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Author: Femi Ogunshakin

“Hear it Not, Duncan……..

Written by Femi Ogunshakin on . Posted in Employment Law, Employment Tax, IR35, Tax. No Comments on “Hear it Not, Duncan……..

….for it is knell that summons thee to heaven or to hell.”

I know: not quite the cheerful entry to a blog, however, those immortal words from my favourite Shakespeare play: uttered by Macbeth on his way to his dastardly deed, the murder of King Duncan, seems an appropriate proclamation to make regarding the introduction in less than a fortnight, of the new Off Payroll rules.

The cause of much debate, the controversial rules will see a marked change in the approach adopted by both business and HM Revenue and Customs, and not wanting to add to the massive body of arguments published and circulated to date, I thought I’d merely summarise the new rules for those who’ve recently arrived from Pluto (is it or isn’t it a planet: I forget!?), so here goes:

From 6 April 2021, any medium or large-sized organisation engaging a worker operating through an intermediary will be responsible for determining the worker’s employment status. This status must then be communicated to the worker and to any party contracted with for the supply of the worker, such as an agency.

Although the client (the medium or large-sized organisation) is responsible for determining employment status, it is the fee-payer who will have to operate PAYE if the determination means the worker falls within the off-payroll working (IR35) rules. The fee-payer, as the name implies, is the organisation paying the intermediary, and will often be different to the client. The intermediary will typically be a personal service company, but could also be a partnership, LLP, a managed service company or even an individual.

Status determination statement

Regardless of the outcome of the status determination, the client must provide a status determination statement (SDS) confirming the conclusion and the reasons behind it.

If there is a labour supply chain involved, the SDS must be passed down each stage of the chain until it reaches the fee-payer. This is extremely important, because if an agency receives the SDS but then doesn’t pass it on down the supply chain, the agency will be treated as the fee-payer, with responsibility for deducting taxes and paying them over to HMRC. The same for the client, who will be treated as the fee-payer until the SDS is carried out and communicated.

There are other situations where the client can end up being treated as the fee-payer:

  • Failure to take reasonable care when making a determination; and
  • Failure to respond within 45 days to a disagreement regarding a determination.

The issue of status will have to be re-checked if the working practices of the engagement change or a new contract is negotiated with a worker.

HMRC’s guidance to off-payroll working for clients changes in April 2021. Details, along with several useful links, can be found here.

So, as we march towards the end of the current tax year and into the change to current IR35 arrangements, it remains to be seen whether or not Macbeth’s knell will apply to the critical and valuable contribution made by Personal Service Companies to the UK economy.

As for me, it’s Friday, so “I go and it is done” – this piece that is!

Photo by Matt Riches on Unsplash

The Clock’s Ticking: Covid VAT deferral – new payment scheme

Written by Femi Ogunshakin on . Posted in COVID-19, Tax, VAT. No Comments on The Clock’s Ticking: Covid VAT deferral – new payment scheme

Businesses that deferred VAT payments due between 20 March and 30 June 2020, and cannot afford to pay by 31 March 2021, have the option of joining a new scheme allowing them to pay the deferred VAT over a longer period. The VAT deferral new payment scheme opened on 23 February and will close on 21 June 2021.

The scheme lets a business pay any outstanding deferred VAT in equal instalments without incurring interest or penalties. The number of instalments can be between two and 11, depending on when a business joins the scheme.

Instalment options

To benefit from the maximum 11 instalments, a business needs to join the scheme by 19 March 2021. For later joining dates:

Join by Maximum instalments
21 April 10
19 May 9
21 June 8

 

Of course, fewer instalments than the maximum can be selected. The first instalment is payable at the time of joining, with a direct debit set up required for subsequent payments. All instalments must be paid by 31 March 2022.

How to join

A business has to opt in to the new scheme. This is done using the business’ Government Gateway account, and one will need to be created if not already set up. Before joining, a business must:

  • Be up to date with its VAT returns;
  • Correct errors on VAT returns as soon as possible;
  • Make sure they know how much VAT was originally deferred, and how much is still outstanding;
  • Decide on the number of instalments to pay; and
  • Be able to make the first instalment.

 

Because of the direct debit requirement, the new scheme cannot be set up by an agent. If a business is unable to use the online service or pay by direct debit, then they should contact the COVID-19 helpline on 0800 024 1222. The starting point to join the VAT deferral payment scheme can be found here.

Photo by Obi Onyeador on Unsplash

Businesses prepare for long term tax hike

Written by Femi Ogunshakin on . Posted in Budget, COVID-19, Tax. No Comments on Businesses prepare for long term tax hike

The 3 March Budget provided an immediate sweetener for businesses in the form of a temporary extension to carry back of trading losses, plus, for companies only, a temporary super-deduction for investment in plant and machinery. However, in two years’ time, the main rate of corporation tax will rise to 25%.

Trading losses

The period over which businesses can carry back trading losses has been extended from one year to three years:

  • For the self-employed, a maximum £2 million of trading losses made in either 2020/21 or 2021/22 can be set against trading profits of the three previous tax years.
  • For companies, carry back against total profits is extended to 36 months for loss making accounting periods ending between 1 April 2020 and 31 March 2022. The £2 million cap applies to claims beyond the normal 12-month carry back.

