By John McAuslin

On February 6, Finance Secretary Kate Forbes stepped up to deliver the Scottish Budget in unprecedented circumstances. In doing so, the 29-year-old became the first female to deliver a Budget either north or south of the border. While Chancellor Rishi Sunak may have had 27 days under his belt compared to the 24 hours that Forbes was given, he delivered what is clearly an extraordinary budget for an extraordinary time in, equally unprecedented circumstances faced by his Scottish equivalent.

Many predicted a budget dominated by coronavirus but that was not the case as Mr Sunak presented a far-reaching plan for the United Kingdom’s financial future. In his hour and four minutes at the dispatch box he delivered a budget that represents the highest levels of net public investment since 1955 but also sees an increase in the overall levels of Treasury income.

The Chancellor led with a comprehensive set of measures to support businesses through the effects of coronavirus, with SMEs, in particular, set to benefit. Firstly, the increased sick pay support in the form of statutory sick pay refunds for businesses that employ fewer than 250 employees was announced to help small businesses struggling as employees are forced to stay at home. This, combined with a proposed £2 billion cash injection direct to 700,000 of the country’s smallest businesses in the form of £3,000 cash grants, will be a welcome relief for smaller Scottish businesses that are already feeling the pressure as a result of the impact of coronavirus.

Much was made of the abolishment of business rates for all retail, leisure and hospitality businesses for England. The small business bonus scheme is already in place for small Scottish businesses but any additional funding for the scheme would surely be welcomed.

Each budget we hope for a VAT reduction for the tourism industry but again this was not forthcoming. However, an across the board freeze on alcohol duty, including scrapping the proposed rise on spirits duty, will help. This combined with a £1 million support package to promote Scottish food and drink overseas, and a pledge to continue lobbying the American government on the Scotch whisky export duty will no doubt go some way to appease one of Scotland’s key industries.

Away from his coronavirus response, the Chancellor had plenty to say around driving entrepreneurial growth – an area so crucial to the Scottish economy. Although some had speculated entrepreneurial tax relief would be abolished altogether, Mr Sunak instead recommended “sensible reform”. A reduction in the lifetime limit on gains from £10 million to £1 million was tabled and seems like an agreeable middle ground. The new measures should help maintain the spirit of an incentive that wasn’t always seen as targeting entrepreneurs. A cynic might say the reduction could have been phased so as to give business owners more time to adjust but, given how much Mr Sunak had to get through and that it should leave 80% of entrepreneurs unaffected, a decent balance appears to have been achieved. Combined with the pre-announced increase in R&D spending credit from 12% to 13% it certainly paints a promising picture for Scotland’s entrepreneurs and innovative companies.

With the national insurance threshold increasing from £8,632 per year to £9,500 a decent number of workers will benefit from this budget and while the threshold hasn’t yet reached the £12,500 target, even this initial increase will cost the Treasury a hefty £11 billion. With that in mind a staged approach is perhaps understandable. The increase in the business threshold from £3,000 to £4,000 is also a move that will benefit Scottish SMEs. While we would have welcomed a larger increase, it is understandable why the Chancellor has set the level where he has.

The announcement that tax relief on red diesel was to come to an end would have had many in Scotland’s agricultural and fishing industries reaching for the panic button. The Treasury has clearly listened to the evidence provided by the NFU and others though as agriculture, rail, domestic heating and fishing are all exempt. This is a proviso that will be very welcome and provides great news for key Scottish industries.

John McAuslin is a tax partner in the Glasgow office of Johnston Carmichael.