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Covid-19 relief measures extended again

Written by admin on . Posted in Budget, COVID-19, Self-Employed, Tax. No Comments on Covid-19 relief measures extended again

The latest, and hopefully last, lockdown is not due to be completely lifted until at least 21 June, so it was no surprise to see Covid-19 relief measures extended in the Budget on 3 March. The furlough scheme will now run until 30 September and there will be two more self-employed grants, plus various other measures.

Furlough (CJRS)

Furloughed employees can continue to receive 80% of their wages for hours not worked, up to a cap of £2,500 per month, until 30 September. By continuing for a few months after restrictions end, the scheme will help businesses slowly recover from the disruption they have faced.

The current level of support will continue until 30 June. In July, the scheme will then only cover 70% of wages for the hours not worked, up to a cap of £2,187.50. This will reduce to 60% for August and September, with a cap of £1,875. Employers will need to pay national insurance contributions and pension contributions throughout.

Self-employed grants (SEISS)

There are to be two more grants; a fourth grant in late April, and a fifth grant in late July. However, extra conditions will apply for the fifth grant.

  • The fourth grant will again be worth 80% of three months’ average profits (now including results reported for 2019/20 but capped at £7,500.
  • The fifth grant will be similar if a business’ turnover has dropped by 30% or more. However, if less, the grant will only be worth 30% of average profits (capped at £2,850).

 

Other measures

A range of additional loans and grants were also extended to provide ongoing relief ahead of the gradual easing of lockdown measures:

  • VAT: The temporary reduced rate of 5% for businesses in the tourism and hospitality sectors has been extended until 30 September 2021, with a rate of 12.5% then applying until 31 March 2022.
  • Recovery loan scheme: The government will guarantee 80% of loans between £25,000 and £10 million.
  • Restart grant: Hospitality and leisure businesses in England will receive a grant of up to £18,000 per premise; up to £6,000 for non-essential retail businesses.
  • Business rates relief: The 100% relief for eligible retail, hospitality and leisure properties in England will continue to 30 June 2021, followed by 66% relief until 31 March 2022.

Details of the levels of CJRS support can be found here or get in touch with us for further guidance.

Photo by JC Gellidon on Unsplash

The Spring 2021 Budget – still some surprises

Written by admin on . Posted in Budget, Business Rates, Capital Gains Tax, Tax, VAT. No Comments on The Spring 2021 Budget – still some surprises

A quiet turning of the tax screw.

Just before the Budget arrived on 3 March, it seemed as if the Chancellor would have nothing to say that was not already public knowledge. However, while some of the torrent of leaks were confirmed, none of the pre-Budget pundits correctly predicted the Chancellor’s strategy. Instead of cutting borrowing, Mr Sunak increased it sharply in 2021/22 over the estimates produced just four months earlier in his Spending Review.

The Chancellor’s approach was:

  • To stimulate investment in the next two years with extremely generous allowances. In effect, for every £1,000 a company invests in new plant and machinery, the government will reduce their corporate tax bill by £247.
  • To pay for this largesse and start to repair public finances:
    • From April 2023, when the enhanced investment allowances end, the rate of corporation tax for companies with profits of at least £250,000 will jump by 6%, from 19% to 25%.
    • Many personal tax thresholds, bands and allowances will be frozen until the end of 2025/26.

The big freeze of everything from the pensions lifetime allowance to the inheritance tax nil rate band counts as a stealth tax. Look at the raw numbers and there is no increase in tax – everything stays the same. In practice, the effect of inflation will take its toll. As incomes and wealth rise, thresholds are crossed and tax bands filled more quickly. More people become taxpayers and all taxpayers pay more tax.

A good (or possibly bad) example is the inheritance tax nil rate band, which was set at its current £325,000 level (now running through to 2026) way back in April 2009. Had the band been linked to the CPI inflation index, it would be about £90,000 higher in 2021/22. That difference equates to an extra £36,000 in inheritance tax at the standard 40% rate.

In other words, you may think you were spared higher tax bills by the Chancellor, but that is not necessarily the case. Tax planning is still important and will become more so as the freeze drags on to 2026.

Photo by Diane Helentjaris on Unsplash

Get Ready for 2021-2022

Written by admin on . Posted in Budget, self-assessment, Self-Employed, Tax. No Comments on Get Ready for 2021-2022

Taking some time to start planning for the 2021/22 tax year might be worth the effort. 

While there is often a focus on planning for the end of the tax year, much less attention is paid to the start of the tax year. The lack of an obvious deadline is probably one reason – deadlines tend to concentrate the mind. Nevertheless, some planning at the beginning of the new tax year can be a rewarding exercise.