Super-deduction

From 1 April 2021 to 31 March 2023, companies investing in qualifying plant and machinery will benefit from a 130% super-deduction. This means that for every £10,000 spent, there will be a £13,000 deduction against profits, saving corporation tax of £2,470. Currently, the tax saving would be just £1,900 within the annual investment allowance. The super-deduction is for those assets that would normally qualify for the 18% writing down allowance. However, only expenditure on new plant and machinery qualifies; motor cars are also excluded.

There is also a 50% first-year allowance for expenditure falling into the special rate pool, but this is less generous than the 100% annual investment allowance.

Corporation tax

From 1 April 2023, there will be two rates:

  • A small profits rate of 19% where profits are below a £50,000 lower limit, and
  • A main rate of 25% where profits exceed a £250,000 upper limit.

 

Where profits are between the lower and upper limits, a marginal taper will apply so that the rate of tax is gradually increased from 19% to 25%. However, this means the rate on this band of profits will be an even more punitive 26.5%.

Some examples of how the temporary loss relief extension will apply for both the self-employed and for companies can be found here.

Photo by Mathieu Stern on Unsplash

Covid-19 relief measures extended again

Written by Femi Ogunshakin 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 Femi Ogunshakin 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 Femi Ogunshakin 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.

Photo by Glenn Carstens-Peters on Unsplash

What Financial Lessons Have We Learnt From The Pandemic?

Written by Femi Ogunshakin 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.

Photo by Martin Sanchez on Unsplash

CIS: VAT Reverse Charge: Rules from March 2021

Written by Femi Ogunshakin 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.

Photo by Mathieu Stern on Unsplash

Navigating VAT in a post Brexit world

Written by Femi Ogunshakin 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.

Photo by Sergii Gulenok on Unsplash

Update on Covid-19 support for businesses

Written by Femi Ogunshakin 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.

Photo by Neil Thomas on Unsplash

Is A Wealth Tax A Viable Option for The Chancellor?

Written by Femi Ogunshakin 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.

Photo by Toa Heftiba on Unsplash

Life After Brexit – Travel to Europe on Business

Written by Femi Ogunshakin 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 Femi Ogunshakin 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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Self-assessment: last minute filing

Written by Femi Ogunshakin on . Posted in Self Assessment, Tax. No Comments on Self-assessment: last minute filing

I’m sitting here musing about the number of calls I’m still taking from (potential) clients regarding taking them on for this year’s self-assessment submissions. It’s got me thinking. Why do some people leave this to the last minute? After all, it is now exactly 11 days to the end of the month, and if, as I read somewhere a few weeks ago, some 2,700 taxpayers took time out from their Christmas day festivities to go online and file their self-assessment tax return for 2019/20, why at the start of this month have a reputed 45% of taxpayers (some 5.4 million) still not filed their returns by the start of January?

To those still looking for someone to help file their 2019-2020 tax returns, it may just be that you’ll have to make the submission yourself. If this is you, a word of caution: it is very easy to make mistakes – especially when left to the last moment – so here are some tips which might help you with your filing:

Online help

If you received any casual income, new interactive guidance is available to check whether the income has to be declared. This might include:

  • selling things, maybe online, or at car boot sales and auctions;
  • doing casual work, such as gardening, food delivery or babysitting;
  • charging for the use of equipment and tools; and
  • renting out property or part of your home.

Don’t forget expenses

For employees and directors, make sure you claim tax relief for any job-related expenses which your employer has not reimbursed. With professional fees or subscriptions, remember to include the amount paid during 2019/20, as these usually increase annually.

Where your own car, motorcycle or bicycle is used for work, a deduction can be claimed based on HMRC approved mileage rates. Remember that travel to and from work only counts if it’s to temporary workplaces.

If you have been required to work from home due to Covid-19 or otherwise, you can claim £4 a week for 2019/20 to cover the additional cost.

Don’t forget income

For employees and directors, don’t forget to include any taxable benefits listed on your P11D if not automatically included by HMRC. Include interest and dividends received, although you can ignore ISA income.

However, for the self-employed, none of the Covid-19 grants paid so far are to be included for 2019/20. It’s now too late to have any tax due collected via your PAYE coding, so make sure you are set up ready to pay HMRC by 31 January.

At the time of writing, it has been reported that HMRC are going to waive fines for anyone who files late this year if the delay is due to Covid-19. Any fines may be waived if you explain how you were affected in your appeal. You must still make the return or payment as soon as you can. The Chancellor is also apparently considering extending the filing deadline for everybody, moving it from 31 January to 31 March, although this has not yet been confirmed.

HMRC provides live webinars on how to complete your tax return, although the sessions covering employment and self-employment are only available just before the filing deadline. Registration details can be found on their website.

