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Coronavirus – Business support updates 13 May 2020

Wednesday, May 13th, 2020

Easing back from lock-down

Boris Johnson made his long-awaited statement on the government’s plans to ease lock-down (7pm, Sunday 10 May 2020). No great surprises and we have included a brief business-related summary in this post.

In his address he said:

And the first step is a change of emphasis that we hope that people will act on this week.

We said that you should work from home if you can, and only go to work if you must.

We now need to stress that anyone who cannot work from home, for instance those in construction or manufacturing, should be actively encouraged to go to work.

And we want it to be safe for you to get to work. So, you should avoid public transport if at all possible – because we must and will maintain social distancing, and capacity will therefore be limited.

So, work from home if you can, but you should go to work if you cannot work from home.

And to ensure you are safe at work we have been working to establish new guidance for employers to make workplaces COVID-secure.

And when you do go to work, if possible do so by car or even better by walking or bicycle. But just as with workplaces, public transport operators will also be following COVID-secure standards.

There are copious instructions for employers, on safeguarding the workplace, and these can be found on the gov.uk website.

 

On your bike…

Last week the government announced a £2bn package to create a new era for cycling and walking.

As walking and cycling are two of the most effective ways to get from A to B whilst respecting social distancing measures, this announcement is good news.

In the news story published at the time of the announcement, changes to be undertaken are summarised as follows:

Following unprecedented levels of walking and cycling across the UK during the pandemic, the plans will help encourage more people to choose alternatives to public transport when they need to travel, making healthier habits easier and helping make sure the road, bus and rail networks are ready to respond to future increases in demand.

The government will fund and work with local authorities across the country to help make it easier for people to use bikes to get around – including Greater Manchester, which wants to create 150 miles of protected cycle track, and Transport for London, which plans a “bike Tube” network above Underground lines.

Fast-tracked statutory guidance, published today and effective immediately, will tell councils to reallocate road-space for significantly increased numbers of cyclists and pedestrians. In towns and cities, some streets could become bike and bus-only while others remain available for motorists. More side streets could be closed to through traffic, to create low-traffic neighbourhoods and reduce rat-running while maintaining access for vehicles.

 

Vouchers will be issued for cycle repairs, to encourage people to get their old bikes out of the shed, and plans are being developed for greater provision of bike fixing facilities. Many more will take up the Cycle to Work scheme, which gives employees a discount on a new bike.

The final statement, regarding the Cycle to Work Scheme, could be a relevant option for employers to consider as there are tax benefits for employees.

 

Chancellor extends Furlough scheme

The Chancellor announced further support for employers (12 May 2020) by extending the Coronavirus Job Retention Scheme (CJRS) until the end of October 2020.

This will be a welcome change for those business owners endeavouring to find a constructive way to manage the present lock-down and other disruptions and emerge from the process with a viable business.

Details announced to CJRS today are:

  • Support will continue until the end of October 2020.
  • Furloughed workers will continue to receive 80% of their current salary up to the existing £2,500 maximum.
  • New flexibility will be introduced from August 2020 with the intention of getting employees back to work. Initially, part-time.
  • From the same date, 1 August 2020, employers may be asked to contribute.

 

Regarding the August changes the Chancellor said:

As we reopen the economy, we need to support people to get back to work. From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.

Detailed information regarding the new flexible approach – part-time working – will be published towards the end of May 2020.

Employers will need to factor these changes into their business plans as we emerge, all-be-it slowly, from lock-down.

Claim now for the Self-Employed grant

HMRC have now updated their instructions regarding the claims process for the Self-Employed Income Support Grant (SEISS).

Originally, the grants were promised – for eligible individuals – for early June 2020.

The good news? You can now make claims from today for payment this month IF you qualify for the SEISS.

This involves checking to see if you are eligible. You will need your Unique Tax Reference number and NIC number to do this. You will then be advised if you are eligible to claim and when you should apply.

 

MTD – The biggest change in tax administration for 20 years – are you ready?

Monday, October 15th, 2018

In 2015 the Government launched its plan to improve the administration of tax in the UK. This plan, called ‘Making Tax or Digital’ or ‘MTD’ will change the way we file tax returns and how we record and store relevant data to be able to calculate our tax liabilities.

Our FAQs below will help to explain what is happening and how it will affect you.

