Archive for July, 2021

The furlough cliff edge

Thursday, July 29th, 2021

Unless government has a change of heart the present furlough scheme will close 30 September 2021.

Businesses that have depended on this grant to hold teams together will – from 1 October – need to decide if business activity has increased sufficiently to maintain their workforces at current levels or consider redundancy options.

Planning is an obvious key requirement at this critical time.

Affected businesses should consider creating a forward estimate of sales and costs and see how these activity financials affect cash-flow and solvency.

One obvious difficulty in preparing these forecasts is trying to double guess the effectiveness of government efforts to control COVID disruption. The recent relaxation of social distancing rules may seem like a step in right direction but what if this overloads the NHS?

Vulnerable sectors remain the entertainment and hospitality trades. However, if further lockdown is required how will this affect business confidence and activity?

We must assume that uncertainty due to the COVID situation will remain with us for some time to come. Which elevates planning akin to sticking a pin on a map wearing a blindfold.

And yet plan we must…

Businesses that have survived thus far should take some comfort from their survival skills. We now have 18 months of hands-on experience to guide us as we contemplate what is to come.

If Richi Sunak starts to claw back the borrowings he has created to fund the furlough and other COVID related schemes – and if inflation starts to climb – his ability to provide additional grants is unlikely. Which means we must proceed on the assumption that from autumn 2021 we are on our own.

If you have concerns about the course of action you should take from October 2021, please call, we can help you consider your options.

Government acknowledges HGV driver shortage

Tuesday, July 27th, 2021

In an open letter to the UK logistics sector, the Government has announced an urgent initiative to resolve the mounting shortage of lorry drivers in the UK.

Following Brexit and the COVID-19 pandemic, thousands of EU nationals – who make up a significant proportion of workers in the UK logistics industry – are having to return to home countries.

The letter outlined measures to boost Heavy Good Vehicle (HGV) driver recruitment and retention rates in the logistics industry.

 

Driving test changes

By altering provisional license entitlement and simplified and single driving tests, the Department of Transport aims to increase the amount of driving tests by 500 a week, and in doing so, streamline the process significantly.

 

Financial aid

Businesses are likely to also receive financial support regarding training, payment incentives and specialised apprenticeships to boost the supply of drivers to the industry.

In addition, the Department for Work and Pensions will be supporting prospective jobseekers to become HGV drivers by collaborating with the haulage sector on content for JobHelp, the Government’s virtual platform to advise and guide people looking for work.

 

Working conditions

The government is looking to improve working conditions to improve retention and encourage former lorry drivers back into the sector. By working with Highways England and other businesses, increased day and overnight facilities are to be created. These measures are in addition to a recent relaxation of drivers’ hours and supermarket delivery times. This was, however, met with criticism, as longer hours would likely result in tired drivers, increasing the risk of road accidents.

The chief executive to the RHA, in response, said: “This is a step in the right direction long-term, but it doesn’t address the critical short-term issues we’re facing.

“The problem is immediate, and we need to have access to drivers from overseas on short-term visas.”

Time to check Minimum Wage Rates?

Thursday, July 22nd, 2021

HM Revenue and Customs (HMRC) has issued a statement urging students and other summer workers to check that they are being paid the correct National Minimum Wage (NMW) rates.

In the 2020/21 tax year, HMRC helped over 150,000 workers across the UK to recover over £16 million remuneration that was due to them because incorrect NMW rates had been used.

Most workers should be paid the correct NMW and National Living Wage rates. This includes temporary seasonal staff on zero-hour and short-term contracts working in bars, hotels, shops and warehouses.

These workers have been reminded by HMRC that minimum wage rates are reviewed and updated at the end of every tax year. This could mean that many people could be underpaid by their employers who have not updated payroll systems with the current NMW rates.

Steve Timwell, Director of Individuals and Small Business Compliance at HMRC, said: “We want to ensure that seasonal workers and students are being paid what they are entitled to and, as the economy reopens, help employers if they are unsure of the rules.”

National Minimum Wage hourly rates from 1 April 2021:

  • £8.91 – age 23 or over (National Living Wage)
  • £8.36 – age 21 to 22
  • £6.56 – age 18 to 20
  • £4.62 – age under 18
  • £4.30 – apprentice

HMRC explains: The two most common causes of minimum wage underpayment are deductions and unpaid working time. For example:

  • Expenses for tools or equipment needed for the job.
  • Cost of uniform or clothing connected with the job.
  • Travelling time between work locations.
  • Training time.

