Rural news: UK Budget 2020 and Government support package to coronavirus

25 March 2020 | Applicable law: England and Wales

We are living in unprecedented times. A wet autumn and winter left many farmers able to drill only a small percentage of their land. Many who did get crops in the ground found themselves ploughing up the land when the dry weather did not arrive. A ban on neonicotinoids has seen rape crops struggle and there is pressure to ban other pesticides.

The spectre of a Corbyn government and the policies that this would have brought now seem a distant memory.

A majority government and resolution for Brexit did bring closure on the future relationship with Europe, but uncertainty as to what will replace the single farm payment and what form a trade agreement will take, assuming one can be agreed, remains.

Rural businesses were concerned that a Budget would abolish entrepreneur's relief and restrict agricultural and business property relief. As it transpired, entrepreneur's relief was restricted to its previous level of £1m rather than abolished. Inheritance tax relief did not even get a mention; perhaps an acceptance that family businesses, including rural businesses, are vital to the UK economy. It is easy to forget that such businesses contribute nearly 30% to UK GDP. The Budget headline for many marginal businesses was relief that red diesel, which is taxed at 11.14p per litre compared with 57.96p per litre for standard diesel, was preserved for agricultural businesses.

The Budget gave initial support for the unfolding coronavirus pandemic. Those advised to self-isolate were entitled to statutory sick pay and firms with fewer than 250 staff would be refunded for sick pay payments for two weeks. Significantly, business rates in England were abolished for the current year for the retail, hospitality, leisure and nursery sectors – the sectors most immediately affected and which, along with other tourism activities, are the backbone of many rural communities. Many of the diversification enterprises run by farms and estates will be eligible. There were promises of more to come.

As the Bank of England and Government worked together to support the economy there followed a reduction in the base rate to 0.1% and an unprecedented series of measure announced by the Chancellor. The aim for both was to try and keep businesses going through the pandemic. Those most affecting the rural community include:

  • Government support to pay the wages of employees who would have otherwise been laid off. Businesses can claim up to 80% of the salary of each affected employee, up to a cap of £2,500 for the next 3 months and backdated to 1 March. This should help avoid many redundancies. Direct cash grants, also of up to £2,500 per month for at least three months, extend similar help to many of the self-employed.
  • £10,000 grant funding for all businesses in receipt of small business or rural rate relief and £25,000 for retail, hospitality and leisure businesses with a rateable value between £15,000 and £51,000;
  • business interruption loans of up to £5m for SMEs and a lending facility from the Bank of England to support cash flow for larger businesses;
  • a 6 month automatic deferral of income tax payments due on account on 31 July until 31 January 2021 with no interest or penalties; and
  • similarly, a 3 month automatic deferral of VAT for VAT registered businesses for VAT due on 20 March until 30 June.

The effect of the pandemic will be wide reaching. The Government support package is welcomed but there are gaps and there will be casualties. Deferral of taxes will help cash flow but will not replace lost income. Some businesses will be able to adapt, a rural pub becoming a farm shop, but many will simply close as the busiest time of the year approaches. The latest lock down will have ramifications beyond the rural community and for some time to come.

However, there are chinks of light. Arable farmers are now able to sow what may be larger than average acreages of spring crops thanks to some welcome dry weather. The US is to lift its ban on UK beef, potentially providing welcome export opportunities for British farmers. There is a strengthened sense of community, particularly in rural areas.

As one works remotely and observes the current advice from the Government, one reflects on whether Brexit and the pandemic will remind the UK population of the importance of food security, buying locally and the significant contribution the rural community plays in their own tourism and leisure.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.


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