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Highlights: UK's Sunak extends COVID rescue plan, plans tax hike on companies

LONDON (Reuters) - Finance minister Rishi Sunak on Wednesday announced a costly extension of his emergency aid programmes to see the economy through its current coronavirus lockdown, but announced a tax hike for many businesses from 2023.

FILE PHOTO: Britain's Chancellor of the Exchequer Rishi Sunak attends a TV interview in London, Britain November 22, 2020. REUTERS/Simon Dawson

Below are highlights of what he said in his speech:

CORPORATION TAX

“In 2023, the rate of corporation tax, paid on company profits, will increase to 25%.”

“I’m protecting small businesses with profits of 50,000 pounds or less, by creating a Small Profits Rate, maintained at the current rate of 19%. This means around 70% of companies – 1.4 million businesses - will be completely unaffected.”

BUSINESS INVESTMENT

“Today I can announce the ‘Super Deduction’. For the next two years, when companies invest, they can reduce their tax bill not just by a proportion of the cost of that investment, as they do now or even by 100% of the cost, the so-called full expensing some have called for, with the Super Deduction they can now reduce their tax bill by 130% of the cost.”

“This will be the biggest business tax cut in modern British history.”

ECONOMIC FORECASTS

“The OBR now expect the economy to return to its pre-covid level by the middle of next year - six months earlier than they previously thought.”

“The OBR forecast that our economy will grow this year by 4%, by 7.3% in 2022, then 1.7%, 1.6% and 1.7% in the last three years of the forecast.”

FURLOUGH SCHEME EXTENSION

Britain will extend its job-protecting furlough programme by five more months until the end of September and expand support for the self-employed too.

“For employees, there will be no change to the terms – they will continue to receive 80% of their salary, for hours not worked, until the scheme ends. As businesses reopen, we’ll ask them to contribute alongside the taxpayer to the cost of paying their employees. Nothing will change until July, when we will ask for a small contribution of just 10% and 20% in August and September,” Sunak said.

DEBT

“Next year, as we continue our unprecedented response to this crisis, borrowing is forecast to be 234 billion pounds, 10.3% of GDP – an amount so large it has only one rival in recent history; this year.”

“Because of the steps I am taking today, borrowing falls to 4.5% of GDP in 2022-23, 3.5% in 2023-24, then 2.9% and 2.8% in the following two years. And while underlying debt rises from 88.8% of GDP this year to 93.8% next year, it then peaks at 97.1% in 2023-24, before stabilising and falling slightly to 97% and 96.8% in the final two years of the forecast.”

INCOME TAX

“This government is not going to raise the rates of income tax, national insurance, or VAT. Instead, our first step is to freeze personal tax thresholds.”

MORE GRANTS FOR PANDEMIC-HIT BUSINESSES

Sunak announced 5 billion pounds ($7 billion) of additional grants to help businesses hit hard by pandemic lockdowns. Shops, bars, clubs, hotels, restaurants, gyms and hair salons will be among nearly 700,000 companies eligible for new direct cash grants of up 18,000 pounds.

VAT CUT EXTENSION FOR HOSPITALITY, TOURISM

“One of the hardest hit sectors has been hospitality and tourism: 150,000 businesses that employ over 2.4 million people need our support. To protect those jobs, I can confirm that the 5% reduced rate of VAT will be extended for six months to 30th September.”

BUSINESS RATES HOLIDAY FOR RETAIL, LEISURE SECTORS

“Last year, we provided an unprecedented 100% business rates holiday, in England, for all eligible businesses in the retail, hospitality and leisure sectors.”

“We’ll continue with the 100% business rates holiday for the first three months of the year, in other words, through to the end of June. For the remaining nine months of the year, business rates will still be discounted by two thirds.”

STAMP DUTY HOLIDAY EXTENSION

“I can announce today the 500,000 pound nil rate band will not end on 31st of March, it will end on the 30th of June. Then, to smooth the transition back to normal, the nil rate band will be 250,000 pounds, double its standard level, until the end of September – and we will only return to the usual level of 125,000 pounds from October 1st.”

NEW MORTGAGE GUARANTEE

“Lenders who provide mortgages to home buyers who can only afford a 5% deposit, will benefit from a government guarantee on those mortgages.”

NEW INFRASTRUCTURE BANK

“I can announce today the first ever UK Infrastructure Bank. Located in Leeds, the Bank will invest across the UK in public and private projects to finance the green industrial revolution. Beginning this spring, it will have an initial capitalisation of 12 billion pounds and we expect it to support at least 40 billion pounds of total investment in infrastructure.”

GREEN SAVINGS BONDS

“Today we’re...announcing a new, retail savings product to give all UK savers the chance to support green projects.”

FUEL, ALCOHOL DUTIES

“I can confirm that the planned increases in duties for: spirits like scotch whisky, wine, cider and beer, will all be cancelled. All alcohol duties frozen for the second year in a row.”

“The planned increase in fuel duty is also cancelled.”

LISTING RULES

Britain will modernise its listing rules to attract more high-growth and “blank cheque” SPAC company flotations to London, Sunak said.

CULTURE, ARTS, SPORTS

“We’re making available 700 million pounds to support our incredible arts, culture and sporting institutions as they reopen; Backing the UK and Ireland’s joint 2030 World Cup bid, launching a new approach to apprenticeships in the creative industries, and extending our 500 million pounds film and TV production restart scheme.”

FREEPORTS

“Our Freeports will have simpler planning – to allow businesses to build; infrastructure funding – to improve transport links; cheaper customs – with favourable tariffs, VAT or duties; and lower taxes – with tax breaks to encourage construction, private investment and job creation.”

“I can announce the eight freeports locations in England: East Midlands Airport, Felixstowe and Harwich, Humber, Liverpool City Region, Plymouth, Solent, Thames and Teesside.”

($1 = 0.7161 pounds)

Compiled by Sarah Young; Editing by William Schomberg

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