Business borrowing – how to access money if you are not eligible for grants
If your business does not qualify for a grant but you still need to get some capital to boost your business, then you may want to consider a business loan. There are many ways to access loan funding and your business bank is likely to be your first port of call.
However, there are alternatives, like getting investors to buy into your company in return for equity, plus crowdfunding propositions such as those offered by Crowdfunder, Kickstarter and Funding Circle. Whether or not these are the right choice for your business depends very much on what type of funding you need, what your business does and what you may have to offer someone who donates to your campaign. But let’s take these in order.
Traditional business loans
The traditional way for a business to access loan funding is through a business bank. Often your own bank will be best placed to help you with a loan, but it may result in you paying more than necessary in interest. So, as always, shopping around is a good idea.
There are numerous sites that can provide business loan comparisons, which allow you to see just what might be available to you. Some can give you a loan within as little as a few days, and you can choose the length of time you want to pay the loan back. You can simply search on the internet for ‘business loan comparison’ to get an idea of how much these loans would cost you. Remember though, your own bank could still be the cheapest, so check there too.
The downside of the loan is that you will pay interest on the amount you borrow, and you also have to pay the capital back over time. It can help you in the short-term to get over a cashflow issue if that is the problem, however, you do not want to put your business in a hole, so make sure you can pay the loan back if you get one.
Investors can boost a business’s ability to grow not just by providing a much-needed cash injection, but with the right partner you may benefit from business expertise too. How much of your business you would need to give away to make an investor interested will depend on what you are offering and how big a risk they are taking. One thing is for sure – the more you are asking for, the less of your company you will own once a deal is done.
Getting investment into a business can be game-changing, and it could provide the accelerated growth your company needs. You must make sure the terms of any investment deal are right, so speak to your accountant and make sure he or she is closely involved in any discussions before you sign any paperwork. They will also help you to offer the right amount of equity in the business at the right price.
Crowdfunding is another option
If you prefer not to have to pay back the money you have been given, then you also have the option of crowdfunding. How and what you offer to those people prepared to buy into your business in return for their cash will depend on what your business does and how it works.
For example, if you are a designer or a small marketing agency, you may want to offer an exclusive design or a day’s marketing support in return. With crowdfunding you can be very creative in the way you raise funds. But you need to work within the rules of the platform you choose, so make sure you are clear about what you can and cannot do before you sign up.
We can help you
If you are unsure about the best way to get new funding for your business, then speak to us and we will help you through the process, so you get the funding that is right for you.
August 22, 2022
How your business can fight inflation
Inflation is a word on many of our lips at the moment as the cost-of-living crisis continues unabated. While the headline rate of inflation – which hit 9.4% in June this year – relates to the average inflation rate suffered by individuals living in the UK, the actual rate of inflation different people feel in their pocket could be higher. Businesses are affected by rocketing prices too, so now is the time to think about what you can do to reduce any costs your business incurs to improve your bottom line.
If your business was one of those badly hit by the pandemic, then you could be facing a double whammy now inflation has reached levels not seen in more than 40 years. Restaurants, hotels and other leisure businesses are often seen as luxuries when people are tightening their belts, and the knock-on effect could be severe.
However, every business should look at how it can reduce its outgoings at times like this, and there are many ways to do this.
Cut your energy costs
If you own your office or your building, then you will have had to choose which energy company you get your light and heat from. So, it might be worth shopping around for an alternative to see if you can get a cheaper deal – after all, things are likely to get worse rather than better in the winter.
For those companies working from leased offices, changing your supplier may not be an option. So, instead you need to think about how to be more cost-efficient in your use of energy. For example, you could install motion-sensor lighting into your washrooms, so the lights are only burning when someone is in there. You could also encourage staff to turn off their computers and any other energy-guzzling appliances when they are not in the office. It all adds up.
Not only will this mean they are doing their bit to help the business cut costs, they will also be helping the environment, something that most people would agree is necessary.
Work from home
Many of your employees may be working from home more often now than they were before, and if it suits your business then it might be time to consider increasing the number of staff that are offered hybrid or fully remote working.
Not only does this help to reduce your office overheads, for many people it improves their work-life balance. It has been shown to increase productivity too – the opposite of what some bosses may think if people have the choice to work flexibly most or all of the time.
The other benefit for your employees is that they will spend less on fuel or trains if they are commuting into work, giving them more money in their own pockets to help with the cost-of-living crisis without the need for a pay rise.
Make sure your employees know what they can claim
Anyone who incurs work-related costs that are not reimbursed directly by the company is entitled to claim these from HMRC. So, if you go down this route, make sure your employees are getting any tax deductions they are entitled to. It all helps to deal with the current high prices in the UK.
If you are unsure how this works, then your accountant will be able to help you, and may also help your employees with their tax returns too.
Let us help you
Helping your business and your employees to deal with the cost-of-living crisis in one hit can never be a bad idea. If you want to know more about how to make this work, and what other measures you may want to consider to boost your bottom line while giving your employees more available cash, then please get in touch and we can explain more about what measures you can take.
August 15, 2022
Payroll a pain heading into summer? Here’s what to do
We have all been there. The rising number of employees off over the summer months – especially now the kids have finished school until September – means some departments will be lacking in numbers and some work could get left behind.
One area you cannot afford to let this happen in is the back office, and especially payroll. Employees will forgive a lot of things, but not having their wage hit their accounts at the right time is not one of them. Not only would it mean many people missing mortgage or rent payments for that month, it would also create a mistrust between employees and management. Once trust is lost, it is not easy to get back.
Ensuring you have enough staff to cover all areas is difficult during these months, and with sick leave and particularly Covid continuing to be an issue with staff needing to take time off, you really need a back-up plan.
While you may never need to use it, you should ensure you have some emergency cover in place just in case you are facing a crisis at short notice. You can do this by training staff to do a different job within the office so they can step in if needed, or you can speak to your accountant and find out if they could give you the assistance you need for the short term if things went wrong.
Never underestimate the importance of admin staff
There is no getting away from the fact that your back-office and admin staff are key to running your business efficiently. Without them, all sorts of problems would arise that could create some costly errors for the company as a whole.
So, make sure they have all the back-up they need as you come into a period where many staff are off on their holidays and the workload becomes a bigger burden for those left behind.
We can help you meet your obligations
If you think you may have difficulties covering all of your admin and back-office roles over the summer, then please get in touch and we can help to suggest solutions for you.
August 8, 2022
Business grants – do you know what your business is entitled to?
Many businesses benefited from grants during the pandemic, but how many realise there are other grants they may be able to access at any time to help their business grow and thrive?
In fact, there are a large number of grants available across the UK to help businesses with everything from reducing carbon emissions right the way through to developing space-based services.
Finding a grant
Finding a grant for your business could be easier than you think, especially as many of them are listed on the gov.uk website. You can go to this site and choose ‘grants’ as the option, and it will provide you with a list of funds that could be available for your business.
Some will be area specific and only available to businesses in certain places, such as Derbyshire, the South West or Leeds, for instance. But there are also grants open for businesses that will increase their workforce and create new jobs in the local area.
What does it mean if I get a grant?
The difference between a grant and a loan or an investor taking an equity stake is that the grant will not need to be paid back. A loan would be paid back with interest, while an equity stake would mean an investor owning part of your business in return for their investment and expecting a return on their money along with the original capital back at a future date.
