Archive for April, 2020

Do not forget to file returns for benefits and expenses

Thursday, April 30th, 2020

Aside from the plethora of schemes to support businesses during the coronavirus disruption, employers should not forget that there is a raft of filing obligations that still need to be met. This post lists the various employer reporting obligations regarding employee benefits and expenses for 2019-20.

 

The following table is reproduced from the government website:

 

What you need to do Deadline
Submit your P11D forms online to HMRC 6 July following the end of the tax year
Give your employees a copy of the information on your forms 6 July
Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b) 6 July
Pay any Class 1A National Insurance owed on expenses or benefits Must reach HMRC by 22 July (19 July if you pay by cheque)

 

1. P11Ds – these are the forms that advise HMRC of the benefits provided by employers to employees. For example, company cars, health insurance, etc.

2. Class 1A NIC is an employer National Insurance charge usually based on 13.8% of the cumulative benefits advised on P11D submissions for employees.

Employers will be relieved to note that any Class 1A NIC paid is a deduction for tax purposes.

And do not forget the P60s

Employers have a statutory duty to provide employees with a copy of their P60 – a statement of gross pay and tax deducted – for the tax year 2019-20, on or before 31 May 2020.

We can help

Clients to whom we provide payroll and associated services will be glad to know that we will complete all of the above for you; unless you have other arrangements to handle these tasks in-house.

Please call if you need help.

Aggressive rent collection to be banned

Tuesday, April 28th, 2020

High street shops and other companies under strain will be protected from aggressive rent collection and asked to pay what they can during the coronavirus pandemic.

In a recent press release a government spokesperson said:

“The majority of landlords and tenants are working well together to reach agreements on debt obligations, but some landlords have been putting tenants under undue pressure by using aggressive debt recovery tactics.

To stop these unfair practices, the government will temporarily ban the use of statutory demands (made between 1 March 2020 and 30 June 2020) and winding up petitions presented from Monday 27 April, through to 30 June, where a company cannot pay its bills due to coronavirus. This will help ensure these companies do not fall into deeper financial strain. The measures will be included in the Corporate Insolvency and Governance Bill, which the Business Secretary Alok Sharma set out earlier this month.

Government is also laying secondary legislation to provide tenants with more breathing space to pay rent by preventing landlords using Commercial Rent Arrears Recovery (CRAR) unless they are owed 90 days of unpaid rent.

This will further safeguard the high street and millions of jobs by helping to protect them from permanent closure during this time. However, while landlords are urged to give their tenants the breathing space needed, the government calls on tenants to pay rent where they can afford it or what they can in recognition of the strains felt by commercial landlords too.”

Under these measures, any winding-up petition that claims that the company is unable to pay its debts must first be reviewed by the court to determine why. The law will not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay is the result of COVID-19.

The new legislation to protect tenants will be in force until 30 June and can be extended in line with the moratorium on commercial lease forfeiture.

Legislation will also be brought forward to prevent landlords using commercial rent arrears recovery (CRAR) unless 90 days or more of unpaid rent is owed.

The Financial Conduct Authority, the Financial Reporting Council and the Prudential Regulatory Authority have also issued a joint statement encouraging investors and lenders to consider the issues arising directly from the COVID-19 pandemic in responding to potential breaches of covenants.

Emergency legislation already introduced by government includes a suspension of forfeiture rights, which prevents all commercial tenants from being removed from their properties until 30 June. The government has also announced new insolvency measures which will provide further support to businesses impacted by the COVID-19 pandemic.

Carry-over of unused annual leave

Thursday, April 23rd, 2020

The rules that would have limited the rights of employees in key industries to carry forward any unused annual leave will be delighted by the announcement made two weeks ago. This will mainly apply to workers in key industries such as food and healthcare.

Workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next two leave years, under measures introduced by Business Secretary Alok Sharma Friday 27 March.

Currently, almost all workers are entitled to 28 days holiday including bank holidays each year. However, most of this entitlement cannot be carried between leave years, meaning workers lose their holiday if they do not take it.

There is also an obligation on employers to ensure their workers take their statutory entitlement in any one year – failure to do so could result in a financial penalty.

The new regulations will allow up to four weeks of unused leave to be carried into the next two leave years, easing the requirements on business to ensure that workers take statutory amount of annual leave in any one year.

This will mean staff can continue working in the national effort against the coronavirus without losing out on annual leave entitlement.