What is Making Tax Digital?

MTD is HMRC’s plan for moving the calculation and collection of taxes to an online or ‘digital’ format. This process will have to take place using MTD compatible software – More on which later. HMRC’s aim is to make the collection of tax more efficient and to reduce the tax calculation errors which cost the Treasury in excess of £9bn a year. 

Who does it affect?

From 1 April 2019 MTD will be mandatory for VAT registered businesses who have a taxable turnover above £85,000, which is the current VAT threshold.

Is MTD only applicable to VAT registered businesses?

No. In the future, MTD will also become mandatory for the self-employed who are not VAT registered, property landlords and companies paying corporation tax who are not included in the first phase. The implementation dates for other businesses have not been confirmed but is likely to be from 2020 or soon after.

Will MTD for VAT change the way I need to record and submit VAT data?

No. The deadlines for submitting and paying your VAT will remain the same and the VAT related information you collect and record will not be changing. 

What is ‘MTD Compatible Software’?

This is accounting software which enables the exchange of accounting and tax data between your system and HMRC’s MTD system. This software includes online accounts packages such as Xero. Excel spreadsheets can be used providing these link to appropriate bridging software to enable you to send and receive data to HMRC.

How can Kingscott Dix help me with MTD?

We can talk you through the changes MTD will bring and how these will affect you.

Kingscott Dix can review your existing accounting systems and advise on whether these will be MTD compatible.  Where required, we can help you to transfer your accounting records onto a MTD/cloud accounting package. For more information about how we can help with your accounts software, see our Accounting and Cloud Integration page.

For more MTD details contact Kingscott Dix at:

Gloucester Office
T: 01452 520 251
E: kdg@kingscott-dix.co.uk

Cheltenham Office
T: 01242 679 099
E: kdc@kingscottdix.co.uk

Tax security deposits to be extended

Tuesday, July 17th, 2018

Continuing the theme from last week’s blog post, we have listed details of a forthcoming change to the taxation of companies that were disclosed in the draft clauses published last week for the forthcoming budget. The change outlined expands the rights of HMRC to demand a security deposit from “at risk” tax payers.

In their draft notes HMRC say:

HMRC can require some businesses to provide a security, in the form of cash or a performance bond, where this is considered necessary to protect the revenue. Securities may be required where a taxpayer has a poor compliance record and in “phoenix” type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts. 

HMRC already has powers to require security in relation to some areas of business tax, including VAT and PAYE. However, there is no similar provision in respect of corporation tax liabilities or deductions made by contractors on account of their subcontractors’ income tax under the construction industry scheme. The government intends to extend the existing securities regime to these areas to address these gaps in the coverage of the regime and strengthen HMRC’s ability to deal effectively with potential defaulters

Security deposits are normally requested when a company is liquidated owing monies to HMRC, and the directors then re-establish the trade in a new company, perhaps using assets purchased from the old firm’s liquidator – a so-called “phoenix arrangement”.

From Newco’s point of view, being required to lodge a hefty deposit with HMRC could be terminal if funding is not available. However, recent First Tier Tribunal cases have supported appeals from taxpayers when they can demonstrate that the owners of Newco were not directly responsible for any mis-management of Oldco. If you receive a request for a security deposit an appeal may be appropriate.  

Do not fall for spoof emails from the taxman

Thursday, July 12th, 2018

New figures show that HM Revenue and Customs (HMRC) requested a record 20,750 malicious sites to be taken down in the past 12 months, an increase of 29% on the previous year.

Despite a record number of malicious sites being removed, HMRC is warning the public to stay alert as millions of taxpayers remain at risk of losing substantial amounts of money to online crooks. The warning comes as Scam Awareness month, run by Citizens Advice, draws to a close.

HMRC has brought in cutting edge technology to tackle cyber-crime and target fraudsters. However, the public needs to be aware and report phishing attempts to truly defeat the criminals.

Genuine organisations like banks and HMRC will never contact people out of the blue to ask for their PIN, password or bank details.

Accordingly, people should never give out private information, download attachments, or click on links in emails and messages they weren’t expecting.

The most common type of scam is the ‘tax refund’ email and SMS. HMRC has confirmed that it does not offer tax refunds by text message or by email.

