Chancellor’s tax break to battle virus

CHANCELLOR Rishi Sunak could allow companies to defer or spread paying taxes as part of a package of measures to help them weather coronavirus disruption in his Budget on Wednesday.

Although the disruption caused by the virus is expected to be temporary, it is still likely to lower both world and UK economic growth, according to economists. The EY ITEM Club think tank says the disruption could reduce Britain’s gross domestic product growth for the year from 1.2 to 1 per cent.

Chris Sanger, EY partner and head of tax, said: “What we may see is Sunak present a Budget that will provide him with all the enabling powers he may need.

“If you look back to the financial crisis of 2008, the Government then introduced the Business Payment Support Service (which allowed companies to spread their tax bills) and I can see something like that coming in for PAYE. I can also see that happening with VAT and business rates.”

Additionally, Sunak is tipped to unveil increased funding for hospitals and medical staff at the front line dealing with the virus, as well as stimulus spending to help support the economy.

Barclays economists Fabrice Montagne and Abbas Khan said: “We believe it would make sense for the Government to include new measures in the spring Budget announcement.

“At the very least, and in a similar fashion to the measures it introduced last year regarding “no-deal” contingency planning, the Government could make funds available for the health sector to draw upon if needed, along with other contingency measures to be triggered in case the situation calls for it.”

A review of the business rates system is set to be announced at the Budget as well as interim measures to soften the pain the tax is inflicting on high streets and retailers in particular.

Relief from business rates is particularly needed as the tax will rise by 1.7 per cent from April 1, which would increase the annual amount it raises by £425 million at a time when high streets in general are struggling.

Deloitte director of business rates Gerry Biddle said: “Continuing the Government’s commitment to helping the high street, it has been indicated that the Chancellor will announce a fundamental review of the business rates system.

“More immediate measures may include the transitional relief scheme, which phases in increases or reductions in liabilities following revaluations.

If downward phasing – the gradual decrease of liabilities – was scrapped or significantly accelerated, it would give relief to many struggling high streets.”