Enews – November 2020
In this month’s Enews we report on the latest government measures that have been brought in to support businesses through a second national lockdown. The furlough scheme has been extended while grants for businesses and the self-employed are being made available. In other news preparations continue for import and export trading after Brexit and the Annual Investment Allowance is set for a reduction, as usual there is lots to update you on.
- Furlough scheme extended
- Increased support made available for the self employed
- Chancellor approves grants for businesses closed by lockdown
- Self assessment customers to benefit from enhanced payment plans
- 54,800 customers claim tax relief for working from home
- Brexit imports and exports
- ATT issues last call for firms seeking to use increased Annual Investment Allowance
- Latest guidance for employers
Furlough scheme extended
On 5 November, Chancellor Rishi Sunak announced that as part of the new national lockdown the Coronavirus Job Retention Scheme (CJRS) has been extended until the end of March 2021. This announcement updates the Prime Minister’s previous announcement on 31 October that the CJRS would be extended for a month until December.
The scheme has also reverted to its original level of support. Furloughed employees will receive 80% of salary for hours not worked and businesses asked only to cover national insurance and employer pension contributions.
The CJRS was due to have ended on 31 October after being scaled back to cover 60% of salaries during that month.
Chancellor Rishi Sunak said that the scheme will retain the flexible element and furloughed employees will receive 80% of their current salary for hours not worked, up to a maximum of £2,500.
A statement from the Treasury also confirmed that the Job Support Scheme (JSS), which had been due to launch on 1 November has now been postponed, and will not start until the CJRS has closed.
Chancellor Rishi Sunak said:
‘I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK – and that has meant adapting our support as the path of the virus has changed.
‘It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support.
‘Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter.’
Internet links: GOV.UK news and GOV.UK factsheet
Increased support made available for the self employed
The government has increased the support available to self-employed workers and extended its emergency business loan schemes as the UK heads for a second national lockdown.
On 5 November Rishi Sunak announced an increase in the level of the third instalment of the Self-employment Income Support Scheme (SEISS) from 55% to 80% of average trading profits for November to January. SEISS grants are calculated over three months and the uplift for November to January, increases the level of the third grant to 80% of trading profits. The maximum grant will be capped at £7,500.
The SEISS grants will also be paid faster than previously planned, with the claims window opening at the end of November rather than the middle of December.
Chancellor Rishi Sunak said:
‘The rapidly changing health picture has meant we have had to act in order to protect people’s lives and I know this is an incredibly worrying time for the self-employed. That is why we have increased the generosity of the third grant, ensuring those who cannot trade or are facing decreased demand are able to get through the months ahead.’
Internet link: GOV.UK SEISS grant extension
Self assessment customers to benefit from enhanced payment plans
Self assessment taxpayers are now able to benefit from enhanced payment plans and can apply online for additional support to help spread their tax bill into monthly payments.
The online payment plan service was already able to set up instalment arrangements for paying tax liabilities up to £10,000. From 1 October 2020, HMRC increased the threshold to £30,000 for self assessment customers following Chancellor’s Rishi Sunak’s announcement on 24 September 2020.
As part of that speech, the Chancellor announced that self assessment taxpayers could pay their deferred payment on account bill from July 2020, any outstanding tax owed for 2019/20 and their first payment on account for 2020/21 in monthly instalments, up to 12 months, via this self-serve tool.
Taxpayers who wish to set up their own self-serve Time to Pay arrangements must meet the following requirements:
- they have no outstanding tax returns, other tax debts or other HMRC payment plans set up
- the debt needs to be between £32 and £30,000; and
- the payment plan needs to be set up no later than 60 days after the due date of a debt.
Taxpayers using self-serve Time to Pay will be required to pay any interest on any outstanding balance from 1 February 2021.
Financial Secretary to the Treasury, Jesse Norman, said:
‘We are supporting jobs by giving more breathing space to up to 11 million self assessment taxpayers when managing their tax affairs.
‘Enhancing Time to Pay should ease the financial burdens and protect the livelihoods of these taxpayers, as they navigate the months ahead.’
HMRC is also warning taxpayers to be aware of scams claiming to be from HMRC, offering to help set up payment plans to pay any tax owed. These scams are trying to harvest taxpayers’ details, in order to steal their money.
Please contact us for advice on meeting your tax payments.
Internet link: Gov.uk news
54,800 customers claim tax relief for working from home
HMRC has received more than 54,800 claims from taxpayers using a new online portal which allows workers to claim tax relief for working at home.
From 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home.
Launched on 1 October 2020, the online portal has been set up to process tax relief on additional expenses for employed workers who have been told to work from home by their employer to help stop the spread of COVID-19.
From 6 April 2020, employers have been able to pay employees up to £6 a week tax-free to cover additional costs if they have had to work from home. Employees who have not received the working from home expenses payment direct from their employer can apply to receive the tax relief from HMRC.