Photo by Markus Winkler on Unsplash

 

Update on new measures for Covid business support

Written by Femi Ogunshakin on . Posted in Business Rates, COVID-19. No Comments on Update on new measures for Covid business support

Admittedly, this is coming to you a little later than planned, but hopefully, this blog will provide some useful insight into the measures introduced following the announcement on January 5th of the current national lockdown in which the Treasury announced another round of one-off cash grants for retail, hospitality and leisure businesses to help them through to the spring. There is also further discretionary funding to support other impacted businesses.

The new grants are only for businesses situated in England, with the devolved administrations of Scotland, Wales and Northern Ireland providing their own support.

Grants will be paid on a per-property basis, with the amount dependent on the property’s rateable value:

Rateable value Amount of grant
£15,000 or under £4,000
Between £15,000 and £51,000 £6,000
Over £51,000 £9,000

 

To qualify, a business needs to be legally required to close and not able to operate effectively remotely. The new grants are in addition to any previous business support, such as the recent local restrictions support grant. Grants may well be paid automatically but keep an eye on your local authority’s website in case you need to register or apply.

Discretionary grants

Businesses not eligible for a cash grant can apply to their local authority for financial help if they are affected by the restrictions. Help is aimed at smaller businesses which do not pay business rates but have relatively high ongoing fixed property-related costs. This might include:

  • those in shared offices or other flexible work spaces;
  • market traders;
  • bed and breakfast businesses paying council tax instead of business rates.

 Other recent announcements

Just before Parliament broke for Christmas, the Chancellor extended the employee furlough scheme by another month to the end of April, with the government-backed bounce back loan scheme now available up to 31 March – it was due to end on 31 January. The business interruption loan schemes have been similarly extended.

You can find out what Covid-19 financial support is available for your business by working through the government’s business support finder.

Photo by Kevin Grieve on Unsplash

Lockdown 3.0 – What To Expect

Written by Femi Ogunshakin on . Posted in COVID-19, Employment Law, Employment Tax, Self-Employed, Tax. No Comments on Lockdown 3.0 – What To Expect

As the third Covid-19 lockdown took effect on 5 January 2021, the Chancellor announced a further £4.6 billion in grants to the retail, hospitality and leisure sectors. This new round of support follows extensions to the job retention and loan schemes revealed on 17 December 2020. There may be more to come with the Budget on Wednesday 3 March 2021.

New lockdown 3.0 grants

An extra £4.6 billion in lockdown grants has been directed at the worst affected sectors.

New one-off grants for closed retail, hospitality and leisure businesses have been announced. The new grants are in addition to all other forms of support, such as the Lockdown Restrictions Support Grant (LRSG (Closed) Addendum) which applied to businesses that were forced to close between 5 November  and 2 December 2020.

The new grants in England will be:

  • £4,000 for businesses with a rateable value of £15,000 or under;
  • £6,000 for businesses with a rateable value between £15,000 and £51,000; and
  • £9,000 for businesses with a rateable value of over £51,000.

In addition, £594 million is being made available for Local Authorities and the Devolved Administrations to support other businesses not eligible for the above grants, that might be affected by the latest restrictions. Businesses should apply to their Local Authorities.

The Devolved Administrations will be receiving additional funding in line with the English measures, with £375 million for Scotland, £227 million for Wales and £127 million for Northern Ireland.

The announcement of the new grants talks of helping business “through to the Spring”, with the Chancellor hinting that additional support measures are to come in the Budget on 3 March 2021.

Coronavirus Job Retention Scheme (CJRS)

The CJRS furlough scheme is now running through to April 2021.

On 17 December 2020, the Chancellor announced a further one-month extension of financial support under the Coronavirus Job Retention Scheme (CJRS) to the end of April 2021. As currently, the government will pay 80% of the salary of employees for hours not worked up to a maximum of £2,500. Employers will only be required to pay wages. National Insurance Contributions (NICs) and pensions for hours worked, and NICs and pensions for hours not worked.

Claims for furloughed employees can only be made for those who were employed and on payroll on 30 October 2020. The employer must have made a PAYE RTI submission to HMRC between 20 March and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employee has been made redundant, or they stopped working on or after 23 September 2020 and have subsequently been re-employed.

Self-employed Income Support Scheme (SEISS)

No change.

No changes to the SEISS were announced alongside the CJRS extension, as the SEISS already runs through to the end of April 2021. Details of the fourth SEISS grant that will cover the three months from February to April have not yet been released.

Loan schemes

Most schemes extended to 31 March 2021.

On 17 December the Chancellor extended access to the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) until the end of March.

Additional support measures

In November 2020 the Financial Conduct Authority (FCA) published fresh guidance across a range of issues including mortgages and consumer credit and loans. The thrust of these was to limit the maximum payment holiday to six months, which had to be agreed three months at a time.

Content supplied by Taxbriefs. Photo by Priscilla Du Preez on Unsplash

Is An Increase in Capital Gains Tax Inevitable?

Written by Femi Ogunshakin on . Posted in Budget, Capital Gains Tax, Tax. No Comments on Is An Increase in Capital Gains Tax Inevitable?

A recent report could herald changes to capital gains tax.

