The UK’s Coronavirus Budget – a budget full of surprises

Posted on 25 March 2020

The UK budget 2020 was delivered on 11 March. The fact that Rishi Sunak delivered the budget was a surprise in itself as he was only appointed as Chancellor of the Exchequer on 13 February 2020 following the resignation of Sajid Javid. Nevertheless, the Chancellor rose to the challenge and delivered an interesting and at the same time surprising budget.

I’m sure it would also have come as a surprise to the UK that it would be delivering a ‘Coronavirus Budget’ as it had to address how the UK intends to respond to the economic impact of the Covid-19 virus. The UK announced a £12 billion plan to provide for businesses, vulnerable people and public services. This included the measure that the UK government will fund the cost for small businesses (those with under 250 employees) to provide Statutory Sick Pay (“SSP”) to their employees for 14 days. This is likely to affect 2 million small businesses.

These emergency measures overshadowed other more traditional elements of the budget such as tax changes. However, we discuss in this article various tax changes that were made which may be of interest to individuals and companies.

Stamp Duty Land Tax (“SDLT”)

The UK announced an additional SDLT surcharge of 2% for non-UK residents buying UK residential property. There is already an existing 3% SDLT surcharge on the acquisition of a second property (relevant for those who own a property anywhere else in the world). This announcement was not surprising – however, the surprising part is that this will take effect from 1 April 2021. Non-residents looking to purchase UK residential property ought to act sooner rather than later to avoid this extra surcharge.

We also note that interest rates will Bank of England interest rate will be cut from 0.75% to 0.25% reducing borrowing costs to the lowest level in history.

Entrepreneurs’ Relief (“ER”)

ER is a tax relief in the UK to attract entrepreneurs to set up their business in the UK by granting certain trading businesses a reduced rate of 10% on lifetime capital gains of qualifying disposals up to £10 million. It was rumoured that ER would be scrapped following heavy criticism that only a small number of affluent taxpayers benefited from it and it did little ‘to generate additional entrepreneurial activity.’ Surprisingly, ER was not scrapped but amended – whereby the lifetime limit on gains was reduced from £10 million to £1 million. This will be relevant for disposals made from 11 March 2020. It is likely that 80% of those using the relief will be unaffected by this change.

UK Businesses

UK Corporation Tax will remain at 19% (instead of reducing to 17%) and this rate will continue for the period 1 April 2021 to 31 March 2022.

Despite the curtailment of ER, the Chancellor maintained that the UK “must encourage innovation, creativity and entrepreneurship post-Brexit, not stifle the next generation of start-ups.” To encourage innovation and support businesses investing in Research & Development (“R&D”), the UK will increase the Research and Development Expenditure Credit (“RDEC”) from 12% to 13% from 1 April 2020.

We also note the implementation from 1 April 2020 of a ‘digital services tax’ at 2% on the value that digital businesses earn from the UK. This is relevant for businesses with over £500 million in worldwide turnover and of which £25 million is derived from UK users.

Tax Avoidance and Tax Evasion

The UK is investing in additional compliance officers and new technology for HM Revenue & Customs (“HRMC”) to tackle tax avoidance and tax evasion. The investment is forecast to yield £4.7 billion of additional tax revenue between now and 2024/2025. We assume that the data received by HMRC from the ground-breaking Common Reporting Standard (“CRS”) will play a significant role in this forecast and HMRC’s ability to successfully tackle offshore tax non-compliance. The CRS is the automatic exchange of financial information between over 100 jurisdictions which allows the UK to detect possible offshore tax non-compliance and investigate accordingly. In fact, in 2018 HMRC received information on approximately 3 million UK taxpayers with offshore financial interests.


The UK budget 2020 focused on the financial impact of the Coronavirus and supporting individuals and businesses dealing with this. As a result, tax announcements were overshadowed and surprisingly we noted that no changes to UK Inheritance Tax were mentioned. We also welcomed a wealth of energy and environmental tax reforms, including a new Plastic Packaging Tax from April 2022 to incentivise the use of recycled plastic in packaging. We also note the application of a zero rate of VAT to e-publications (essentially abolishing the ‘reading tax’).

UK companies should take note of the new restrictions to ER and the advantageous reduction of the RDEC and plan accordingly. Foreigners investing in UK property now have a window to avoid the additional SDLT 2% surcharge. In these ‘surprising’ times, we ought to grasp available opportunities with both hands.