquially-known 'tampon tax', i.e. the tax on women's sanitary products at a 5% rate of VAT - has been the subject of widespread debate by women's rights activists. Following persistent lobbying, plus the end of the transition period on 31 December this year, the VAT treatment will be reduced from 5% to zero from 1 January 2021.

Currently e-publications, including e-books and e-newspapers, are subject to the 20% rate of VAT, despite the Council of the EU's announcement in October 2018 allowing member states to apply reduced, super-reduced or zero VAT rates to e-publications.

As a result of pressure from authors and groups including the Publishers Association and Professional Publishers Association, the Chancellor announced that as of 1 December 2020, the zero rate of VAT will apply to e-publications, aligning the VAT rules for electronic and physical publications.

VAT postponed accounting on imports

Hidden on page 95 of the Budget 2020 statement is confirmation that VAT postponed accounting will apply to all imports of goods from 1 January 2021, including imports from non-EU countries as well as from the EU. Rather than needing to make payment of the import VAT at the time goods are released into the UK, postponed accounting means that importers will be able to account for the import VAT on their VAT return.

There is no need to apply for postponed accounting; it will be available from 1 January 2021. Although primarily designed to help those who currently only import from EU countries, those importing goods from outside the EU will also benefit from the cash flow advantages of deferred VAT payments.

In light of the current post-Brexit situation, this policy announcement will give those importing goods from the EU a bit of breathing space while navigating their individual procedures for completing customs declarations once the transition period with the EU comes to an end on 31 December 2020.

On 10 February the Government announced that policy easements put in place for a potential no deal exit were not to be reintroduced - it was assumed this would include deferred VAT accounting. Thankfully this is not the case and businesses will not be hit by immediate cash flow impacts of paying VAT on imports from the EU upfront - it may also ease inevitable congestion at the borders.


Non-Resident Stamp Duty Land Tax 2% surcharge on purchases of residential property

The Government confirmed the introduction of a 2% surcharge for purchases of residential property by non-UK residents made from 1 April 2021 (after previous suggestions that the surcharge could be at 1% or 3%).

The surcharge will apply at a rate of 2% above all the residential rates (including the higher rates for additional dwellings and companies, the 15% rate and the first time buyers' rates). There may be a transitional relief where contracts have been concluded before 11 March 2020, subject to conditions.

The Government will consult on draft legislation over the summer and introduce the change in the 2020/21 Finance Bill.

There are no indications that the Scottish Government intends to introduce a similar surcharge for LBTT - no announcement was made about it at the Scottish Budget 2020 on 6 February 2020.

Stamp duty and SDRT market value charge on transfer of shares to connected companies

A market value stamp duty and stamp duty reserve tax (SDRT) charge was introduced for the transfer of listed shares and securities to connected companies from 29 October 2018. This market value charge is being extended to unlisted shares and securities. The Government will also amend legislation to avoid a double tax charge on certain company reorganisations.

Annual Tax on Enveloped Dwellings (ATED) and the 15% rate of Stamp Duty Land Tax (SDLT): Relief for housing co-operatives

The Government will introduce new reliefs from ATED and the 15% rate of SDLT for housing co-operatives. It will consult on draft legislation over the summer and introduce the change in the 2020/21 Finance Bill. 

Annual Tax on Enveloped Dwellings (ATED): 2020/21 annual chargeable amounts

The ATED charges will increase by inflation for the 2020/21 chargeable period.

There is also an ongoing consultation on freeports, which among other things, asks about the merits of an SDLT relief in freeport areas.


To support small businesses in England and Wales affected by COVID-19, the Government is increasing the Business Rates retail discount to 100% for 2020-21, and expanding it to the leisure and hospitality sectors.

These temporary measures, taken together with existing Small Business Rates Relief (SBRR), mean that around 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020-21. The Government has also already announced the introduction of a £1,000 Business Rates discount for pubs with a rateable value below £100,000 in England, for one year from 1 April 2020.

To support pubs in response to COVID-19 the discount will be increased to £5,000. Local authorities will be fully compensated for these business rates measures.

To support businesses that pay little or no business rates, the Government is providing funding for local authorities in England to provide cash grants of £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs.

A fundamental review of business rates in England will consider further reforms to the business rates system and will report in the autumn.

These changes apply to business rates in England. Significant changes were recently made to business rates in Scotland following the Barclay Review of Non-domestic Rates which reported in 2017.

Most of the recommendations of the Barclay Review were adopted by the Scottish Government, and the Non-Domestic Rates (Scotland) Bill that introduced those reforms needing legislative change was passed on 5 February 2020.


While no measures directly affecting funds were announced (aside from tweaks to the byzantine rules for offshore funds investing in UK real estate), the Government has announced a wide-ranging review into funds taxation, which should be followed with interest.

The review promises to look into a number of areas of funds taxation and regulation _ including direct and indirect taxes, improving the tax treatment of companies used by funds to hold assets, and VAT on fund management fees.


The measures included in the Budget for the food and drink industry certainly encourage a positive outlook - the freezing of all alcohol duty was warmly welcomed.

The Chancellor acknowledged the impact of US import duties on the whisky industry and announced support by allocating £10 million for R&D spending in order to decarbonise distilleries – making distilleries green.

The Scottish food and drink sector will further benefit from a £1million campaign to promote exports as well as encourage tourism from new markets.

Further changes should be expected as the Government will be undertaking a review of the current duty system, with a view to simplifying matters for producers and consumers after the end of the transition period on 31 December 2020.

The call for evidence is expected this summer. Due this spring are the results from the Small Brewers' Relief; the industry is hoping that changes will address the 5000 hl cliff edge that can be a disincentive to growth. A more gradual tapering has been suggested.


The Finance Bill 2020 will make provision for a new Plastics Packaging Tax to be introduced in April 2022 as well as launching a further consultation on the details. Plastics manufactured or imported with less than 30% recycled plastic will be subject to the tax at a rate of £200 per tonne.

There will be an exemption for smaller importers and producers, but those liable for the tax will have to register with HMRC.


Some other important measures that were not announced in the Budget, but which take effect from 6 April 2020 include the following:

  • Reforms to the off-payroll working rules (which ensure that individuals working like employees, but through their own company, pay broadly the same tax and NICs as employees) will be extended to the private sector, shifting the responsibility for determining employment status for tax to the employer.
  • Individuals disposing of UK residential property from 6 April 2020 will have to make a capital gains tax (CGT) return and pay any CGT due within 30 days of completion of the disposal.
  • Offshore companies that operate a UK property business or otherwise receive UK property income will be subject to corporation tax on such income, rather than income tax as at present.
  • NICs will become payable on any part of a termination payment paid by an employer which is subject to income tax. Currently, termination payments in excess of £30,000 are subject to income tax but not NICs. This could increase the cost of termination payments for employers.
  • A new Digital Services Tax (DST) will be introduced from 6 April 2020 on the revenues of large digital businesses, including search engines, social media platforms and online marketplaces, to the extent value is derived from UK users. The rate of tax will be 2%.


Isobel d'Inverno

Director of Corporate Tax

Alan Barr