Businesses being able to carry back losses of up to £2 million for three years will be a major boost to cash flow for many businesses, according to a leading accountancy firm.
Chancellor Rishi Sunak unveiled £65 billion worth of support in his March Budget, including a more ‘generous’ tax treatment of losses which will enable to businesses to claim up to £380,000 in tax refunds by carrying back losses.
Sean Farnell, a partner at Burgis & Bullock, which has offices in Leamington Spa, Nuneaton, Rugby and Stratford upon Avon, has praised the Budget and is confident it will be well received by the business community.
He said: “Overall I think businesses have to be pleased with the measures announced in Parliament, however as always the devil is in the detail and we will have to analyse closer before assessing the true impact on business.
“The Chancellor delivered the Budget cleverly with 22 minutes of really good news, he then spent eight minutes talking about how bad the situation was, but then didn’t give a massive amount of bad news.
“It’s really good news regarding being able to carry back losses for three years and that will be important for quite a lot of businesses this year. To be able to carry back those losses and get the tax relief today, at the current 19 per cent Corporation Tax rate, will provide a crucial cash flow advantage.
“There was an expectation that Corporation Tax would go up and it is a big jump to 25 per cent, but to introduce it in 2023 gives people time to plan. The tapering of the tax depending on profits is welcomed too.
“The new Recovery Loans scheme being introduced for any business is important, and we hope it will work in the same way as the previous Coronavirus Business Interruption Loan Scheme (CBILS). It will be interesting to see what the relationship is between being able to take loans under the new scheme and the previous CBILS.”
The Chancellor also announced continued support for the self-employed and added that newly self-employed people, who had previously been excluded from support, would now be able to access the scheme.
However, Sean has reservations regarding the announcement for the self-employed and believes it might not be as effective as it appears.
He added: “The self-employed income support scheme is very welcome, as is the inclusion of newly self-employed people. But I do have concerns around how they are going to implement this.
“If the criteria for grants is based on profits from last year then those profits will be tiny in comparison to a normal year – particularly given the lack of support for the newly self-employed over the last 12 months.
“As a result, the support given to the newly self-employed could be very small and might be more of a good headline for Government rather than having any substantial impact.”