Furlough Scheme

The Furlough scheme has been extended up until 31 March 2021.

Employees will receive 80% of their wages for hours not worked up to a maximum of 2,500 per month. Employers will have to pay for the Employers NI and Employers Pension contributions.

Up to 31 October, the maximum number of employees that can have furlough pay claimed back from HMRC cannot exceed the number of employees previously claimed for in a single claim before 1 July 2020.

You can claim for employees who have not previously been furloughed. They just have to have been employed and included on a RTI payroll submission to HMRC between 20 March and 30 October 2020.

Claims for November have to be submitted by 14 December and then 14th of each subsequent month.

The thousand-pound Job Retention Bonus will now not be paid in February due to the extension of the furlough scheme.

Self-Employment Income Support Grant

There will be two further rounds of grants available to self employed people covering the two three-month periods 1 November to 31 January 2021 and 1 February to 30 April 2021.

The maximum grant is 80% of 3 months average trading profits capped at 7,500.

The next grant will be able to be claimed online from 30 November.

The same eligibility criteria apply as for the first two grants, mainly having been self-employed in the tax year to 5 April 2019 and still being self-employed during the tax year ended 5 April 2020.

Other support

Businesses forced to close should be able to claim cash grants of up to 3,000 per month.

Councils are being provided with additional funds to be able to support businesses, so check the website of your local authority to see what support you can claim.

Businesses should be able to top up bounce-back loans until the end of January 2021.

Mortgage holidays are being extended. Borrowers should speak to their individual banks.

VAT

The VAT payment that was deferred until 31 March can be spread over 11 months from March 2021.

The lower rate VAT for hospitality will remain in place until 31 March 2021.

Time to Pay

If you are struggling as a business to manage other liabilities such as PAYE or Corporation taxes, you should ring the HMRC debt management line relevant to the tax in question to get a payment plan put in place. If you do not pay and do not ring, HMRC will chase you for the payment and apply interest and penalties. Ringing them will avoid this.

Follow this link on details for getting time to pay https://www.gov.uk/difficulties-paying-hmrc

Coronavirus Information 22nd July 2020

The Kickstart Scheme

This is a work placement scheme aimed at 16 – 24 year olds claiming universal credit, whereby they can get 6 month long work placements.

The funding pays 100% of the National Minimum wage, Employers NI and Employers Pension for up to 25 hours per week. Additional hours paid will be at the employer’s cost.

The Traineeships Scheme

Employers who hire new apprentices between 1 August 2020 and 31 January 2021 will receive payments of £2,000 where they are under 25 years old and £1,500 for aged 25 and over.

Usually these payments are made after the employee has worked with the employer for a minimum qualifying period.

VAT Rate for Hospitality Sector

The VAT rate for hospitality, accommodation and attractions is reducing from 20% to 5% from 15 July 2020 until 12 January 2021.

What is included?

• Supply of food and non-alcoholic beverages on premises;
• Takeaway of hot food and non-alcoholic beverages;
• Supply of sleeping accommodation;
• Pitch fees for tents & caravans plus associated facilities charges;
• Admission to certain attractions

There are many areas of sales which will be complicated by this change, especially the fact that the change in rate comes in the middle of a month, never mind VAT quarter. Here are the main issues we expect clients in this area to come across.

What is the Tax Point?

The tax point is the point whereby VAT becomes chargeable. In the case of goods, this is usually the point that the customer can take them away or has access to them. In the case of services this is the date that the service is performed. This point becomes more important in instances like this when the VAT rate changes.

Deposits

Where a customer pays a deposit for something such as a hotel room booking, if the deposit is paid before 15 July, there will be VAT on this amount at 20% and then when the balance is due, the VAT rate will be 5%.

If the deposit was more of a damage deposit such as on keys or a hire car, then there will be no VAT on this amount unless it crystallises as a sale when the customer breaks or loses the item thus forfeiting their deposit. The VAT rate would be the rate that applies on the date the deposit is forfeited.

Cash Accounting

The usual rules relating to Tax Points will apply. For example, if goods are sold on credit before 15 July, VAT will be charged at 20% even though they may not be paid for until after that date.

Stamp Duty Temporary Reduction

Between 8 July 2020 and 31 March 2021, stamp duty will be applied to the first £500,000 of a property sale at 0%. For additional properties, it will be 3%, which is the usual additional percentage paid.