HMRC is encouraging taxpayers claiming tax relief for working from home to apply directly through GOV.UK working at home.
Eligible taxpayers can claim tax relief based on the rate at which they pay tax. For example, if an employed worker pays the 20% basic rate of tax and claims tax relief on £6 a week, they would receive £1.20 a week in tax relief (20% of £6 a week) towards the cost of their household bills.
Higher rate taxpayers would therefore receive £2.40 a week (40% of £6 a week). Over the course of the year, this could mean taxpayers can reduce the tax they pay by £62.40 or £124.80 respectively.
HMRC’s Interim Director General of Customer Services, Karl Khan, said:
‘We want everyone to get the money that they are entitled to, so we’ve made the online service as easy to use as we can – it takes just a few minutes to make a claim.
‘Once the application has been approved, the online portal will adjust an individual’s tax code for the 2020/21 tax year. The employee will receive the tax relief directly through their salary and will continue to receive the adjustment until March 2021.’
Internet link: GOV.UK working at home
Brexit imports and exports
From 1 January 2021, the UK will operate a full external border with the EU, which will entail major changes for imports and exports to and from the trading bloc. From 1 January 2021, declarations will be needed to import or export specific (limited) goods categorised as ‘controlled’.
However, for non-controlled goods brought from the EU to GB, import controls apply in three stages: January, April and July 2021. Some changes will apply to all goods movements, and will involve customs declarations, customs duties and VAT on imports, and safety and security declarations. ‘Additional requirements’ come in, but only affect certain specific goods movements, such as foodstuffs.
Action points to consider now include:
Economic Operators Registration and Identification (EORI) numbers: from 1 January 2021, an EORI number with the prefix ‘GB’ is needed to move goods between the UK and the EU, unless you only move goods between Northern Ireland and Ireland.
Remember that from January 2021, it will be important to think about both the UK and EU sides of the equation: to comply with EU requirements, you will, for example, need an EU EORI number if your business makes customs declarations or gets a customs decision in the EU.
Using a customs intermediary: given the complexity of UK and EU customs declarations, you may want to engage a customs intermediary to deal on your behalf.
Postponed VAT accounting for goods imported from the EU: from 1 January 2021, import VAT applies to imports from the EU. Using ‘postponed VAT accounting’ from 1 January 2021 lets you account for import VAT on your VAT return, giving the potential to declare and recover import VAT on the same return.
Delaying customs declarations and payment of tariffs: when the UK’s full suite of border controls are in place in July 2021, full customs declarations and payment of customs duties, as set out in the new UK Global Tariff (or as specified in any trade deal with the EU) must take place when goods are imported from the EU. But from 1 January 2021 to 30 June 2021, most traders with a good compliance record can defer declaration and payment for up to six months on imports of standard goods from the EU.
This is only a summary outline of some of the issues involved. Gov.uk provides an online checker tool to use in your own circumstances. Do talk to us where further advice is needed.
Internet links: GOV.UK imports and GOV.UK exports
ATT issues last call for firms seeking to use increased Annual Investment Allowance
The Association of Taxation Technicians (ATT) has issued a last call for businesses looking to make use of the increased Annual Investment Allowance (AIA).
The AIA will be reduced from £1 million to £200,000 from 1 January 2021. Businesses that incur significant expenditure on plant and machinery before the end of this year are likely to get tax relief on the cost much earlier than if the purchase is made in 2021.
Jeremy Coker, President of the ATT, said:
‘The AIA rules can catch a business unawares. Many businesses will have deferred decisions about purchasing capital equipment this year because of the enormous uncertainties created by the pandemic. For any which are considering such purchases now, the scheduled ending of the temporary increase in the AIA in two months’ time introduces an unwelcome additional complexity.
‘Although the timing of a purchase may make no difference in the long run to the amount of expenditure which qualifies for tax relief, it can make an enormous difference to how quickly that relief is received and the contribution that the relief can make to the cashflow of a business.‘
Internet link: ATT
Latest guidance for employers
HMRC has published the latest issue of the Employer Bulletin. The October issue has information on various topics including:
- coronavirus support schemes and what employers need to do from November onwards
- National Insurance Number delays
- Guidance on off payroll working rules (IR35)
- grants for businesses that complete customs declarations
- new Employment Allowance status option on PAYE for employers
- using HMRC’s Business Tax Account
- making PAYE settlement agreement payments
- applications for the £50 million customs grant scheme
- deferred self assessment payments from July 2020
- Student Loan repayments.
Please contact us for help with payroll matters.
Internet link: Employer Bulletin
Enews – September 2020
In this month’s Enews we consider changes to the plastic bag tax, pension scams and the latest advisory fuel rates. With the latest figures on the success of the Eat Out to Help Out scheme, self assessment deadlines, the latest guidance for employers, the launch of the Kickstart Scheme and the Self Employed Income Support Scheme Grants there is lots to consider.