So, if you are able to benefit from a grant, it is well worth considering it as the money will be yours to use to improve your business and also to expand your reach and potentially workforce.
What’s the catch?
However, depending on the reason for the grant being made, there may be conditions attached to how you are able to use that money. For example, if the grant is specifically to help you buy some plant or machinery, you would not be able to use it to fund wages. You may think no-one will check, and you may be right. But it is not worth taking the chance.
You should always check the fine print of any grant your business is applying for to make sure you can fulfil any conditions or rules that apply, otherwise you could find yourself failing to secure the grant or, which could be worse, possibly having to return the money after you have spent it.
Check locally and elsewhere too
While there are a number of national grant schemes, it is also worth checking locally with your council, any business support organisations – chambers of commerce of business hubs – and associations that are relevant to your business. It may be that you run a company dealing with the arts or is looking to increase the benefits to the local economy. All these aspects could open up a range of funding that you had not previously considered.
If you have a business that would benefit from grant funding, then contact us and we will give you all the help, support and information you need.
August 1, 2022
Are you claiming everything you are entitled to from the taxman?
Tax is something that is a certainty in life, as former US President Benjamin Franklin said, but there are lots of ways you can reduce the amount of tax you have to pay by claiming for expenses you may not realise you could.
Those of us who are self-employed or own businesses are more likely to claim the majority of costs and expenses against tax that we can. But what many PAYE employees do not realise is that they can also claim certain expenses if they are not covered by their employer, and they are specifically relevant to their work.
What can be claimed?
For example, let’s say you are a nurse, an engineer, a psychologist or simply an employee who happens to use their car for work purposes sometimes. In each of these cases, there are likely to be things that you are paying for that you could claim if your employer is not repaying you for them.
It could be fees you pay to be a part of a professional institution, or professional indemnity insurance, or uniforms that you need to buy yourself, shoes, books you need to study for your work, toys that you may need to use to encourage children to talk to you in the case of a child psychologist, for instance. The list would include anything and everything that you need to buy yourself that solely relates to your work.
While many of these may be relatively small amounts individually, they will soon add up, and if you consider how much they add up to over a long period of time, there is every reason to reclaim that money.
How do you claim them?
Understandably, many people are nervous about dealing with the taxman because they think automatically that it is going to end up costing them money. But that is not always the case. Reclaiming these amounts that are legitimate allowances could put a significant amount of money back into your pocket.
To claim these, you would need to do a self-assessment form. This is something many people who pay tax through PAYE would not be familiar with. You can speak to your accountant for more information if you need it, or you can ask HMRC directly about how you claim for these costs on your self-assessment.
Don’t be nervous, and go back as many years as you can
You do not need to be nervous when dealing with the tax office as you are not doing anything wrong. This is money you are owed, and you would be doing yourself a disservice by not getting this money back into your own pocket.
If you have not been claiming this money back before, then you can go back up to four previous tax years. This means you can reclaim overpaid tax from 2018/19 if you make the claim before April 5, 2023. If you had an average of £1,000 that you could have reclaimed for each of these years, then you would get a £4,000 rebate from the taxman by making the claim.
In the current economic climate, even relatively small amounts that you can reclaim will make a difference. But remember, you must have proof of the purchases you made. Usually these would need to be receipts, but if you do not have these, then you can prove any payments made using bank statements if you need to. If you bought anything online, you may have records there in your email or, say, an Amazon account.
We can help you
If you are unsure about whether you can claim some of the expenses for your work or want to know you have claimed everything that it is possible to claim, then please get in touch with us and we will help you through the process.
July 25, 2022
Can your business claim a super deduction?
If your business has spent money on plant and machinery and it is subject to corporation tax, then it may qualify for a super deduction which is a temporary allowance you do not want to miss.
Qualifying purchases will need to have been made between April 1, 2021, and April 1, 2023, and will be valid as long as you did not buy the plant or machinery due to a contract you entered into before March 3, 2021.
It is also possible to claim a special rate first year capital allowance – which is another temporary allowance – if you have bought qualifying or plant machinery as above.
Qualifying plant and machinery
There are a few rules, as you might expect, that your business needs to comply with to ensure your plant or machinery qualifies for these allowances. One of the key rules is that the machinery must be new, not used or second-hand.
It also cannot be given to you as a gift, it cannot be a car as these will not qualify for this allowance, and it cannot be bought to be leased to someone else. The exception to this final rule is if it is background plant or machinery within a building. It also cannot be purchased during the period in which the business ceases activity.
What can I claim a super deduction for?
A super deduction can be claimed on a variety of work tools, including:
Machines such as computers, printers, lathes and planers.
Office equipment such as desks and chairs
Vehicles such as vans, lorries and tractors – but not cars.
Warehouse equipment such as forklift or pallet trucks and stackers.
Tools such as ladders or drills.
Construction equipment, such as excavators, compactors and bulldozers.
Some fixtures, including kitchen and bathroom fittings and fire alarm systems.
There are some other rules to be aware of, which is why it is best to speak to your accountant to help you make the most of this super deduction, rather than trying to go it alone.
To see how much a business can claim, let’s look at an example which is on Gov.uk. A company called Alpha Ltd bought a lathe for £10,000 on December 1, 2021. It has a calendar year end accounting period.
In the accounting period ending December 31, 2021, Alpha Ltd can claim a super deduction of 130% for this expenditure, giving them a claim of £13,000.
What about the special rate first year allowance?
If a company buys a qualifying item in its first year, then it can claim the special rate first year allowance. Again, there is an example of how much this is worth on Gov.uk. A company called Bravo Ltd buys a solar panel for £10,000 on December 1, 2021, which is for installation at its business premises and will be used in its business.
In the calendar year ending December 31, 2021, Bravo Ltd can claim the 50% special first year allowance, which gives a rebate of £5,000 for this expenditure. The remaining balance can be added to the special rate pool in the following accounting period and writing down allowances can also be claimed, according to the Gov.uk information.
Again, there are specific rules about what items qualify for the special rate first year allowance, so it is best to work with an accountant to ensure you only claim what you are allowed to.
Let us help you
Both allowances can be complex to navigate, especially as there are a number of specific rules surrounding what type of plant and machinery you can claim for. So, let us do the hard work for you and get in touch. We will make sure you are getting everything you are entitled to, so you can legitimately reduce your tax bill.
July 18, 2022
Last chance to make sure your business is ready for MTD
Companies and sole traders who have not yet finalised their plans to comply with Making Tax Digital are in the last chance saloon this month, and the very latest date you have to comply with MTD for paying VAT is August 7.
That is the latest date on which you will need to make your first – if you are not already doing this – MTD VAT return. So, if you have not already done so, you have very little time left to make sure you comply with this legislation.
Whether you are required to pay VAT – because your business turnover is above the £85,000 threshold at which you are required to register – or because you have voluntarily registered, you now must keep your records and file your returns electronically.
How do I file?
From April 1, you will need to have filed any VAT due through MTD-compatible software, which includes the likes of QuickBooks and Xero, among others. If you are not able to file your return this way, then HMRC can currently issue a £400 fine. But from January next year, HMRC is due to bring in a points system, which means you accrue points each time you miss a deadline. Once you hit a certain number of points, you will face a £200.
So, the best thing you can do is prepare yourself properly. If you have not sorted this out already, you really are running out of time.