Where someone buys a new home before selling their existing one, they will have three years to sell their initial home in order to reclaim the stamp duty paid.

Job Retention Bonus

The job retention bonus will be paid to employers who retain staff who were furloughed. The payment will be paid after February 2021 to employers at the rate of £1,000 per employee continuously employed up until the end of January 2021. The detail of this scheme has not yet been released and is expected at the end of July.

Coronavirus Information 29th June 2020

Where we are with Covid-19 support

This blog replaces all of the previous ones written since we started producing these updates on 21 March. It is up to date as of 27 June 2020.

Please note that we are continuing to provide the Q&A session via Zoom at 14:00 starting from Monday 29 June and continuing fortnightly, where we will go into more detail on this blog.

Job Retention Scheme

This scheme, known as the Furlough Scheme is available to employers who cannot maintain their workforce due to their business being adversely affected by Coronavirus.

We would advise extreme caution to employers who are continuing to furlough household family members and directors, whilst their business is continuing to trade albeit perhaps not as profitably as usual. We suspect that HMRC might regard this as abuse of the system. Please talk to us if you are not sure if you would still qualify.

From 1 July employers can bring employees back off furlough part time, so they can work some hours and be furloughed the rest of the time to maintain their usual wage.

New claims cannot be made from 1 July for employees who have been laid off after 10 June 2020. All furloughed employees from 1 July have to have been furloughed for at least three weeks before that date.

From 1 August employers will only be able to claim for 80% of the normal wage, up to £2,500 per month. They will no longer be able to claim for employers NI contributions or employer pension contributions.

From 1 September employers will only be able to claim for 70% of the normal wage. They will have to top up 10% of the wage cost and can opt to top up the remaining 20% if they so wish.

From 1 October employers will only be able to claim for 60% of the normal wage. They will have to top up 20% of the wage cost and can opt to top up the remaining 20% if they so wish.

The scheme is currently planned to close at the end of October.

Any claims relating to the period before 30 June have to be made by 31 July.

Statutory Sick Pay

Employers can claim for two weeks of statutory sick pay (SSP) paid to employees who are ill with Coronavirus or self-isolating.

This has caused much confusion as many employers did not realise that they would usually have to bear the cost of SSP. This has been the case since the Employers Allowance for NI was introduced, whereby small employers are exempt from the first £4,000 of Employers NI.

VAT Deferral

VAT payments which were due to be paid between 20 March 2020 and 30 June 2020 can be deferred without penalty until 31 March 2021.

If you have a VAT period end 31 May, where the VAT is due for payment by 7 July, or a 30 June period end where the VAT is due for payment by 7 August, you cannot defer this VAT payment under this scheme. If you are unable to pay you would have to ring HMRC on 0800 024 1222 to get help and time to pay.

We recommend taking steps now to consider how to save and ensure that the deferred VAT can be paid by 31 March 2021 as well as keeping on top of VAT liabilities that continue to arise over the coming months.

Self-Assessment Payment on Account Deferral

You can choose to defer your second payment on account for the 2019/20 tax year, which is due for payment by 31 July 2020. This can be deferred until 31 January 2021 and paid with the balancing payment due at that time.

You don’t need to apply. HMRC have been assuming that people will defer the tax and have been sending out statements with the second payment on account removed.

If you can pay, HMRC request that you do so.

Business Rates Relief

Businesses in the retail, hospitality and leisure sectors will not have to pay business rates in for the year 1 April 2020 to 31 March 2021.

This is an automatic relief. If you are in one of these sectors and have not received a replacement rates bill for £0, or are being chased for payment, you will need to contact your local authority directly.

Small Business Grant Fund and Discretionary Grants Fund

The small business grants fund was for businesses who had business rates relief or rural rates relief. In this case grants of £10,000 were being paid without the need to apply.

The Discretionary Grants fund is for businesses with fixed premises costs who did not qualify for the Small Business Grant. In this case, you need to check with your local authority to see if you qualify before applying. These grants are limited and are being dealt with in different ways between local authorities. The grants range from £2,000 to £10,000 and are only available for a short time.

Self-Employment Income Support Grant

The first trance of this grant ends on 13 July.

The Scheme allows for self employed people to claim for 80% of their average monthly trading profit for three months, up to a maximum claim of £7,500.

Their business has to have been adversely affected by Covid-19 to be eligible to claim.