  • Estimate your total income for 2021/22 – If you have a rough estimate of what your income will be, it will give you an idea of what to watch out for and what each extra £1 of gross income will be worth. For example, if your estimate is around £50,000, that means you are on the borders of higher rate tax (or well into the 41% band if you are resident in Scotland). £50,000 is also the threshold at which the child benefit tax charge comes into play.
  • Check whether you will cover your allowances – The allowances to which you are entitled often depend upon your income, although the £2,000 dividend allowance applies universally. Couples have the opportunity to cover two sets of allowances, possibly by transferring investments between each other or changing from single ownership to joint ownership.
  • Check your PAYE code – If you have received a 2021/22 PAYE coding, check that it is correct. The wrong code could mean you pay too much tax during the year.
  • Top up your ISA – If it makes tax sense for you to invest in an ISA because of the potential income and capital gains tax savings, then the time to do so is as soon as possible, not just as the tax year end approaches.
  • Consider making pension contributions – The sooner your contribution is invested, the longer it benefits from a tax-favoured environment and the less likely it is to be ‘lost’ in other expenditure.

For more 2021/22 tax planning, get in touch now, and get ahead of the curve.

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What Financial Lessons Have We Learnt From The Pandemic?

Written by admin on . Posted in COVID-19. No Comments on What Financial Lessons Have We Learnt From The Pandemic?

Hard to believe, but we are on the threshold of the second year of the Covid-19 pandemic.

The World Health Organisation declared Covid-19 a pandemic on 11 March 2020, coincidentally the day that Chancellor Rishi Sunak presented his first Budget. At the time, the Chancellor announced a £12bn stimulus to counter the impact of the pandemic. By November, the Office of Budget Responsibility was estimating the cost had reached £280bn.  

The last year has been a traumatic one in which much has changed, perhaps never to revert to the old ‘normal’. It has also provided some useful financial lessons (quick caveat: these are my own personal meandering thoughts, not by any means advice!):

  • Make sure you have an up-to-date will – Early on in Lockdown 1.0 the importance of having an up-to-date will (or, in some cases, any will) was highlighted to many people just as it became difficult to arrange one.

 

  • Relying on a state safety net is dangerous – The pandemic saw the number of Universal Credit (UC) claimants more than double to 5.8 million in the year to November 2020. The lowly level of benefits – even after a £1,000 temporary uplift – was a shock for many of those new claimants, including people who fell between the gaps in the job support schemes.

 

  • Keep an adequate cash reserve – In a world of near zero interest rates, you may be reluctant to leave cash on deposit, earning next to nothing. However, cash gives you valuable flexibility and time to react to changed circumstances.

 

  • Don’t panic – Whether you’re an active investor or simply make pension contributions, watching the performance of world markets has been stressful over the last year. The UK’s FTSE 100 hit its low for 2020 on 23 March, the day that the Prime Minister launched Lockdown 1.0. It was a dark time, but any investor who panicked and sold up at that point, when the FTSE 100 was below 5,000, would have chosen the worst time to pull out. By the end of 2020, the index was 29.4% above its March nadir. That performance was also a reminder of another lesson: trying to predict market timing is almost impossible.

If any of these maxims resonate with you then you may be better prepared for next time.

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CIS: VAT Reverse Charge: Rules from March 2021

Written by admin on . Posted in Tax, VAT. No Comments on CIS: VAT Reverse Charge: Rules from March 2021

The VAT domestic reverse charge will finally apply to most supplies of building and construction services from 1 March 2021. The rules, whose implementation have been postponed twice, cover standard and reduced rate VAT supplies between VAT-registered sub-contractors and contractors where reporting is required under the construction industry scheme (CIS).

The definition of construction services is based on the CIS definition, with various professional services excluded. However, unlike the CIS, the reverse charge applies to the total supply if any element in the supply is within the definition, subject to a 5% disregard.

Sub-contractors

The reverse charge applies if the following conditions are all met:

  • The supply is within the scope of the CIS.
  • The supply is standard or reduced rated (zero-rated supplies are excluded).
  • The customer is VAT registered.
  • The customer is CIS registered.
  • The customer is not the end user (the final customer who does not make an onward supply – typically, the property developer).

Sub-contractors will no longer charge or account for output VAT, and invoices must state that the reverse charge applies.

Cashflow is likely to be affected for sub-contractors who will no longer benefit from retaining VAT before paying it over to HMRC. Moving to monthly VAT returns could be the best option for managing repayments.