We can help you meet your obligations
If you are not yet registered to deal with MTD through relevant accounting software, then we can help you. But there is no time to lose. Please get in touch with us as soon as you can, and we will do everything in our power to help you meet your filing deadlines.
July 11, 2022
Where is the best place to hold your tax money?
Putting aside the tax money due each time you have an invoice paid is sensible planning, but is that money working as hard for you as it could be?
Many current accounts are paying no interest whatsoever, and when it comes to savings accounts, you would still be struggling to get anything meaty when it comes to interest payments. Businesses, in particular, will often leave this money sitting in an account that is paying nothing or next to nothing on the money building up.
However, when these amounts run into tens of thousands of pounds – if not hundreds of thousands of pounds depending on your personal or business status – not having this money work for you is a big opportunity to miss.
So, if you are currently using a separate current account paying no interest, or worse leaving the money in your existing business account without separating it out, then it would be sensible to look at what you can do to boost your returns.
Business easy access accounts
Let’s say you have around £250,000 sitting in your tax account waiting to be paid to the taxman. If you were to put it into an easy access account for businesses, you could currently get 1% interest on this, according to financial statisticians Moneyfacts at the time of writing. Over the year, that would give you £2,500 extra to play with for no effort on your part.
Business notice accounts
However, if you are prepared to give some notice before you make a withdrawal – which would mean not being able to access it whenever you wanted – you would be able to get more in interest. For example, by agreeing to give 95 days’ notice, you could get 1.3% at the time of writing. So, you would increase the amount you could earn from that same £250,000 to £3,250.
Remember, this is money you do nothing to get other than spend a bit of time on paperwork to open the account. For the time that takes, it is a return worth having.
There are even companies that provide services for businesses to help them boost the returns on their business income by finding the best accounts for their funds. In short, a specialist will manage these accounts for you, to maximise the returns you can make.
One firm that offers this type of service highlighted that if a company failed to move £903,000 in cash accounts to the best-paying accounts over five years, this could result in a loss of income of as much as £41,538 over that period. This would be enough to hire an additional part-time member of staff for most businesses.
These companies should never hold your money in their own accounts, they should simply be working under your direction to move funds to the best-paying bank accounts and you pay a fee for this service. This ensures you are still covered by the Financial Services Compensation Scheme (FSCS).
We can help you
As your accountant, we are likely to have services that will help you to increase the returns you can make on the money you hold in your business accounts. So, please contact us for details on how we can help you make your money work harder for your business.
June 27, 2022
Currency exchange – why it can pay to not rely on your bank
International trading is something many businesses are involved in, whether it’s because you are selling your good or services abroad or buying raw materials in from overseas to help with manufacturing.
Either way, exposing yourself and your business to currency risk is a reality for many businesses, and how you reduce that risk as much as possible is something to think seriously about. For most businesses, the default option is to simply transfer money from your business bank account to the account of the company you are working with abroad. It’s easy, yes, but you could be paying more than you need to and cutting your profit margins as a result.
How much do you transfer abroad each year?
The best way for you to make your international money transfers depends very much on how much, and how often, you transfer overseas. If you make a one-off payment each year, then you will most likely need to take a different approach to a company making regular payments abroad every month.
So, the first thing to do is look at how and when your company is transferring money overseas. By checking through your bank statements, assuming you are using your business bank to make the transfers currently as many businesses do, you should also be able to get a sense of what the exchange rates you have been getting are, and how much you are paying in fees per transaction.
How much does it cost to send money internationally?
The problem you have is that when it comes to sending money internationally, pinning down the costs involved is not easy. This is because different companies will charge different amounts and will give you different exchange rates depending not just on how much you are transferring at a time, but also, they will each take a ‘margin’ on the exchange rate. This is a way of increasing the amount of money they can make on the international transfer.
For example, let’s say you want to transfer £100,000 to a company in Germany. Your transfer will go from sterling to euros and your bank may charge you, say, £25 to make that payment if you use telephone banking to make the transfer. It could be lower, say, £15 if you make the transaction online.
The company receiving the money may also be charged by their bank, which could add another, say, £6 to the cost of the transaction. So, without taking any currency exchange values into account, you and your receiving party could already be paying up to £31 just to move money overseas.
Exchange rates and other products
Then, you need to take into account the exchange rates you are going to pay. These can vary considerably from company to company. Banks will typically offer worse rates than international money transfer specialists, who do nothing other than currency transfers day in, day out.
Let’s say you are moving money from sterling to euros. If you want to send £100,000 then the Barclays rate at the time of writing was €1.1234. This would give you €112,340 in euros. Remember, you would need to pay the additional fees on top of this.
Compare that with a money transfer specialist such as OFX, and you would receive €1.1778 for the same transaction at the time of writing. This would give you €117,780 – an extra €5,440. Plus, you would not need to pay the extra fees charged by most banks.
The foreign exchange specialists also have a variety of products that will help you save more money, especially if you make regular payments overseas. There is something called a ‘forward contract’ that allows you to fix the exchange rate you will get for a period of time, taking the guesswork out of exchange rates and can help businesses set their budgets more effectively.
There are other products that can help you mitigate risks and boost the chances of getting a better exchange rate for the transfers your business needs to make. Remember, these products are also available to individuals if you need to make regular transfers to deal with bills associated with an overseas property, for example.
Let us help you
If you want to learn more about how you can reduce the risk you take when making currency transfers, then please contact us for more details.
June 20, 2022
End of bulk appeals for tax fines in May
If you are unlucky enough to be fined for a late filing, then the way in which any appeal can be made changed as of May 7.
Prior to this, HMRC had temporarily reintroduced the ability to bulk appeal late filing penalties for income tax in 2020 and 2021. But from now onwards, all such appeals need to be made individually.
To be fair, if you keep in close contact with your accountant and give sufficient time for all of the paperwork to be done, then you should not be in a position where you are facing a late filing penalty. But if you have either filed paperwork late yourself or had a late filing penalty for some other reason, then each appeal now must be made individually.
Even though you use an accountant to deal with your tax liabilities, you are still ultimately legally responsible for the correct and timely filing of your returns. There are several different penalties that could apply too.
Types of penalties
For example, there is an ‘inaccuracy penalty’ which can be applied across specific taxes, including income tax, PAYE, capital gains tax, inheritance tax and corporation tax. This penalty could be anything from 0% to 30% of the extra tax due if the error occurred due to a ‘lack of reasonable care’.
If the error is considered deliberate, this rises to between 20% and 70% of the extra tax due, and if it is both deliberate and concealed, it could rise to between 30% and 100% of the extra tax due.
You could also face a penalty for a failure to notify HMRC of a change in your liability to tax. This could be, for example, if your company makes a profit and becomes liable to corporation tax. Or it could be because your business has reached the turnover for the VAT threshold (£85,000) and you have not registered for VAT.
Other penalties could include ‘Offshore penalties’ and ‘VAT and Excise wrongdoing penalties’ – so it is important if any of these could potentially apply to you, that you speak to your accountant immediately. You can find more information on the types of penalties that could apply on the GOV.UK website.
We can help you meet your obligations
If you think there is a chance that you could fall foul of any of these rules and face a penalty, or that there is any other issue you need advice on to make sure you comply with all your HMRC requirements, please contact us as soon as possible. We will help you navigate any problems that arise.