- Plastic bag tax charge to be doubled and extended to all retailers
- More than £30 million lost to pension scams
- Advisory fuel rates for company cars
- Eat Out to Help Out – over 64 million meals
- Self assessment deadlines
- HMRC latest guidance for employers
- Kickstart Scheme opens for applications
- Self Employment Income Support Scheme Grants
Plastic bag tax charge to be doubled and extended to all retailers
The fee for plastic shopping bags in England will be doubled to 10 pence and extended to all shops from April 2021.
Small retailers, those employing 250 people or fewer, will no longer be exempt, the Department for Environment, Food and Rural Affairs (Defra) said.
According to Defra, since the charge was first introduced in 2015 it has successfully prevented billions of plastic bags being sold and ending up in the ocean and environment.
Government data shows the current levy, which stands at 5 pence per bag and applies to any retailer employing 250 or more people, has led to a 95% cut in plastic bag sales in major supermarkets since 2015.
Commenting on the announcement, Environment Secretary George Eustice, said:
‘We have all seen the devastating impact plastic bags have on the oceans and on precious marine wildlife, which is why we are taking bold and ambitious action to tackle this issue head on.
‘The UK is already a world-leader in this global effort, and our carrier bag charge has been hugely successful in taking billions of harmful plastic bags out of circulation. But we want to go further by extending this to all retailers so we can continue to cut unnecessary waste and build back greener.’
Internet link: GOV.UK
More than £30 million lost to pension scams
Over £30 million has been lost to pension scams since 2017, according to the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR).
A total of £30,857,329 in pension savings has been lost to scammers since 2017, data published by the FCA and the TPR revealed. Reported losses ranged from under £1,000 to as much as £500,000. The average victim was a man in his 50s, the FCA and the TPR found.
65% of pension savers said they felt confident they could spot a scam. However, four in ten would put themselves at risk unknowingly by engaging with a common scam tactic, such as being told it’s a time-sensitive offer.
The FCA and the TPR have advised savers not to be pressured into making any decisions about their pensions, and to reject unexpected pension offers, whether these are made online, via social media or over the phone.
Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, said:
‘During these uncertain times, it is more important than ever to defend your lifetime savings from scammers.
‘Fraudsters will seek out every opportunity to exploit innocent people, no matter how much or how little you have saved.’
Internet link: FCA news
Advisory fuel rates for company cars
New company car advisory fuel rates have been published which take effect from 1 September 2020. The rates only apply to employees using a company car. The guidance states:
‘You can use the previous rates for up to one month from the date the new rates apply.’
The advisory fuel rates for journeys undertaken on or after 1 September 2020 are:
|1400cc or less||10p|
|1401cc – 2000cc||12p|
|1400cc or less||7p|
|1401cc – 2000cc||8p|
|1600cc or less||8p|
|1601cc – 2000cc||10p|
HMRC guidance states that the rates only apply when you either:
- reimburse employees for business travel in their company cars or
- require employees to repay the cost of fuel used for private travel.
You must not use these rates in any other circumstances.
The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.
If you would like to discuss your car policy, please contact us.
Internet link: GOV.UK AFR
Eat Out to Help Out – over 64 million meals
The government has announced that more than 64 million meals were enjoyed by diners across the country during the government’s Eat Out to Help Out discount scheme. The scheme closed on 31 August 2020.
Government figures show that restaurants had claimed for more than 64 million discounted meals as Eat Out to Help Out entered its fourth week.
This continues the upward trend in the scheme’s popularity, with 10.5 million meals claimed for in the first week, growing to a total of 35 million meals in the second.
The upward trend in meals claimed for shows that millions continued to flock to eat out to support 1.8 million jobs in the hospitality sector, which has been hit hard by coronavirus (COVID-19). The government has confirmed that 87,000 claims have been made by restaurants taking part in the scheme.
Data from OpenTable shows that during Eat Out to Help Out’s third week the number of customers at UK restaurants was 61% higher than the same days last year on average for Monday to Wednesday. The average level across Monday to Wednesday in the first and second week were 12% and 41% respectively. The data also shows that the number of customers at UK restaurants was up 17% compared to the same week in 2019.
Chancellor of the Exchequer Rishi Sunak said:
‘Today’s figures continue to show that Brits are backing hospitality – with more than 64 million meals discounted so far, that’s equivalent to nearly every person in the country dining out to protect jobs.
‘This scheme has reminded us how much we love to dine out, and in doing so, how this is helping to protect the jobs of nearly two million people who work in hospitality.’
Internet links: GOV.UK news HMRC guidance
Self assessment deadlines
Two self assessment deadlines are approaching:
- 5th October 2020
For those individuals who have not previously completed a tax return but need to report a liability for 2019/20.
