In response to an unprecedented year of pandemic and economic crisis, the Chancellor Rishi Sunak delivered a Budget to offer continued support to the economy and an early view of what he believes the post-pandemic and post-Brexit economy will look like for the UK. Unsurprisingly, fast growth companies will play a key role.
The Budget Offers Support to Innovative Companies in the UK
The Chancellor holds the fast-growing tech sector in high regard as providing a path to drive the economy out of this crisis. The Budget highlights that these companies are part of the UK's success stories and provides wide-ranging support to continue their success.
Immediate Relief to Weather the Coronavirus Storm
A number of business support programmes are continuing to provide support to businesses through the immediate crisis:
- Furlough Scheme – The scheme will be extended until September. After July, and after the much anticipated lifting of social restrictions, the scheme will adapt to require a 10 per cent contribution from businesses in July, growing to 20 per cent in August and September.
- Recovery and Restart Loans – Similar to the Bounce Back loans from 2020, the Recovery loans will be open to all businesses and range from £25,000 and £10 million.
- Business Rates Holiday – The business rates holiday will continue through June, and will change to 66 per cent relief through the end of 2021.
Future Fund: Breakthrough
In 2020, the Future Fund committed around £1 billion to issue convertible loans to innovative UK companies to help prevent disruption due to COVID-19. Building on that successful programme, this new fund will commit £375 million to support scale-up of innovative and R&D-intensive businesses. The British Business Bank is expected to join funding rounds of more than £20 million led by private investors as a part of this programme. More detail on this programme is expected in the coming days.
Enterprise Management Incentives (EMI)
The Treasury is kicking off a call for evidence on how EMI is being used and if more UK companies should be able to access this incentive to aid their recruitment and retention schemes. The government is seeking responses by 26 May 2021.
Filling the Skills Gap: High Skilled Migration
Tech skills are in high demand and visas to encourage the best and brightest to come to the UK to contribute to Britain's economy are key to a recovery led by fast-growing innovative companies. The Budget discusses the need to modernise the immigration system, and includes visa policy changes that will be of interest to tech companies across start-up and scale-up phases, including:
- An elite, points-based visa that looks to remove the 'third-party endorsement' or company sponsorship that is currently required and can be difficult for companies to navigate when trying to attract the best talent. This new visa will also have a fast-track option for those with a job offer from a recognised UK scale-up.
- A review of the Innovator visa and expansion of the Global Entrepreneur Programme to make it easier for founders to choose the UK for their business ideas and to market the UK as the destination of choice for these founders.
- In 2022, a Global Business Mobility visa will be launched for global businesses to establish a presence or transfer staff to the UK. This will be helpful for attracting global fast-growth companies which want to expand to the UK as they scale globally.
Filling the Skills Gap: Apprenticeships
The Chancellor announced a number of provisions to encourage and support apprenticeships and ensure that the next generation has the skills needed to succeed in the new economy. These provisions include:
- Work placement support for 16 – 24 year olds during the 2021/2022 academic school year. The government will provide businesses with £1,000 per trainee.
- Employers in England who hire apprentices between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire.
- The government will also introduce a £7 million fund from July 2021 to create and expand portable apprenticeships. This will help businesses manage their talent pipeline as they rapidly expand to meet the business' needs.
Help to Grow schemes
These two schemes show a commitment to supporting UK-based entrepreneurs. Help to Grow: Digital will provide online advice and vouchers to support the implementation of productivity-enhancing software. This project will help up to 100,000 SMEs update their systems. Help to Grow: Management will provide management training to those running SMEs to give them the skills to run their businesses more efficiently.
Review of R&D tax reliefs
The government will review its R&D tax relief schemes to ensure that the UK remains competitive as a place for innovative research and that those schemes are appropriately targeted.
Other Tax Updates – Extended Loss Carry Back, Deductions and Corporate Rates
Several other tax changes are made in the Budget, including:
- For businesses forced into a loss-making position by the crisis, the trading loss carry-back rule is extended from one to three years.
- The 'Super Deduction' tax relief only allows for businesses to write down qualifying plant and machinery assets, and does not include investment in digital resources to support the continued digital transformation
- Corporate rates will rise. The UK currently has one of the lowest statutory corporate tax rates in the OECD. In April 2023, the rate on profits of more than £250,000 will raise to 25 per cent, and the small profit rate (profit of under £50,000) will remain at 19 per cent. In line with the increase to the main rate, the Diverted Profits Tax rate will rise to 31 per cent to discourage diverting profits abroad.
Updating the Rule on UK Listings
Lord Hill's Review was released the same day as the Budget. The government made the commitment to work with the Financial Conduct Authority to implement the report's recommendations to make the UK the best place to IPO a company, and to attract the attention of Special Purpose Acquisition Companies (SPACs).
Cassy Raby (Trainee Solicitor, London, White & Case) contributed in the development of this publication.