Furlough bonus

£1,000 bonus for keeping furloughed staff until January 2021 – Employers who have furloughed staff up until June 2020 will be given a £1,000 bonus per employee in January 2021 if the staff return to full time work until January 2021 without using the furlough scheme.

Apprentice incentives

The government will pay £2,000 for every apprentice employed and will pay an additional £1,500 if the employee is over 25 years of age. There is a maximum claim of 10 staff. £1,000 will be issued for traineeships.

Kickstart scheme

The government will pay 100% of the wages (national minimum wage) for each employee aged between 16 and 24. This applies for anyone who is currently unemployed and for up to 25 hours per week for a 6 month placement.

Stamp Duty Holiday

Stamp Duty Land Tax has been reduced temporarily to 0% for the first £500,000 (currently £125,000). This will save an average of £4,500 for people moving home, with some saving as much as £15,000. The scheme runs for the next 6 months.

Eat out to help out scheme

A 50% discount on Monday-Wednesday meals during August in restaurants (those that apply for the scheme) up to a maximum of £10.

5% VAT on qualifying hospitality

VAT currently charged at 20% on hot food, accommodation, and attractions has been temporarily reduced to 5% (starting 15 July 2020 and ending 12 January 2021)

Over the coming days and weeks, the government will release more information on these and how some of the measures will be applied in practice.

The post Economy rebuild measures announced appeared first on Assure Accountants.

Last updated 17th June 2020:

Changes to the Job Retention Scheme

Additions to Grants for the self-employed

Contents

• Coronavirus Job Retention Scheme
• Local authority discretionary grants
• Grants for the self-employed
• Bounce back loan scheme
• Ban on evictions for commercial tenants
• 3 month extension for filing business accounts
• Deferral of VAT liability
• Deferral of Income Tax payment
• Other Tax payments (HMRC Time to Pay)
• Support for businesses who are paying sick pay to employees
• Support for retail, hospitality and leisure businesses that pay business rates
• Cash grants for retail, hospitality and leisure businesses
• Support for nursery businesses that pay business rates
• Support for businesses that pay little or no business rates
• Coronavirus Business Interruption Loan Scheme
• Insurance

Coronavirus Job Retention Scheme

A generous initiative that will allow an employer to “furlough” a worker between 1 March 2020 and 31 October 2020 (but the 10th June was the last date at which you can furlough someone for the first time – more details below). This is designed to help employers pay up to 80% of the salary of those employees that would otherwise have been made redundant during and because of this crisis. This is subject to a cap of £2,500 per month per employee.

Who is eligible?

All UK businesses are eligible as are Company Directors including Limited Company Contractors

The HMRC guidance says:

“As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme….the board can decide that such directors should be furloughed. Where one or more individual directors’ furlough is so decided by the board, this should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.”

Furthermore, public sector clients are encouraged to furlough their contractor staff if need be:

“If Contingent Workers are unable to work due to COVID-19, for example, due to sickness, self-isolation, or the temporary closure of offices, they should be paid at 80% of their pay rate up to a maximum of £2,500 per month.”

Those working through an umbrella company are eligible to be furloughed through the scheme and should be agreed with the umbrella agency as the deemed employer (although you’d want to discuss with the end client too)

To be eligible, the staff member has to have been employed by the business on or before March 19th 2020.

What will you need to do?

Designate employees as “furloughed workers” and notify your employees of this change (note that as of the 10th June you can only extend the furlough of someone already previously furloughed – no new employees can be included)
Submit information to HMRC about the employees that have been furloughed and their earnings through an online portal.

How will the wages payment be calculated?

Wages for full or part time employees on a salary will be calculated based on 80% of the salary in their last pay period prior to 19th March 2020.

When will the scheme end?

The scheme will close to anyone who hasn’t been furloughed for 3 weeks by 30 June, so you will only be able to claim for employees after that if they have been furloughed for a full three-week period at any time before the end of June. So a period of furlough would have to have started on or before 10 June. You will then have until 31 July to make a claim for any periods of furlough up until 30 June – this applies to both employees furloughed for the first time and those you have previously furloughed and claimed for.

For employees previously furloughed (for at least 3 weeks prior to 30 June), the scheme is open until October 31 although the rules of the scheme are changing from 1 July.

New rules from 1 July

• For June and July, the government will pay 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
• For August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
• For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
• For October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.

Local authority discretionary grants scheme

In an effort to plug a gap, the government announced in Late May that discretionary grant funds will be made available via local councils. Small and micro businesses with fixed property costs that are not eligible for the Small Business Grant Fund or the Retail, Hospitality and Leisure Grant Fund may be eligible for this Discretionary Grants Scheme.

Who is eligible?

You may be eligible if your business:

• is based in England
• has fewer than 50 employees
• has fixed building costs such as rent
• was trading on 11 March 2020
• has been adversely impacted by the coronavirus

Local councils have discretion about how to prioritise the funding so you’ll have to check with your council for details of their scheme.

What will you need to do?

Visit your local council’s website to find out how to apply. You can find the website for your local council here.

Grants for the self-employed

Self-employed workers are apply to for up to 2 taxable grants to help them cope with the financial impact of coronavirus.

Grant 1 applications opened on 13 May and close on 13 July and cover 3 months’ worth of profit at a rate of 80% of average monthly trading profits or £2,500, whichever is lowest

Grant 2 will cover 3 months’ worth of profit at a rate of 70% of average monthly trading profits and capped at £6,570. More details on application dates will  be available later in June.