- 31st October 2020
For those individuals who have previously submitted ‘paper’ self assessment tax returns the deadline for the 2019/20 return is 31 October 2020. Returns submitted after that date must be submitted electronically or they will incur a minimum penalty of £100. The penalty applies even when there is no tax to pay or the tax is paid on time.
If you would like any help with the completion of your self assessment tax return, please do get in touch.
Internet link: HMRC deadlines
HMRC latest guidance for employers
HMRC has published the latest edition of the Employer Bulletin. This guidance for employers, and their agents, includes articles on:
- Coronavirus Job Retention Scheme and what employers need to do from August onwards
- making sure you are paying the correct workplace pension contributions
- new laws to ensure furloughed employees receive full statutory redundancy payments
- the deadline to report the disguised remuneration loan charge – 30 September 2020
- COVID-19 – are you due a repayment?
- off-payroll working rules (IR35)
- applications for the £50 million customs grant scheme
- the delay to the VAT reverse charge on building and construction services
- the end of the VAT payment deferrals period
- Student Loan repayments
- Finance Act 2020 changes to company car tax.
Please contact us for help with employment matters.
Internet link: Employer Bulletin
Kickstart Scheme opens for applications
On 2 September 2020, the government’s £2 billion Kickstart Scheme opened for employer applications.
The scheme is part of the Plan for Jobs announced during Chancellor Rishi Sunak’s July Summer Economic Update.
The Kickstart Scheme aims to create work placements for young people who are at risk of becoming unemployed for the long-term. Businesses can join the scheme, with the government paying employers £1,500 to help set up support and training. Funding is available following a successful application process. Applications must be for a minimum of 30 job placements.
Businesses that are unable to offer this many job placements can partner with other organisations to reach the minimum number.
Selected out-of-work young people will be offered six month work placements for at least 25 hours a week to help them gain experience, skills and confidence. The scheme is designed to be a stepping stone to further employment.
Employers will receive funding for 100% of the relevant National Minimum Wage (NMW) for 25 hours a week, plus associated employer national insurance contributions (NICs) and employer minimum auto-enrolment pension contributions.
Chancellor Sunak said:
‘This isn’t just about kickstarting our country’s economy – it is an opportunity to kickstart the careers of thousands of young people who could otherwise be left behind as a result of the pandemic.
‘The scheme will open the door to a brighter future for a new generation and ensure the UK bounces back stronger as a country.’
Internet link: GOV.UK
Self Employment Income Support Scheme Grants
HMRC are inviting those individuals that are self employed or a member of a partnership and have been adversely affected by coronavirus to claim a second grant under the Self Employed Income Support Grant.
Applications for the first grant under the scheme closed on 13 July 2020.
The second and final taxable grant is worth 70% of an individual’s average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
Applications for the second and final grant are now open. The grant is only available to businesses that have been adversely affected on or after 14 July 2020. Taxpayers must make a claim for the second grant on or before 19 October 2020.
HMRC will work out businesses’ eligibility for the second grant in the same way as the first grant.
Taxpayers are able to make a claim for the second grant if they are eligible, even if they did not make a claim for the first grant.
HMRC have confirmed that taxpayers can:
- continue to work
- start a new trade or take on other employment including voluntary work and duties as a military reservist.
The grant does not need to be repaid if a taxpayer is eligible, but will be subject to both income tax and self employed National Insurance.
Internet link: GOV.UK SEISS guidance
McKellar Accountancy August eNews
eNews – August 2020
In this month’s eNews, we report on the Job Retention Bonus as HMRC publishes further details regarding requirements and what employers need to do now to claim the bonus. There have been plenty of other developments. We look at some of them here and analyse changes to tax policy and the wider economy. As the COVID-19 pandemic continues to dominate the news, there are lots of issues to update you on.
- HMRC outlines Job Retention Bonus criteria
- Treasury sets out next steps for Making Tax Digital
- Government announces review of business rates scheme
- Eat Out to Help Out now up and running
- Scottish government cuts LBTT to help home buyers
- Wales reduces LTT rate
- Chancellor asks OTS to review capital gains tax
- Overclaimed COVID grants
HMRC outlines Job Retention Bonus criteria
HMRC has outlined the eligibility requirements for the Job Retention Bonus (JRB) that follows the furlough scheme as part of the government’s measures to support the economy through the COVID-19 lockdown.
The government’s Coronavirus Job Retention Scheme ends on 31 October 2020 and the JRB aims to provide additional support to employers who keep on their furloughed employees in meaningful employment.
The JRB is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Employers will be able to claim the JRB after they have filed PAYE for January and payments will be made to employers from February 2021.
All employers are eligible for the scheme including recruitment agencies and umbrella companies. They should ensure that they have complied with their obligations to pay and file PAYE accurately and on time under the Real Time Information (RTI) reporting system, maintained enrolment for PAYE online and have a UK bank account.