June 6, 2022
Get a business health check at the start of the tax year
Using up personal allowances is not the only reason you should see your accountant at the start of the tax year, it is also the best time to get a health and wealth check for your business too.
The end of the tax year is the busiest time for your business and your accountant, meaning devoting time and effort to checking whether your business is on track is sadly lacking.
Take the time while you have the time
However, the complete opposite is the case at the start of the tax year, so now is the time to make the most of the chance to review your business strategy, cashflow and plans for the coming year to ensure your company has the best chance of success.
What can your accountant help you with?
Your accountant is perfectly placed to help you put an effective plan in place to give your business the boost it needs at the start of the tax year. He or she can help you with everything from saving tax and paying the right amount of tax, right the way through to helping you comply with relevant regulations and improving your cashflow.
A good accountant can also help you access relevant funding – whether that is a grant that your business would qualify for or an investor that would help your business to grow.
Setting out an effective business plan at the beginning of your financial year is like creating a road map for the coming months, allowing you to follow that map to achieve your goals.
We can help your business run smoothly
When things get tough, your accountant is there to help you with everything from advice to reality checks so your business can continue to run smoothly.
If you want help to set your business on the right path for this tax year, then please get in touch and find out how we can help you.
May 9, 2022
MTD D-Day has arrived – here’s how to make sure you comply
Anyone filing VAT returns from April 1, 2022 onwards now has to file their return digitally as HMRC’s Making Tax Digital reaches its next phase.
All businesses registered for VAT – even if they have turnover below the threshold – must file their returns this way from now on. The premise for changing to the MTD regime is to reduce the number of common mistakes made, according to HMRC, and will save taxpayers time when it comes to managing their tax affairs.
However, it is also a key plank of digitising the UK’s tax regime, and MTD is likely to have increased revenue to HMRC thanks to reduced errors in both 2019 and 2020, said HMRC.
Sign up now if you haven’t yet
Nearly 1.6m taxpayers had already joined MTD for VAT as of December 2021, and more than 11m returns have already been submitted this way. Around a third of those businesses with a turnover below the £85,000 VAT threshold signed up before April 1, 2022 and “thousands more are signing up each week”, said HMRC.
Lucy Frazer, Financial Secretary to the Treasury, said: “Businesses using MTD are saving time on their tax affairs, streamlining their processes, and boosting their productivity as a result.
“[This is] our first move towards a modern, digital tax service – MTD makes it easier for businesses to get their tax right first time. There is a range of support and information available for those that need it – including accessible online content such as YouTube videos, GOV.UK help pages and HMRC’s Extra Support service.
“Agents can sign up on behalf of a business, although businesses remain responsible for meeting their VAT obligations. Those who do not join may be charged a penalty for failure to do so.”
Businesses must sign up before they send their next VAT return
Any businesses that have not yet signed up need to before they file their first VAT return after April 1, 2022. There are a number of software options that can be used, including free options for the easiest of calculations, or more advanced for more complex affairs, said HMRC.
Some VAT-registered businesses can receive exemptions, primarily where it is not reasonable or practical for them to use digital tools for their tax. These include reasons based on age or disability, or a religious objection to using computers. But any other reasonable basis for exemption will be considered by HMRC. You can find more information on whether an exemption may apply on Gov.UK.
While you are waiting for a final decision, continue to file your returns as you usually do.
MTD for income tax 2024
MTD is being extended to 4.2m income taxpayers who are landlords, sole traders and partnerships from 2024. Anyone with business and/or property income over £10,000 will be brought into the regime then. So, it is worth starting to plan ahead with your accountant to make sure this transition is as smooth as possible.
Please get in touch with us to find out how we can help you if you are yet to sign up for MTD. We can help you comply with the new rules.
May 3, 2022
Strong Customer Authentication (SCA) rules – what they mean for businesses and consumers
You may have already noticed when you are buying things online that you are now being asked to confirm your purchase in more than one way to improve security, and this is the result of the new Strong Customer Authentication (SCA) regulations which came into effect on 14 March 2022.
What are the SCA regulations?
The SCA regulations create an additional layer of security for card payments which involve a second method of identification. This could be a text message with a code that needs to be added to a purchase, a phone call to a landline, or via a card reader or smartphone app. The aim is to reduce the amount of fraud and make customer transactions safer.
The effect on businesses
There is, of course, an impact on customers directly. But all companies who sell directly to consumers via card purchases have had to make some changes to their technology too. Retailers should have already upgraded their payment gateways and payment services providers have been working towards helping achieve this.
From 14 March 2022, any transaction that is not SCA compliant will be declined, which would be costly to retailers. If you are still having problems with this for your business, then you urgently need some help.
Find out how we can help you
If you want to know more about SCA or have any problems implementing it, then please get in touch and we will do what we can to help you.
April 25, 2022
Bank of England (BoE) base rate rises to 0.75% – what it means for consumers and businesses
The Bank of England (BoE) base rate rose to 0.75% in March in response to Consumer Prices Index (CPI) inflation rising to 5.5% – almost triple the BoE’s target of 2%. Inflation is set to continue rising throughout the year (see Spring Statement round-up) with the Russian invasion of Ukraine creating increased pressure on already rising prices.
What does it mean for you?
Any rise in the base rate has an impact on borrowing rates for businesses and individuals, and on savings rates. Each is likely to rise – great news for savers, not such great news for borrowers.
How will borrowers be affected?
Any loan you have that does not have a fixed rate – such as some mortgages, personal loans or credit card debt, for example – could face a rise in interest rates if the company providing this chooses to pass this rate on. And many will.
However, if you have a fixed-rate mortgage, unsecured personal loan or other loan, for example, then you will not see these rates change until you reach the end of the offer term or until the loan is paid off.
How are savers affected?
If you have savings in a fixed-rate account, these will not rise either. But if your savings are in a non-fixed interest rate account, then you could see the interest you are paid on this rise.
If you see a better rate than you are being paid elsewhere, then it is worth considering moving your savings to the better-paying account. But bear in mind if you are in a fixed-rate account, you could face a penalty for doing this which could negate the benefit of moving. So, check with an expert before taking any action.
You also need to consider how much of your money is in each institution. The Financial Services Compensation Scheme (FSCS) covers your money on deposit with a single institution up to £85,000. But you need to be aware that various brands come under one institution – such as Halifax and TSB coming under the Lloyds Banking Group.
You would be covered up to £85,000 across all these accounts, not in each. It only becomes relevant if one of the banks goes bust, but we know from experience that however unlikely, this can happen. So, it is something to bear in mind.
Find out how we can help you
If you are unsure about whether your money is working as hard for you as it could, then please feel free to get in touch and we will help you in any way we can.
April 20, 2022
Bounce-back loans – where are we now?
The bounce back loans, CBILS and CLBILS for larger companies were some of the most generous schemes available to businesses suffering from the impact of lockdowns due to the Covid-19 pandemic, paying out a total of £80 billion to help keep businesses afloat.
The Bounce Back Loan Scheme was the largest of these, paying out £47.36 billion in total to around 1.6m recipients, with amounts up to £50,000 available to companies that would have faced real financial difficulty without them.