There will be a second claim available from August for businesses which have been adversely affected from 14 July. Businesses who have been able to resume normal trading since the first grant will be unlikely to qualify, however those who continue to be unable to trade, or their income is a mere fraction of what it had been before, will be eligible.

Unfortunately, accountants are not able to help their clients with these claims and if HMRC believe they have, the claims will be treated as fraudulent and not paid out!

Taxation of grants

All non-refundable grants are taxable in the hands of the recipient as normal trading income. This means companies will pay corporation tax on the receipt and self-employed individuals will pay tax and NI.

Obviously if there has been a significant reduction in income because of Coronavirus, this may not make any significant difference as it will likely be offset against the business overheads and other costs.

Bounce Back Loans

The banks are encouraging small businesses looking for loan support to apply for the bounce-back loan in the first instance. This is a loan of a maximum of 25% of the last years turnover, up to a maximum loan of £50,000.

It is interest free for the first 12 months, with no repayments due in that period either.

The interest rate will be 2.5% per annum after the first 12 months.

To apply, your business has to have been adversely affected by the Coronavirus. You cannot have already claimed under the CBIL facility but you can transfer an existing CBIL loan.

The application process for this loan is very straightforward with no need to provide any detailed financial information.

CBIL – Coronavirus Business Interruption Loan

This scheme provides loans of up to £5m.

Businesses have to demonstrate that they have been adversely affected by Coronavirus and that they would be a viable business if it was not for this situation. They also have to confirm that they were not in difficulty prior to 31 December 2019.

Applying for these loans is taking significantly longer than for the bounce back loans as the banks are asking for management accounts, forecasts and other information that they deem necessary.

If we look at CCF as an example, we are typical of many businesses in our position.
Currently, we have desks in different positions to how the office was designed, with makeshift screens and social distancing measures in place. That’s just for the staff who remained in the office. There are also the workstations belonging to the home workers who have been working there for a long time and plan on staying there part if not full time. Then there are the ones in between who have had a mixture of home and workdays.

What this all leads to is an inefficient use of office space. For businesses such as mine who have basic computer and telephone systems in place, we end up with desks sat empty but for a computer with no operator in the building and clients not being able to call them directly, or other desks only being used once or twice a week.

Investment is therefore going to be required to bring ours and many similar offices into an efficient space to work.

One of the questions that will be presented is whether to buy or lease the equipment and furthermore if buying, whether to buy outright or to use finance.

The first consideration is cash-flow. Can the organisation afford to buy the item outright. This is often the least expensive option.

Next is the useful life of the equipment and whether the business wants the risk of owning it and having the hassle and expense of replacing it in 3 – 5 years or so. This might steer them towards rental rather than buying on hire purchase.

Next up is the deal on offer. When comparing two like for like items but with one on lease or another on a purchase plan, which one represents better value for money or a better deal?

Finally, comes the tax consideration. In any case, the costs of office equipment and telephone systems will be allowable expenses for tax purposes, however, tax relief doesn’t want to be the steering force. What is a consideration however is the difference between a lease and an outright purchase or purchase on HP.

When acquiring equipment on a lease, (subject to the 90% test) the rentals will be offset against profit as and when the payments are made, so if it is a three-year lease, there will be tax relief over three years.

When buying the equipment outright on a cash purchase or HP, the full purchase price can be used to reduce taxable profit in the accounting period which it is acquired in. So that’s all the tax relief in one go in year one. This can make a massive difference depending on the value of the goods purchased.

Financing equipment can feel like a minefield but it can be straightforward once you understand the thought process behind it.

CCF can help with these considerations as we understand the differing priorities of businesses depending on their circumstances. If you wish to discuss your next asset purchase, call CCF on 01423 567499.

However, did you know there are advantages to getting involved in the voluntary sector as the owner or manager of a limited company?

For example, you may not be aware that charitable donations are allowable for tax, reducing your taxable profit in the same way as regular business expenditure.

Other options to consider include:

Donating money

Donations are deducted from taxable profit in the same way as any regular business expenditure. However, bear in mind loans don’t count and, if your company is given anything in return – tickets to an event for example – their value mustn’t be above a certain amount.

Donating company equipment or stock

The cost of any donated equipment or company stock counts as a capital allowance. Examples include office furniture, computers, vans and cars or even tools and machinery. For tax purposes, a donation of stock is classed as a sale at £0.00; the expense appears as usual in the limited company’s profit-and-loss account but there is no corresponding sale. If VAT would normally be applied, the donation can be zero-rated so there’s none to pay. However, the VAT on the purchase of the stock is reclaimable as normal.