Employers will be able to claim for employees who were furloughed and had a Coronavirus Job Retention Scheme claim submitted for them that meets all relevant eligibility criteria for the scheme.
They must have up-to-date RTI records for the period to the end of January and not be serving a contractual or statutory notice period, that started before 1 February 2021, for the employer making a claim.
HMRC will publish further details about this process before the end of September 2020.
Internet link: GOV.UK publications
Treasury sets out next steps for Making Tax Digital
On 21 July, the Treasury set out the next steps in its plan to extend Making Tax Digital (MTD) to all businesses and those taxpayers that file self assessment returns.
Currently, businesses above the VAT threshold of £85,000 are required to comply with Making Tax Digital for VAT (MTD for VAT).
From April 2022, the initiative will be extended to all VAT-registered businesses including those with turnover below the VAT threshold. From April 2023 MTD will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.
According to the Treasury, the MTD changes will affect the way that taxes are reported, not the level of tax that is collected. They will help to minimise avoidable mistakes, which cost the exchequer £8.5 billion in 2018/19.
Jesse Norman, Financial Secretary to the Treasury, said:
‘We are setting out our next steps on MTD… as we bring the UK’s tax system into the 21st century.
‘MTD will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.’
Internet link: GOV.UK publications
Government announces review of business rates scheme
The government has published a call for evidence on the overhaul of the business rates system that applies in England.
The government announced at the 2020 Budget in March that it would conduct a review of the business rates system in England. It is seeking views from businesses, business representative organisations, local authorities, rating agents, others involved in the operation of the system and anyone interested in the business rates or wider tax system.
The call for evidence seeks views on how the business rates system currently works, issues to be addressed, ideas for change and a number of alternative taxes.
The government stated that it welcomes views on the multiplier and reliefs sections of the call for evidence by 18 September 2020, to inform an interim report in the autumn.
Internet link: TM Treasury consultations
Eat Out to Help Out now up and running
On 1 August, the government’s Eat Out to Help Out scheme began operating at eateries across the country.
The scheme was announced by Chancellor Rishi Sunak in his Summer Economic Update. It provides a 50% reduction of up to £10, for sit-down meals in participating cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.
Those establishments taking part in the scheme will display stickers and posters in their windows. Diners can take advantage of the offer as many times as they like during the month and do not need to present a voucher.
Chancellor of the Exchequer Rishi Sunak said:
‘Our Eat Out to Help Out scheme’s number one aim is to help protect the jobs of 1.8 million chefs, waiters and restaurateurs by boosting demand and getting customers through the door.
‘More than 72,000 establishments will be serving discounted meals across the country, with the government paying half the bill. The industry is a vital ingredient to our economy and it’s been hit hard by coronavirus, so enjoy summer safely by showing your favourite places your support – we’ll pay half.’
Internet link: GOV.UK publications
Scottish government cuts LBTT to help home buyers
On 15 July, the Scottish government reduced the rate of Land and Buildings Transaction Tax (LBTT) following a similar reduction to the rate of residential Stamp Duty Land Tax (SDLT) announced by Chancellor Rishi Sunak in the recent Summer Economic Update.
LBTT is payable by the purchaser in a land transaction occurring in Scotland. SDLT applies to land transactions in England and Northern Ireland.
The threshold at which residential LBTT is paid has been raised from £145,000 to £250,000 in order to help homebuyers following the coronavirus lockdown. Announcing the change, Finance Secretary Kate Forbes said that 80% of homebuyers will be exempt from paying LBTT.
Scottish Finance Secretary Kate Forbes said:
‘Overall, increasing the LBTT threshold will help increase housing market activity, boost the construction sector and stimulate our economy.
‘Alongside this distinctive Scottish approach to raising the starting threshold for LBTT, I am also targeting further support in other areas. For example, we are injecting £50m into our First Home Fund, which provides first time buyers with up to £25,000 to buy a property. This will help an estimated 2,000 first time purchases.
‘To mitigate the immediate adverse impact on the housing market in Scotland as a result of the Chancellor’s announcement, we are now working at pace on the necessary legislation and to ensure Revenue Scotland is ready to collect and manage the tax.’
Internet link: Scottish government LBTT
Wales reduces LTT rate
On 27 July, the Welsh government reduced the rate of Land Transaction Tax (LTT) following the cuts made to SDLT and LTT across the rest of the UK.
LTT is payable by the purchaser of residential or non-residential property occurring in Wales.
From 27 July 2020, the starting threshold for residential LTT rose from £180,000 to £250,000. This applies until 31 March 2021. The tax reduction does not apply to purchases of additional properties, including buy-to-let and second homes.
The Welsh government predicts that around 80% of homebuyers in Wales will pay no tax when purchasing their home, and that buyers of residential property who would have paid the main rates of LTT before 27 July will save £2,450 in tax.
