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Business As Usual During Covid 19

Corona Vat Deferral Update

Corona VAT

On 24 September 2020, the Chancellor announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.

Instead of paying the full amount by the end of March 2021, HMRC have confirmed businesses can make smaller payments up to the end of March 2022, interest free.

You will need to opt-in to the scheme, and for those who do, this means that your VAT liabilities due between 20 March and 30 June 2020 do not need to be paid in full until the end of March 2022.

Those that can pay their deferred VAT can do so by 31 March 2021.

If you are still unable to pay the VAT due and need more time, you can contact HMRC by phoning: 0300 200 3835.

More information on the scheme will be available in the coming months and we will keep you up to date when changes occur.

See: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19?utm_source=cad7c1fc-6225-4a8b-97b6-66507f6182c0&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

Please don’t hesitate to contact us if you would like more help with this.

Expansion of UK Government Job Support Scheme

In some good news for beleaguered hospitality businesses the Chancellor has announced extra support which will apply to businesses here in Scotland that are forced to close by local lockdowns.

The government news release states:

“The government’s Job Support Scheme (JSS) will be expanded to protect jobs and support businesses required to close their doors as a result of coronavirus restrictions, the Chancellor announced today, 9 October.

  • Job Support Scheme will be expanded to support businesses across the UK required to close their premises due to coronavirus restrictions
  • government will pay two thirds of employees’ salaries to protect jobs over the coming months
  • cash grants for businesses required to close in local lockdowns also increased to up to £3,000 per month

Under the expansion, firms whose premises are legally required to shut for some period over winter as part of local or national restrictions will receive grants to pay the wages of staff who cannot work – protecting jobs and enabling businesses to reopen quickly once restrictions are lifted.

The government will support eligible businesses by paying two thirds of each employees’ salary (or 67%), up to a maximum of £2,100 a month.”

Full details here: https://www.gov.uk/government/news/job-support-scheme-expanded-to-firms-required-to-close-due-to-covid-restrictions

If you need any help with your furlough claims don’t hesitate to get in touch.

 

Considering An Electric Company Car?

There is currently a zero P11d benefit for the drivers of electric cars in 2020/21. The legislation for this change is included in Finance Act 2020 which also states that the benefit will be 1% of list price in 2021/22 and then 2% in 2022/23.

The zero taxable benefit also applies to hybrid cars emitting no more than 50 grams of CO2 per kilometre with a range using its electric motor of at least 130 miles, but only for cars first registered on or after 6 April 2020. Unfortunately, the range of most plug in hybrids is considerably less than 130 miles. For example, the Mercedes A 250e costing £32,980 emits 26g CO2 but has a PEV range of only 45 miles.

An additional benefit for the business is that motor cars that emit no more than 50g CO2 per kilometre currently also qualify for a 100% first year allowance which means that the full cost can potentially be set off against business profits.

The Mercedes A 250e would currently qualify for a 100% first year allowance but the P11d benefit would be 6% for the employee in 2020/21.
Note however that the 50g CO2 threshold reduces to zero from April 2021 which means that hybrids will cease being eligible for the 100% write off. If the business can afford to do so it’s a good time to buy a plug in hybrid.

If you would like any advice on cars or vans in your business please get in touch.

The Winter Economy Plan. Explained.

The winter economy plan explained

Chancellor Rishi Sunak has outlined a series of measures to support jobs and the economy over the next six months. Here we provide an overview of the five new initiatives with a brief explanation. Please pass it on to your clients as you see fit.

1. New Job Support Scheme

With the current furlough scheme ending on the 31st October, the Chancellor has announced its replacement to start from the 1st November and will run for six months.

The scheme will target employees whose normal working hours have been reduced. The government will contribute a third of the normal hours not worked by the employees, and expect the employer to do the same. Meaning they will be paid two thirds of the hours that they were unable to work under the scheme.

For Example:

The employer pays the worked hours in full.

Usual Weekly Hours

40 @ £10 ph = £400.00

Reduced Worked Hours

25 @ £10 ph = £250.00

The remaining hours not worked are dealt with as follows:

Hours not worked

15 @ £10ph = £150.00

Government Contribution

5 @ £10ph = £50.00

Employer Contribution

5 @ £10ph = £50.00

Lost Hours

5 @ £10ph = £50.00

The following conditions apply:

  • Employees must be working at least 33% of their normal working hours.
  • The Government Contribution will be capped at £697.92 per month.
  • Employers do not need to have used the Furlough scheme to be eligible for the Job Support Scheme.

2. Self-Employment Income Support Scheme (SEISS) Extended

The Government has announced a continuation of the SEISS grants for the self-employed.

