A few Budget Highlights for you;
Corporation Tax up from 19% to 25% – But Micro Entities Exempt
Arguably the most unfair tax hike of recent times, since Directors will effectively pay the same tax as basic rate employees and then pay tax again on their wages. And then pay tax again on dividends over £2000. For big companies it isn’t really a huge problem, they can re-locate their financial HQ as tech giants do. Re-locate their senior staff for tax purposes too. Smaller 5-10 person companies will suffer the greatest burden.
However, one man – or woman, or trans-gender-neutral person – companies do get an escape clause; if declared profit is below £50,000 then 19% still applies.
Commenting on the Chancellor’s decision to leave entrepreneurs relief unchanged, Paul Trail, managing director of Close Brothers Premium Finance, said:
“The Chancellor has recognised that entrepreneurs (including brokers) are key to driving forwards the UK economy after the pandemic, and that the current incentive schemes for them to build up their businesses and take value from their life’s work when they come to sell are an important part of that. The pace of M&A in broking has been frenetic in recent months, driven partly by fears among brokers of a harsher tax regime. I don’t believe yesterday’s decision will bring M&A to a halt, but it will remove the incentive for brokers to sell immediately, giving them more time to weigh up their strategic options, which is a good thing.”
Furlough Extended – Lockdown Likely to Return
Sunak stated that furlough will be extended to the end of September. It seems likely that lockdown will therefore return in the summer, rather than a complete re-opening of the economy. Those brokers in the Commercial/Retail Lines sector should probably move into other sectors immediately; electric vehicles, climate change funded infrastructure projects, social housing and enterprises funded by the taxpayer etc.
The High Street is finished – the big question is whether smaller brokers can get a look in when it comes to covering risks on new Build Back Better/Climate Agenda projects.
For large insurance companies extending furlough also offers the opportunity to buy a slice of the new High Street landscape. The taxpayer is basically covering much of the infrastructure bill, while the adjustment from Retailing and Hospitality to social housing and electric transport solutions, takes place across most UK towns and cities. It allows insurers to become landlords of physical assets, and gatekeepers of data-driven services within that new landscape.
Business Grants Mean Lockdown Isn’t Just For Christmas
Another clue that lockdown will essentially remain in place forever, is that grants of up to 6K for small non-essential businesses, and 18K for hospitality, were announced today. The idea that life will be back to normal in mid June now seems ridiculous; why would you need grants if shops and pubs were going to open again?
The plan seems to be a slow destruction of small shops and pubs, barbers, butchers, artisan bakers etc. with some furlough and grants made available to soften the blow. For brokers, it opens the door on offering new policies designed for home-based hairdressing, gin delivery, bakeries, jewellery/shoe repair, key-cutting – all the stuff that made up the foundation of many local High Streets is going into sheds, garden studios and kitchens.
Freeports – Golden Opportunity for HNW/Commercial Brokers
Eight freeports are to be created and if similar tax rules to Geneva apply, then companies can import luxury goods, classic cars, art etc and store them tax-free, before selling them on to another country. This avoids the import duties and extra paperwork charges usually levied per item. Not one of the freeports is located outside England by the way.
Great chance for HNW brokers to partner up with all types of businesses operating warehousing within freeports.
Fuel Duty Frozen
Following the announcement in today’s Chancellor’s Budget that fuel duty will continue to be frozen, RAC head of policy Nicholas Lyes said:
“Drivers will breathe a sigh of relief that the Chancellor has decided not to ‘rock the fuel duty boat’. We feared this would only pile further misery on drivers at a time when pump prices are on the rise and many household incomes are being squeezed as a result of the pandemic.
“Many drivers see their cars as a safe way to carry out essential journeys and believe having access to a vehicle is even more important as a result of the pandemic. If the Chancellor had raised fuel duty, he could have risked choking any economic recovery as it would have led to increased costs for consumers and businesses.”
No Festival Re Insurance Scheme
Sunak refused to listen to the music industry, who hoped that the TV/Film insurance underwriting scheme would be extended to festivals, gigs and tours, so that promoters could stage events risk-free. Sadly, it was a facepalm moment today. So as IE has already suggested, tap up Bono, Elton, Sting, Macca, Adele and Ed Sheeran and get them to form their own Lloyd’s syndicate – problem solved with a £20m contribution apiece.
Insurance Premium Tax remains frozen, and as Compare The Market noted, it `hits younger drivers harder, as they pay more in premiums.’
Albanwise Insurance welcomed the move on Twitter, saying Sunak had resisted the urge to go for an easy target and raise IPT.
Alcohol Duty Frozen
No change there. No pubs open to celebrate, but hey…cheers everyone!