Fraudulent loan claims
Due to the speed that these loan schemes were implemented, and the fact that the Government backed them 100% – meaning taxpayers would pick up the tab for any loans that were not repaid – there was predicted to be a considerable amount of fraud. PwC initial suggested there would be around £4.9 billion of fraud associated with the Bounce Back Loan Scheme, which it subsequently reduced to £3.5 billion.
Lord Agnew, the former minister for counter-fraud described the oversight of the loan payments by the British Business Bank as “nothing short of woeful” when he spoke about his resignation from that role in the House of Lords. He highlighted what he described as “schoolboy errors” such as more than 1,000 companies receiving these loans despite not even trading when the pandemic hit.
What to watch out for if you need additional business loans
However, for the millions of companies these loans helped, there has been considerable benefit. They were applied for through business banks and you could get up to 25% of the self-certified annual turnover, or £50,000 – whichever was less. The biggest appeal for many though was the 2.5% interest rate – lower than many other business loans available – and the option to repay the loan over six years, although you can request that this is extended to 10 years, with the Government covering interest payments for the first 12 months.
One important thing for companies to remember is that the interest on these loans can be offset against tax, which is one benefit. But there are a few banana skins to avoid if you need additional lending within the period that you have the loan, according to the Association of Taxation Technicians (ATT).
It said: “Be particularly careful if your business needs any other source of funding during the life of the BBL taking any form of security, mortgage, charge pledge, lien or encumbrance over its assets whatsoever. You must check this is allowed under the loan terms, and often it is not.”
Be careful if your business becomes insolvent
It was possible to use the BBLS to pay dividends if the business has retained profits but was struggling with cash flow, but if your company was to become insolvent then you may be asked to repay these dividends as it is not possible to pay a dividend from an insolvent company. Any personal use of these loans could also result in the requirement to repay the money used, which potentially puts your personal assets at risk.
We can help you
If you are concerned that your BBLS may not have been used for the correct purpose, or that business risks could leave your company insolvent and you personally exposed due to the way the loan was used, then please contact us and we will explain the best course of action.
March 7, 2022
Businesses must prepare as wider creditor action protections end in March
Companies with debts outside of their rental arrears face the removal of protection against creditor actions from March 31, 2022.
Other debts outside rental arrears affected
Currently, rent arrears built up because of forced closures as a result of COVID-19 are excluded from these measures, as they are covered by other legislation
Any debts outside of rent arrears, must reach a £10,000 threshold before a winding-up petition can be filed. Before the filing, the creditor must have given the debtor a notice – called a Schedule 10 Notice – which states that if a proposal for payment of the debt has not been made within 21 days of the notice, then the creditor intends to file a winding-up petition.
Firms must prepare to deal with possible litigation from April 2022
However, these restrictions end on March 31, so any business with debts of more than £10,000 that are not related to rent arrears needs to be sure it is prepared for these protections to be removed, unless more legislation is passed before that date.
Challenges could be made for as little as £750 owed
Law firm Freshfields Bruckhaus Deringer highlighted that the Government has not changed the threshold to serve a statutory demand for winding-up from £750. So, while the current legislation is in place there are two thresholds in place for the compulsory winding-up process. But once Schedule 10 notices are repealed, the lower level of £750 remains.
Find out how we can help you
If you have debts outside of rental arrears that have built up due to difficult trading conditions during the pandemic, or because of forced closures, then please contact us to find out how we can help you manage this most effectively for your business.
February 21, 2022
To help employers affected by the spread of the Omicron variant of COVID-19, the Statutory Sick Pay (SSP) rebate scheme for small employers is being reintroduced. In addition, the period for which an employee can self-certify a sickness absence is increased temporarily from seven days to 28 days.
SSP rebate scheme
The SSP rebate scheme for small employers allowed employers who had fewer than 250 employees on their payroll on 28 February 2020 to reclaim up to two weeks’ SSP per employee in respect of Coronavirus absences. Normally, employers must meet the cost of any SSP paid to an employee in full. The original scheme applied in respect of Coronavirus absences prior to 30 September 2021, with a deadline for making rebate claims of 31 December 2021.
To help employers affected by staff absences as a result of the surge in COVID-19 cases following the emergence of the Omicron variant, the SSP rebate scheme for small employers is being resurrected. You will be able to use the scheme if you are based in the UK and you had a PAYE scheme with fewer than 250 employees as of 30 November 2021. As previously, you will be able to claim back the cost of up to two weeks’ SSP paid to an employee for Coronavirus-related absences. The claim period is being reset; consequently, a claim can be made in respect of SSP paid to an employee, regardless of whether a claim was made under the original scheme. Claims under the resurrected scheme can be made retrospectively from mid-January 2022.
The period for which an employee is able to self-certify an absence for SSP purposes has been increased temporarily from seven days to 28 days. This means that rather than needing a Fit Note from a GP for absences of more than seven days, employees will only need a Fit Note once they have been absent for 28 days. This will reduce the pressure on GPs.
Regulations have been introduced to give statutory effect to the relaxation, which applies for periods of sickness which begin on or after 17 December 2021 and end on or before 26 January 2022. Thereafter, the self-certification period will revert to seven days.
Speak to us
To find out more about how to make a claim under the SSP rebate scheme, or to learn more about the temporary self-certification rules, please speak to us.
January 24, 2022
Help if you are struggling to pay your tax bill
Financially, 2021 has been a difficult year for many, and you may be struggling to pay your January tax bill in full. Any tax and National Insurance that remains unpaid for 2020/21 must be paid by 31 January 2022, along with the first payment on account for 2021/22.
If you cannot pay your tax bill on time, you should contact HMRC as soon as possible – you do not need to wait until the payment is late, and it is advisable not to do so. You will be able to discuss the help that is available to you, and may be able to pay what you owe in instalments by setting up a Time to Pay arrangement.
Time to Pay arrangements
A Time to Pay arrangement is an agreement with HMRC to pay the tax that you owe in instalments. The procedure for setting up a Time to Pay arrangement depends on the type of tax that you owe and the amount that you owe.
If you are unable to pay your self-assessment tax bill, you may be able to set up a Time to Pay arrangement up online via your Government Gateway account. You can do this if:
you have filed your latest tax return;
you owe less than £30,000;
you are within 60 days of the payment deadline; and
you plan to pay off your tax debt within the next 12 months, or less.
This is the most straightforward way to arrange to pay what you owe in instalments. To avoid triggering unnecessary late payment penalties, if you know that you will struggle to meet your 31 January 2022 tax bill, it is advisable to ensure that your return is filed in good time so that a Time to Pay arrangement can be in place by this date.
Unable to make an online arrangement?
If you are unable to set up a Time to Pay arrangement online, for example, if the tax that you owe is more than £30,000, you may be able to agree an instalment payment plan by calling HMRC’s self-assessment helpline on 0300 200 3822.
Other types of tax
If you owe tax other than that due under self-assessment, or if your company cannot pay tax that it owes, you can contact HMRC’s Payment Support Service on 0300 200 3835 to discuss setting up a Time to Pay arrangement.
To set up a Time to Pay arrangement you will need to have the following information to hand:
your unique tax reference number;
your VAT registration number if you are a VAT-registered business;
your bank account details; and
details of any previous payments that you have missed.
HMRC will ask you a number of questions, including:
how much you can afford to repay each month;
whether you are able to pay what you owe in full;
whether there are any other tax bills that you need to pay;
how much money you earn;
how much you usually spend each month; and
what savings and investments you have.