A third grant in the scheme will be paid covering the period of November to January; the contribution will be 20% of the average monthly profits. The grant will be capped at £1,875 and will be available to all those that were eligible for the earlier grants. An additional grant has been announced for the February to April period, but no details have been announced in regards to the amounts.

3. Flexible options on Government-backed loan repayments

For those businesses that accessed a Bounce Back Loan a new flexible system has been introduced to assist in repaying the loans. Measures include:

  • The ability to extend the length of the loan from six years to 10 years.
  • Interest-only periods of up to six months
  • Payment holidays

Coronavirus Business Interruption Loan scheme lenders are also being given the flexibility to increase the length of loans from six years to 10 years.

Loan scheme applications have been extended to the end of November, giving businesses more time to apply.

4. Extension of the temporary VAT cut for hospitality and tourism sectors

The current temporary VAT cut of 15% for the hospitality and tourism sectors is being extended up until the end of March 2021.

5. VAT and Income Tax Deferments

Businesses that took advantage of the ability to defer a VAT payment until March 2021, will now have the options to join a ‘New Payment Scheme’. This will give businesses the option to spread the amount over 11 interest-free payments during the 2021-22 financial year, instead of paying the full amount at the end of March.

Taxpayers were given the ability to defer the July 2020 Payment on Account until the 31st January 2021.

Taxpayers will now be able to access a self-service facility ‘Time to Pay’. The facility will grant taxpayers an extra 12 months to pay the amounts that would have been due on the 31st January 2021. The previously deferred payment on account and the final balancing payment for the year.

Useful resources

The full outline Winter Economy Plan can be found here.

Information on the Self-Employment Income Support Scheme grant extension.

How to check if you can claim a grant through the Self-Employment Income Support Scheme.

Information on the Job Support Scheme.

If you need any more help with any of these measures please do not hesitate to get in touch.

New Court Ruling on Company Vans vs Company Cars

It is usually beneficial for tax purposes that a vehicle in a business is classified as a commercial vehicle rather than a car. A new court ruling is not good news for people who run dual purpose vehicles.

The Court of Appeal have now ruled on the tax status of certain vehicles provided to employees of Coca Cola. The court has upheld the HMRC view that vans with windows and a second row of seats behind the driver are not goods vehicles but motor cars for benefit in kind purposes. Consequently, the income tax and national insurance payable by employee and employer is significantly higher than if the vehicles had been classified as goods vehicles.

The income tax legislation defines a “goods vehicle” as “a vehicle of a construction primarily suited for the conveyance of goods or burden of any description…”

At the original Tax Tribunal it was decided that modified VW Kombi vans failed this test whereas modified Vauxhall Vivaro vans did fall within the definition of goods vehicles. However the Court of Appeal has now ruled that the Vauxhalls should also be taxed as motor cars for P11d benefit in kind purposes. This means that where the vehicle is available for private use the taxable benefit will be based on the original list price multiplied by a percentage based on the vehicle’s CO2 emissions.

The decision means that employers may need to reconsider providing such vehicles. They may also need to rectify the P11d reporting in respect of earlier years and we await further guidance from HMRC.

What is also particularly confusing, and thus difficult for businesses to deal with, is that the benefit in kind rules are not the same as the rules for recovery of input VAT.

If you would like advice on which vehicle will be most tax efficient for your business please don’t hesitate to get in touch.

September Changes To Furlough Scheme

The CJRS grant claim changes again on the 1st of September. Please talk to us if you would like us to help estimate your claim.

  • From 1 September CJRS will pay 70% of usual wages up to a cap of £2,187.50 per month for the hours furloughed employees do not work.
  • You will still need to pay your furloughed employees at least 80% of their usual wages for the hours they do not work, up to a cap of £2,500 per month. You will need to fund the difference between this and the CJRS grant yourself.
  • The caps are proportional to the hours not worked. For example, if your employee is furloughed for half their usual hours in September, you are entitled to claim 70% of their usual wages for the hours they do not work up to £1,093.75 (50% of the £2,187.50 cap).
  • You will continue to have to pay furloughed employees’ National Insurance (NI) and pension contributions from your own funds.

You can find ourt which employees you can put on furlough and claim for through the Coronavirus Job Retention Scheme here.