Who is eligible?

To be eligible you must have:

• filed a tax return for the year ended 5 April 2019
• Had trading profits of less than £50,000
• Made most of your income through self employment

What will you need to do?

• If eligible for grant 1 you should have been invited during May to apply by HMRC
• You’ll have been given a date when you should complete a simple online form – you will need to complete this by July 13 in order to be considered for grant 1
• Details on applications for grant 2 are due later in June
• Self employed can access a business interruption loan in the mean time

Bounce-back loan scheme

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year. The length of the loan is 6 years, but you can repay early without paying a fee.

Who is eligible?

You can apply for a loan if your business:

• is based in the UK
• was established before 1 March 2020
• has been adversely impacted by the coronavirus

Businesses from any sector can apply, except banks, insurers and reinsurers, public-sector bodies, state-funded primary and secondary schools.

You cannot apply if you’re already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS), Coronavirus Large Business Interruption Loan Scheme (CLBILS) or COVID-19 Corporate Financing Facility. If you’ve already received a loan of up to £50,000 under one of these schemes you can transfer it into the Bounce Back Loan scheme.

What will you need to do?

There are 11 lenders participating in the scheme including many of the main retail banks. You should approach a suitable lender yourself via the lender’s website.

The lender will ask you to fill in a short online application form and self-declare that you are eligible.

The lender will decide whether to offer you a loan or another type of finance and you’ll be responsible for repaying 100% of the amount borrowed.

Ban on evictions for commercial tenants

Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction. These measures will mean no business will be forced out of their premises if they miss a payment in April, May and June.

Who is eligible?

All UK businesses renting commercial premises are eligible

What will you need to do?

Discuss with your landlord initially to see if a voluntary arrangement involving rent deferral

In any event, there now exists a legislative backstop to prevent evictions due to lack rent payment

3 month extension for filing business accounts

From 25 March 2020, businesses are able to apply for a 3-month extension for filing their accounts.

Who is eligible?

All UK businesses are eligible

What will you need to do?

• Apply online here – it will take around 15 minutes
• Those citing issues around COVID-19 will be automatically and immediately granted an extension

Deferral of VAT liability

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you can defer the payment until March 2021.

HMRC will not charge interest or penalties on any amount deferred.

Who is eligible?
All UK VAT registered businesses are eligible to defer:

• quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
• payments on account due between 20 March 2020 and 30 June 2020
• annual accounting advance payments due between 20 March 2020 and 30 June 2020

What will you need to do?

• This is an automatic offer with nothing for you to do in order to claim.
• Direct Debits – Cancel your direct debit with the bank
• You will still be required to file your VAT return
• You will need to pay by March 2021
• VAT refunds and reclaims will still be paid as usual

Deferral of Income Tax payment

A measure to help self employed defer a Self Assessment payment on account from July 2020 to January 2021.

Who is eligible?

All self assessment payers can defer these payments, including directors of ltd companies such as contractors.

What will you need to do?

This is an automatic offer with nothing you need to do to take advantage of this. Just don’t make the payment if you are self employed.No penalties of interest for late payment will be charged in the deferral period.

Other Tax payments (HMRC Time to Pay)

This is a scale up of an existing scheme (Time to Pay) for businesses and individuals in financial distress. The help offered here is available on a case by case basis and tailored to individual circumstances.
Who is eligible?

Anybody who pays tax to the UK Government and has outstanding tax bills.

What will you need to do?

• • • • If you have missed a tax payment or are worried you will miss your next one due to Covid-19 then call HMRC’s dedicated helpline: 0800 0159 559
      • It is always better to talk to HMRC rather than ignoring a tax debt

Support for businesses who are paying sick pay to employees

In the past SSP (Statutory Sick Pay) has not been recoverable by an employer from UK Government. It was announced that temporary legislation will be put in place to allow employers to reclaim SSP (£94.25 per week) for the first 2 weeks for employees off work due to Covid-19. SSP will be paid from day 1 rather than day 4 if due to Covid-19 and applies retrospectively from 13 March 2020

Who is eligible?

UK based employers with fewer than 250 employees at 28 February 2020 can claim for the first 2 weeks of employee sickness due to Coronavirus. This includes for quarantined individuals.

Directors of ltd companies with less than 250 employees can pay themselves two weeks SSP (£94.25 per week) if they earn at least £118 per week.

The self employed are not eligible for SSP but can claim Universal Credit or Employment and Support Allowance payable from day 1 of sickness rather than day 8. The earnings floor has been removed.

What will you need to do?

The online service you’ll use to reclaim SSP is not available yet. HMRC will announce when the service is available and this guidance will be updated. Meantime, employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 Online.

Support for retail, hospitality and leisure businesses that pay business rates

A business rates holiday for all businesses in the retail, hospitality and leisure industry. So no business rates to pay for April 2020 to March 2021.

Who is eligible?

A business based in England that is in the retail, hospitality and/or leisure industry. This includes shops, restaurants, cafes, drinking establishments, cinemas and live music venues, for assembly and leisure and hotels, guest & boarding premises and self-catered accommodation.

What will you need to do?

• • • • This will happen automatically and eligible businesses will have their bills reduced to zero.

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in that sector with cash grants of up to £25,000 per property. Businesses with a rateable value of under £15,000 will receive a £10,000 grant. Businesses with a rateable value of £15,001 to £51,000 a grant of £25,000 will be received.

Who is eligible?