The changes will also ensure all employers affected by COVID-19 have the flexibility to allow workers to carry over leave at a time when granting annual leave could leave them short-staffed in some of Britain’s key industries.

COVID-19 – support grants and loans update

Tuesday, April 21st, 2020

This week has seen a flurry of changes to the various government support schemes. We have summarised a few in this article.

Coronavirus Job Retention Scheme (CJRS)

The HMRC portal – where you formally register your claim – should be live as from 20 April 2020. HMRC have published a “user” guide to the claims process. In the general information about the scheme the guide says:

  • To be eligible for CJRS an employer must agree with the employee that they are a ‘furloughed worker’.
  • Employees must be notified that they have been furloughed.
  • Employees must be furloughed for a minimum of three weeks.
  • The employee cannot do any work for the employer that has furloughed them.
  • You can claim 80% of wages up to a maximum of £2,500 per month per furloughed employee.
  • A separate claim is needed for each PAYE scheme.
  • You can only claim for furloughed employees that were on your PAYE payroll on or before 19 March 2020.
  • An RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
  • You must have a UK bank account.

The Chancellor has also confirmed that due to the extension of the lock-down period for a further three weeks, claims can be extended to 30 June 2020.

Coronavirus Business Interruption Loan Schemes (CBILS)

A reminder that banks cannot ask for a personal guarantee if the loan is below £250,000.

For loans over £250,000, personal guarantees will be limited to 20% of any amount outstanding on the CBILS loan after any recoveries from business assets have been considered.

Having problems securing a loan from your bank?

Please call if you would like our help progressing loans with your bank.

Coronavirus – Business update

Monday, April 20th, 2020

Coronavirus Job Retention Scheme (CJRS)

Employers will be relieved that the waiting is over, as of 5.30am this morning (20 April 2020), they can login to HMRC’s new portal and claim their CJRS rebate for the first pay periods. HMRC have promised that money will be in employers’ bank accounts within six working days of registering their claims.

And just in case you missed the announcement last week, the CJRS scheme has been extended for a further month – to the end of June 2020. Claims are therefore available for a potential four months, from 1 March 2020 to 30 June 2020.

Early indications seem to be mixed, but those who have managed to login to the portal have found the process fairly straight forward.

If you are encountering problems, there is an HMRC helpline. Apparently, 5000 HMRC staff will be manning the phone lines, but as there are many more businesses that are likely to be making claims expect holding delays if you need to call.

For those in need, the information you will need to make a claim is:

  1. The number of employees being furloughed
  2. The dates employees have been furloughed to and from
  3. Details of employees – the name and National Insurance Number of each furloughed employee
  4. Your employer PAYE scheme reference number
  5. Your Corporation Tax Unique Taxpayer Reference, Self-Assessment Unique Taxpayer Reference, or Company Registration Number as appropriate for your entity
  6. Your UK bank account details
  7. Your organisation’s registered name
  8. Your organisation’s address

You should make sure you have this information ready before you access the system to make a claim.

Also announced today:

Government Future Fund

The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.

These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.

The scheme will be delivered in partnership with the British Business Bank.

You are eligible If:

  • your business is based in the UK
  • your business can attract the equivalent match funding from third party private investors and institutions
  • your business has previously raised at least £250,000 in equity investment from third party investors in the last 5 years

The Future Fund will launch in May 2020. Further details about this scheme will be published in due course.

Safety first options for manufacturing and retail sectors

Thursday, April 16th, 2020

Both of these sectors require people to work in close proximity to each other. Government has issues broad guidelines to reduce the risks for workers from Coronavirus.

Manufacturing and processing businesses

Manufacturing plays an important role in the economy. It can continue if done in accordance with the social distancing guidelines wherever possible.

Where it is not possible to follow the social distancing guidelines in full in relation to a particular activity, you should consider whether that activity needs to continue for the business to continue to operate, and, if so, take all the mitigating actions possible to reduce the risk of transmission between staff.

If you decide the work should continue, staff should work side by side or facing away from each other rather than face-to-face if possible.

You should increase the frequency of cleaning procedures, pausing production in the day if necessary for cleaning staff to wipe down workstations with disinfectant.

You should assign staff to the same shift teams to limit social interaction.

You should not allow staff to congregate in break times; you should consider arrangements such as staggered break times so that staff can continue to practice social distancing when taking breaks.