HMRC expect that if you are able to pay the tax that you owe, you will do so. Also, if you have any savings or assets, they expect that you will use those to meet your tax obligations.
Where you are unable to pay what you owe in full, HMRC will usually set your monthly payments at about 50% of the money you have left over each month after you have paid your bills.
Once a Time to Pay agreement is in place, it is important that you pay at least the agreed amount each month. If you are able, you can pay more than the agreed amount if you want to clear the debt more quickly.
Unable to agree a Time to Pay arrangement?
If you are unable to agree a Time to Pay arrangement with HMRC, for example, if HMRC do not think you will stick to the agreement because you have defaulted in the past, you will be asked to pay what you owe in full. If you are unable to do this, HMRC may take enforcement action to collect the debt.
We can help
If you are struggling to pay tax that you owe or are worried about being able to pay your January self-assessment bill, talk to us. We can help you set up a plan to pay in instalments.
January 10, 2022
Company cars and vans
A tax charge may arise if an employee is able to use a company car or van for private use. A further charge will arise if you provide the fuel for any private use. The taxable amounts that will apply for 2022/23 have now been announced.
Where an employee has a company car, if that car is available for their private use, they are taxed on the benefit of that private use.
The amount that is charged to tax is a percentage (the appropriate percentage) of the car’s list price and any optional accessories (as reduced for any capital contributions up to £5,000). The charge is reduced where the car is not available for the full year, and also for any private use contributions made by the employee.
The appropriate percentage depends on the car’s carbon dioxide (CO2) emissions. A supplement of 4% applies to diesel cars not meeting the RDE2 standard. The appropriate percentage is capped at 37%.
The appropriate percentages applying for 2022/23 are available on the Gov.uk website.
For 2022/23, electric cars are taxed on 2% of their list price, regardless of the date of first registration.
If the employee is provided with fuel for private journeys, a separate fuel benefit charge applies. The taxable amount is the appropriate percentage used to calculate the car benefit charge multiplied by the set figure for the tax year. For 2022/23, this is £25,300.
There is no charge if you pay for electricity for private use of an electric company car.
If you provide an employee with a company van, and they have unrestricted private use of that van, unless the van is an electric van, a tax charge will arise. For 2022/23, the taxable amount is £3,500. If you also provide fuel for private journeys, a separate fuel charge arises. For 2022/23, this is valued at £688.
There is no charge where an employee uses an electric company van for private use.
Get in touch
We can help you understand how to provide tax efficient company cars and vans to your employees.
December 20, 2021
Seasonal gifts to employees
Christmas is a time of giving, and you may wish to give your employees a small token of your appreciation for their work during the year. To prevent the gift being accompanied by an unwanted tax liability, you can take advantage of the trivial benefits exemption to keep the gift tax-free.
Scope of the exemption
Where you provide an employee with a low-cost benefit, the employee is not taxed on the provision of that benefit as long as the following conditions are met:
the benefit is not cash or a cash voucher;
the cost of the benefit is not more than £50;
the benefit is not made available to the employee under a salary sacrifice arrangement or under a contractual obligation; and
the benefit is not provided in recognition of particular services being performed, or in anticipation of them being performed.
Benefits that meet these conditions are known as trivial benefits.
Where the conditions are met, if the recipient is a director of a close company, the total value of tax-free trivial benefits that they can enjoy in the tax year is capped at £300. Otherwise, there is no limit on the number of trivial benefits which can be given to an employee tax-free each year.
Application of the exemption to Christmas gifts
The trivial benefits exemption can be used to ensure that gifts typically given to employees at Christmas, such as chocolates, wine, a turkey or a hamper, can be given tax-free. The key is to keep the cost below £50.
It will normally be straightforward to work out the cost of an item, but where it is difficult to determine the individual cost, the average cost can be used instead.
The trivial benefits exemption only applies if you give modest gifts costing £50 or less; lavish gifts will fall outside the exemption. The £50 limit is not a tax-free allowance, and if the cost of the gift is more than £50, the full amount will be taxable, not just the excess over £50. For example, if you give your employees a Christmas hamper costing £200, the taxable amount is £200, not £150 (the excess over £50).
If you do wish to give your employees an expensive Christmas gift, you may wish to pay the associated tax on their behalf by including it within a PAYE Settlement Agreement.
The gift card trap
To enable employees to choose their own gift, you may prefer to give a gift card or access to an app which lets them choose a treat. However, it is necessary to tread carefully here. If an employee uses an app or is given a gift card which may be topped up, the cost of the benefit is the total cost in the tax year, not the cost each time the app or gift card is used. This may mean that while each individual item purchased from the app or gift card costs less than £50, if the annual cost is more than £50, the benefit will not be a trivial benefit, and the exemption will not be available.
Speak to us
To check whether your Christmas gifts fall within the scope of the exemption, please get in touch.
December 13, 2021
Tax checks for licence renewal applications
From 4 April 2022, applicants applying to renew certain licences will need to pass a tax check before their licence application can be considered. Initially, the requirement will only apply in England and Wales. However, the Government have consulted on extending the requirements to Scotland and Northern Ireland from 2023.
Tax conditionality (the need to pass a tax check before a licence is renewed) will apply to licences to:
drive taxi and private hire vehicles (such as mini cabs);
operate a private hire vehicle business;
carry on the business of a scrap metal dealer on a site; and
carry on business as a mobile collector of scrap metal.
The check will only apply to licence renewal applications, not to first-time applications. However, the licensing authority will need to provide first-time applicants with information on what they need to do to comply with their tax obligations, and check that the applicant has received that information, before considering the licence application.
Nature of the tax check
The new tax check will apply in addition to the existing requirements imposed by the licensing authority. The purpose of the check is to confirm that the applicant is registered for tax. The check should only need to be completed about once every three years.
If you are applying to renew a licence on or after 4 April 2022, you will be able to complete the check, which will comprise a few short questions, via your Government Gateway account. The Government are to make guidance on completing the check available on the Gov.uk website. A helpline will also be available.
Once you have completed the check, you will be given a code. The code is important, and you must give it to your licensing authority as they are unable to progress your licence renewal application without it.
HMRC will inform the licensing authority whether you have passed the tax check. However, they will not provide them with any details of your tax affairs.
In preparation for the introduction of tax conditionality, it is advisable to ensure that your tax affairs are in order, and get them up to date if they are not. HMRC have published a communications pack explaining what this will mean for licence applicants. It is worth a read.
We can help
If you will be required to pass the tax check in order to renew a licence that you need to operate your business, we can help you ensure that your tax affairs are in order.
November 22, 2021
New VAT rate for hospitality and leisure
To help the hospitality and leisure industries recover from the impact of the COVID-19 pandemic and associated lockdowns, a reduced rate of VAT of 5% applied from 15 July 2020 until 30 September 2021. This rate has now come to an end, and a new reduced rate of 12.5% applies from 1 October 2021 until 31 March 2022. The rate of VAT applicable to this sector will return to the standard rate of 20% from 1 April 2022.
Supplies benefitting from the reduced rate
You are able to take advantage of the reduced rate of 12.5% if you make supplies of any of the following:
food and non-alcoholic beverages sold for on-premises consumption, for example, in restaurants, cafes and pubs;
hot takeaway food and hot takeaway non-alcoholic beverages;
sleeping accommodation in hotels or similar establishments, holiday accommodation, pitch fees for caravans and tents, and associated facilities; and
admissions to cultural attractions that do not already benefit from the cultural VAT exemption, such as theatres, circuses, fairs, amusement parks, concerts, museums, zoos, cinemas, exhibitions and other similar cultural events and facilities.