Rebecca Evans, Welsh Minister for Finance, said:
‘These rates and thresholds have been set so they more closely reflect the property market in Wales and will ensure that we retain a progressive regime that expects those with the broadest shoulders to contribute a larger share in tax.’
Internet links: Welsh government website written statement
Chancellor asks OTS to review capital gains tax
Chancellor Rishi Sunak has asked the Office of Tax Simplification (OTS) to carry out a thorough review of capital gains tax (CGT).
In a letter to the OTS, the Chancellor requested that the independent office review CGT and aspects of the taxation of chargeable gains in regard to individuals and small businesses.
Mr Sunak requested that the review identifies and offers advice on the opportunities to simplify the taxation of chargeable gains to ‘ensure the system is fit for purpose’.
In the letter, the Chancellor said that he would be interested in proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, in addition to the interaction of how gains are taxed compared to other types of income.
The OTS has published a call for evidence in the form of an online survey, which seeks views on CGT. The OTS wants to hear from businesses, individuals, professional advisers and representative bodies about which aspects of CGT are complex and difficult to get right, as well as suggestions on how the tax can be improved.
Internet links: GOV.UK publications letter
Overclaimed COVID grants
Taxpayers who have received CJRS or SEISS grants are urged to doublecheck their entitlement as the 90 day period to inform HMRC of any overclaimed amounts is now law.
Finance Act 2020 includes legislation that the Coronavirus Job Retention Scheme (CJRS), Self-employment Income Support Scheme (SEISS), Coronavirus Statutory Sick Pay Rebate Scheme and coronavirus business support grants are taxable. As well as including HMRC powers to recover grant payments to which the taxpayer is not entitled and penalty provisions.
HMRC has published guidance on how to repay overclaimed grants. This guidance confirms that the onus is on the taxpayer to notify HMRC if they have overclaimed a CJRS or SEISS grant and this must be done by 20 October 2020 or 90 days of receipt of the grant, whichever is the later.
Internet links: CJRS guidance SEISS guidance
Reflecting on your Plans and Goals Post Covid-19
Lockdown has had many of us reflecting on our current circumstances – how we work and how we live. While business plans, or personal goals are written with great intentions, they can often get left untouched while work gets in the way. It’s beneficial to regularly review your plans, to check things are on track or to consider changes. In business, we all make mistakes along the way or things we’d do differently second time round. Hopefully these mistakes are ones we can learn from. It just takes a bit of thought and reflection.
Areas that may be in need of change:
Many of us find ourselves tied to a traditional 9-5 working model, with some working much longer hours than this. This really needs an overhaul. While there may be busy periods in your career where you need to put in more hours, it is not sustainable to be working long days for a long period of time. And as for the 9-5, it simply doesn’t work for some people. It should be much easier for working hours to fit around other commitments or goals, whether that is childcare, hobbies or learning.
Since people who could started working remotely due to covid-19, many have preferred this way of working. Cutting out the commute and getting more time with their families have been clinching factors for some. And it’s not just employees seeing the benefits. Big companies, such as Twitter and Slack, have announced that working from home will be a permanent option for their staff.
The term “digital nomad” has been popping up more and more lately, with people searching for careers that allow them to work from anywhere with an internet connection. While for you, this might not mean jetting off to Bali, maybe it’s simply the option to work from home, or a coffee shop. Not all careers or positions allow for this, but if it’s suited to you and to your career, why not ditch the office?
Your language and your thinking
With the time we’ve had to reflect, we may be realising that we want to change things for ourselves based on our outlook or our values. Maybe you want to try to think more positively and welcome more challenges at work. Perhaps it’s about changing your business to be more sustainable, or to put more focus on staff wellbeing. Whether it’s your personal goals, or your business plan, make sure that it reflects who you are and who you want to be.
What have you been thinking about doing differently? Or are there things you have had to change due to covid-19 that you want to go back to normal? If you are feeling unhappy or stressed, the first step we’d suggest is dusting off those plans and thinking about what needs to change for the better.
McKellar Accountancy July eNews
Enews – July 2020
In this month’s Enews, we report on Chancellor Rishi Sunak’s Summer Economic Update, which unveiled the government’s three-point plan to protect and create jobs as the economy begins to recover from the coronavirus lockdown. There have been plenty of other developments. We look at some of them here and analyse changes to tax policy and the wider economy. As the COVID-19 pandemic continues to dominate the news, there are lots of issues to update you on.
- Chancellor unveils three-point plan for jobs
- Stamp duty temporarily reduced
- Flexible furloughing starts on job retention scheme
- Government expands aid for start-ups and innovators
- Bank of England increases stimulus package for UK economy
- FCA confirms further support for consumer credit customers
- Private sector off-payroll reforms given go ahead for April 2021
- Late payment crisis has worsened during coronavirus lockdown
Chancellor unveils three-point plan for jobs
On 8 July, Chancellor Rishi Sunak announced a three-point plan to support jobs in the wake of the COVID-19 pandemic when he delivered a Summer Economic Update to Parliament.
