The Latest Measures to Support Businesses

The Chancellor, Rishi Sunak, outlined a raft of further measures to support the UK’s ailing businesses, those affected by the forbidding COVID-19 outbreak. The list that follows summarises his announcements in the order they were announced:

 

  • The Treasury are making available £330bn of loan guarantees. These guarantees will underpin government backed bank loans on attractive terms. The loans can be used to support businesses through financial difficulties during the COVID-19 crisis. Note they are loans. At some point interest will be charged and repayments will have to be made. The Chancellor confirmed that if this level of support was insufficient, further guarantees would be forthcoming.
  • Support for liquidity to larger firms will be provided by low-cost, easily accessible commercial paper. Support for smaller firms will be accessed via the Business Interruption Loan Scheme previously announced – the initial loan ceiling of £1.2m is to be increased to £5m and no interest due for the first six months. Both of these schemes are due to be up and running by the start of next week.
  • Further measures are to be introduced to support airlines. No details as yet.
  • Businesses in the hospitality, leisure and retail sectors who have made claims for business interruption from their insurers due to government interventions, may have had difficulties making a claim. Government have now intervened and the insurers have agreed to pay up in appropriate cases.
  • Businesses in the retail, hospitality and leisure sectors with a rateable value below £51,000, will also receive – in addition to the 100% rates relief previously announced – a cash grant of up to £25,000 per business.
  • In the same sector, the 100% rates reduction will be applied to all business irrespective of rateable value.

To clarify, the previous two bullet points mean that all businesses in the retail, hospitality or leisure sector – shops, pubs, theatres, music venues, restaurants etc – will have no rates to pay for 2020-21, and if the rateable value of their property is below £51,000, they may also be able to claim a cash grant of up to £25,000.

  • The £3,000 grants to smaller business, announced last week, are to be increased to £10,000.
  • Mortgage lenders have agreed with government that individuals disrupted by the Coronavirus can have at least a three-month holiday from making mortgage repayments.

The Chancellor also hinted that there would be further support for incomes and jobs. Perhaps an increase in statutory sick pay or increased access to State Benefits. Watch this space.

What is not clear is how we claim for the various loans and grants on offer. We offer the following suggestions although the actual processes finally agreed may differ from these:

  • Rates reductions should be made automatically and revised statement sent by local authorities in the coming weeks for 2020-21. Contact your local rating department to clarify that this is so.
  • It is not clear how qualifying businesses will claim the grants mentioned in the above list – those that range between £10,000 to £25,000 – could be applications need to be made to local authorities or another government department. We will confirm as soon as details are released.
  • We assume that you will need to apply to your bank for the guaranteed Business Interruption Loan. It is likely that your bank will need up-to-date figures to back up your application. Please call if you need help preparing these.
  • At the time this update was composed, the government had still not confirmed how employers can claim back the 14-day cost of Statutory Sick Pay paid to employees. Again, we will publish details as soon as they are released.

Although not part of the Chancellor’s presentation, Chief Secretary of the Treasury, Steve Barclay, made a further announcement to parliament last night (17 March 2020). The government are postponing the roll-out of draconian IR35 measures to the private sector that would have affected the tax status of many incorporated contractors across the UK. This a welcome change as it will defer much disruption in this sector until the worst aspects of the COVID-19 outbreak have passed. The new rules are now slated to come into effect from 6 April 2021, a year later than planned.

Our best wishes to all who are directly affected by this unprecedented outbreak. And please get in touch if you need more information or support.

Government support for individuals if affected by the COVID-19 outbreak

The government has published a number of measures to support individuals during the current Coronavirus outbreak. We have summarised below some of the issues covered in a recent post-budget press release.

Statutory Sick Pay

Statutory Sick Pay (SSP) will now be available for eligible individuals diagnosed with COVID-19 or those who are unable to work because they are self-isolating in line with Government advice. This is in addition to the change announced by the Prime Minister that SSP will be payable from day 1 instead of day 4 for affected individuals.

Sick notes from 111

People who are advised to self-isolate for COVID-19 will soon be able to obtain an alternative to the fit note to cover this by contacting NHS 111, rather than visiting a doctor. This can be used by employees where their employers require evidence. Further details will be confirmed shortly.