Other reasons for underpayment can include employee tips not being included in their wages, and an employee moving to a higher rate per hour after a birthday.

Employers who pay workers less than their entitled amount must pay arrears of wages to the employee.

If your business needs help or advice, contact us today.

Claiming for work-related expenses

Tuesday, July 20th, 2021

The tax office is now open for claims from employees that have incurred work-related costs for the year to 5 April 2021 and have not been – and will not be – reimbursed by their employers.

How to make a claim – the DIY approach

You can claim online, by post or by phone.

This will involve completing application forms and you will need full details of money you have laid out in the tax year.

You can also claim for previous years within the permitted deadlines.

And if this process seems like too much trouble, we can help…

 

How much can you claim?

There are two choices. You can either gather all the receipts and other evidence to support your claim or you can claim HMRC’s flat rate allowances.

You will need to check that flat rate claims are available, but they generally cover expense claims for uniforms, work clothing and tools.

What can you claim for?

You can claim for:

  • Using your own vehicle for business mileage
  • Paying costs for using a company vehicle
  • Hotel and meal expenses
  • Use of your own home (providing a home office workspace for example)
  • Uniforms, work clothing and tools

In fact, if your employer has asked you to pay for any costs associated with your work for that employer, you should be able to make a claim if you have not been reimbursed.

 

We can help.

If you are unsure how to work out what you can claim for or how to make a claim we can help. Please call so we can discuss your options.

Is inflation something to be concerned about?

Thursday, July 15th, 2021

Inflation is a measure of how much the value of currency depreciates each year. For example, if prices for a loaf of bread rise by 3% in a year, you would have to earn that extra 3% to continue to purchase bread, so your extra earnings would have no extra value.

According to the Bank of England, average price inflation rose by an average of 5.2% a year between 1950 and 2020. £10 in your purse or wallet in 1950 would now need to be £350.42 to have the same purchasing power.

The process is pernicious. As prices increase there is a tendency to try and buy now before prices increase. This increase in demand can further outstrip supply and push up prices even more.

The reverse applies if prices fall; this is known as deflation. There is a tendency to defer buying decisions in the hope that prices will fall further. This is a disaster for businesses as they must lower prices to win sales, become unprofitable, and if the process continues, become insolvent and forced to liquidate.

While earning keep pace with inflation the increasing number of £s in your pocket will help you maintain your purchasing power, but the increased earning will not allow you to buy more stuff.

If inflation outstrips earnings, then you will have less purchasing power.

Inflation is a recent phenomenon. Between the seven hundred years 1200 and 1900, average inflation was low, only 0.4% per annum. In the next one hundred years, as the effects of industrialisation and increases in money supply took effect, average inflation was 4.4%.

If the Bank of England manages to keep inflation at the target rate of 2%, we should suffer no ill effects. The danger is if rates climb above 2% the BOE may need to increase interest rates – their prime instrument for reducing inflation – which means that we will all have to pay more to borrow money or finance our debts.

Is July 19th freedom-day?

Tuesday, July 13th, 2021

Next week, many of the present lockdown regulations in England are being relaxed. But cautionary guidance has also been published. It recommends:

  1. Meeting in well-ventilated areas where possible, such as outdoors or indoors with windows open.
  2. Wearing a face covering where you meet people you do not normally meet in enclosed and crowded spaces.
  3. Washing your hands with soap and water or using hand sanitiser regularly throughout the day.
  4. Covering your nose and mouth when you cough and sneeze.
  5. Staying at home if unwell, to reduce the risk of passing on other illnesses onto friends, family, colleagues, and others in your community.
  6. Considering individual risks, such as clinical vulnerabilities and vaccination status.

If anything has been learned in the last eighteen months, it is to expect the unexpected. Fingers crossed that the proposed relaxations in social distancing will not mean an unwelcome and unmanageable rise in hospital admissions.

Businesses in the hospitality and entertainment sectors will be holding their breath. Firstly, will government follow through with the stage 4 relaxations to COVID regulations on the 19th, and secondly, how long will they last?

Of course, there is no way of knowing. Which makes long-term planning difficult, but all business owners should keep a weather eye on the statistics on the coming months.

We recommend adopting a flexible planning process. Rather than fixing your financial plans, review and revive them on a regular basis. Key events that could impact your plans in the coming months could include:

  • Continuing COVID uncertainties,
  • Bank interest rate rises,
  • Continuing supply issues as we become adjusted to the EU withdrawal.

If you need help creating or revising your financial plans, please call, we can help.