Mr Sunak confirmed the Coronavirus Job Retention Scheme (CJRS) will end as planned this October. The Chancellor said furloughing had been the right measure to protect jobs through the first phase of the crisis. The second phase will see a three-point plan to create jobs, support people to find jobs and to protect jobs.
The CJRS will be followed by a Job Retention Bonus, which will be introduced to help firms keep furloughed workers in employment. This will see UK employers will receive a one-off payment of £1,000 for each furloughed employee who is still employed as of 31 January 2021. To qualify for the payment, employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021.
The Chancellor also launched a £2 billion Kickstart Scheme that will aim to create subsidised six-month work placements for young people aged 16-24 who are claiming Universal Credit. Funding available for each placement will cover 100% of the National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions. Employers will be able to top this wage up.
In order to support the UK’s tourism and hospitality industry, the Chancellor announced a cut in the rate of VAT from 20% to 5% for the sector. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, as well as supplies of accommodation and admission to attractions, including theme parks and zoos, across the UK.
Additionally, the Eat Out to Help Out scheme will entitle every diner to a 50% discount of up to £10 per head on their meal at any participating, eligible food service establishment from Monday to Wednesday. Participating establishments will be fully reimbursed for the 50% discount.
Mr Sunak said:
‘Our plan has a clear goal: to protect, support and create jobs. It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start.’
Internet link: GOV.UK publications
Stamp duty temporarily reduced
Chancellor Rishi Sunak announced a temporary cut in the rate of Stamp Duty Land Tax (SDLT) in order to boost confidence in the flagging housing market in his Summer Economic Update.
Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential SDLT in England and Northern Ireland from £125,000 to £500,000. This will apply to purchases from 8 July 2020 until 31 March 2021.
Additionally, the Chancellor announced a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. The scheme aims to upgrade over 600,000 homes across England, helping to reduce energy bills and support the green economy.
Eric Leenders, Managing Director of Personal Finance at UK Finance, said:
‘The Chancellor’s announcement on stamp duty should give a welcome boost to the housing market and in turn have positive knock-on effects for the wider economy.
‘This measure designed to re-boot the housing market builds on the wide package of support put in place by mortgage lenders, working with the regulator and HM Treasury, to help customers through these tough times.
‘The industry has a clear plan to help homeowners whatever their financial situation and is committed to providing ongoing support to those customers who need it.’
Internet link: GOV.UK publications and UK Finance press release.
Flexible furloughing starts on job retention scheme
On 1 July, changes to the Coronavirus Job Retention Scheme (CJRS) saw flexible furloughing introduced, so employees will no longer have to be furloughed for a minimum period of three weeks.
Following the change the CJRS has more flexibility to allow claims on a pro rata basis. Employers will be able to permit employees to work some of the week and be furloughed for the rest.
An employee needs to have been furloughed for at least three consecutive weeks between 1 March and 30 June to be eligible for furlough from 1 July. Additionally, after 1 July, employers may be subject to a cap on the number of employees that can be claimed for in a CJRS claim they are able to make.
The CJRS changes have effect from 1 July until the closure of the scheme on 31 October.
Parents returning from statutory maternity leave, paternity leave, adoption leave, shared parental leave and bereavement leave are broadly exempt from the CJRS furlough changes. So parents who are returning to work over the coming months will be eligible for the CJRS despite the scheme closing to new entrants on 30 June.
Additionally, from 1 August, the level of the grant will be reduced each month. From August the employer will need to pay employer national insurance and pension contributions for the time the employee is furloughed. For August, the government will continue to pay 80% of wages up to a maximum of £2,500 proportional to the hours the employee is furloughed. For September, the government will pay 70% of wages up to £2,187.50, and for October, the government will pay 60% of wages up to a maximum of £1,875. During these months employers will have to top up employees’ wages to ensure they receive 80% of their wages up to the £2,500 cap.
Internet link: GOV.UK publications
Government expands aid for start-ups and innovators
The government has expanded its COVID-19 support for start-ups and innovative companies with the launch of a new fund.
On 27 June the government announced the Sustainable Innovation Fund (SIF), which is aimed at helping businesses to keep ‘cutting edge’ projects and ideas alive during the pandemic.
The SIF will make almost £200 million available to UK companies that are developing new technologies in certain areas. These include making homes and offices more energy efficient, creating ground-breaking medical technologies, and reducing the carbon footprint of public transport.
The government is asking research and development-intensive businesses to apply for the funding.
Internet link: Sustainable Innovations Fund
Bank of England increases stimulus package for UK economy
On 18 June, the Bank of England increased the stock of purchases of UK government bonds by an additional £100 billion to help boost the UK economy following the coronavirus (COVID-19) pandemic.The £100 billion in additional quantitative easing funds takes the total to £745 billion.