Corona Update 27th March 2020

Corona Information For Businesses as at 27th March 2020

Job Retention Scheme

  • Employers can claim a grant of up to 80% of salaries of employees who would have been laid off during this crisis. This is subject to a cap of £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.
  • Employers must designate affected employees as ‘furloughed workers’ and notify the employees of this change.
  • To qualify for this scheme: workers should not undertake work while furloughed.
  • Employers submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.  The portal is not available yet.
  • HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
  • Employers can claim for:
    • full-time employees
    • part-time employees
    • employees on agency contracts
    • employees on flexible or zero-hour contracts
  • Workers must have been on your payroll on 28 February 2020.
  • The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
  • Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
  • Employees who are shielding in line with public health guidance can be placed on furlough.
  • There is an updated information page here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Self-employment Income Support Scheme

  • You can claim 80% of your trading profits up to £2,500 per month for three months
  • It is a grant which means it is not repayable although will have to be accounted for in your next set of accounts
  • You must be Self- employed or a member of a partnership
  • Your 2019 tax return must have been submitted (although if it hasn’t you have four weeks to do so (23rd April 2020 deadline)
  • You must be trading or would be if it were not for the Corona Virus
  • You must intend to trade in the tax year 20/21
  • You must have made losses due to Covid -19
  • Your trading profits must be less than £50,000 (this is an average of last three years profits) and more than half of your total taxable income
  • The grant will be paid directly into your bank account in one payment
  • You cannot apply for this scheme HMRC will contact you if you are eligible
  • You can read full government information here:   https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

VAT
You do not need to make any VAT payments during the period 20 March 2020 to 30 June 2020.

  • This is a deferral of tax and not an exemption.
  • This is an automatic offer with no applications required.
  • VAT deferred during this period will have to be paid by the end of 2020.
  • It will still be necessary to submit all VAT returns as normal.

Income Tax
Anyone in the Self Assessment tax regime can defer payment of their July 2020 payment on account

  • Payment will be deferred until the 31 January 2021.
  • This is an automatic offer with no applications required.
  • It will still be possible to have the payments on account reduced for the July payment if you expect profits to be reduced

IR35 & off-payroll working

  • HM Treasury have said they intend to postpone the introduction of the Off-payroll working rules to the private sector.
  • The extension of the off-payroll working rules was due to commence on 6 April 2020. The start date is now be deferred to 6 April 2021.

See IR35 changes postponed

Business Rates

  • Existing small business rate relief continues to apply, this provides full relief for businesses using a single property with a rateable value of £12,000 or less.
  • A business rate holiday applies to retail, hospitality and leisure businesses in England for the 2020/21 tax year.
  • Pubs are given a rates discount of £5,000.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.
Cash grants: via local authorities

  • A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
  • A one-off grant of £10,000 to around 700,000 businesses currently eligible for SBRR or Rural Rate Relief.

Funding for the scheme will be provided to local authorities by the government in early April. Guidance for local authorities on the scheme will be provided shortly.

The situation in Scotland is slightly different for Business rates and the local authority grants.  I have summarised the situation in Scotland below:
The non-domestic rates reliefs and grant funding measures announced by the chancellor only apply only in England. They do not apply in Scotland.

  • 1.6% rates relief for all non-domestic properties.
  • 100% rates relief for retail, hospitality and leisure businesses
  •  Retail, hospitality and leisure businesses with a rateable value between £18,001 and up to and including £50,999 will be able to apply for a one-off grant of £25,000.
  • If your business is in receipt of the Small Business Bonus Scheme Relief you can apply for a one off £10,000 grant.
  • You can also get this grant if you applied for Nursery ReliefBusiness Growth Accelerator or Disabled Relief but are eligible for the Small Business Bonus Scheme.
  • You can only apply for one grant – even if you own multiple properties.
  • You will need to fill out an application for these grants which will be available on your local council website

SMEs: Coronavirus Business Interruption Loan Scheme

  • A new Coronavirus Business Interruption Loan Scheme will be delivered by the British Business Bank.
  • This is aimed at small and medium-sized businesses to access bank lending and overdrafts.
  • The scheme is covered by the government and will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
  • The government will not charge businesses or banks for this guarantee and the Scheme will support loans of up to £5 million in value.
  • The scheme will be open for six months with loan terms of up to 3 years.
  • Businesses can access the first twelve months of that finance interest-free, as the government will cover the first twelve months of interest payments.
  • To be eligible businesses must:
    • Be UK based with annual turnover of up to £45 million.
    • Generate more than 50% of their turnover from trading activity.
    • Have a borrowing proposal which would, were it not for COVID-19, be considered viable by the lender to enable your business to trade out of any short-to-medium term difficulties. The scheme became available from 23 March 2020. Details of the first set of lenders providing access to the scheme can be found here.
  • More details will be announced in the coming days. Businesses are advised to approach their existing lender and to apply through the lender’s own website in the first instance. They can then try other lenders if their own lender cannot help.

Business taxes: Time to Pay

  • All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
  • These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
  • It is essential to contact HMRC and make a Time To Pay agreement before the tax debt becomes due.