A business based in England that is in the retail, hospitality and/or leisure industry. This includes shops, restaurants, cafes, drinking establishments, cinemas and live music venues, for assembly and leisure and hotels, guest & boarding premises and self-catered accommodation.

What will you need to do?

You do not need to do anything. Your local authority will write to you if you are eligible.

Support for nursery businesses that pay business rates

A business rates holiday will be introduced for all nursery businesses. So no businesses rates payable for April 2020 to March 2021.

Who is eligible?

English based nurseries that are on Ofsted Early Years Register.

What will you need to do?

This will be an automatic reduction in business rates for eligible businesses and you should receive a new bill from your local authority.

Support for businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

Who is eligible?

A business based in England that occupies property and already receives small business rate relief or rural rate relief.

What will you need to do?

You do not need to do anything. Your local authority will write to you if you are eligible for this grant.

Coronavirus Business Interruption Loan Scheme

Support primarily for small and medium-sized businesses to access bank lending and overdrafts.

The 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 £5 million in value. The maximum length of the facility depends on the type of finance you apply for and will be up to 3 years for overdrafts and invoice finance facilities and up to 6 years, for loans and asset finance facilities.

Who is eligible?

You are eligible for the scheme if your business:

• • • • is based in the UK
      • has an annual turnover of up to £45 million

You need to show that your business:

• • • • would be viable were it not for the pandemic
      • has been adversely impacted by the coronavirus

What will you need to do?

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website.

There are over 50 lenders participating in the scheme including all the main retail banks. You should approach a suitable lender yourself via the lender’s website.

You’ll need to tell the lender:

• • • • the amount you’d like to borrow
      • what the money is for
      • how long you’d like to pay it back

Depending on the lender and the amount requested you may be asked for some or all of the following supporting documents:

• • • • management accounts
      • cash flow forecast
      • business plan
      • historic accounts
      • details of assets

Insurance

Most businesses are unlikely to be covered but businesses that do have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry has confirmed that advice to avoid pubs, theatres etc is sufficient to make a claim as long as all other terms and conditions are met.

Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.

The post Coronavirus business support measures explained appeared first on Assure Accountants.

Covid-19 – support for businesses

The government have announced in the past 24 hours measures to ease disruption to businesses around the country.

The package of temporary measures announced are:

• A new Bank of England lending facility that extends the business interruption scheme mentioned in the budget, allowing businesses to borrow up to £5million interest free for 6 months. This should be available from next week and the support is being given directly to lenders
• Cash grants of up to £25,000 for retail, hospitality and leisure businesses with a rateable value below £51,000. To claim this, you would need to contact your local authority
• A business rates holiday for retail, hospitality and leisure businesses that will last for 12 months. To claim this, you would need to contact your local authority
• £10,000 cash grants for small businesses (this is an extension of the £3,000 announced in the budget). To claim this, you would need to contact your local authority
• The government have announced that they are happy to discuss time to pay arrangements where businesses can’t pay their taxes. The government will be assessing support on a case-by-case basis and ask that you call their dedicated helpline for COVID-19 on 0800 0159 559
• Statutory sick pay for companies with under 250 employees will be covered by the government (2 weeks SSP per employee who has been off work because of COVID-19). Employers should keep records of staff absences and report these to us together with their monthly payroll.

For more information on the measures announced please see here: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

The post Dealing with COVID-19 disruption appeared first on Assure Accountants.

Chancellor Rishi Sunak delivered his first Budget, and the first since the UK’s departure from the European Union, against the backdrop of the coronavirus outbreak.

The Chancellor announced a £30 billion stimulus package to support the economy through coronavirus contagion and pledged to give the NHS whatever extra resources are needed to cope.

Following the news that the Bank of England had reduced interest rates to 0.25%, in an emergency response to the coronavirus, Mr Sunak put further measures in place.

These include Statutory Sick Pay (SSP) for employees who are advised to self-isolate, even if they are displaying no symptoms. The government will also meet some SSP costs for businesses.

In addition, business rates for shops, cinemas, restaurants and music venues in England with a rateable value below £51,000 have been suspended for a year. This tax holiday will be worth up to £25,000 to thousands of businesses across the retail, leisure and hospitality sectors.

Citing the latest economic forecasts from the Office for Budget Responsibility, Mr Sunak said the economy is predicted to grow by 1.1% this year. However, the GDP forecast does not fully account for the impact of coronavirus.

Turning to duties, tax on beer, wine, cider and spirits have been frozen while tobacco duty will continue to rise by inflation plus 2%. Fuel duty will also remain frozen, for a tenth consecutive year, despite widespread speculation that it would rise. However, Mr Sunak introduced other green measures including a new tax on plastic packaging and freezing the climate change levy on electricity while raising it on gas. The Chancellor also promised to spend £500 million to support the rollout of new rapid charging hubs for electric cars.

In addition, Mr Sunak resisted calls to end Entrepreneurs’ Relief, although the lifetime allowance will be reduced from £10 million to £1 million. The Chancellor will abolish the so-called ‘tampon tax’, reducing the VAT rate on sanitary products to zero from 1 January 2021, as well as scrapping VAT on digital e-publications, including e-books, e-newspapers, e-magazines and academic e-journals, from 1 December 2020.

The Budget confirmed increased spending on infrastructure projects including broadband, railway and roads. £5 billion was promised to get gigabit-capable broadband into the hardest to reach places and £510 million of new investment into the shared rural mobile phone network.

