Hello
Welcome to our June 2022 newsletter/blog looking at some of what has happened since April and a few items that come into place in the near future which I hope is of interest to our clients.
Cash Flow management is key in a turbulent economy
Do you agree? Most of our other clients do. In this economy cash is king and managing your cash flow is more important than ever.
If you are concerned about the future of your business, then take some time to reflect on where you are and what could happen in the next few months. It is now vitally important for all businesses to plan ahead for a range of scenarios. Cash flow and business planning in these uncertain times may appear difficult but there are some practical steps you can take to minimise potential disruption to your business.
- Review your Budgets and set realistic and achievable targets for the remainder of 2022.
- Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues.
- Review and flow chart the main processes in your business (e.g. Sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
- Put extra effort into making sure your relationships with your customers are solid.
- Review your list of products and services and eliminate those that are unprofitable or not core products/services.
- Pull everyone together and explain the business strategy and get their buy-in.
We specialise in helping our clients manage their cash flow. We do this by preparing and updating detailed cash flow forecasts, using the latest and most powerful software. We can also help you negotiate or renegotiate overdraft facilities and find specific funding to help you grow!
Please talk to us about cash flow planning for the next few months, we can help with a template so you can do this yourself or work together to produce estimates for a variety of scenarios.
In this month’s issue:
Bounce Back Loans – Payback Time
2.1 million annual tax credits packs to be issued
Claiming work related expenses
Don’t forget to claim the Employment Allowance
Employee travel and subsistence
Increase in HMRC Interest rates
Advisory fuel rate for company cars
New internet phishing alert
Lasting Power of Attorney revamped
Check if a letter you have received from HMRC is genuine
Bounce Back Loans – Payback Time
When Covid hit and shutdown forced many businesses to reduce their level of trading the Chancellor was very generous in offering Bounce Back loans to assist with short term cash deficiencies.
Now, over a year later, the loans are being repaid to the lenders. Many businesses have returned to trading and have the cash flow to repay these loans when the repayments fall due.
There are many businesses that have not been so fortunate and they are struggling to make the payments. These business do not have the cashflow or the resources to fund the payments as they fall due.
For some businesses the Bounce Back loans were a way to defer the inevitable end as they were just not profitable, even before the pandemic. For these businesses the loans will not be able to be repaid and there will be a liquidation in the not too distant future.
However there are businesses that were profitable but have not manged to return to their former levels of income and profitability. They need help and handholding to work their way through the rough patches and to get out the other end.
This could be by refinancing or by restructuring existing processes.
We can assist clients with looking at their business to see where they can improve income, cut costs or find a different way of working to bring in more profits. We can meet with business owners to look at their systems or just provide a sounding board to go through ideas you have.
Get in contact to discuss your concerns or to look for solutions.
Claiming work related expenses
Where an employee has work related expenses such as clothing or working from home allowance then the way these can be claimed form HMRC has changed from 7 May 2022.
Employees used to be able to submit claims in almost any format. From 6 May 2022 the claim must now be in a prescribed format. The new form can be completed online or downloaded, printed and sent to HMRC. If sending the form by post all 8 pages must be sent. A claim can also be made by telephone if previous claims have been made.
We recommend that any employee wishing to make a claim uses the HMRC online service. However in order to do so the employee will need to have a government gateway account.
In order to claim go the HMRC claims page and complete the relevant section.
The most popular claims that we come across are the working from home allowance if the employer does not pay this to the employee, claims for professional memberships and mileage claims where the employer does not pay mileage at the HMRC recommended levels. There are many other claims, such as flat rate job expenses, that can be made.
Employee travel and subsistence
With employees’ and directors’ P11d’s for 2021/22 due by 6 July 2022 it is timely to remind employers of the rules for travel and subsistence, particularly as HMRC have recently issued some updated guidance and useful examples of their interpretation of the law.
Tax relief for employee travel costs is available provided the journey isn’t ordinary commuting or private travel. Thus, amounts paid by the employer would not be taxable.
No relief is available for ordinary commuting, which is travel between home (or a place that is not a workplace) and a ‘permanent workplace’.
There are a number of criteria for determining if a workplace is temporary or permanent, but in general a workplace will always be a permanent workplace if the worker:
- regularly goes to the same workplace in the course of a period of continuous work which lasts or is likely to last more than 24 months, or
- regularly goes to the same workplace for all or almost all of the time for which the worker is likely to hold (or continues to hold) the same employment.
Where the journey qualifies for tax relief then necessary and reasonable subsistence costs associated with that journey would also qualify for tax relief, and if paid or reimbursed by the employer would not be taxable employment income.