Support for the self-employed

Those who are not eligible for SSP, for example the self-employed or people earning below the Lower Earnings Limit of £118 per week, can now more easily make a claim for Universal Credit or Contributory Employment and Support Allowance

Hardship fund

The government has announced a new £500 million Hardship Fund so Local Authorities can support economically vulnerable people and households. The government expects most of this funding to be used to provide more council tax relief, either through existing Local Council Tax Support schemes, or through similar measures.

Problem paying tax

If you fall behind paying your taxes HMRC should be approached to organise a staggered repayment plan – based on your reduced capacity to meet any payments due.

And finally, if you need more information on any of these issues please call.

Spring Budget 11 March 2020

In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.

Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.

Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below.

Personal Tax and miscellaneous matters

 

Statutory Sick Pay (SSP)

SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.

Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.

Local Authority Hardship Fund

Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.

Most of this funding will probably support the extension of council tax relief.

Personal Tax allowance

The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500).

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:

  • Basic rate band £37,500 (2019-20 £37,500)
  • Higher rate band £37,501 to £150,000 (2019-20 £37,501 to £150,000)
  • Additional rate, no change, applies to income of more than £150,000.

Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

Earlier payments of Capital Gains Tax (CGT)

As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.

The changes have applied from April 2019 for non-UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government is making two changes to the private residence relief:

  1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
  2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.

Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.

Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.

CGT annual allowance

The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).

The equivalent allowance for trustees is £6,150 (£6,000 2019-20).

Tax benefit charges for low CO2 vehicles

In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).

Tobacco Duty Rates

All tobacco products will see an increase in duty by 2% above the current rate of inflation.

Hand-rolling tobacco will see an increase of 6% above the rate of inflation.

These changes will impact prices from 6pm, 11 March 2020.

Vehicle Excise Duty

Rates are due to be increased in line with the Retail Prices Index from April 2020.

Fuel Duty

Is frozen for another year.

Alcohol duty rates

Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.

ISA limits 2020-21

Adult savings limits remain unchanged at £20,000.

Junior ISA limits are increased to £9,000.

Zero-rating of VAT for women’s sanitary products

This measure is to be introduced from 1 January 2021.

Bank support from mortgage lenders

Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.

Banks are also considering increasing credit card limits and cash withdrawal limits.

 

Business Tax changes

 

National Insurance

It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.

Relief for Statutory Sick Pay payments

Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.

Watch this space as this is a welcome cost saver for smaller businesses.

Business Rates Retail Discount Scheme

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues.

To support small businesses, in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19, the discount will be increased to £5,000.

Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.

One-off grant for small businesses

The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.

Businesses that think they may be eligible should contact their local authority.

Coronavirus Business Interruption Loan Scheme

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.

Government 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 £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

HMRC’s Time To Pay Scheme

HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.

 

Corporation Tax

The previously announced reduction in Corporation Tax from 19% to 17% – from April 2020 – has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.

Structures and Buildings allowance

The annual writing down rate is to be increased from 2% to 3% from April 2020.

Digital Services Tax

Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.

This will be a major revenue raiser for HMRC.

Capital loss restriction from 1 April 2020

For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.

Employment Allowance

The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.

Car and van benefits charges

Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.

R&D expenditure credit

This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.

Zero-rating of e-publications

From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.

VAT reverse-charge for the construction sector

A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.

Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Clamp-down on tax evaders

As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.

Bank support for small businesses

In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms.

Climate issues

The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals.

The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.

Self-employed v Employed

Many employed persons are drawn to the idea of running their own business. This short article sets out a few of the pros and cons of this change in status.

The advantages:

One of the major advantages of being self-employed is the opportunity to secure more than one income stream. When employed, we normally work for one employer and thus all eggs are in one basket – lose your job and you lose your monthly income.

Self-employed persons have the opportunity to secure multiple customers – lose one customer and you will lose some but not all of your income.

To some extent, as a self-employed person, you may have more freedom to choose when you work although this can be a double-edged sword, business owners may get demands from clients out of hours and it may be difficult to resist their demands if they are big spenders.

Contrast these advantages with some of the less advantageous demands that may be made if you become self-employed.