However, if the admission to an attraction is within the existing cultural VAT exemption, the exemption applies rather than the reduced rate of VAT.
If you operate in the hospitality and leisure sector, please get in touch with us to check that you are applying the correct rate of VAT to any supplies that you make.
November 15, 2021
AIA transitional limit extended
The Annual Investment Allowance (AIA) is a capital allowance that enables you to claim an immediate deduction against your profits for qualifying capital expenditure up to the available limit. The AIA limit was temporarily increased from £200,000 to £1 million from 1 January 2019 to 31 December 2021. It was due to return to its permanent level of £200,000 from 1 January 2022. However, the Chancellor announced in his Autumn Budget that the temporary limit will be extended until 31 March 2023.
Take advantage of the higher limit
The announcement allows more time to take advantage of the higher temporary limit. If you are intending to spend more than £200,000 on plant and machinery that qualifies for the AIA, you now have until 31 March 2023 to benefit from the higher allowance and immediate relief for your expenditure.
Calculating the AIA limit for your accounting period
The AIA limit for your accounting period depends on when that period falls and on the length of that period. The limit is proportionately reduced for accounting periods of less than 12 months.
Accounting period ends on or before 31 March 2023
If your accounting period is 12 months in length and falls wholly within the period running from 1 January 2019 to 31 March 2023, the AIA limit for the period is the temporary amount of £1 million.
Consequently, if your accounting period ends on or before 31 March 2023, you will be able to benefit from the £1 million limit.
Accounting period spans 31 March 2023
Calculating your AIA limit is more complicated if your accounting periods spans 31 March 2023 as transitional rules apply.
If you are planning capital expenditure in an accounting period that spans 31 March 2023, you will need to be aware of the transitional rules. Depending on the level of investment planned, it may be advisable to incur it prior to 31 March 2023, rather than after this date.
Super-deduction for companies
Companies are able to benefit from a ‘super-deduction’ equal to 130% of qualifying expenditure incurred in the period from 1 April 2021 to 31 March 2023. It applies where the expenditure would be eligible for main rate writing-down allowances of 18%. This is a better option than the AIA as it secures a higher rate of relief. However, unincorporated businesses are unable to benefit from the super-deduction.
Companies can also benefit from a 50% first-year allowance for expenditure incurred in the same window where the expenditure would qualify for reduced rate writing-down allowances of 6%. However, where the AIA is available, this is preferable to claiming the first-year allowance as will give relief at the rate of 100% of the expenditure, rather than at the rate of 50%.
To benefit from both the super-deduction and the 50% first-year allowance, companies must incur the qualifying expenditure on or before 31 March 2023.
Speak to us
If you are planning significant capital expenditure, speak to us to find out how to maximise your available capital allowances. The timing of the expenditure will affect the allowances that are available to you.
November 8, 2021
Get ready for the plastic packaging tax
The plastic packaging tax is a new tax which is being introduced from 1 April 2022. The tax aims to provide a financial incentive to use recycled plastic in plastic packaging, which in turn will boost recycling and divert plastic away from landfill.
You may have to pay the tax if you manufacture or import plastic packaging that does not contain at least 30% recycled plastic by weight. However, the tax will not apply to businesses that manufacture or import less than 10 tonnes of plastic packaging a year.
HMRC have published guidance for businesses that may fall within the scope of the tax to help them prepare for its introduction.
Scope of the tax
The plastic packaging tax applies to finished plastic packaging components that are manufactured or imported into the UK which contains less than 30% recycled plastic by weight. If you import goods in plastic packaging, for example, drink in plastic bottles, you may have to pay the tax. However, the tax only applies to the weight of the plastic packaging, not to the goods that it contains.
Certain types of plastic packaging are exempt from the tax, irrespective of the amount of recycled plastic packaging that they contain. The exemptions apply to:
plastic packaging that is manufactured or imported for use in the immediate packaging of medicinal products;
transport packaging used on imported goods;
packaging used as aircraft, ship or rail stores; and
components that are permanently set aside for a use other than a packaging use.
Goods for export
Liability for the tax can be deferred for up to 12 months if you import plastic packaging for export. The liability for the tax is cancelled if the packaging is exported within 12 months of importation.
A tax credit will be available if packaging within the scope of the tax is converted into other packaging. This is to prevent a double liability on the same packaging.
Amount of the tax
The tax will be payable at a rate of £200 per tonne of plastic packaging which does not contain at least 30% recycled plastic.
Registering for the tax
Manufacturers and importers of plastic packaging will need to register for the tax. You will need to register if:
at any time after 1 April 2022, you expect to manufacture or import at least 10 tonnes of plastic packaging in the following 30 days. Where this the case, you have 30 days in which to register; or
the business has manufactured or imported at least 10 tonnes of plastic packaging in a 12-month period ending on the last day of a calendar month. You are liable for the tax from the first day of the next month, and must register by the first day of the following month.
In each case, only plastic packaging manufactured or imported on or after 1 April 2022 is taken into account.
It is important to note that when working out whether you need to register, the weight of all plastic packaging that you manufacture or import is taken into account, not just that containing less than 30% recycled plastic.
If you manufacture or import plastic packaging, you will need to keep records, even if you manufacture or import less than 10 tonnes annually as you will need to demonstrate to HMRC that you do not need to register for the tax. You will need to keep records of the weight of plastic packaging manufactured or imported, how much (by weight) is recycled plastic, and the amount by weight covered by an exemption.
HMRC have said that reduced record-keeping requirements will apply to businesses that manufacture or import less than 10 tonnes of plastic packaging each year, details of which are to be published in due course.
Get in touch
Talk to us if you manufacture or import plastic packaging to find out how the new tax will affect your business.
September 27, 2021
Accessing the Government Gateway
From 15 June 2021, all businesses and organisations will need multi-factor authentication in order to sign into the Government Gateway.
Businesses and organisations that use HMRC’s online services and which do not currently receive an access code by text or voice call, or direct to an authenticator app, will need to add a device, such as their mobile phone number, to their Government Gateway account in order to be able to sign in. Once a device has been added, you will receive an access code every time you sign in. The changes are being made to further protect Government Gateway accounts from fraud.
You do not need to do anything until the next time that you sign in. At this point you will be asked to add your new device.
Already have multi-factor authentication?
If you already have multi-factor authentication on your business’s or organisation’s Government Gateway account, nothing will change. You can continue to sign in as usual, receiving your access code in the normal way.
If your business or organisation needs to allow employees to access your Government Gateway account, this can be done using multi-factor authentication. To do this, use the administrator and assistant functionality in your Business Tax Account to create additional users. Each user will have their own multi-factor authentication, and will need an access code to sign in.
Individuals and agents
The changes do not apply to individuals accessing their own account, or to agents.
Talk to us
Contact us to find out how to set up and use your Government Gateway account.
July 5, 2021
Budget 2021 – Business Matters
Coronavirus loan schemes
In 2020, the government introduced a number of government-guaranteed coronavirus loan schemes. In December 2020 the Chancellor extended, until the end of March 2021, access to the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme and the Coronavirus Large Business Interruption Loan Scheme.