The MPC also voted to cut the cost of borrowing to a record low of 0.1%. The Committee admitted it is ‘hard to draw conclusions about the UK’s recovery prospects’ and stated that extra stimulus is needed to help boost the UK economy and push inflation.
The MPC said:
‘The unprecedented situation means that the outlook for the UK and global economies is unusually uncertain.
‘It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors.
‘Inflation is well below the 2% target and is expected to fall further below it in coming quarters, largely reflecting the weakness of demand.’
Internet links: Bank of England’s Market Notice.
FCA confirms further support for consumer credit customers
The Financial Conduct Authority (FCA) has confirmed further support for users of certain consumer credit products if they are experiencing temporary payment difficulties due to the coronavirus pandemic.
The measures outline the options firms will provide for credit card, revolving credit and personal loan customers who are coming to the end of a payment freeze. They also outline options for customers who have agreed an arranged interest-free overdraft of up to £500.
In addition, customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500 will have until 31 October 2020 to apply for one.
According to UK Finance, its members have offered over 27 million interest-free overdrafts, provided 992,400 payment deferrals on credit cards and 686,500 payment deferrals on personal loans during the pandemic.
Christopher Woolard, Interim Chief Executive at the FCA, said:
‘Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic.
‘For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.’
Internet link: FCA press release
Private sector off-payroll reforms given go ahead for April 2021
The introduction of off-payroll rules to the private sector will go ahead as planned next April after an attempt to delay them failed in the House of Commons.
The reforms of the off-payroll rules to the private sector, which are known as IR35 and have applied to the public sector since 2017, was reviewed earlier this year.
They will shift the responsibility for assessing employment status to the organisations employing individuals.
The rules would have applied to contractors working for medium and large organisations in the private sector and were due to come into effect on 6 April this year. Due to the disruption caused by the outbreak of the coronavirus, the decision was taken in March to delay the introduction until 6 April 2021.
An amendment to the Finance Bill, brought by a cross-party group of MPs, was designed to delay the IR35 changes until 2023, but was defeated by 317 votes to 254.
The move to introduce new IR35 rules to the private sector has proved highly controversial, amid claims that the regulations are too complex and that HMRC’s online tool Check Employment Status for Tax (CEST), used to determine whether they apply, is flawed.
Internet link: Parliament website.
Late payment crisis has worsened during coronavirus lockdown
The Federation of Small Businesses (FSB) has found that the UK’s late payment crisis has worsened during the coronavirus (COVID-19) lockdown.
62% of small businesses have been subject to late or frozen payments during the COVID-19 pandemic, according to research carried out by the FSB. Just 10% of small firms have agreed changes to payment terms with their clients. In addition, 65% of small businesses that supply goods or services to other businesses have experienced being paid late or having payments frozen.
The FSB has called on policymakers to give the Small Business Commissioner additional powers to investigate and fine repeat late payment offenders.
Mike Cherry, National Chairman of the FSB, said:
‘Before the COVID-19 outbreak struck, many small firms were already under immense financial pressure because of late payments.
‘Cash is still very much king for small firms, and withholding it has pushed many to the brink at a time when they’re at their most vulnerable. Our endemic culture of treating small businesses as free credit lines against their will must be brought to an end.’
Internet link: FSB press release.
Planning for the Unplanned – Why You Should Make A Habit of Long Term Cashflow Forecasting
If there’s something business owners have learned during this period, it’s that things don’t always go to plan. At the start of the year, you may have had firm ideas about how 2020 would go for your business but when the global coronavirus pandemic hit, you most likely had to rethink things in some way. Perhaps you’ve had to apply for government support or decide whether you can afford to keep paying all your employees their full salaries. Maybe your business cashflow goals for the year seem irreparable but it is not too late to start forecasting your cashflow, planning ahead and making allowances for the “what ifs”.
We suggest planning both short term and long term. A period of 2-4 months can help you to look at any immediate issues that may arise but looking a year into the future can be really useful for planning ahead and making business decisions.
You should try to be as accurate as possible when forecasting. If you overestimate your business cashflow, this can obviously lead to problems, but similarly, underestimating cashflow can lead to missed opportunities. It can be hard to estimate if you haven’t been trading for long but this is something that an accountant will be happy to help you with.
Make cashflow forecasting a regular part of your routine. Continually updating and reviewing this will mean that you are properly reflecting on what is going on in your business. This process allows you to see where you maybe need to cut costs, or plan for big expenses in the future to avoid any negative impact. It can also help you to decide if borrowing is affordable for your business. We recommend using Float’s Scenario Planning tool which can help you to plan for best- and worst-case scenarios.
Remember that if you need assistance with forecasting, or with using Float, we are here to help you. Planning ahead is so important, as we’ve seen recently, but it isn’t always easy, so please contact us if we can help you to make cashflow forecasting a habit.