The disadvantages:

  • As an employee you should have no personal, financial liability for your employer’s debts or guarantees. This may not be the case if you are running your own business. There are ways to organise your business structure to minimise these risks but adopting them comes at a cost.
  • You won’t get a payslip and have your taxes and NIC paid by deduction if you are self-employed. You will have to maintain proper accounts and make returns to HMRC to determine your liabilities.
  • If your turnover is over the present £85,000 registration threshold, as self-employed you may have to register for VAT and make regular, on-line returns to HMRC.
  • You will need to fund any investment required to set-up and run your business.
  • NIC contributions by the self-employed may not create sufficient State Pension funding and private schemes may need to be considered.
  • Instead of benefitting from benefits attached to employed status: holiday pay, statutory sick pay, most State benefits; you will have to guarantee these benefits for your employees.

Finally, as self-employed, you will have to budget and meet all of the costs associated with your business activity.

How we can help

We have been supporting new business set-ups for a number of years and can help you address all of these concerns. Running your own business may not be for the faint of heart, but with adequate planning and support, setting up and building a business can be immensely satisfying and rewarding.

Please call if you want to explore your options.

How will the Chancellor address Coronavirus issues?

Most pundits agree that the growing disruption posed by the Coronavirus outbreak combined with continuing Brexit uncertainty – exactly what will our trading relationship with the EU be from January 2021 – are likely to have a dampening effect on demand and supply; a combination that will lead to a slow-down in global economic activity.

It is doubtful that Budget announcements this week will do much to quell the anxieties of small business owners.

There are concerns about the cost of meeting sick-pay obligations as increasing numbers of employees self-isolate in response to government advice to contain the spread of the virus.

Will business owners be offered more time to pay their taxes?

As the outbreak in the UK is at an early stage expect a staged approach to business support. It is feasible that the government will have to print money – so-called quantitative easing – to cover the funding support required by the UK business community. This is the method used during the banking crisis of 2008 when the banks were the recipients of government’s largesse.

Without a doubt, on its own the Coronavirus poses a significant challenge for all of us and in particular the survival of vast number of a small and medium sized business in the UK, the backbone and engine room of our UK economy.

Fingers crossed that Rishi Sunak and his Treasury advisors come up with adequate support this week. Watch this space for our budget summaries to be published later this week.

Mis-selling of leasehold interests

The Competition and Marketing Authority has published information recently that points to evidence of potential mis-selling and unfair contract terms in the leasehold housing market.

Their press release is reproduced below:

As part of a probe into the industry, the Competition and Markets Authority (CMA) is concerned that leasehold homeowners have been unfairly treated and prospective buyers misled by housing developers. These concerns include:

  • Ground rents: homeowners having to pay escalating ground rents, which in some cases can double every 10 years. This increase is often built into contracts, meaning people can often struggle to sell their homes and find themselves trapped.
  • Cost of the freehold: the CMA has seen evidence that people have been misled about the cost of converting their leasehold to freehold ownership. When buying their home, some people were told the freehold would cost only a small sum, but later down the line this price had increased by thousands of pounds with little to no warning.
  • Misleading information: not being told upfront that a property is leasehold and what that means. Some developers are failing to explain the differences between leasehold and freehold when directly asked, and some actually tell potential buyers that there is no difference. By the time people find out the realities of owning a leasehold, including the regular charges to be paid, they are often unable to pull out of the purchase, or would face significant difficulties if they tried to do so.
  • Unreasonable fees: being charged excessive and disproportionate fees for things like the routine maintenance of a building’s shared spaces or making home improvements. If people want to challenge such charges, the process is often difficult and costly, meaning few people decide to go through with it.

The CMA is now completing all the necessary legal work to launch direct enforcement action against companies it believes have broken consumer protection law. This could result in firms signing legal commitments to change how they do business. If they fail to make the required changes, the CMA could act through the courts to make them comply with the law.

The evidence found by the CMA also supports the case for changes to the law in this area. The CMA will continue to work with the Government on its reform plans for the leasehold market, including supporting the move to ban the sale of new leasehold houses and reduce ground rents for new leases to zero.

As part of its work, the CMA is developing consumer advice for people who own, or are looking to buy, a leasehold property. This will offer tips on what they can do when faced with permission fees and service charges they consider unjustified.