HMRC has also been trialling new technology which identifies phishing texts with ‘tags’ that suggest they are from HMRC and stops them from being delivered. Since the pilot began in April 2017, there has been a 90% reduction in people reporting spoof HMRC-related texts. This innovative approach netted the cyber security team with the Cyber Resilience Innovation of the Year Award in the Digital Leaders (DL100) Awards.

In November 2016, the department implemented a verification system, called DMARC, which allows emails to be verified to ensure they come from a genuine source. The system has successfully stopped half a billion phishing emails reaching customers. This initiative has saved the public more than £2.4 million by tackling fraudsters that trick the public into using premium rate phone numbers for services that HMRC provide for free. Scammers create websites that look similar to HMRC’s official site and then direct the public to call numbers with extortionate costs.

HMRC has successfully challenged the ownership of these websites, masquerading as official websites, and taken them out of the hands of cheats. HMRC is working with the National Cyber Security Centre to further this work and extend the benefits beyond HMRC customers.

Readers of this post who are concerned by any emails or text they have received should contact HMRC by phone to check and see that they are genuine. Clients in receipt of similar communications should contact us before responding.

 

Advance notice

Tuesday, July 10th, 2018

Last week the Treasury issued draft clauses for the forthcoming Finance Bill (to be published after the Autumn Budget later this year). These will set the scene for tax matters 2019-20 and beyond.

The aim of the advance notice is to give interested parties a chance to comment on the contents before government starts the formal process of processing the legislation through Parliament.

The draft clauses include numerous technical changes to legislation that are outside the scope of this article, but a cross-section of the more “interesting” disclosures are set out below:

  • Technical changes to various benefit arrangements for cars and vans.
  • Exemption from benefit charges if employees provide free vehicle-battery charging facilities for employees at work.
  • HMRC are to remove requirement for employers to check receipts for subsistence claims by employees using approved HMRC rates.
  • Employees will be able to nominate beneficiaries outside their close family members to receive their death in service benefits.
  • Non-UK resident property businesses will be subject to UK corporation tax and not income tax as at present.
  • The rent-a-room relief is to be amended to include a non-exclusive residence clause. This will mean that to continue to qualify for the £7,500 tax-free allowance, persons letting a room in their home will have to be in residence when they let.

Bear in mind that these are suggested clauses and are subject to change before the formal Finance Bill is published later this year.

Construction drawn into VAT reverse charge process

Friday, July 6th, 2018

It would seem, that HMRC is keen to plug the apparent drain from VAT receipts when contractors and sub-contractors charge their customers VAT and then go missing, keeping the VAT for themselves. This is described in legislation as “missing trader fraud”.

Their preferred method for dealing with this abuse is to make customers responsible for accounting for the relevant VAT charge rather than the supplier of construction services. This is an extension to the reach of the “reverse charge” scheme.

It has been used in the past to tackle similar VAT avoidance tactics. For example, a reverse charge was introduced for:

  • mobile telephones and computer chips with effect from 1st June 2007,
  • emissions allowances with effect from 1st November 2010.

Further reverse charge measures were introduced for gas and electricity with effect from 1st July 2014 and for electronic communications with effect from 1st February 2016.

The government are considering this extension of the reverse charge process to the construction sector from 1 October 2019.

According to HMRC:

The risk of fraud in the construction industry is principally centred around the supply of construction services between construction businesses in the supply chain and this instrument, therefore, does not require other types of business to apply the reverse charge when receiving construction services and there is also no reverse charge requirement in relation to building and construction materials that are supplied separately and independently of construction services.

They conclude:

Reverse charge accounting makes it impossible for fraudsters to perpetrate missing trader fraud because the customer rather than the supplier accounts for the VAT direct to HMRC. The introduction of the reverse charge in this business sector will mean that businesses will need to adapt their systems and manage their cash flow differently. Due to the large number of small businesses potentially affected by a reverse charge for construction services the government has given a long lead-in time to help businesses adjust, having announced in Autumn 2017 the intention to introduce legislation which will come into force in Autumn 2019.

Making Tax Digital

Friday, July 6th, 2018

A reminder that from April 2019, HMRC’s much vaunted Making Tax Digital (MTD) scheme will apply to certain businesses.

The April 2019 launch will only apply to VAT registered traders. More specifically, MTD will apply to businesses who have a turnover above the VAT threshold – the smallest businesses will not be required to use the system, although they can choose to do so voluntarily.

