Chancellor Rishi Sunak’s first UK budget was far from standard fare with Brexit worries taking a backseat to coronavirus concerns.
This year, the economy is predicted to grow by 1.1%, revised down from 1.4% a year ago. There’s been a noted U-turn on the austerity drive enacted a decade ago, with the government set to borrow £14.6bn more this year than it was previously forecast to.
The Advertising Association welcomed the budget but drew comparisons between the economic impact of the coronavirus and the economic shock of 2008 and 2009 following the impact it's had on the global trading.
Here are the five key takeaways from the budget for those in the marketing, media and creative industries.
Subscription tax abolished
The government has abolished the reading tax on digital content, which means that ebooks, online newspapers, emags and journals will no longer be faced with a VAT tax.
Previously, only print products enjoyed this perk, in place since 1973.
Sunak said: “Digital publications are subject to VAT. That can’t be right. So today I’m abolishing the Reading Tax. From 1 December, just in time for Christmas, books, newspapers, magazines or academic journals, however they are read, will have no VAT charge whatsoever.”
This comes at a cost of more than £800m over the next five years.
Tech giants will be hit by a digital tax
While it's cut the digital subscription tax, there will be a 2% digital services tax imposed on the tech giants such as Facebook, Google, and Amazon from 1 April 2020.
It has been a long-tabled proposal to implement a tax on these Silicon Valley companies, which have historically come under criticism for their complex setups which allow them to record ad revenues in the UK through EU subsidiaries.
This meant Facebook’s UK division paid just £28m in corporation tax in 2018 despite making £1.6bn in British sales. Google, meanwhile, was criticised for paying £65.3m tax for the same financial year on revenues of over £1.4bn.
The tax would apply to companies with revenues greater than £500m from which more than £25m are generated by British users.
Though it didn’t name the tech giants directly, it said the tax would affect "large multinational enterprises with revenue derived from the provision of a social media service, a search engine or an online marketplace to UK users".
HMRC said the tax could result in the region of £515m in additional annual income by the end of the financial year ending in 2025.
Business rates cut
In England, business rates have been cut to benefit museums, art galleries, theatres, caravan parks, gyms, small hotels, sports clubs and nightclubs.
Companies with a rateable value of less than £51,000 will be exempt from business rates in 2020, a tax cut he values at £1bn and potentially up to £25,000 per business. In Scotland, Wales and Northern Ireland such rates are devolved.
The government also backed temporary small loans for SMEs struggling with any downturn. The Bank of England slashed the headline borrowing rate by 0.5% to just 0.25%.
Elsewhere, the tampon tax was slashed, fuel duty was frozen as was spirits, beer, cider and wine. Tobacco was raised and pubs saw business rate cuts from £1,000 to £5,000 this year.
There’s a coronavirus action plan to support British business
A £30bn stimulus package has been planned for the economy. Of this £12bn will be implemented to directly tackle the coronavirus. £7bn has been flagged for business and £5bn for the NHS.
The impact of the pandemic on the economy cannot be overestimated due to, among other things, international disruption and the potential quarantines of consumers and the workforce. Some businesses have benefited from the conditions. Hand soaps and loo roll has been flying off shelves, meanwhile, food delivery companies and e-commerce firms have capitalised on the public’s increased reluctance to leave the house. All in there will be a net loss to the economy with markets around the world taking a hit.
In acknowledgment, businesses with fewer than 250 employees will be able to repay the cost of providing Statutory Sick Pay to employees who have contracted coronavirus. Meanwhile, self-employed workers will be able to claim contributory Employment Support Allowance.
Sunak also updated on plans to introduce a plastic packaging tax that would come into force from April 2022, though said it will enter into a consultation period on the proposal until May 2020.
“To tackle the scourge of plastic waste, we will deliver our manifesto promise to introduce a new plastics packaging tax,” he said. “From April 2022, we will charge manufacturers and importers £200 per tonne on packaging made of less than 30% recycled plastic
It also said it would invest £7.2m into a national system to track waste movements across the country.
Additional reporting from Jen Faull.