Budget Highlights

• A reduction in the Entrepreneurs’ Relief lifetime limit
• An increase in the Employment Allowance
• An increase in the rate of Structures and Buildings Allowance
• An increase and extension of business rates discounts
• Extended access to Statutory Sick Pay due to coronavirus
• An increase to the National Insurance thresholds
• Fuel duty to be frozen for the 10th consecutive year

Personal tax

Pensions changes

The pensions annual allowance (currently £40,000) is the maximum amount of tax-relieved pension savings that can be accrued in a year. However, for those on higher incomes, the annual allowance is reduced by £1 for every £2 that an individual’s ‘adjusted income’ exceeds £150,000, to a minimum annual allowance of £10,000. Adjusted income is broadly net income before tax with the addition of any pension accrual. The taper potentially applies to an individual with income before tax, without the addition of the pension accrual, above £110,000. This is known as the ‘threshold income’.

Adjusted income and threshold income will each be raised by £90,000 for 2020/21.  The threshold income will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance. The annual allowance will begin to taper down for individuals who also have an adjusted income above £240,000.

There is also a change to the minimum annual allowance. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from 6 April 2020. This reduction will only affect individuals with adjusted income over £300,000.

Support during the coronavirus

The Prime Minister previously announced that the forthcoming COVID-19 Bill will temporarily allow Statutory Sick Pay (SSP) to be paid from the first day of sickness absence, rather than the fourth day, for people who have COVID-19 or have to self-isolate in accordance with government guidelines. The Budget sets out a further package to widen the scope of SSP and make it more accessible. The government will temporarily extend SSP to cover:

• individuals who are unable to work because they have been advised to self-isolate
• people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate.

Support for those ineligible for SSP

The government recognises that self-employed people and employees earning below the National Insurance Lower Earnings Limit are not entitled to SSP and will offer financial support to these individuals through a ‘new style’ Employment and Support Allowance and Universal Credit.

Child Trust Funds (CTFs)

Junior ISAs and its precursor CTFs allow tax free savings to be made for children under 18. There is no access to the investments until the child is 18. CTF accounts will start to mature in September 2020 when the first children reach 18. Without regulatory change the investments would lose their tax advantaged status. CTF and ISA regulations have therefore recently been made which:

• make sure that investments in CTF accounts retain their tax advantaged status post maturity, pending instructions from the account holder
• allow savings transferred from a matured CTF to be disregarded for the annual ISA subscription limit.

Junior ISA and CTF annual subscription limits

The annual subscription limit for Junior ISAs and CTFs will be increased from £4,368 to £9,000 for 2020/21.

Income tax and personal savings

The Chancellor announced the following income tax rates and allowances.

Income tax rates and bands

Income tax rates in Scotland and Wales on income other than savings and dividend income have been devolved.

Savings income

A starting rate for savings band of £5,000 at 0% may be available unless taxable non-savings income exceeds the starting rate band.

Dividend income

Personal allowances

Scottish income tax rates and bands

Savings and dividend income are taxed using UK rates and bands.

Welsh income tax rates

Although income tax for Wales has been devolved, Welsh resident taxpayers continue to pay the same overall rates as taxpayers in England and Northern Ireland.

Employment taxes

National Insurance thresholds

The government has recently announced National Insurance thresholds for 2020/21. Most thresholds will rise with inflation. Two thresholds, however, will rise by 10% from £8,632 to £9,500:

• the primary threshold – which sets the level at which employees start to pay Class 1 National Insurance contributions (NICs)
• the lower profits limit – which sets the level at which the self-employed start to pay Class 4 NICs.

The upper thresholds which apply to these two classes of NICs remain at £50,000.

Off-payroll working in the private sector

The changes to the off-payroll working rules (commonly known as IR35), which came into effect in April 2017 for the public sector, will be extended to the private sector from April 2020. Draft legislation has been issued. The new rules apply to payments made for services provided on or after 6 April 2020.

The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.

Only medium and large businesses will be subject to the 2020 rules, so small businesses will not need to determine the status of the off-payroll workers they engage. A small company is one which meets two of these criteria: its annual turnover is not more than £10.2 million: it has not more than £5.1 million on its balance sheet: it has 50 or fewer employees. For unincorporated organisations it is only the annual turnover test that applies.

Review

In January 2020, the government announced a review of the implementation of the April 2020 reform, to address concerns from affected businesses and individuals. The government has confirmed the changes will go ahead but:

• businesses will not have to pay penalties for errors relating to off-payroll working in the first year, except in cases of deliberate non-compliance
• there will be a legal obligation on clients to respond to a request for information about their size from the worker or the fee-payer.

Employer provided cars

The scale of charges for calculating the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.

For 2019/20 the rates increased by 3% from the rates applying for 2018/19.

The government announced in Budget 2017 that CO2 emissions for cars registered from April 2020 will be based on the Worldwide Harmonised Light Vehicles Test Procedure (WLTP). Draft legislation has been issued to amend the previously planned benefit percentages for 2020/21 through to 2022/23:

• All zero emission cars will attract a reduced percentage of 0% in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23.
• For cars registered before 6 April 2020, the current test procedure will continue to apply and there are no further changes to percentages previously set for 2020/21. These rates will be frozen at the 2020/21 level for 2021/22 and 2022/23.
• For cars first registered from 6 April 2020 most rates will reduce by 2% in 2020/21 before returning to planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23.