Live pilot studies are already being carried out and the first businesses have started keeping digital records and providing updates to HMRC to test and develop the MTD service for income tax and NICs. HMRC is keen to expand this pilot.

HMRC announced in 2017:

We will start to pilot Making Tax Digital for VAT starting with small-scale, private testing, followed by a wider, live pilot starting in Spring 2018. This will allow for well over a year of testing before any businesses are mandated to use the system. No business will be mandated before 2019.

From April 2019, businesses above the VAT threshold will be mandated to keep their records digitally and provide quarterly updates to HMRC for their VAT.

We will keep an eye on the results of the pilot studies and monitor the progress of accounting software providers to create the necessary links with HMRC’s digital systems.

If you are registered for VAT, have annual turnover above the current £85,000 limit, and have not yet considered how you are going to cope with MTD, please call so that we can help you research your options.

Self-employed tax bills

Friday, July 6th, 2018

Whether you pay income tax or National Insurance, the effect on your cash flow is the same. The payments are a necessary part of our obligation to fund the activities of State, but the self-employed are often surprised that their bi-annual tax payments cover both “taxes” – NIC and income tax.

The weekly NIC Class 2 contribution is included, presently £2.95 per week, also Class 4 contributions: these amount to 9% of taxable income in excess of £8,424 and up to £46,350, and 2% on earnings above £46,350.

Accordingly, the combined rate of State dues on self-employed earnings in excess of £8,424 is potentially 29% – 20% basic income plus 9% Class 4 NIC – and over £46,350 a combined rate of 42%. Although in practice some of the income over £8,424 may be covered by other personal tax allowances, these combined rates illustrate the true impact of income tax and National Insurance to be paid.

Self-employed traders with significant taxable earnings should therefore expect to pay more than the usual rates of income tax when they contemplate settlement of their annual self-assessment bill and have funds in reserve to meet these combined liabilities.

Director minimum salary levels 2018-19

Friday, July 6th, 2018

Many director shareholders take a minimum salary and any balance of remuneration as dividends. This tends to reduce National Insurance Contributions (NIC), and in some cases income tax.

The planning strategy is to pay a salary at a level that qualifies the director for state benefits, including the state pension, but does not involve payment of any NIC contributions.

For 2018/19 the NIC rate is set at 0% for annual earnings in the range of £6,032 to £8,424 inclusive. Earnings in this band range qualify for NIC credit for state benefit purposes. At up to £116 per week (£6,032 p.a.) no NIC credit is obtained for state benefit purposes. At over £162.01 per week (£8,424 p.a.) employees’ NIC starts to be paid at the rate of 12%.

Directors, who are first appointed during a tax year, are only entitled to a pro rata annual earnings band that depends on the actual date appointed. Care needs to be taken in these circumstances not to incur an unexpected liability to pay NIC.

Directors resigning during the year still have the full annual earnings band quoted above, and so care is needed to ensure that earnings for the whole tax year are within the range of £6,032 to £8,424.

Careful planning is also required to ensure that any impact of the National Living Wage regulations is considered, this may be particularly important for women who would like to claim statutory maternity benefit at some future date.

Directors considering their planning options for the first time are advised to take professional advice when setting the most tax/NIC efficient salary. We, of course, would be delighted to help.

Tax Diary July/August 2018

Friday, July 6th, 2018

1 July 2018 – Due date for corporation tax due for the year ended 30 September 2017.

6 July 2018 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2018 – Pay Class 1A NICs (by the 22 July 2018 if paid electronically).

19 July 2018 – PAYE and NIC deductions due for month ended 5 July 2018. (If you pay your tax electronically the due date is 22 July 2018)

19 July 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2018.

19 July 2018 – CIS tax deducted for the month ended 5 July 2018 is payable by today.

31 July 2018 – Deadline for payment of second instalment self-assessment for 2017-18.

1 August 2018 – Due date for corporation tax due for the year ended 31 October 2017.

19 August 2018 – PAYE and NIC deductions due for month ended 5 August 2018. (If you pay your tax electronically the due date is 22 August 2018)

19 August 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2018.

19 August 2018 – CIS tax deducted for the month ended 5 August 2018 is payable by today.