You should communicate to all staff that they should wash their hands with soap and water for 20 seconds or more at the beginning and end of every break, when they arrive at work and before they leave. To help with this, you should consider adding additional pop-up handwashing stations or facilities, providing soap, water and/or hand sanitiser.

When entering and leaving, you should ensure your workforce stays 2 metres apart as much as possible. To protect your staff, you should remind colleagues daily to only come into work if they are well and no one in their household is self-isolating.

Retail

You run a retail outlet which, in line with the government advice on retail, remains open.

To protect staff and customers, you should manage entry into the store, only allowing a limited number of people into your store at any given time.

You should put up signage to ask customers with symptoms not to enter the store, and to remind both staff and customers to always keep 2 metres from other people, wherever possible.

You should regularly encourage staff to wash their hands with soap and water as often as possible and for 20 seconds every time.

If feasible, you should also put up plexiglass barriers at all points of regular interaction to further reduce the risk of infection for all parties involved, cleaning the barriers regularly. You should still advise staff to keep 2 metres apart as much as possible.

To protect your staff, you should remind colleagues daily to only come into work if they are well and no one in their household is self-isolating.

More Coronavirus tax support options

Wednesday, April 15th, 2020

Apart from the main business and personal tax reliefs that have received publicity in the past few weeks, a number of supplementary support items have been introduced. We have highlighted two in this post.

 

Claiming Child Benefits for new-borns

General Register Offices are currently operating with reduced capacity and with government guidance to social distance and stay at home, new parents are advised not to visit them. However, they can still claim Child Benefit without having to register their child’s birth first to ensure that they do not miss out.

HMRC said:

“First time parents will need to fill in Child Benefit Claim form CH2 found online and send it to the Child Benefit Office. If they haven’t registered the birth because of COVID-19, they should add a note with their claim to let us know.”

If you already claim Child Benefit, you can complete the form or add your baby’s details over the phone on 0300 200 3100. You will need your National Insurance number or Child Benefit number.

Note, Child Benefit claims can be backdated by up to 3 months.

Child Benefit payments increased from 6 April to a weekly rate of £21.05 for the first child and £13.95 for each additional child. Child Benefit is paid into a parent’s bank account, usually every 4 weeks.

Only one person can claim Child Benefit for a child. For couples with one partner not working or paying National Insurance contributions (NICs), making the claim in their name will help protect their State Pension.

 

New HMRC tax helpline is now open for calls

Business owners and self-employed individuals who are struggling to pay their tax can now ring a new helpline. The service allows any business or self-employed individual who is concerned about paying their tax due to coronavirus to get practical help and advice. Up to 2,000 experienced call handlers are available to support businesses and individuals when needed.

 

For those who are unable to pay due to coronavirus, HMRC will discuss your specific circumstances to explore:

  • agreeing an instalment arrangement
  • suspending debt collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately

The helpline number is 0800 024 1222 – and is an addition to other HMRC phone contact numbers. Opening hours are Monday to Friday 8am to 4pm. The helpline will not be available on Bank Holidays.

Tax planning options for 2020-21

Thursday, April 9th, 2020

The 6th April marks the beginning of a new tax, and for the coming year, unprecedented challenges. As with most things in life, problems are a necessary precursor to finding solutions. We have listed below a few reminders of the issues you may want to consider as worthy of including in your 2020-21 tax planning to-do list.

 

We are all likely to experience a drop in earnings this year. The scale of the reduction will vary, but very few will be able to maintain their business profits or personal income at pre-COVID-19 levels. Apart from the obvious reduction in taxes paid due to the reduction, what else should we consider? We have listed below just two options that you may like to consider.

 

1.If you are Self-employed

Most self-assessment tax falling due for payment in 2020 will include payments on account for 2019-20. HMRC has indicated that it will allow you to defer the 31 July 2020 payment until 31 January 2021. However, if you can demonstrate that your actual profits for 2019-20 were lower than those for 2018-19, you can formally apply to reduce your payments on account.

Action note: to do this prepare your accounts taxed in 2019-20 (usually the year ending 31 March or 5th April 2020) as soon as you can. We can then make the necessary postponement election for you based on the results – if they show a drop in profits.

A BONUS – if you prepare accounts quickly, you can also use the figures to support any application for bank funding to see you through the COVID-19 disruption.

 

2. Reduce benefit-in-kind charges

If your business is closed due to COVID-19, it is likely that directors and employees may not have been using their company cars since the lock-down started to bite in the last two months. Accordingly, if you can confirm that company cars were not made available to directors and employees in this time, and record this on your P11D return for 2019-20, then taxable benefits for 2019-20 can be reduced.