Last July the Chancellor asked the Office of Tax Simplification (OTS) to undertake a review of capital gains tax (CGT) “in relation to individuals and smaller companies”. The request was something of a surprise for two reasons. Firstly, there had been no suggestion that Mr Sunak wanted to reform capital gains tax. Secondly, two earlier reports on another capital tax, inheritance tax, had been sitting in the Treasury’s in-tray for over a year, awaiting attention.

Cynics pointed out that while the Conservatives’ 2019 manifesto promised no increases to the rates of income tax, VAT and national insurance, there was no such protection for CGT. Certainly, the ideas put forward by the OTS would raise extra revenue for the Treasury’s depleted coffers, but probably not the £14bn seen in some of the November headlines.

The OTS made eleven proposals for the government to consider. The more significant were:

  • CGT rates should be more closely aligned with income tax rates, implying the maximum tax rate on most gains could rise from 20% to 45%.
  • The annual exempt amount, currently £12,300 of gains, should be reduced to a ‘true de minimis level’ of between £2,000 and £4,000.

When inheritance tax relief applies to an asset, there should be no automatic resetting of CGT base values at death, as currently occurs. The OTS also suggested that the government should consider whether to end all rebasing at death, meaning that the person inheriting an asset would be treated as acquiring it at the base cost of the person who has died.

The £1m Business Asset Disposal Relief, which only replaced the £10m Entrepreneurs’ Relief in March 2020, should itself be replaced with a new relief more focused on retirement.

The OTS paper underlines just how favourably capital gains are currently treated relative to income. As the tax year end approaches the report is also a reminder to examine your use-it-or-lose-it options for the 2020/21 annual exemption.

Photo by Kelly Sikkema on Unsplash

 

Changes to the National Minimum and Living Wages

Written by Femi Ogunshakin on . Posted in Budget, Employment Law, Employment Tax, Tax. No Comments on Changes to the National Minimum and Living Wages

One of the announcements to come out of the Chancellor’s Spending Review was welcome increases to minimum wages.

From 1 April 2021, the National Living Wage will get a 19p increase, going up to £8.91 per hour, with this rate being extended to employees aged 23 and over. It currently applies to employees aged 25 year and over.

The original plan was for a more substantial increase, but the Low Pay Commission advised against this as it would have had a negative effect on businesses already struggling from Covid-19 restrictions. National Minimum Wage rate increases are similarly constrained, although the apprentice rate will go up by 3.6%. Future and current rates are:

Age From 1 April 2021 Current
National Living Wage 23 and over (currently 25 and over) £8.91 £8.72
National Minimum Wage 21 to 22 (currently 21 to 24) £8.36 £8.20
National Minimum Wage 18 to 20 £6.56 £6.45
National Minimum Wage 16 to 17 £4.62 £4.55
Apprentices under 19 or in first year £4.30 £4.15

 

Apprentices over 19 who have completed the first year of their apprenticeship are entitled to the rate for their age. The provision of accommodation is the only benefit that counts towards national minimum pay, with the maximum offset increasing to £8.36 per day (£58.52 per week).

What counts as working time?

If you are required to work off-site from the main premises, deciding when to charge for your time is not always straightforward. For example:

  • Count time on standby near the workplace, or waiting to collect goods, meet someone for work or start a job, but not rest breaks.
  • Count time travelling in connection with work (including travelling from one assignment to another) and for training, but not travelling between home and work.

For example, if an employee has an appointment in the morning, then travels to the office to work there she should be paid minimum wage for the duration of the appointment plus the journey to the office. The break she takes for lunch at the office, however, is unpaid.

HMRC has a calculator to check if you paying the correct amounts of National Living Wage and National Minimum.

Social media suggestion
The government announced increases to both the National Living and National Minimum wages, although Covid-19 curtailed more substantial rises.

Photo by Annie Spratt on Unsplash

 

Tougher criteria for third SEISS grant

Written by Femi Ogunshakin on . Posted in COVID-19, Self-Employed, Tax. No Comments on Tougher criteria for third SEISS grant

Applications for the third Self-Employment Income Support Scheme (SEISS) grant opened from 30 November, and you have until   29 January 2021 to make a claim. Be warned, however, that some of the conditions for this grant are different from those applicable to the previous grants.

Due to Covid-19, you must either:

  • Be currently trading but impacted by reduced demand, or
  • Have been trading but are temporarily unable to do so.

This status must be met during the period 1 November 2020 to 29 January 2021.

Additionally, you must declare that:

  • You intend to continue to trade, and
  • You reasonably believe there will be a significant reduction in your trading profits.

Make sure you keep evidence showing how your business has been unable to operate as normal due to Covid-19, so that your case for a loan is robust. The criteria are defined as follows.