30 days or else

We have reported earlier this year that from 6 April 2020, residential property sales that are subject to capital gains tax will need to be reported to HMRC within 30 days of the sale. Any CGT due will also need to be paid in this 30 day period.

Property sales affected will include:

  • a property that you’ve not used as your main home
  • a holiday home
  • a property which you have let for people to live in
  • a property that you have inherited and have not used as your main home

Property sales that will not be subject to this 30 day reporting deadline include:

  • a legally binding contract for the sale was made before 6 April 2020
  • you meet the criteria for Private Residence Relief
  • the sale was made to a spouse or civil partner
  • the gains (including any other chargeable residential property gains in the same tax year) are within your tax free allowance (called the Annual Exempt Amount)
  • you sold the property for a loss
  • the property is outside the UK

Accordingly, if you are contemplating a sale after 5 April 2020, please let us know in advance of the sale. In this way we can gather together all the information required to calculate any capital gain and ensure that returns are made in good time.

There are penalties for late disclosure.

Disposals by non-resident owners

If you are a non-UK resident you must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a Capital Gains Tax liability, within 30 days of completion of the disposal.

You will no longer be able to defer payment of Capital Gains Tax via your Self-Assessment return, and any tax owed must be paid within the 30-day reporting and payment period.

This includes disposals of residential properties, non-residential properties and indirect disposals.

Don\’t fall for this scam

The Insolvency Service has issued a warning that fraudsters have been contacting investors in insolvent schemes claiming to be from the Official Receiver’s office or to have been appointed by the Official Receiver to help recover funds for a fee.

These approaches are always fraudulent.

Official Receivers or any agent legitimately instructed to act on their behalf will never ask you to pay a fee to get some or all of your investment back.

The Official Receiver can only make a return to you as a creditor in failed schemes if it is possible to identify and sell any remaining assets owned by the liquidated company you bought your investment from. All too often businesses of this nature have few if any, assets left to repay creditors and it can take several years to undertake complex asset recovery work and complete a liquidation.

Paying a fee will not make you a priority creditor, meaning you get paid faster or increase the chance of you getting any money back.

If you are asked to pay a fee to get your money back someone is attempting to scam you.

The Official Receiver does not charge investors a fee to get money back and does not employ anyone else to do this on their behalf.

You should report all fraudulent contact from individuals, stating they can get your lost investments back for a fee, to the Official Receivers. You can also report these approaches to Action Fraud.

Tax Diary March/April 2020

1 March 2020 – Due date for Corporation Tax due for the year ended 31 May 2019.

2 March 2020 – Self assessment tax for 2019/19 paid after this date will incur a 5% surcharge.

19 March 2020 – PAYE and NIC deductions due for month ended 5 March 2020. (If you pay your tax electronically the due date is 22 March 2020)

19 March 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2020.

19 March 2020 – CIS tax deducted for the month ended 5 March 2020 is payable by today.

1 April 2020 – Due date for Corporation Tax due for the year ended 30 June 2019.

19 April 2020 – PAYE and NIC deductions due for month ended 5 April 2020. (If you pay your tax electronically the due date is 22 April 2020)

19 April 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 April 2020.

19 April 2020 – CIS tax deducted for the month ended 5 April 2020 is payable by today.

30 April 2020 – 2018-19 tax returns filed after this date will be subject to an additional £10 per day late filing penalty.

Additional rates reduction for pubs

Pubs will benefit from £1,000 business rates discount from April 2020.

The cut is on top of previously announced plans to slash the bills of small shops by 50%.

In a fresh demonstration of the government’s support for communities up and down the country, a new Pubs Relief will be introduced in April, with £1,000 being taken off the business rates bills of small pubs who qualify.

As many as 18,000 pubs are expected to benefit from the discount.

The relief will come on top of an extended retail discount which smaller pubs are also eligible to claim. Those able to claim both reliefs will benefit from a possible £13,500 off their annual bills.

From April this year:

  • small shops and cafes will see their bills halved as the retail discount, currently a third off, is extended to 50%
  • music venues and cinemas will become eligible for the retail discount
  • a £1,500 discount for local newspapers office space will be extended for a further five years

Regional variations may apply. Check with your local rating authority to see how this announcement will affect your rates bill in 2020-21.