Main contractor

The main contractor accounts for the VAT on the services of sub-contractors as output VAT, but can also usually claim a corresponding input VAT deduction.

The end user will then be invoiced as normal. The main contractor will therefore now be responsible for accounting for the full amount of VAT in the chain.

The VAT reverse charge means adjustments for subcontractors and contractors. Detailed technical guidance from HMRC, including supplier and buyer flowcharts, can be found here.

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Navigating VAT in a post Brexit world

Written by admin on . Posted in BREXIT, Tax, VAT. No Comments on Navigating VAT in a post Brexit world

Many businesses are struggling with the VAT regime in place since Brexit, especially when it comes to exporting goods to the EU. We address some of the common misunderstandings.

Exporting goods

Provided you have proof of postage or shipment, goods exported from the UK to the EU are zero-rated. However, as businesses are finding out, problems arise because the VAT implications of importing into the EU must also be factored in.

Most businesses will need to accept responsibility for the EU VAT and therefore export on delivered duty paid terms. This adds significant cost unless you register for VAT in each country exported to so that VAT can be recovered. However, the introduction of the EU’s one stop shop from 1 July 2021 will mean just one EU member state VAT registration will be required for consignments of less than 150 Euros.

Many businesses are setting up an EU base to get around the worst of the problems, which the government has appeared to encourage. The Netherlands, with English spoken by most, is a popular choice, and Dutch logistics and warehousing companies are seeing high demand for their services.

Imported goods

The introduction of postponed import VAT accounting means that, in most cases, import VAT does not need to be paid upfront. Instead, import VAT is accounted for as a reverse charge on the VAT return. You or your agent simply need to indicate on the customs declaration that postponed accounting will be used.

Services

VAT on business to business services remains essentially the same, with the place of supply generally where the recipient belongs. There is no longer any need to submit EC sales lists for goods exported or services supplied to the EU.

HMRC guidance on VAT on exports can be found here.

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Update on Covid-19 support for businesses

Written by admin on . Posted in Business Rates, COVID-19, Self-Employed, Tax. No Comments on Update on Covid-19 support for businesses

More support is available to help businesses in this latest lockdown, expected to last until at least 8 March. Keep up to date with, and claim, any support that your business is entitled to so you can plan cash flow and take remedial action as necessary.

Council grants

The Closed Businesses Lockdown Payment of up to £9,000 supports businesses required to close due to the latest national lockdown. It should be paid automatically if you have previously received a grant, but visit your local council’s website to check. Your business must:

  • be based in England;
  • pay business rates;
  • be required to close because of the national lockdown (closure for any other reason doesn’t count); and
  • be unable to provide the usual in-person customer service (even if a takeaway service is provided).

Fourth SEISS grant postponed

The fourth SEISS grant, promised by the Chancellor in October 2020, will not be paid until after the Budget on 3 March, with no details announced until then. Claims for the third grant opened on 30 November 2020, so the fourth grant will be later than expected. The delay of the payment into March has met with dismay, with some left with no income at all in February. However, it is likely that profits reported for 2019/20 will be taken into account, and this will help anyone who commenced trading after 5 April 2019.

Kickstart Scheme

The Kickstart Scheme, designed to create jobs for 16- to 24-year-olds, commenced last September. The scheme covers the minimum wage for six months, along with the associated employer NICs and pension contributions. The scheme has now been simplified with the removal of the 30-vacancy requirement where an employer applies directly.

Annually paid directors

Many small company directors have not been able to benefit from the furlough scheme if they pay themselves annually. Directors may qualify under the latest version of the scheme, and HMRC has recently published examples outlining how claims should be calculated.

Government support for businesses keeps evolving. Visit business support to find out what support is available.

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Is A Wealth Tax A Viable Option for The Chancellor?

Written by admin on . Posted in Budget, Capital Gains Tax, COVID-19, Property, Tax. No Comments on Is A Wealth Tax A Viable Option for The Chancellor?

The Wealth Tax Commission, an independent body of tax experts, has set out the framework for a one-off wealth tax.  Will the Chancellor be tempted to adopt this?

In his November [2020] statement, in which Chancellor Rishi Sunak highlighted that the government was spending £280 billion this financial year on coping with the Covid-19 pandemic, he is also said:

“[W]e have a responsibility, once the economy recovers, to return to a sustainable fiscal position.”