  • Reduced demand – You have fewer customers or clients than you would normally expect, or contracts have been cancelled and not replaced. Simply having increased costs is not a reason for making a claim.
  • Temporarily unable to trade – Your business has had to close due to government restrictions, or you have been instructed to shield, self-isolate, have tested positive for Covid-19 or cannot work due to parental caring responsibilities. You cannot claim if you can work from home or have to self-isolate after going abroad.
  • Significant reduction – There must be a reduction in your trading profit for the whole accounting period, not just between 1 November and 29 January 2021. If you prepare accounts to 31 March or 5 April this shouldn’t be too difficult to establish, although there is a disincentive to work longer hours to make up lost income. It is impossible to apply if you are just starting your accounting period with, say, a 31 October 2021 year end, but it seems likely that HMRC will overlook this as profits will not be reported until 31 January 2023. The first two SEISS grants must be included in your 2020/21 trading profit.

HMRC has further guidance on what is meant by reduced demand and temporary closure, along with some examples.

If you are planning on applying for the third SEISS grant and need clarification, please get in touch.

Photo by Arthur Osipyan on Unsplash

Surviving Winter In the Midst of A Pandemic

Written by Femi Ogunshakin on . Posted in Bounce Back Loans, COVID-19, Restructuring & Insolvency. No Comments on Surviving Winter In the Midst of A Pandemic

A recent survey of small businesses has revealed that only a quarter of them are confident of their survival into 2021, with many worried about cash flow. Those businesses that took out Bounce Back Loans (BBLs) have already used up most of this funding.

Cash flow

Some two-thirds of businesses are waiting longer to be paid, with a significant number having had their customer payment terms renegotiated to three months or more. As they wait longer for cash to come in, these businesses in turn are withholding payments to suppliers.

If cash flow is an issue, businesses need to view sales and contracts in a completely different light. Payment terms are likely to be more important than short-term profitability.

The latest high-profile corporate collapse will see creditors of the Arcadia Group badly hit. With such giants of the high street unable to survive, it is essential to check a customer’s financial health before going ahead with a large sale or contract.

Coronavirus Business Interruption Loan Scheme (CBILS)

The CBILS is going to be the key to winter survival for many cash-strapped businesses. Now, here’s the really interesting bit; whilst it is not possible to benefit from both the CBIL and a BBL, a BBL can normally be refinanced into a CBILS. The CBILS borrowing limit is £5 million, so considerably more than the BBL maximum of £50,000, and with four times the number of lenders in the CBILS, there is much more choice.

There are, however, some downsides:

  • The government only guarantees 80% of the loan, rather than 100%.
  • Interest rates are set by the lender, rather than a set rate of 2.5%.
  • The application process can be more onerous, rather than just making a self-declaration.
  • Repayment terms are stricter, with, for example, no automatic repayment holiday.

The CBILS runs until 31 January 2021, although, with lenders reporting high levels of demand, don’t wait to apply.

Details of how to apply for a CBILS can be found on the British Business Bank’s website.

 Photo by Matthias Kinsella on Unsplash

Known Knowns and Not knowing What You Don’t Know

Written by Femi Ogunshakin on . Posted in BREXIT. No Comments on Known Knowns and Not knowing What You Don’t Know

One of my favourite quotes from the Bush II administration (and there were a few) is the famous quote from then Secretary of Defence, Donald Rumsfeld who famously said:

“Reports that say that something hasn’t happened are always interesting to me because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”

Reliable reports have it that with less than a month to go until the Brexit transition period ends, just one in five businesses have a good understanding of the risks and enough preparations in place, according to a survey by one of the largest accountancy firms EY. Many firms believe that after some initial challenges, business as usual will resume soon after 1 January 2021. In reality, whether or not the UK and EU succeed in negotiating a trade deal, there will be massive changes to the UK’s trading, regulatory and immigration systems. Business disruptions are guaranteed and it is still unclear how many new processes will work effectively.

Businesses that trade goods with the EU will be significantly affected, regardless of whether there is a trade deal. And getting ready for the new processes takes time. Businesses that trade with Europe will have to make customs declarations for, and pay the relevant tariffs on, goods moved between the UK and Europe. You may need to take advantage of one of the specialist services available to complete the often complex forms. Some businesses may be able to delay declarations and duty payments, but there are conditions.

Moving goods between Great Britain and Northern Ireland will be subject to special rules under the Northern Ireland Protocol. Businesses involved in such trade can sign up to a free government trader support service but need to be preparing now.

There will also be new rules for providing services. If you rely on professional qualifications to practice in the EU, you may need to act to get them recognised by EU regulators. You may need a work permit or visa if you travel on business to the EU and Brexit will also affect the cross-border transfer of personal data.

It will be more difficult for businesses to hire workers from the EU. A points-based immigration system will treat EU and non-EU citizens equally and only businesses registered as licensed sponsors will be able to hire non-UK workers.

Opportunities to supply the public sector in the UK will be advertised on a new UK internet portal instead of on the EU Tenders Electronic Daily.

The UK will also leave EU intellectual property systems and this will affect how the rules for trademarks and designs operate. You may have to take steps to ensure your intellectual property is protected in your main markets.

So, returning to Mr Rumsfeld’s quote, I’ve come up with a shorter version: “Whilst I May Not Know What I Don’t Know, I Do Know What I Do Know” and the above represent just some of the known changes. It is essential that businesses watch out for announcements of changes to UK and EU guidance and be ready to act upon them. Further information on some of these issues is available at https://www.gov.uk/transition.