Employment Allowance

The Employment Allowance provides businesses and charities with relief from their employer NICs bill. Regulations have been issued to restrict the Employment Allowance, from 6 April 2020, to those employers whose employer NICs bill was below £100,000 in the previous tax year. Employers who are connected to other employers (such as companies within a group) will need to add together all of their employer Class 1 NICs liabilities incurred in the tax year prior to the year of claim to determine eligibility.

The maximum Employment Allowance will be increased from £3,000 to £4,000 with effect from 6 April 2020.

From 6 April 2020 the Employment Allowance will operate as de minimis State aid. This means it will count towards the total aid a business is entitled to under the relevant de minimis State aid cap.

Loan Charge review

The Loan Charge tackles disguised remuneration tax avoidance schemes. These are tax arrangements that seek to avoid income tax and NICs by paying income to individuals in the form of loans, usually via an offshore trust, with no expectation that the loans will ever be repaid. The charge applies to any loans made through disguised remuneration schemes after 6 April 1999, which had not been repaid by 5 April 2019.

Draft legislation has been issued to amend the scope of the Loan Charge:

• It will now only apply to outstanding balances of disguised remuneration loans made between 9 December 2010 and 5 April 2019 inclusive.
• It will not apply to loans made in tax years before 2016/17 where a reasonable disclosure of the use of a disguised remuneration tax avoidance scheme was made within the relevant tax return or associated documents where appropriate, and HMRC failed to take any action (for example by opening an enquiry).
• Those affected by the Loan Charge will be able to elect to split their loan balance over three consecutive years 2018/19 to 2020/21 (rather than the full charge arising in 2018/19).
• The date by which the additional information form must be returned to HMRC will move from 1 October 2019 to 1 October 2020. The form requires taxpayers to provide full information to HMRC relating to any outstanding disguised remuneration loans for which they will need to make tax payments.

National insurance

2020/21 Class 1 (employed) rates

Entitlement to contribution-based benefits for employees retained for earnings between £120 and £183 per week.
The employer rate is 0% for employees under 21 and apprentices under 25 on earnings up to £962 per week.

Minimum wage

Increases in the National Minimum Wage and National Living Wage rates now occur in April each year.

Apprentice rates apply to those under 19, or 19 or over and in the first year of their apprenticeship. National Living Wage applies to those aged 25 and over.

Tax and Travel

Mileage rates

Changes to the HMRC business mileage rates are announced from time to time. The fuel only advisory rates below relate to company cars only and apply from 1 March 2020.

For those using their own vehicle the following mileage allowance payments apply.

Car benefits

Business tax

Corporation tax rates

Corporation tax rates have already been enacted for periods up to 31 March 2021.

The main rate of corporation tax is 19%. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor has announced the rate will remain at 19%.

Capital Allowances: Structures and Buildings Allowance

The annual rate of capital allowances available for qualifying investments to construct new, or renovate old, non-residential structures and buildings will increase from 2% to 3%. The change will take effect from 1 April 2020 for corporation tax and 6 April 2020 for income tax.

Enhanced Capital Allowances in Enterprise Zones

The government has announced the 100% first year allowance for investment in new plant and machinery within designated assisted areas within Enterprise Zones will remain available for expenditure incurred in relation to all areas, whenever designated, until at least 31 March 2021.

First year allowances for business cars from April 2021

The government has announced an extension to 100% first year allowances for zero-emission cars, zero-emission goods vehicles and equipment for gas refuelling stations by four years from April 2021. CO2 emission thresholds will also be amended from April 2021. These determine the rate of capital allowances available through which the capital expenditure for business cars can be written down. The thresholds will be reduced from 50g/km to 0g/km for the purpose of the first year allowances for low CO2 emission cars and from 110g/km to 50g/km for the purpose of WDAs for business cars.

Research and Development (R&D) tax relief

The rate of tax credit for companies falling within the Research and Development Expenditure Credit (RDEC) scheme will rise by 1% to 13% from 1 April 2020. This relief is given as an above the line credit for companies undertaking qualifying R&D.

Budget 2018 announced that, from 1 April 2020, the amount of payable R&D tax credit that a qualifying loss-making company can receive in any tax year will be restricted to three times the company’s total PAYE and NICs liability for that year. The government has now announced the implementation of the restriction will be delayed to 1 April 2021.

Corporation tax loss relief

Draft legislation has been issued to extend the rules that potentially limit the use of brought forward losses to include brought forward capital losses. Companies (and corporate groups) will continue to have a £5 million ‘deductions allowance’ before restrictions apply.

The changes will have effect where carried forward capital losses are used to offset chargeable gains accruing from 1 April 2020.

Intangible fixed assets

The government has announced an extension to corporation tax relief for intangible fixed assets. All pre-Finance Act 2002 intangible assets acquired from 1 July 2020 will come within the intangible fixed asset regime, subject to certain transitional provisions.

Digital Services Tax

The government has confirmed a new 2% tax on the revenues of search engines, social media platforms and online marketplaces which derive value from UK users. The tax only applies when the group’s worldwide revenues from these digital activities are more than £500 million and more than £25 million of these revenues are derived from UK users.

The tax will apply from 1 April 2020.

Freeports

The government is consulting on proposals to create up to ten freeports across the UK which would have different customs rules to those which apply in the rest of the UK.

The government is considering a UK freeport model which would include multiple customs zones located within or away from a port, as well as a type of special economic zone (SEZ) designated over or around the customs zones. The government intends to work with the devolved administrations to develop proposals to allow freeports to be created in Scotland, Wales and Northern Ireland, in addition to those in England.

