Industry News

PPA Budget Analysis, March 2020

This article is based on the Budget announcements on March 11, and does not fully account for recent additional financial measure to combat Coronavirus.

Last week Chancellor of the Exchequer, Rishi Sunak MP, introduced a radical set of measures in the Spring Budget, alongside responding to the Coronavirus pandemic and Brexit with a package of policies totalling £30 billion.

Spending is set to increase, as well as a wave of infrastructure funding for new roads, schools and hospitals. With the government set to borrow £14.6 billion more this year than was previously forecast.

The government is using record low borrowing rates to commit considerable borrowing resource as it seeks to mitigate the impact of COVID-19, with the Chancellor promising to "protect our country and our people" with a major economic package. The package includes an additional £5 billion fund to support the NHS and public services and £7 billion for individuals and businesses to support jobs and commerce. This is on top of the £18 billion for planned spending pledges.

Yesterday Mr Sunak announced additional measures for businesses in light of increasing efforts to contain the Coronavirus outbreak. These can be found at GOV.UK.

The Office for Budget Responsibility’s (OBR) forecasts is for the economy to grow by 1.1 per cent in 2020, revised down from 1.4 per cent a year ago in the Spring Statement 2019. However, the OBR’s economic and fiscal forecast does not reflect the now global spread of COVID-19, nor the outbreak in the UK which appears to have significantly deteriorated since the Budget.

Here are the key takeaways from the budget for PPA members:

Reading Tax Abolished

In his budget, the Chancellor announced government plans to abolish the 20 per cent VAT aka “reading tax” on digital magazines, journals, newspapers and books, starting from December 1, which will make it clear that digital publications are entitled to the same VAT treatment as their physical counterparts.

Digital Services Tax on Tech Giants

Following last year’s consultation on the adoption of a digital services tax on tech giants, the government has decided to go ahead and charge companies including Amazon, Facebook and Google, from April 1 2020. The tax will apply to large multinational companies with revenues greater than £500 million of which more than £25 million are generated by British users, derived from the provision of a social media service, search engine or online marketplaces.

HMRC expects the tax to result in the region of £515 million in additional revenue by the end of the financial year ending in 2025.

Plastic Packaging Tax

The government updated plans to introduce a plastic packaging tax from April 2022 and confirmed a public consultation on the proposal until May 2020, concentrating on the intention to charge manufacturers and importers £200 per tonne on packaging made of less than 30 per cent recycled plastic.

Other notable policies include:

  • a £100 billion cheap funding scheme has been announced for banks to support small businesses (further extension since announced – loans of up to £5m available through commercial banks with government guarantees)
  • Reforms to the intangible fixed assets regime designed to reinforce the attractiveness of the UK as a place for businesses to own and manage intellectual property.
  • A business rates holiday for shops, cinemas, restaurants and leisure venues in England with a rateable value below £51,000 for a year. (Since extended to all businesses in these sectors. Similar schemes announced in Scotland and Wales).
  • £13 million to expand the British Library’s network of Business and Intellectual Property Centre to 21 cities and 18 surrounding local library networks across England.
  • The threshold to start paying Employee National Insurance has been increased from £8,632 to £9,500.
  • A £500 million "hardship fund" for local authorities in England to help vulnerable people in their areas.
  • Funding to double investment in flood defences and £200 million for local communities in England to build flood resilience.
  • £5 billion fund to bring gigabit-capable broadband to 95 per cent of the country in the next five years.
  • Stamp duty surcharge of 2 per cent for buyers based overseas on residential property in England and Northern Ireland from April 2021, rising to 5 per cent if the overseas buyers are not intending to live in the property themselves. The government says it will ringfence the money from this surcharge to reduce rough sleeping.

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