Photo by KE ATLAS on Unsplash

Friday Afternoon Meanderings; What Is The Future of The Company Car Benefit?

Written by Femi Ogunshakin on . Posted in Company Car Tax, Employment Law, Tax. No Comments on Friday Afternoon Meanderings; What Is The Future of The Company Car Benefit?

It’s not often I get nostalgic, but every once in a while, I harken back to my days in the Revenue (now “HMRC”) and in practice as a tax consultant;  to a time when the company car was the fringe benefit that every employee wanted. As my somewhat fuzzy memory recalls, you had ‘made it’ once you had the keys to a car with no worries about servicing, insuring or, sometimes, even fuel costs. It could also make plenty of tax sense, as the cost of the car was not fully reflected in the amount on which tax was charged. Go back far enough and two company cars were not uncommon for some senior executives.

Unsurprisingly, the days of company cars as tax-efficient remuneration have largely passed, other than for electric vehicles. The government approach to company cars brings to mind the comment of Jean-Batiste Colbert, a 17th century French Minister of Finance, who said “the art of taxation consists in so plucking the goose as to procure the largest quantity of feathers with the least possible amount of hissing”.

Some 400 years later, successive UK chancellors have steadily notched up the company car benefit scales to raise additional revenue from a stable to shrinking number of company car drivers. For example, the latest HMRC data show that between 2010/11 and 2018/19, the average company car taxable value has risen by 57% against a 19% increase in inflation over the same period.

Similarly, the taxable value of ‘free’ fuel (i.e. employer-funded fuel) has risen by 44%. As the graph shows, the popularity of ‘free’ fuel has steadily fallen – only about one in eight company car drivers now pays nothing to fill up their tank. If you are one of that minority, do make sure you have enough private mileage to justify the tax you pay. The main reason for the drop in ‘free’ fuel numbers is that for many employees, the tax bill would be greater than their personal refuelling cost.

The gradual demise of the company car is a lesson in how the tax system can subtly alter over time. A major revamp in the treatment of salary sacrifice schemes introduced in 2017 changed the tax landscape for other fringe benefits, too. The one that has survived and still remains attractive – at least for now – is salary sacrifice to fund pension contributions.

Source: HMRC September 2020

 

 

Brain Teaser For The Self Employed – Thinking of Retiring?

Written by Femi Ogunshakin on . Posted in Self-Employed. No Comments on Brain Teaser For The Self Employed – Thinking of Retiring?

My regular readers will know that I like to ponder out loud, my meandering musings in my blogs, so they won’t be surprised I’ve come up with another quick quiz:

  • Are you self-employed?
  • If so, have you contributed to a private pension in the last year?

The Institute for Fiscal Studies (IFS) examined the answers to these two questions and found the probability of answering yes to both is much the same. Drawing on government data, the IFS calculated that in 2018:

  • 1% of the UK workforce – some 4.8 million people – were self-employed.
  • Just 16% of the self-employed contributed to a private pension.

As the graph shows, the proportion of pension contributors among the employed and self-employed workforce was on a steady decline from 1998 until 2012. In October 2012, pension automatic enrolment was launched, and by March 2019, over 10 million workers had joined a workplace pension arrangement. The self-employed were left out of auto-enrolment, hence the sharp divergence of the employee and self-employed lines from 2012 onwards.

The IFS research struggled to establish why only one in six of the self-employed were saving in a private pension, two thirds less than 20 years ago. It found that the characteristics of the self-employed workforce have changed over that period – it now consists of more females, an older demographic and an increase in part-time workers  – but none of these factors were enough to account for the fall in pension contributions. Given the tax relief which pension contributions attract, one surprising discovery was that the largest decline in self-employed contributions came from the higher-income bracket and the long-term self-employed.

If you answered yes to the first question and no to the second, then you may be expecting the state pension to make up the largest slice of your retirement income, a view shared by more than a quarter of the self-employed.  At present, the state pension amounts to £175.20 a week. If that sounds like a less than comfortable retirement plan, perhaps you need to rethink the answer to that second question…and please don’t turn to me, I’m just a lowly solicitor. I’m not qualified to advise on pensions. I just like to muse about these things. Especially on a Friday evening!

Claiming Tax Relief for Working From Home Expenses Just Got Easier….!

Written by Femi Ogunshakin on . Posted in Benefits, COVID-19, Tax. No Comments on Claiming Tax Relief for Working From Home Expenses Just Got Easier….!

To assist taxpayers, HMRC has launched an online portal for the making of working from home expenses incurred during the pandemic.

From 6 April 2020, employees can claim a tax-free amount of £6 a week to cover the additional costs of working from home. For a basic rate taxpayer, this works out to tax relief of £62.40 over the course of 2020/21, with relief of £124.80 for a higher rate taxpayer.

Taxpayers do not have to provide any evidence, such as increased bills, to support the £6 a week claim.