As directors and employees will have estimated benefit in kind amounts adjusted for in their tax codes for 2019-20, based on information for 2018-19, any resulting reduction could potentially create refunds of tax for 2019-20.

Action note: let us have the details of car usage asap. We can then file P11D’s sooner rather than later and apply for any overpayments in your tax paid for 2019-20.

Our advice?

When profits and income reduce this should encourage us to prepare accounts and tax returns quickly in order to challenge any overpayments of tax and NIC in previous years.

And as a bonus, the information produced will support applications to banks and other parties for financial support during this difficult time.

Please get in touch as soon as you can if you would like us to fast-track your accounts and tax return for 2019-20 and to quantify, and recover, any taxes you may have overpaid.

How to apply for a Business Interruption Loan

Tuesday, April 7th, 2020

The British Business Bank has updated its guidance on how to apply for the recently changed Coronavirus Business Interruption Loan Scheme (CBILS). A summary follows;

Who can you apply to?

Most of the UK High Street banks can provide a CBILS loan facility. As your present bankers already know you and your business, for most businesses, making an application to your existing bank would seem to be appropriate.

Apply online

Due to the present disruption – phone lines are extremely busy and it’s unlikely you will be able to visit a branch – make your application online.

What about personal guarantees?

Under the scheme, lenders will not take personal guarantees if your loan application is below £250,000.

For facilities above £250,000, personal guarantees may still be required, at a lender’s discretion, but:

 

  • Guarantees will not include your home – they will exclude any property that is considered to be the residence that qualifies for capital gains tax Principal Private Residence Relief, and
  • Recoveries under these guarantees are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.

Who can apply?

To apply, your business must:

  • Be UK-based in its business activity
  • Have an annual turnover of no more than £45 million
  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic
  • Self-certify that it has been adversely impacted by the coronavirus (COVID-19).

 

The third point in this list is critical.

What your bank will need from you

Apart from completing the online application, lenders will need:

  1. The amount you want to borrow.
  2. Why you need the loan, what the money is to be used for.
  3. The repayment period, what term are you requesting, and
  4. Can you afford the repayments?

Supporting documents that may be required

You will need to provide certain evidence to show that you can afford to repay the loan. This is likely to include:

  • Management accounts
  • Cash flow forecast
  • Business plan
  • Historic accounts
  • Details of assets

The above requirements will vary from lender to lender. If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business.

Note: For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.

We can help

If you are considering a loan we can help you gather together the forecasts and other documentation you will need. We can also help you decide on the level of support you will need and how long you will need to repay the loan.

Dividends excluded from job support scheme calculations

Friday, April 3rd, 2020

When first announced as a news story, published by government 26 March 2020, information regarding the support scheme for the self-employed included a telling paragraph. It said:

Those who pay themselves a salary and dividends through their own company are not covered by the scheme [the self-employed scheme] but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

Clearly, this confirms that claims under the Coronavirus Job Retention Scheme will be based on previously submitted payroll returns that include director’s salaries (but not dividends).

Directors that have taken the lion’s share of their income in the form of dividends – and benefitted from significant NIC reductions for a number of years – will therefore be restricted in the amount of relief they can claim. Potentially, they will only be able to recoup up to 80% of their monthly salary – capped at £2,500 a month.

To make a claim, directors will need to furlough themselves. This is the new shorthand for laying yourself off. To qualify, you will also have to play no further active role in the business. For most directors this is a non-starter as directors, at the very least, have a legal responsibility to monitor and file ongoing returns to HMRC and Companies House, keep accounts up-to-date and manage numerous ongoing matters for their business.

What are the choices for directors?

If your company is unable to trade – perhaps one of the leisure, entertainment or other “closed down” service industries – you may be able to organise moth-balling activity in such a way that you can assert you are furloughed and collect 80% of your reported salary as a grant, up to the £2,500 limit.

If this does not meet your basic cash requirements there are other personal claims you can consider: Universal Credits or other relevant benefits.

If you want to consider ongoing trading, possibly at a reduced level, planning will be key. Directors will need to take care that they do not borrow money to support temporary losses if this results in insolvency. Insolvency in this respect means running out of retained profits and issued share capital.

Whatever your decision on these choices, please contact us, as planning and monitoring of your company finances will be paramount. The longer this disruption continues, the greater the strain and risk for small businesses will become.

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