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There’s no doubt, not many of us would want to be in Rishi Sunak’s shoes as he delivered his second budget this week, following a year of what can only be described as political and economical carnage. With a delicate balance to strike between paying back the colossal borrowing and keeping a buoyant economy to protect jobs and livelihoods, Mr Sunak’s budget has focused on corporation tax, Capital Gains Tax and inheritance tax, but with a range of incentives for business owners to encourage growth and investment.
Get ready to invest in new assetsInvesting in new assets and capital equipment is a key part of the economic recovery plan, with the introduction of a radical ‘super-deduction’ of 130% when businesses invest in new plant and machinery.
In essence, if a business invests £100,000 in a new piece of plant or machinery, they are able reduce their taxable business profits by up to 130% of the investment cost. Essentially you will liable for a smaller tax bill because of the investments you have made.
These changes will come into effect from 1 April 2021 and will run for two years. If you’re looking to invest in new plant or machinery, you may be wise to wait until the new tax year so that you can benefit from the enhanced tax allowances that the ‘super-deduction’ brings, therefore reducing your tax bill. As always, we recommend you speak to your Accountant to ensure that you time the purchase of business assets to gain maximum taxable benefit.
What assets are in, what assets are out? Vehicles, including coaches, light commercial vehicles and vans Equipment for Construction, Waste Management and Agriculture Assets for Manufacturing, Engineering and LogisticsCars for business use are excluded from the ‘super-deduction.’ The scheme needs to focus on initiatives to enhance the development and growth of the business, so cars as a ‘non-essential’ business expense won’t qualify for this deduction.
What actions should businesses take now?Andy Wise, Managing Director of TVAF suggests that businesses need to focus on getting cash-flow fit:
“Cash-flow is at the heart of every business and there’s no doubt about it, your profits will be impacted by the increase in tax rates. You can prepare for this by looking at your projected forecasts and setting the money aside for the increase in corporation tax so that it’s budgeted for in two years time.”
“However, there is a huge opportunity for businesses to grow and the ‘super-deductions’ mean businesses can scale and grow by financing the assets they need within the next two years. If you’ve been thinking about investing in new plant and machinery, then getting this in place from April is a brilliant move. Many of our clients have been busier than ever during the pandemic, so need to replace their equipment whether that’s due to age or because of increased demand. The new tax year is definitely the time to contact the TVAF team to find out more about how asset finance can support your business.”
Relocation, relocation, relocationIf you’re looking to set up a new manufacturing plant or facility, then looking at the eight locations designated as “freeports” around England which benefit from generous tax breaks if you set up there could be a brilliant solution. If you’re looking to relocate, you can benefit from Stamp Duty Land Tax exemption, 100% first year allowances on plant and a 10% per annum structures and buildings allowance.
Other Government support available for businesses Furlough scheme extendedThis was expected, although employers will be required to make contributions to their employee’s salaries. This move is intended to protect jobs and provide employers with a safety net so that they don’t have to make redundancies before the world has fully opened up.
Sole trader supportSupport has been extended to sole traders who were previously excluded from support because their business started up in the 2019/20 tax year. This will help-out an estimated 600,000 businesses, however the directors of Limited Companies remain excluded from any government support, except the various loan schemes.
Tax relief on business lossesIf your business made losses in previous years (possibly due to COVID), then you can receive tax relief on those losses too.
High Street and hospitality sector grantsBusinesses forced to close due to the Coronavirus lockdown will be eligible to apply for grants of up to £18,000 depending upon the rateable value of their business premises. Pubs, restaurants, hotels, gyms and hairdressers will be eligible for a grant of up to £18,000 per premises whilst non-essential retail businesses will be eligible to apply for a grant up to a maximum of £6,000.
What are the challenges facing businesses?The Conservatives manifesto stated that they won’t raise income tax, VAT or National Insurance, so the hole in government finances will be plugged by increases in corporation tax, Capital Gains Tax and inheritance tax. What does this mean for UK businesses?
Nothing will change until April 2023, so you’ve got a few years to get yourself ready If your company profits are under £50,000, then you’ll continue to pay 19% corporation tax You will pay 25% corporation tax on profits over £250,000 If your profits fall between £50,000 and £250,000 then your corporation tax will raise in incrementsTVAF can help you
If you want to know more about how you can benefit from the opportunities that the 2021 Chancellor’s Budget can provide, in particular how you can maximise the tax efficiencies for plant and machinery investments, get in touch with the TVAF team on 01635 785 400 or Contact Us to arrange a callback.
There are a number of ways that an independent finance broker, such as TVAF may be able to help a business to get that much-needed cash injection even if a traditional high-street lender or bank says no.
For example, some start-ups will struggle to get additional lending to support business growth simply because the bank needs a minimum of two years' trading history. However, TVAF has access to a wide panel of lenders and have access to specialist lenders who can support start-ups, as demonstrated in this recent example with a Delicatessen start-up.
TVAF Managing Director Andy Wise and Business Development Manager Steve Kayll talk about the reasons why a traditional lender might say 'no' to lending and the ways in which TVAF can help.
Have you been declined for funding from a traditional lender? If so, there are other options, and a specialist, independent Asset Finance broker will have access to a wide panel of lenders who will be able to help you, particularly if you work in a niche or specialist area.
Get in touch with the TVAF team on 01635 785 400 or request a callback via the TVAF website here if you want to talk about your asset finance options.
Accessing a specialist broker for asset finance can be a brilliant move, especially if the traditional lenders such as banks have declined your application for finance in the past.
Specialists in asset finance Completely independent with access to over 40 finance lenders Able to support start ups as well as businesses with an opportunity to grow Able to help businesses making a loss and individuals with a poor credit historyHere, TVAF Managing Director Andy Wise and Business Development Manager Steve Kayll talk about the various reasons why a bank may decline a finance application and how TVAF can help many businesses when the bank says 'no.'
If you're in the enviable position of securing a large contract, you might need additional cash in order to deliver on it. This is exactly what happened to one of TVAF's customers recently when they won a large contract for Highways England. Refinancing their existing assets allowed them to release cash into the business, allowing them to deliver the contract. The refinance exercise also reduced their monthly repayments.
If you've got assets within your business and you want to find out more about how you can use them with a Refinancing Loan, please get in touch with the TVAF team on 01635 785 400 or Contact Us.
Want to know a bit more about Refinance loans? Find out more about Refinancing Loans here.
There are a number of different finance options available for businesses and ways to generate money for short-term cash flow or longer term growth strategies.
Did you know that TVAF offers VAT Loans?
You can also talk to TVAF if you need an Unsecured Business Loan.
And many TVAF customers come to us because they need a loan to cover their Professional Indemnity Insurance premium.
HTVAF Managing Director Andy Wise and Business Development Manager Steve Kayll talk about the different types of loan products available.