What to claim

For 2020/21, HMRC, in recognition of the unusual circumstances, are generously permitting a claim for the entire year regardless of how many weeks you are required to work from home. It doesn’t matter if you only work at home one or two days a week. If two or more people work from the same home, then each person is entitled to make a claim.

The amount to claim for 2020/21 is £312 (52 weeks at £6). The online portal can also be used to claim for the final two weeks of 2019/20 after the lockdown commenced.

The online portal

There are two circumstances when the online portal is not applicable:

  • When your employer is reimbursing the £6 a week allowance – you are already benefiting from the tax-free amount.
  • If you complete a self-assessment tax return – the expense claim should instead be made on the return.

Do not expect a tax refund once an online claim is made. Relief is given by adjusting your PAYE coding, so this will reduce PAYE over the remainder of 2020/21.

You can check here if you are entitled to claim work-related expenses, and then, if entitled, proceed with a claim.

Photo by Charles Deluvio on Unsplash

Self-Employed Granted Furlough Extension

Written by Femi Ogunshakin on . Posted in Budget, COVID-19, Self-Employed, Tax. No Comments on Self-Employed Granted Furlough Extension

Two further grants under the SEISS were announced in September and have now been updated.

Following the announcement last week, of a second lockdown, the government’s new package of support measures announced in the Chancellor’s Winter Economy Plan has been reworked, including an increase to the self-employed income support scheme (SEISS).

The extension covers a six-month period divided into two additional grants. The level of the upcoming third grant has now been increased from its initial 40% to 55% of average monthly profits. Applications for the third grant covering the three months from November 2020 to January 2021 will open on 30 November and will be capped at a maximum of £5,160, paid in a single instalment.

The fourth grant will cover the three months from February to April 2021, however, no further details have been released as yet.

Eligibility

To be eligible for the third grant you must have been eligible for the previous two (even if they were not actually claimed), so this excludes anyone with:

  • average annual profits exceeding £50,000; or
  • self-employed income that makes up less than 50% of total income.

In addition, you will have to declare that you intend to continue trading and are either currently actively trading, but are impacted by reduced demand due to Covid-19, or were previously trading but are now temporarily unable to do so due to Covid-19. The requirements to be actively trading and to be impacted by reduced demand are new and might indicate that HMRC is tightening up the rules.

The first two grants were based on average profits for the tax years 2016/17, 2017/18 and 2018/19. At this point, there is no indication if HMRC will allow profits for 2019/20 to be taken into consideration.

The Chancellor’s latest round of grants have faced widespread criticism offering less support than that available for employees who cannot work due to Covid-19, and, even with the increased level of 55%, the third grant is still less than 70% of the amount paid under the first grant.

If you need help with any support grants, please get in touch.

Photo by Markus Winkler on Unsplash                     

Winter Blues: Furlough Scheme Version 2.0

Written by Femi Ogunshakin on . Posted in COVID-19, Employment Law, Tax. No Comments on Winter Blues: Furlough Scheme Version 2.0

With the announcement of another national lockdown, the furlough scheme has been extended for a further month from 1 November until 2 December.

The extension of financial support under the Coronavirus Job Retention Scheme (CJRS) is the same as that given for August, with employees receiving 80% of their salary for hours not worked, capped at £2,500 per month. Employers have to cover National Insurance contributions (NICs) and workplace pension costs.

Two new job support schemes (JSS Closed and JSS Open) set out in the Chancellor’s Winter Economy Plan will now not take effect until the furlough scheme ends.

Differences

One important difference from the previous furlough scheme is that claims can be made for employees notified to HMRC with an RTI submission by 30 October. Otherwise, the extension is similar to the old scheme:

  • Employees recently made redundant can be rehired and furloughed if they were employed up to 23 September.
  • Businesses will be paid upfront to cover their salary costs.
  • Flexible furloughing is allowed, with the employer paying as normal for hours worked. For hours not worked, the employer can make up the employee’s full pay if they wish.
  • Employees can be on any type of contract.
  • Hours not worked will be calculated by reference to the usual hours worked by the employee.
  • The employer’s furlough claim must be for a minimum period of seven consecutive days.
  • Neither the employer nor the employee needs to have previously used the furlough scheme prior to 1 November.

When will the extension end?

There are conflicting reports of whether the lockdown will end, as planned, on 2 December, or whether it will be extended if the infection rate has not fallen sufficiently. Presumably, the furlough scheme will be extended in line with any lockdown extension, although the government is not making any promises.

There should, however, be no gap in eligibility for support between the furlough scheme ending and the new JSSs being introduced.

If you need help in assessing your situation, please let us know.

Photo by Aaron Burden on Unsplash

 

What Now, Autumn Budget?

Written by Femi Ogunshakin on . Posted in Budget, Business Rates, Capital Gains Tax, COVID-19, Tax. No Comments on What Now, Autumn Budget?

So, the Autumn Budget has been pushed into spring 2021, with tax rises on the cards. What should we expect in the Spring Budget?