The proposals include the following customs and tariff benefits for businesses bringing goods into a freeport site:

• duty suspension, with no tariffs, import VAT or excise to be paid on goods brought into a freeport from overseas until they leave the freeport and enter the UK’s domestic market
• duty inversion, if the duty on a finished product is lower than that on the component parts, allowing businesses to import components duty free, manufacture the final product in the freeport, and then pay the duty at the rate of the finished product when it enters the UK’s domestic market
• duty exemption for re-exports, allowing businesses to import components duty free, manufacture the final product in the freeport and pay no tariffs when the final product is re-exported
• simplified customs procedures for businesses accessing freeports.

Business rates

Business rates have been devolved to Scotland, Northern Ireland and Wales. 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 for 2021.

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 for pubs will be increased to £5,000.

The government is launching a fundamental review of business rates to report in the autumn. A call for evidence will be published in the spring.

Time to Pay

The government will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs.

HMRC has set up a dedicated COVID-19 helpline to help those in need, and they may be able to agree a bespoke Time to Pay arrangement. Time to Pay gives businesses a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back.

Statutory Sick Pay

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme include:

• the refund will be limited to two weeks per employee
• employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences, but should not require employees to provide a GP fit note
• the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force.

Capital taxes

Capital gains tax (CGT) rates

The current rates of CGT are 10%, to the extent that any income tax basic rate band is available, and 20% thereafter. Higher rates of 18% and 28% apply for certain gains; mainly chargeable gains on residential properties with the exception of any element that qualifies for Private Residence Relief.

There are two specific types of disposal which potentially qualify for a 10% rate up to a lifetime limit for each individual:

• Entrepreneurs’ Relief (ER). This is targeted at directors and employees of companies who own at least 5% of the ordinary share capital in the company, provided other minimum criteria are also met, and the owners of unincorporated businesses.
• Investors’ Relief. The main beneficiaries of this relief are external investors in unquoted trading companies who have newly-subscribed shares.

Investors’ Relief has a lifetime limit of £10 million, however the lifetime limit position for ER has been changed in the Budget and is considered further below.

CGT annual exemption

The CGT annual exemption is £12,000 for 2019/20 and £12,300 for 2020/21.

Entrepreneurs’ Relief (ER)

The lifetime limit is reduced from £10 million to £1 million for ER qualifying disposals made on or after 11 March 2020.

There are special provisions for disposals entered into before 11 March 2020 that have not been completed.

Private Residence Relief (PRR)

Draft legislation has been issued to make changes to the PRR regime from 6 April 2020. For properties that have not been occupied throughout the period of ownership, available deductions for capital gains tax purposes will be amended as follows:

• the final period exemption will be reduced from 18 months to nine months (there are no changes to the 36 months that are available to disabled persons or those in a care home)
• lettings relief will be reformed so that it only applies in those circumstances where the owner of the property is in shared occupancy with a tenant.

Payments on account and 30 day returns

Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated CGT liability. For disposals made on or after 6 April 2020:

• a tax return is required if there is a disposal of UK land on which a residential property gain accrues
• CGT is required to be computed on the reported gain in the tax return.

The return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.

The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by PRR.

Inheritance tax (IHT) nil rate bands

The nil rate band has remained at £325,000 since April 2009 and is set to remain frozen at this amount until April 2021. An additional nil rate band, called the ‘residence nil rate band’ (RNRB), continues to be phased in. For deaths in 2019/20 it is £150,000 rising to £175,000 for deaths in 2020/21. Thereafter it will rise in line with CPI.

Stamp Duty Land Tax (SDLT) surcharge

A SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland is to go ahead. The 2% surcharge is to take effect from 1 April 2021. Where contracts are exchanged before 11 March 2020 but complete or are substantially performed after 1 April 2021, transitional rules may apply.

Other matters

VAT

E-publications

The government will introduce legislation to apply a zero rate of VAT to e-publications from 1 December 2020, to make it clear that e-books, e-newspapers, e-magazines and academic e-journals are entitled to the same VAT treatment as their physical counterparts.

Tampon tax

From 1 January 2021 the government will apply a zero rate of VAT to women’s sanitary products.

Postponed accounting

From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including those from the EU.

Plastic Packaging Tax

This will be a new tax that applies to plastic packaging produced in or imported into the UK that does not contain at least 30% recycled plastic. The tax rate will be £200 per tonne of non-compliant plastic packaging. A consultation on the design and implementation of the tax has been issued and the tax is to take effect from April 2022.

Duties

Alcohol and tobacco duties

The duty rates remain frozen for beer, spirits, wine and made-wine, still and sparkling cider and perry.

The duty rate on all tobacco products will continue to increase by 2% above RPI inflation. The duty rate on hand-rolling tobacco will increase by a further 4%. These rates will have effect from 11 March 2020.

Fuel duty

Fuel duty will be frozen for the 2020/21 tax year.

What They Said…

‘This is the Budget of a government that gets things done.’

Rishi Sunak, Chancellor of the Exchequer

‘The reality is that this is a Budget that is an admission of failure – an admission that austerity has been a failed experiment.’

Jeremy Corbyn, Leader of the Labour Party 

‘In deeply challenging times, the Chancellor has worked against the clock to deliver two Budgets in one: a first for national resilience today and a second for economic ambition tomorrow.’

Dame Carolyn Fairbairn, Director General of the Confederation of British Industry

‘This is a pro-small business Budget, which has delivered a high streets bonus, a series of Conservative manifesto promises to small businesses, and emergency steps to support small firms through the coronavirus outbreak.’