Note that where expenses (such as travel and subsistence) are incurred wholly, exclusively and necessarily in the performance of the duties of the employment they no longer need to be reported on form P11d. A dispensation from reporting is no longer required but HMRC would expect there to be controls in place within the organisation to review and approve the expenditure.
Travel by workers operating via Personal service companies (IR35)
From 6 April 2016, new provisions changed the treatment of travel and subsistence expenses for workers providing their personal services to clients through employment intermediaries (IR35). Each engagement the worker undertakes that falls within IR35 is regarded as a separate and the worker’s travel and subsistence expenses are treated as if the worker was directly employed by the engager. This will mean that generally no relief will be given for home-to-work travel costs and associated subsistence. However, in certain circumstances, the new provisions are modified or disapplied.
Overarching contracts of employment where worker is supplied via an Agency
Temporary workers engaged under traditional employment agency contracts and caught by the agency legislation, are not entitled to relief for payment of travel and subsistence expenses, including home to work travel to a client’s work premises, as each assignment is deemed to be a separate employment and so each new place of work becomes a permanent workplace.
Many Employment Agencies have changed their business model and now put in place overarching contracts of employment to link the various assignments undertaken by workers supplying their services to various separate end-user clients at separate locations. The overarching contract of employment links together a series of separate assignments so that each location of each assignment becomes a temporary workplace. The worker effectively becomes a permanent employee of the employment agency under an overarching contract of employment.
If it is accepted that the contracts are overarching contracts of employment, then each new place of work will usually become a temporary workplace (subject to the “24 month rule”) and the individual’s travel and subsistence expenses would qualify for relief under the travel rules.
Advisory fuel rate for company cars
Unbelievably there were very few changes to the HMRC advisory fuel rates from 1 March 2022, which may not have been your experience at the filling station! Now that the increased road fuel prices have fed through into the HMRC calculations there are some significant increases from 1 June 2022. These are the suggested reimbursement rates for employees' private mileage using their company car.
Remember that provided any private fuel is fully reimbursed the employee will not be taxed on the fuel benefit and there is no class 1A employers NIC.
Where the employer does not pay for any fuel for the company car these are the amounts that can be reimbursed in respect of business journeys from 1 June 2022.
Engine Size
Petrol
Diesel
LPG
1400cc or less
14p
(13p)
9p
(8p)
1600cc or less
13p
(11p)
1401cc to 2000cc
17p
(15p)
11p
(10p)
1601 to 2000cc
16p
(13p)
Over 2000cc
25p
(22p)
19p
(16p)
16p
(15p)
Where there has been a change the previous rate is shown in brackets. Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.
Lasting Power of Attorney revamped
UK Ministers have set out plans to transform the lasting power of attorney (LPA) system – making it quicker to use, easier to access and even more secure from fraud.
Under the proposals, people will be able to make an LPA completely online for the first time – bringing it in line with other government services such as applying for a divorce. The current paper-based system will continue to operate meaning people can choose an accessible process that’s best for their specific needs.
Crucially, the reforms will bolster safeguards to protect vulnerable people from abuse or fraud. The plans include new identification checks which would require official documents or information such as a driving licence, passport or Government Gateway account as part of a strengthened verification process.
The number of registered LPAs has increased drastically in recent years to more than 6 million, but the process of making one retains many paper-based features that are over 30 years old.
Last week’s announcement follows a government consultation which sought views on modernising the system. The proposals have been developed following engagement with a wide range of stakeholders such as Age UK, the Law Society, and the National Mental Capacity Forum, to ensure that they work for those who rely on LPAs to manage their affairs in later life.
We believe that LPAs are an essential planning tool in the even of an unexpected event and would urge all clients who do not have one in place to look at implementing one without delay.
See: Lasting Power of Attorney revamp to improve safety and efficiency - GOV.UK (www.gov.uk)
2.1 million annual tax credits packs to be issued
About 2.1 million tax credits customers have begun to receive their annual renewal packs from HMRC.
The packs were sent between 25 April and 27 May, and customers(!) have until 31 July to check their details are correct and update HMRC if there has been a change in their circumstances.
There are 2 types of renewal packs:
- if it has a red line across the first page and says, ‘reply now’, customers will need to confirm their circumstances to renew their tax credits
- if it has a black line across the first page and says, ‘check now’, customers will need to check their details are correct. If correct, customers do not need to do anything, and their tax credits will be automatically renewed
About 630,000 people will need to confirm their circumstances to renew their tax credits for the 2022 to 2023 tax year.