Budget 2021 announced a new loan scheme to be introduced to replace those coming to an end.
From 6 April 2021 the Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.
In addition Restart Grants will be provided in England of up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses. This will provide the cash certainty needed to plan ahead and safely relaunch trading over the coming months.
Self-Employment Income Support Scheme (SEISS)
Budget 2021 has confirmed details of a fourth grant. This will be 80% of three months’ average trading profits to be claimed from late April 2021. Payment will be in a single instalment capped at £7,500 in total and will cover the period February to April 2021. The scheme has been extended to those who have filed a 2019/20 self assessment tax return prior to 3 March 2021. This means that the newly self-employed from April 2019 now qualify subject to satisfying the other conditions.
A fifth and final grant was announced and can be claimed from late July 2021 to cover the period May to September 2021. This grant will be determined by a turnover test. Where the self-employed business turnover has fallen by 30% the grant will be worth 80% of three months’ average trading profits capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850.
Business rates have been devolved to Scotland, Northern Ireland and Wales. All four nations have introduced 100% business rates relief mainly aimed at retail, leisure and hospitality businesses. Such businesses have not had to pay business rates from 1 April 2020 to 31 March 2021.
In a Scottish Budget update statement on 16 February, the Scottish Government proposed an extension to the relief for the retail, hospitality, leisure and aviation sectors until 31 March 2022.
The Chancellor has now announced a continuation of 100% business rates relief for eligible retail, hospitality and leisure properties in England to 30 June 2021. This will be followed by 66% business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties. Nurseries will also qualify for relief in the same way as other eligible properties.
Following the Chancellor’s announcement, the Welsh Finance Minister has extended the rates holiday for the retail, leisure and hospitality sectors in Wales for a further 12 months.
The government announced at Budget 2020 that it would conduct a fundamental review of the business rates system in England. The government’s objectives for the review are reducing the overall burden on business, improving the current business rates system and considering more fundamental changes in the medium-to-long term.
The government has recently announced the final report will be published in Autumn 2021 with an interim report published on 23 March.
Reduced VAT rate for hospitality sector
In July 2020, the government introduced a temporary 5% reduced rate of VAT for certain supplies of hospitality, hotel and holiday accommodation and admissions to certain attractions. In September 2020 the Chancellor extended the reduced rate to 31 March 2021. The government has now announced an extension of the reduced rate until 30 September 2021. To help businesses manage the transition back to the standard 20% rate, a 12.5% rate will apply for the subsequent six months until 31 March 2022.
Corporation tax rates
The main rate of corporation tax is currently 19% and it will remain at that rate until 1 April 2023 when the rate will increase to 25% for companies with profits over £250,000. The 19% rate will become a small profits rate payable by companies with profits of £50,000 or less. Companies with profits between £50,000 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective corporation tax rate.
The main rate of corporation tax has been 19% since 1 April 2017. The rate for the Financial Year beginning on 1 April 2020 was due to fall to 17% but the Chancellor reversed this decision in Budget 2020.
A temporary extension of the period over which businesses may carry trading losses back for relief against profits of earlier years to get a repayment of tax paid will have effect for company accounting periods ending in the period 1 April 2020 to 31 March 2022 and for tax years 2020/21 and 2021/22 for unincorporated businesses.
Trade loss carry back will be extended from the current one year entitlement to a period of three years, with losses being carried back against later years first.
For companies, after carry back to the preceding year, a maximum of £2 million of unused losses will be available for carry back against profits of the same trade to the earlier two years. This £2 million limit applies separately to the unused losses of each 12 month period within the duration of the extension.
For individuals a separate £2 million cap will apply to the extended carry back of losses made in each of the tax years 2020/21 and 2021/22.
The £2 million limit applies separately to the unused losses of each tax year within the duration of the extension. Income Tax payers will not be subject to a partnership-level limit.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.
Under this measure a company will be allowed to claim:
a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
This relief is not available for unincorporated businesses.
First year allowances for business cars from April 2021
Budget 2020 announced the extension of 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 writing down allowances (WDAs) for business cars.
The reduction in thresholds will mean that only business cars acquired with CO2 emissions of 0g/km will be eligible for first year allowances. Ultra-low emission vehicles which currently qualify for first year allowances if 50g/km or less will no longer qualify. They will be eligible for WDAs at the main rate (18%). Cars with CO2 emissions exceeding 50g/km will be eligible for WDAs at the special rate (6%).
In 2020 the government consulted on proposals to create up to ten Freeports across the UK. The government is now proposing a range of measures covering customs, tax reliefs, planning, regeneration funding and innovation to create Freeports as national hubs for global trade and investment across the UK.
A UK Freeport will be a geographical area with a diameter up to 45km which is closely linked to a sea port, airport or rail port. East Midlands Airport, Felixstowe & Harwich, Humber, Liverpool City Region, Plymouth and South Devon, Solent, Teesside and Thames have been successful in the Freeports bidding process for England.
The government is working with devolved administrations to establish Freeports in each of the nations.
Within the Freeport there will be a primary customs site and perhaps custom subzones. A customs site or subzone provides customs and tariff benefits such as:
duty deferral while goods remain on site
duty inversion if the finished goods exiting the Freeport attract a lower tariff than their component parts
subject to the UK’s trade agreements, customs duty exemption on goods that are imported into a Freeport, processed into finished goods and subsequently re-exported
simplified import procedures.
Freeports may also have one or more tax sites within which tax reliefs will apply. The aim is for a single site and up to three tax sites may be allowed but the total area of the site(s) must not exceed 600 hectares. The tax site will likely be located on primarily underdeveloped land to generate new, additional productive activity in Freeport locations.
The intention is to offer:
Stamp Duty Land Tax relief on land purchases within Freeport tax sites in England where that property is to be used for qualifying commercial activity
a 10% rate of Structures and Buildings Allowance rather than the 3% rate that applies for businesses constructing or renovating structures and buildings for non-residential use
enhanced tax relief for qualifying new plant and machinery assets for the full cost of the qualifying investment in the same tax period the cost was incurred
100% relief from business rates on certain business premises within Freeport tax sites in England.
Very broadly, the reliefs will apply for expenditure from various dates in 2021 to 30 September 2026.
In addition, a 0% rate of employer NICs on the salaries of any eligible employee working in the Freeport tax site is proposed. The relief is intended to be available for up to 9 years from April 2022.
Research and Development (R&D) tax relief
A cap on the amount of R&D tax credit which can be paid to a loss-making small or medium-sized enterprise (SME) will be introduced for accounting periods which commence on or after 1 April 2021.
Prior to the introduction of the cap, loss-making SMEs incurring qualifying expenditure on R&D activities are allowed to make a claim to surrender the unrelieved loss for a payable tax credit of up to 14.5%. For accounting periods commencing on or after 1 April 2021, payable tax credits are restricted to £20,000 plus three times the company’s relevant expenditure on workers.
Relevant expenditure on workers is the company’s PAYE and NICs for the period and importantly this is the company’s whole PAYE and NIC liability. In addition, if the company is supplied with workers by a connected company the relevant workers’ expenditure is extended to include a proportion of those worker costs.
Some companies which create or manage intellectual property and spend less than 15% with connected persons on R&D qualifying expenditure will be exempt from this cap.