Mike Cherry, National Chairman of the Federation of Small Businesses

‘The Budget has addressed the immediate challenges facing the economy, but the Chancellor will have to do more to support businesses as they navigate changes to trading arrangements and the end of the Brexit transition period.’

Dr Adam Marshall, Director General of the British Chambers of Commerce 

2020/21 Tax Calendar

This Budget Report was prepared immediately after the Chancellor’s Budget Statement based on official press releases and supporting documentation. The Budget proposals are subject to amendment before the Finance Act receives Royal Assent. This Report is for guidance only, and professional advice should be obtained before acting on any information contained herein. No responsibility can be accepted by the publishers or the distributors for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.

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• Corporation tax remaining at 19% – This was announced months ago but the government officially confirmed this today
• The sales on online books and newspapers will be zero rated for VAT purposes
• Abolition of tampon tax – Woman’s sanitary products will be zero rated for VAT purposes from 1 January 2021
• The government is setting up a working group to assess whether financial services should be vatable
• The government will continue engaging with stakeholders to discuss a simplified process to the partial exemption VAT treatment and the capital goods scheme
• There will be no increase in duties for many items including fuel and alcohol, but tobacco will rise from between 2% and 6%
• The Domestic Reverse charge for building and construction services has been postponed to 1 October 2020 as announced earlier in the year
• The government is intending to bring in £4.4 billion of additional tax revenue from compliance checks and expanding debt collection capabilities
• Zero emission vans will no longer be subject to the van benefit charge
• Company car tax rates will reduce for cars registered from 6 April 2020 by 2%, increasing by 1% each year until 2022/2023, at which point they will be frozen until 2024/2025.
• The expensive car supplement will no longer apply to zero emission cars
• The government will introduce a 2% stamp duty land tax (SDLT) surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.
• Entrepreneurs relief – The £10 million lifetime allowance will reduce to £1million
• Research and Development Credit will increase from 12% to 13% from 1 April 2020
• The employment allowance will increase from £3,000 to £4,000, saving many companies £1,000 in employment taxes
• The government has announced various discounts for small business rates
• The rules regarding the tapering of pension relief are changing and the threshold income will be an increased to £200,000 per annum (adjusted income to £240,000). These changes are effective from April 2020
• The government has announced an increase in the flat rate deduction for homeworking and this will be increasing from £4 per week to £6 per week, effective April 2020.
• The National Insurance threshold (currently £8632) is increasing to £9,500 per year, and the government is working towards increasing this to £12,500. The £9,500 threshold would mean a benefit to employees of £104 per year and £78 for those that are self employed.
• Small firms can look at accessing business interruption loans of up to £1.2million
• Taxpayers effected by COVID-19 will be able to negotiate better time to pay arrangements with HMRC
• Announcement of a relaxation in the rules of Statutory Sick Pay (SSP) with the COVID-19 Virus.

In summary, in a budget where there are potentially tough times ahead with the COVID-19 virus, there are many things to be hopeful about for both individuals and business owners.  If you have any questions about the above, please feel free to contact us and we can look at how we can help you.

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Lettings relief

This useful relief can be claimed by individuals who have let out their properties, which are or have been at some point in the past their main residence.  Lettings relief currently provides up to £40,000 of relief (£80,000 for a couple).

The relief is changing from April 2020 and will only be available to those who are in shared occupancy with a tenant.  This change will not affect owner-occupiers, as they are occupying the property with their tenant or landlords who have never lived in the property they are renting out, as this relief would never have been available to them in the first place.

Final period exemption

Currently individuals do not have to pay capital gains tax on gains made in the final 18 months of ownership, even if they are not an owner-occupier during that period, as long as the property has been their main residence at some point.

However, a long exemption period means that more relief can accrue on two properties (an unsold one and a new one) at the same time.  HMRC state that this relief is ‘out of line with the intention of the exemption, which is meant to protect those who move to a new main residence but are unable to sell their original home immediately’.

Therefore, from April 2020, the exemption will be reduced to 9 months from the previous 18 months, which in turn was reduced from 36 months from April 2014.  According to HMRC 9 months is still twice the length of an average property transaction, it does make you wonder where HMRC are going with this exemption.  For those in or moving into care homes, and people with a disability, 36 months of exemption will not change.

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Receiving a letter from the worldwide disclosure facility

So what should you do if you receive one of these letters? Firstly if you receive one do not panic, it could be that you are already correctly declaring all of your income. In these instances, simply sign HMRC’s declaration included in their letter, which states that your income is “correct and complete to the best of your knowledge and belief”. In these circumstances, it may be worth your time sending a covering letter explaining your foreign income and how you have been declaring this.

The area of tax surrounding domicile, remittance and residency status can be complicated and there are many instances of individuals receiving money from foreign sources, which are not being declared in the UK. Usually there is no deliberate intention to not inform HMRC, just a lack of understanding on what does and what does not need to be declared in the UK.

Prompted disclosures

If you are reading this blog and you have yet to receive a letter from HMRC but are suddenly very aware that there may be income you should have been declaring then you are in luck. HMRC will usually charge lower penalties than those they charge if you are ‘prompted’ by one of their letters. For ‘prompted’ disclosures, the penalties could be up to 100% of the unpaid liabilities, or up to 200% for offshore-related income.

Whether you have or have not received this letter, if you are unsure of your position I would recommend talking to a tax adviser. Assure Accountants can certainly help you understand your tax position and what, if any action needs to be taken.