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.
Insurance
Standard business interruption policies are unlikely to cover a pandemic. You need to check your policy wording and contact your insurer.

HMRC late payment interest rate cut
HMRC interest rates for late payments will be revised after the Bank of England interest rate reduction to 0.1%.
These changes will come into effect on:

  • 30 March 2020 for quarterly instalment payments
  • 7 April 2020 for non-quarterly instalments payments

Repayment interest rates remain unchanged.
The rate for underpayments of quarterly instalments is reduced to 1.25% from 23 March 2020. Added 24/03/2020.

Landlords & Tenants
New measures have been announced which apply to private or social accommodation. Added 21/03/2020.

  • Landlords will not be able to start proceedings to evict tenants for at least a 3 month period.
  • Landlords whose tenants are experiencing financial difficulties due to coronavirus will receive a 3 month mortgage payment holiday.
  • At the end of this period, landlords and tenants are expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.

 

2019/20 Salary Dividend Planning – Save Tax !

It is a long established practice that small businesses who are structured as a Limited Company might pay themselves a small salary and dividends to potentially save tax.

However in the run up to this tax year there have been multiple legislative changes that have affected the most tax efficient way of doing this. So all small Limited Companies should be reviewing their remuneration strategy with their accountant to check that it is still the best way forward.

Salary Level:

  • The abolition of the Employer’s Allowance for one Director Companies has actually simplified the issues around what is the best salary to take.
  • There is no point in paying additional National Insurance in order to save a smaller amount of tax.
  • Therefore in the majority of cases small business owners should be paying themselves a salary of £8,632 a year.

The advantages of this are:

  • No National Insurance,
  • A year’s credit toward the State Pension (now need 35 years)

Dividends:

  • The Dividend Tax allowance has been reduced to £2,000 from April 6th 2018

New Scottish Tax Bands:

  • There are new Scottish tax bands from the 5th April 2018 which along with the dividend allowance and the savings allowance make planning remuneration even more complex than it was before.

There are a number of ways of mitigating dividend tax including transferring shares to your spouse, Company Pension contributions and employing members of your family where they are actually doing proper work for your business.

Give us a call if you would like a review of your remuneration strategy.

MTD for VAT cheatsheet

MTD for VAT is fast approaching. This cheatsheet shows some helpful information and resources that should assist a smooth transition.

Who has to register and what records do you need to keep:

From April 2019 VAT registered businesses and organisations with taxable turnover above the VAT threshold of £85,000 will be required to:

    • Maintain their accounting records digitally in a software product or spreadsheet. Maintaining paper records will cease to meet the legal requirements in tax legislation.
    • Submit their VAT returns to HMRC using a functional compatible software product that can access HMRC’s API (Application Program Interfaces) platform.

The requirements do not apply to VAT registered businesses with taxable turnover below the VAT threshold (eg, those that have registered voluntarily).

What does this mean in practice:

  • You must be doing your book keeping in a package. Ideally a cloud package like Xero, Quickbooks Online, or Freeagent. Or on the desktop with MTD enabled software like Sage 50. You must then use this software to submit your returns.
  • You must register with HMRC for MTD VAT. This is a new requirement so everyone must do this.
  • You must configure your software to use the MTD portal.

What are the key dates?:

We recommend that assuming you have suitable software you take action the day after the submission of your last non MTD VAT return. This will give you 3 months to ensure you have registered with HMRC and switched your software to use the new system.

  • March/June/September/December VAT periods
    • First mandatory VAT period: 1st April to 30th June 2019
    • Deadline for first MTD VAT return: 7th August 2019
    • Take action date: 8th May 2019
  • April/July/October/January VAT periods
    • First mandatory VAT period: 1st May to 31st July 2019
    • Deadline for first MTD VAT return: 7th September 2019
    • Take action date: 8th June 2019
  • May/August/November/February VAT periods
    • First mandatory VAT period: 1st June to 31st August 2019
    • Deadline for first MTD VAT return: 7th October 2019
    • Take action date: 8th July 2019

How to register with HMRC:

HMRC have published a handy video on Youtube to show how to register with HMRC:

HMRC MTD VAT Video

How to switch your software to using MTD:

We will Publish seperate articles on this as the software vendors publish information.

If you need more information please get in touch: Contact Us

Client Focus – Automatic Protection Ltd

Automatic Protection Ltd in Biggar have been a client of ours since 2013. They were established in January 2001 by Father and Son team Neil and Stuart Harrison. Based in the border town of Biggar, South Lanarkshire, APL has over 45 years of experience in the fire and security industry with unparalleled expertise in Automatic Fire Extinguishing & Fire Suppression systems. See more details at: https://www.autoproltd.co.uk

 

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