Donating land, property or shares

Selling shares of the limited company to a charity doesn’t bring any tax breaks but sales of land, property or shares in another company are exempt from Capital Gains Tax. If the sale is a gift at less than market rate, the market value of the gift (not the land, property or shares) can be deducted from taxable profits.

Seconding employees

If an employee is seconded to a charity, the costs of the employment of that individual are still deductible as a business expense against taxable profit. In other words, although they may be absent from the office, for tax purposes, it’s as though they’re still there.

Sponsoring a charity

As with donations, sponsorship of a charity is deductible from taxable profit in the same way as business expenditure.

The charity’s options include public support for the company’s products or services while the company may wish to use the charity’s branding or logo on its letterhead, website or printed material. The company may also be invited to the charity’s public events, enjoy some representation at the charity’s offices and also benefit from mutual online links.

If you have any other questions or would like to know more, feel free to contact us by emailing enquiries@ccfaccountancy.co.uk or call the office on 01423 567499.

The last year has been a strange one, especially for businesses which has experienced mixed fortunes. Some have been on their knees fighting to survive, some have got through with help from the government or council grants but others have posted record profits as they capitalised on the shift to online.

However, the next few months are going to be equally telling. Whilst those who can might be planning to get their tax bills down by spending, there’s still an awful lot of uncertainty in the economy.

For businesses fortunate enough to find themselves emerging from their first year of the COVID era in a much healthier position, now is the time to actually cement some solid foundations and ring-fence a reserve for the rainy days of the future.

In an ideal world any owner-managed business – or indeed any business – should have a rainy-day fund to help them get through difficult times. The start of the pandemic in March 2020 highlighted just how many didn’t and therefore quickly fell into a dire financial black hole.

For many, the extreme stress and anxiety that followed was exacerbated when the sales tap was turned off. Nobody ever imagined a time would come when the whole country would be closed down with everyone told to stay home. But it happened.

So, what if it happens again? Granted, the Government might be on hand to support businesses as much as they can but having a reserve to bridge the gap between the tap being closed and the support arriving would save many people a few sleepless nights.

This is the perfect time for businesses to re-evaluate their position, start looking towards the future and planning for the “What if..?” scenarios.

We have the benefit of hindsight now to be able to help us build a stronger business platform for the future.

If you have any other questions or would like to know more, feel free to contact us by emailing enquiries@ccfaccountancy.co.uk or call the office on 01423 567499

Your business will be affected by the new rules if you:

• Buy goods from an EU seller and bring them into the UK
• Send goods you’ve sold to a buyer in an EU country
• Haven’t exchanged money but need to move equipment that you use for your business, between the UK and the EU

In order to support you getting to grips with the changes, you can now apply for the SME Brexit Support Fund. The government has made £20 million available and provided you meet certain eligibility criteria, smaller businesses can get up to £2,000 to pay for practical support, including training or professional advice to adjust to new customs, rules of origin and VAT rules when trading with the EU.

What you’ll be able to use the grant for

There are two types of grants that Traders can apply for.

You can use the grant for training on:

• How to complete customs declarations
• How to manage customs processes and use customs software and systems
• Specific import and export related aspects including VAT, excise and rules of origin

You can also apply for a grant for professional advice so your business can meet its customs, excise, import VAT or safety and security declaration requirements.

Who will be able to apply?

In order to qualify for the grant your business must:

• Be established in the UK
• Have been established in the UK for at least 12 months before submitting the application, or currently hold Authorised Economic Operator status
• Not have previously failed to meet its tax or customs obligations
• Have no more than 500 employees
• Have no more than £100 million turnover
• Only import or export goods between Great Britain and the EU, or move goods between Great Britain and Northern Ireland, if you already import or export goods from or to a non-EU country you are not eligible for his grant.

In addition your business must also either:

• Complete (or intend to complete) import or export declarations internally for its own goods
• Use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain)

How to apply

PricewaterhouseCoopers (PwC) is administering the grants on behalf of HMRC.

You need to contact them quickly though as applications will close on 30 June 2021 or earlier if all funding is allocated before this date.

Apply online through Price Waterhouse Coopers.

If you have any other questions or would like to know more, feel free to contact us by emailing enquiries@ccfaccountancy.co.uk or call the office on 01423 567499.