If income does need to be declared a disclosure will need to be made via HMRC’s worldwide disclosure facility and Assure Accountants can do this for you on your behalf, working with HMRC to get the best penalty outcome for you.

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Unfortunately, these attacks are increasing in sophistication and there has been a sizeable increase in activity over recent months, from very convincing emails to calls from people pretending to be from HMRC.

How can you identify an HMRC phishing scam?

Suspicious threatening phone calls

I thought it would be worth emphasising to you that HMRC do not phone up requesting payment for taxes due on the spot, HMRC will not hound you with multiple calls (they don’t have the resources!), they would not call from multiple numbers. They do not threaten people with arrest warrants etc…

Asking for personal details

If you find yourself on the phone to HMRC and the caller is threatening action or requesting immediate payment, firstly do not give them any information. My guidance would be to politely advise the caller that you have no way of verifying who they are. To advise them that you will get your accountant to look in to their claims, then hang up.

Report the number to HMRC

Try to get the number you are being called on because if they are a scammer we can forward this number on to HMRC phishing department.

Protect yourself with Assure Accountants

We will, on your request, make sure that you have no outstanding tax by contacting HMRC on their verified numbers and of course let you know the outcome.

The above action should minimise any risk you have from these fraudsters.

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Over the past few years HMRC have been tinkering not only with what percentage of mortgage interest is allowable as a direct expense but also with how principle private residency and lettings relief are calculated. It would be hard to argue with landlords who expressed the opinion that they are being somewhat put upon at the moment.

What can I do as a landlord of a buy-to-let property?

One crumb of comfort I offer to clients who manage their affairs in such a way as to remain within the basic rate tax bracket is the following; ‘the amount of tax you would be due to pay doesn’t change as deducting mortgage interest from pre-tax profits and offering relief at the basic rate on post tax profits will give the same effect.’ It is only when a client is a higher rate tax payer that they will feel the pinch… except, this isn’t exactly the whole picture.

For clients who have the ability to moderate their annual income (I am thinking about business owners in the main), the above crumb of comfort has to be caveated. With less mortgage interest allowable as a direct expense, more of the rental income is included as income in the tax calculation. Even if relief is given at 20% later in the calculation, the effect of this additional rental income is to reduce what other income can be taken within the basic rate tax band. To illustrate my point please see below.

The above example is slightly artificial but does get the point across. There would be relief in the second example of £10,000 at 20%, but this does nothing to stop the basic rate tax band being diminished.

Review your rental income

I would urge anyone in the above situation, specifically business owners who try to remain within the basic rate tax band, to review exactly what income is expected from rental property in the current tax year. The more rental income shown in the tax calculation will mean less dividends you can take before hitting the higher rate.

The issues do not stop there however. For those higher rate tax payers who have reluctantly accepted their fate there could be an additional sting, the additional income from rental can affect Child Benefit claims and Personal Allowance abatement to name a couple.

There are some solutions to the above issues depending on your aspirations as a property owner. One would be to incorporate a second business just for property; within a limited company structure, mortgage interest is still a 100% deduction. With a limited company structure you can moderate what income you taken out of the company.

Still not sure? Speak to an adviser

As with everything, there are plusses and minuses to the above approach and very much depends on what your long terms plans are. If you are unsure about how these recent changes will affect you and the best way to move forward, give us a call.

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You may have seen in the news recently that Hargreaves Lansdown has lost in the Upper Tribunal an appeal made by HMRC against an earlier decision in Hargreaves’ favour. If you invest via Hargreaves the below will give you a bit of background to the case and how the outcome affects you if you receive these loyalty bonuses.

A while back, on the 25 March 2013 HMRC published a Revenue and Customs Brief (No 4) to explain their view on the tax treatment of payment of ‘trial commission’ passed on to investors in collective investment schemes.

In this brief, HMRC explain that payments made to the investor originating from the annual management charge, which is traditionally where cash rebates come from, are (in tax terminology) ‘annual payments’ and subject to Income Tax under S683 Income Tax Act 2005.

HMRC advised in their brief that as a consequence of the above ‘payers are under an obligation to deduct basic rate Income Tax, in accordance with Chapter 6 Part 15 Income Tax Act 2007, from the payment of trial commissions and to account for this to HMRC.  The investors should then account for any higher or additional higher rate tax due through their Self-Assessment tax return’.

HMRC stated in their brief that liability in respect of past payments would not be pursued as HMRC themselves had “in some cases advised investors that such payments are not taxable”.

Hargreaves Lansdown (HL) did not accept that this obligation applied to the payments which it made to investors.

Their appeal rested on the meaning of “annual payment” with the First Tier Tribunal finding in HL’s favour, the conclusion being that the Loyalty Bonus did not meet the full criteria of annual payments.

HMRC was granted permission to appeal to the Upper Tribunal and on the 9 August won.

HL and HMRC had come to an agreement at the start of the appeal process to retain an amount equal to the basic rate of income tax on the payment to investors and HMRC would then assess HL for that amount under section 957 or the Income Tax Act 2007.

If HMRC had not been successful, this would have meant a nice windfall for HL’s customers as the 20% retained would have been paid back to them.  In light of the decision and as HL had been and continues to deduct 20% from their customer’s loyalty bonuses, very little will change in terms of how the Loyalty Bonus is administered.  If you are a basic rate tax payer, there will be no further tax charge.  Customers who pay a higher rate of tax could be liable to further tax at their marginal rate.

The decision in favour of HMRC also affects customers of other platform service providers.

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