Head of tax at DQ Advocates, Greg Jones, considers the UK budget.

‘WHY ME..?’ Rishi Sunak must have asked when, in March 2020, days after his first budget as UK chancellor and in the slipstream of the long-running Brexit saga, the world was gripped by the Covid-19 pandemic.

In that budget he was able to announce both a record high for UK employment and an apparently generous £12 billion aid package for those likely to be affected by the virus.

Fast forward barely 12 months and the UK economy has literally been decimated (a 10% fall being the worst in 300 years), the cost of government support for all sectors of society spiralling towards a gargantuan £352 billion, and (whilst its vaccination programme has made Britain the envy of Europe) it will clearly be some time before the economy is able to stand on its own feet again.

The content of this support package is wide and varied, ranging from the extension of the well-known furlough arrangement (safeguarding 80% of employee wages up to £2500 per month) and self-employed grants, a £700 million rescue handout to sport, culture and the arts, the retention of a 5% VAT rate for the hospitality sector and continued exemption from business rates until June 2021 (the latter itself representing an effective tax saving for business of around £16 billion).

In addition, the temporary but immediate introduction of a 130% ‘super allowance’ for investment into qualifying plant and machinery should help generate both trade and employment in these difficult times.

Effectively the taxman is offering to fund nearly 25% of capital expenditure (eg a £1m purchase will cost only £753,000 after the tax relief), which put me in mind of the old 250% tourist premises allowances here in the island. Clearly all this will have to be paid for at some stage, but at present the government is content to exploit low interest rates and simply borrow its way to the end of the tunnel. In response to fears of huge tax rises Mr Sunak has guaranteed individuals will not suffer higher tax rates for at least five years – although the freezing of annual allowances will allow inflation to do that job surreptitiously.

Even the forecast increase in corporation tax (paid in the UK by companies on profits) to 25% has been deferred for two years, with lower rates for less profitable companies.

Whilst this will be unwelcome news for Manx investors in the UK, who now face a 6% tax rise on, for example, property rents and sales, I can envisage a flurry of activity in March 2023 as property owners look to cash in on the lower (19%) rate.

Labour leader Sir Keir Starmer could not bring himself to applaud the Chancellor’s financial juggling act, describing the budget as ‘papering over the cracks’ (although I suspect he was secretly relieved to have been in opposition during the past year). Mr Sunak had indeed promised to be ‘honest’ with the country about the state of public finances, but there is only so much honesty you can take all at once: it made me yearn for the time when Brexit was all we had to think about….!