A wealth tax is one way that has been suggested to repay at least part of the massive debt that has accumulated. The idea was given a boost in December when a 125-page report detailing how a wealth tax could operate was published by the Wealth Tax Commission, which is independent of government. Its main proposals were:

  • The tax should be a one-off, levied at the rate of 5% on individual wealth above £500,000.
  • The definition of wealth would include all So, for example, there would be none of the special reliefs for pensions, farmland or business assets that currently apply under inheritance tax.
  • The valuation date would be on or shortly before the first formal announcement of the tax, to prevent post-announcement forestalling actions. The value of housing and land would in the first instance be calculated by HMRC’s Valuation Office Agency (VOA).
  • In practice the tax payment would normally be at the rate of 1% (plus nominal interest) for five years.
  • Deferred payments could be made by asset-rich, cash-poor individuals. For pensions, payment would be drawn from the tax-free lump sum, when benefits are drawn.

The Commission estimated that such a tax would raise a net £260 billion. It would be payable by 8.25 million people, meaning it would reach many who pay income tax at no more than basic rate.

It should be noted that earlier in the year, (in July 2020 to be exact), Rishi Sunak had said, “I do not believe that now is the time, or ever would be the time, for a wealth tax”. However, as several commentators have noted, the Commission’s report has given the Chancellor cover to increase revenue from two related taxes he currently has under review – capital gains tax and inheritance tax.

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Life After Brexit – Travel to Europe on Business

Written by admin on . Posted in BREXIT, Law. No Comments on Life After Brexit – Travel to Europe on Business

Continuing my immigration theme from earlier this week, I thought I’d comment on business travel to the EU as this has become significantly more complicated since 1 January, with many activities carried out by short-term business visitors now requiring a work permit. Business travel includes activities such as travelling for meetings and conferences, providing services, and touring art or music.

The 90-day rule

If you travel to Schengen area countries (including Switzerland, Norway, Iceland and Liechtenstein) for less than 90 days in a 180-day period, certain activities, such as attending a business meeting or conference, conducting market research or a sales trip, are permitted without the need for a visa or work permit.

Bulgaria, Croatia, Cyprus and Romania, who are not yet Schengen area countries, form a separate bloc, with another combined limit of 90 days’ entry. You can spend 30 days each in France, Germany and Spain, but 30 days in France and Germany, followed by 31 days in Spain would breach the 90-day limit. However, there would be no problem if the second, 31-day trip was instead to, say, Romania.

Business travellers will need to track how many days they spend in the EU, although this should be fairly straightforward given your passport will be stamped on entry to and exit from each EU country you visit.

When the 90-day rule does not apply

A visa, work permit or other documentation may be required if you are planning to stay for longer than 90 days in a 180-day period, or if you’ll be doing any of the following:

  • carrying out a contract to provide a service to a client in an EU country in which your employer has no presence;
  • providing services in an EU country as a self-employed person; or
  • transferring from the UK branch of a company to a branch in an EU country, even if just for a short period of time.

Advice about travelling abroad, including the latest information on Covid-19, safety and security, entry requirements and travel warnings, can be found on the government’s travel advice website.

Photo by KOBU Agency on Unsplash

 

Brexit and the impact on immigration rules

Written by admin on . Posted in BREXIT, Employment Law, Law. No Comments on Brexit and the impact on immigration rules

With the end of freedom of movement between the UK and EU from 1 January 2021, the UK has introduced an immigration system that treats all applicants equally. Anyone recruited to work in the UK from outside the UK, excluding Irish citizens, must meet certain requirements and apply for permission. Employers will need a sponsor licence.

The new system does not apply to EEA or Swiss citizens already employed in the UK, although they will have to apply under the EU Settlement Scheme to continue living in the UK.

Sponsor licences

A sponsor licence will normally be required to employ someone from outside the UK, with the application process typically taking six to eight weeks. Once obtained, the licence is valid for four years.

The licence can cover those with long-term job offers and temporary workers. You can apply for a licence covering one or both types of worker. Before applying to be a sponsor, you should check that the people you want to hire will meet the requirements for coming to the UK for work.

Skilled worker route

This will be the route for most workers employed from outside the UK. Visas are only awarded to those who gain sufficient points, with key requirements including:

  • job offer at the required skill level (A Level and equivalent);
  • English spoken to the required standard; and
  • minimum salary threshold.

Applicants can trade characteristics, such as their qualifications, against a lower salary to get the required number of points.

Impact on recruitment

As expected, the impact on employers and their workforces will be varied. You can no longer rely on EU recruitment to fill low-skilled and mid-level occupations, while those recruiting skilled workers face more onerous requirements and greater expense.

The retention of existing workers is more important than ever, and you will need to plan over the longer term how vacancies are to be filled. For some companies, remote working may offer a solution.

A good starting point for anyone looking to employ from outside the UK is the introduction to new recruitment rules for employers found here.

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