With intense speculation around tax rises to pay for the raft of Covid-19 support measures, the first serious clue to a possible Autumn Budget delay emerged on 8 September, when the Office of Tax Simplification (OTS) slipped out a statement about its review of capital gains tax (CGT), which had been commissioned by the Chancellor in July. The statement announced the response deadline on the technical part of the OTS consultation would be deferred by four weeks, to 9 November. This was a surprising move as the OTS CGT report was expected to feed into the Autumn Budget.

Soon after, the Chancellor himself issued a brief written statement saying he had asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast ‘to be published in mid-to-late November’. The vagueness surrounding the timing was evident, as the OBR report is produced alongside the Budget and incorporates costings for Budget measures.

What had started to look inevitable was confirmed on 24 September when the Treasury cancelled the Autumn Budget. The Chancellor will still have a set piece event towards the end of the year; not only is there the OBR report to present, but Mr Sunak must also publish a Spending Review. The latter was also a victim of the general election and ought to have been produced a year ago to cover the three years from April 2020. Instead, the then Chancellor published a one-year Spending Round. Given the pandemic uncertainties, it is likely that Mr Sunak will take a similar short-term view, rather than introduce a multi-year plan.

The postponement of the Autumn Budget does not mean the spectre of tax increases has also evaporated. The level of government borrowing (£174 billion in the first five months of 2020/21) makes tax rises virtually inevitable. However, the Chancellor has afforded you more time to plan and take action in areas such as CGT and pension contributions.

Any thoughts?

Photo by Steve Johnson on Unsplash

HMRC Related Scamming On The Rise

Written by Femi Ogunshakin on . Posted in Tax. No Comments on HMRC Related Scamming On The Rise

Given the amount of Covid-19 financial assistance available, it comes as no surprise that there is an increase in HMRC-related scams this year.

What is worrying is that scammers have become more sophisticated; it is no longer a matter of  simply ignoring emails offering tax refunds. Recent scams have targeted the self-employed receiving income support grants, and, with two further payments to come, the scams are expected to continue.

So what are the scammers after?

The holy grail for a scammer is to obtain sufficient personal information to access and empty a bank account. For instance, a Covid-19 goodwill payment may be conditional on providing bank details so the funds can purportedly be paid direct into the account.

As banks strengthen security, the focus of scams will shift to identity theft, especially where passport details are involved. Other scams may call for the payment of upfront fees to help claim a tax refund.

Moving away from emails

As scam email detection improves, many scammers have switched to text messaging. Telephone numbers are spoofed to show HMRC as the sender, with links to very convincing HMRC-lookalike websites.

Automated voicemails, voice calls and messages sent via social media are other means of making initial contact.

Prevention

A bit of common sense will protect you from most scams, although the best ones can be quite convincing. Remember that HMRC will:

  • Always include your 10-digit tax reference on any correspondence;
  • Never use email, texts or social media to contact you regarding a tax refund; and
  • Never ask for bank account details or personal information.

If still in doubt, contact us or check the legitimacy of a proffered tax refund by logging on to your personal tax account.

HMRC have published examples of phishing emails and bogus contact here.

Photo by Bermix Studio on Unsplash

Pop Quiz on Capital Gains Tax

Written by Femi Ogunshakin on . Posted in Capital Gains Tax, Tax. No Comments on Pop Quiz on Capital Gains Tax

HMRC has published some interesting research into capital gains tax (CGT).

Here are three CGT questions for you to ponder:

  1. How many individuals made enough capital gains in 2018/19 to face a CGT bill?

The answer is just 256,000, according to the latest provisional figures from HMRC – 9,000 fewer than in the previous tax year. Viewed another way, that is less than 1% of all income taxpayers. However, over the 10 years since 2008/09 the number of CGT payers has nearly doubled.

Now you know that individual CGT payers numbered only about a quarter of a million, try the next question…

  1. How much tax did they have to pay in total?

The answer is £8,805m, which is over £3,400m more than was collected in inheritance tax (IHT) in 2018/19. IHT and CGT are both capital taxes, often levied on the same asset, albeit usually at different times. Yet CGT attracts much less criticism than IHT, which has been rated as the UK’s most-hated tax.

With the information on how many taxpayers and how much tax was collected, the third question might look easy…

  1. What proportion of that £8,805m was paid by the top 5,000 CGT payers?

The top 5,000 – about 2% of all CGT payers – contributed 54.4% (£4,789m) of all CGT paid. They all had gains of at least £2,000,000. Expand the band a little and 18,000 individuals, with gains of at least £500,000, accounted for just under three quarters of the CGT paid.

The answers to these three questions highlight two points which give pause for thought, one to the Chancellor and the other for investors:

  • As with some other personal taxes, the amount raised from a small number of the wealthiest individuals is a significant proportion of the total. This means that the results of increasing the tax rate(s) will heavily depend upon how those individuals react. If some of them decide not to realise their gains, the overall tax take could fall rather than rise.
  • The annual CGT exemption is £12,300 in 2020/21. Investment returns that are received as capital gains are usually taxed more lightly than those received as income. The relatively small number of taxpayers is a reminder of the current generosity of the exemption.

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