Business rates overall for England

Thursday, July 8th, 2021

One of the largest fixed costs associated with business premises are rates payments to local authorities.

The present system for reviewing rates in England is somewhat antiquated, the last review in England was 2017.

The government had previously undertaken to move to more frequent revaluations, having introduced legislation to bring forward the next revaluations to 2021 – based on 2019 property values. Due to COVID, and to help reduce uncertainty for firms, this was delayed, with the next revaluation set to take effect in 2023 – based on 2021 values.

To regularise the process and move to a three-year review, the government are now undertaking a formal consultation that is timed to conclude Autumn 2021.

If the government are successful, perhaps we will move to a fairer and faster system for valuing rates based on the current use and value of properties rather than that applicable up to five years previously.

If, at the next rates review in England, your rates assessment is increased, you may be able to claim a transitional relief. This means that changes to your rates bill will be phased in gradually if you are eligible. Your council should automatically adjust your bill if you are eligible.

Additional rates reliefs currently available to business rates payers in England include:

  • Small business rates relief
  • Rural rates relief
  • Charitable rates relief
  • Enterprise zones
  • Exempted buildings and empty buildings relief
  • Hardship relief
  • Transitional relief
  • Retail discount
  • Local newspaper relief
  • Nurseries discount

Contact your local authority to make sure you are receiving any reductions to which you may be entitled. They will also be able to reassure you that you have had any COVID support grants that you may have been able to claim.

Furlough support changed 1 July 2021

Tuesday, July 6th, 2021

Employers will need to start contributing to work not done by furloughed employees from 1 July 2021.

The update from HMRC is reproduced below:

From 1 July 2021, the level of grant will be reduced, and you will be asked to contribute towards the cost of your furloughed employees’ wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

The table below shows the level of government contribution available in the coming months, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

Wage caps are proportional to the hours not worked.

May June July August September
Government contribution: wages for hours not worked 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 60% up to £1,875
Employer contribution: employer National Insurance contributions and pension contributions Yes Yes Yes Yes Yes
Employer contribution wages for hours not worked No No 10% up to £312.50 20% up to £625 20% up to £625
For hours not worked employee receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month

You can continue to choose to top up your employees’ wages above the 80% total and £2,500 cap for the hours not worked at your own expense.

If you still have employees on furlough now would be a good time to engage in a formal planning process to work out how your business will manage the transition back to you covering all wage costs from 1 October 2021.

Realistically, this should involve preparing a business forecast for at least the next twelve months.

We can help

Let us help you prepare the necessary forecasts and consider your options.

Tax Diary July/August 2021

Thursday, July 1st, 2021

1 July 2021 – Due date for Corporation Tax due for the year ended 30 September 2020.

6 July 2021 – Complete and submit forms P11D return of benefits and expenses and P11D(b) return of Class 1A NICs.

19 July 2021 – Pay Class 1A NICs (by the 22 July 2021 if paid electronically).

19 July 2021 – PAYE and NIC deductions due for month ended 5 July 2021. (If you pay your tax electronically the due date is 22 July 2021).

19 July 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 July 2021.

19 July 2021 – CIS tax deducted for the month ended 5 July 2021 is payable by today.

1 August 2021 – Due date for Corporation Tax due for the year ended 31 October 2020.

19 August 2021 – PAYE and NIC deductions due for month ended 5 August 2021. (If you pay your tax electronically the due date is 22 August 2021)

19 August 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2021.

19 August 2021 – CIS tax deducted for the month ended 5 August 2021 is payable by today.

Taking goods abroad to sell?

Thursday, July 1st, 2021

You must declare goods that you take with you to sell outside the UK – for example if they are in your baggage or in a private vehicle.

There is a different process if you take goods abroad temporarily (for example samples for a trade fair) or use a courier or freight forwarder.

Most countries have a limit on the value of goods you can bring in duty free.

If you are taking goods to another country temporarily for business reasons and you think you’ll be over the duty free limit, you can usually get an ATA Carnet to avoid paying duty. This includes things like:

  • samples to show at trade fairs or sales meetings
  • publicity materials
  • recorded film and audio
  • equipment you need for work like laptops, cameras or sound equipment
  • goods for educational, scientific or cultural purposes
  • personal effects and sports goods

If you are taking a vehicle, get a CPD Carnet instead.

If your goods have a total value of £1,500 or less, you may be able to make any customs declaration required online. Otherwise, you will need to make a full export declaration.

You will need to show customs your declaration before you can leave and if you are taking restricted goods, take the licence or certificate with you.

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