Don’t forget to claim the Employment Allowance
The Employment Allowance (EA) is a £5,000 allowance set against employers National Insurance Contributions (NICs) and has to be claimed each tax year if the employer qualifies.
This allowance was introduced in 2014/15 and was increased to £5,000 from 2022/23.
Employers make a claim for the Employment Allowance through their payroll software. They do this by completing and submitting a Real Time Information - Employer Payment Summary (EPS) to HMRC. The employer must enter “Yes” in the “Employment Allowance Indicator” field of the EPS confirming that they are eligible to claim the allowance.
Eligible employers can claim the Employment Allowance at any time during a tax year.
Employers may also claim the Employment Allowance against closed tax years, provided they have not already claimed the allowance for those years. However, claims for closed tax years are limited to the four tax years falling before the current tax year.
The Employment Allowance can be claimed by most employers who pay secondary Class 1 NICs on their employees. This includes:
- businesses (includes self- employed persons, companies and partnerships who have employees)
- charities (includes private businesses that have charitable status such as schools, academies, further education colleges and universities)
- Community Amateur Sports Clubs
If two or more companies are connected with one another, or two or more charities are connected with one another, then only one of those companies/charities may claim the Employment Allowance and they must decide which company/charity claims the allowance.
For those qualifying payroll schemes which we manage we will make the claim on behalf of the business. If you prepare your own business payroll then do not forget to make the claim.
Increase in HMRC Interest rates
Where tax due is not paid on time HMRC will charge interest from the due date until the date of payment.
The rate of interest charged and paid by HMRC is linked to the Bank of England base rate. The rate of late payment interest is set at the base rate plus 2.5%, whereas the rate of repayment interest paid is set at the base rate minus 1%, subject to a floor of 0.5%.
The bank base rate was increased by 0.25 percentage points, from 0.75% to 1.00%, on 5 May 2022. As a result, the rate of interest on late paid tax will increase to 3.5% from 24 May 2022. The rate was previously increased to 3.25% with effect from 5 April 2022. There was no change to the rate or repayment interest, which remains at 0.5%, the level it has been set at since 29 September 2009.
If you are struggling to pay any tax due you are advised to set up a Time-to-Pay agreement where possible. You should contact HMRC to discuss payment difficulties, rather than ignoring tax bills that you cannot pay.
If you wish us to assist you in setting up arrangements then we can help you with this.
New internet phishing alert
New emails and letters appearing to be from employees of the Government Legal Department/Bona Vacantia Division are in circulation. Emails are being sent from bogus email addresses purporting to be from members of the Bona Vacantia Division. These emails are not from the @governmentlegal.gov.uk address and may ask for confirmation of personal information or provide false links or download attachments.
Do not give out private information (such as bank details or passwords), download attachments or click on any links in emails if you are not sure they are genuine.
Check if a letter you have received from HMRC is genuine
Check a list of recent letters from HMRC to help you decide if a letter you've received is a scam.
Contents:
- Letter OCA300 — repayment of Student Loan deductions
- Overpaid Self-Employment Income Support Scheme (SEISS) grants
- Research about employee experience of the Coronavirus Job Retention Scheme
- Research about the digitisation of Child Benefit
- Refund of Income Tax from changes to your Self-Employment Income Support Scheme (SEISS) grant
- Other letters you should check
If your letter is not listed here check other letters sent by HMRC
Report suspicious phone calls, emails or texts to HMRC
We can help - just ask us
Are you considering starting a new arm to your business or do you have a query about tax planning? Do you need advice about financing or cashflow, maybe you just need help in accessing a loan.
We have a broad range of experience that goes far beyond just preparing accounts and tax returns. We also have access to a broad range of tools that will help with providing answers. Get in touch as we will probably have an answer to help you with your challenges.
I wish you the best for the next month.
If you have any queries you can book a free 15 minute zoom meeting with me.
Finally, don’t forget to make time for yourself and do not let your business run you, you should run your business.
Simon
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Three quarters of adults in the UK have now received both doses of a COVID-19 vaccine, as the public continues to do what it can to protect themselves and their community. With the furlough scheme finishing at the end of September there will be a return back towards what was considered “normal” before the pandemic started.
As soon as legislation is passed, the commercial tenant protection measures will only apply to ringfenced arrears. This includes rent debt accrued from March 2020 by commercial tenants affected by COVID-19 business closures until restrictions for their sector are removed.
The Treasury are also consulting on changing the tax year itself from the archaic 5 April year end to 31 March or even 31 December. A calendar tax year would bring the UK into line with most other countries at last!
