The Mini Budget September 2022 and Insolvency
What were the specific announcements for Businesses?
The headlines from Kwasi Kwarteng’s mini budget on 23rd September largely focused on the tax cuts he announced for individuals. However, there were a number of announcements specifically for businesses, which we take a look at in this article. In the view of our Insolvency Practitioners, the economic and financial environment for businesses remains extremely challenging, so whilst we welcome these announcements for businesses, it still remains the case that the sooner that businesses in financial trouble take advice from their accountant or an insolvency practitioner, the more likely it is that a positive outcome will be the result.
Energy Support for Businesses
In an earlier article, we quoted the British Chambers of Commerce who stated that SMEs are likely to need, on average, c.£5,000 each so that they can afford to pay their energy bills this winter. Given that there are c.4.5 million SMEs in the UK, that would equate to £23 billion of government support.
It had already been announced that energy price support for businesses was on its way, but on 23rd September, the Chancellor stated that energy bills for UK businesses will be cut by around half their expected level this winter. Starting on 1st October and lasting for 6 months, the scheme will fix wholesale gas and electricity prices for firms as well as hospitals, schools and charities. It is understood the scheme will be reviewed after three months with an option to extend support for “vulnerable businesses” – but it is not known what sectors come under the category.
The independent analyst Cornwall Insight has stated that the support equated to a 45% discount on energy prices as at 16th September.
We have heard reports of annual energy bills for companies in some sectors rising by more than 100%. In extreme cases bills were set to more than triple, so this support was crucial and will save many thousands of businesses. However, many businesses were already in severe financial difficulties so whilst our Insolvency Practitioners welcome this support package, only time will tell how effective this plan will be.
Other Announcements for Businesses
The other main measure affecting businesses directly that hit the headlines was:
- the cancellation of the planned increase in the corporation tax rate to 25% from 1 April 2023 has been cancelled. The rate will remain at 19%.
In addition, some of the other announcements for business included:
- The National insurance increase of 1.25p in the £ for workers and employers will be reversed from 6th November.
- From 6 April 2023, companies will be able to raise up to £250,000 under the Seed Enterprise Investment Scheme (SEIS), an increase from £150,000.
Will there be another budget this year?
This mini budget did not include a full analysis of the measures announced by the Independent Office for Budget Responsibility, as would be the case in a full budget. Therefore, it is likely that there will still be a full budget later in the Autumn, or at least a further statement supported by forecasts from the Office for Budget Responsibility. This is pencilled in for 23rd November.
What about Business Asset Disposal Relief?
As anticipated, Business Asset Disposal Relief (BADR) was not mentioned in the mini budget, so we are pleased to report that it is still available for Members’ Voluntary Liquidations.
For some years now, there has been speculation and rumours that the Chancellor will end BADR, which costs the Treasury c.£6 billion per annum. It has not happened yet, but with the huge cost of the energy support scheme – estimated to be at least £150 billion – added to the cost of Covid-19 support, BADR could be on the Treasury’s agenda again in future budgets.
For now, Business Asset Disposal Relief is still available if you close your solvent company using a Members Voluntary Liquidation. We can advise whether your business qualifies for such relief and what these limits are. It can save business owners many £000s.
Contact our Licensed Insolvency Practitioners for help and advice
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