Hello

 Here is our September newsletter/blog looking at some of what has happened over the month of August and a few items that come into place in September or later which I hope is of interest to our clients.

 

A picture containing person, indoorDescription automatically generatedThree 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.

 

I predict that there will not be a full return to the way things were pre-pandemic as many businesses have found that they can work just as effectively or with lower overheads during the past 18 months.

Many businesses have found other income streams and more efficient ways of working.

With the Government support winding down business will have to get back to trading fully again and this should give a boost to the economy. If you are not sure how you will restart or if you are having concerns about getting going again please get in touch so that we can hand hold you through the restart.

Don’t forget that we are here to assist you with any business queries you may have.

There are many new initiatives being put in place as restrictions finish and therefore there are a few more items in this month’s list of action points.

In this month’s issue:

Self-Employment Income Support Scheme (SEISS)

Coronavirus Job Retention Scheme (CJRS) – Last month!

Off-Payroll Working – Will HMRC accept CEST result?

Commercial rent debts: policy statement

Are you ready for Making Tax Digital?

Abolition of tax basis periods and new tax year end?

Eviction protection

Research & Development – Not for you 

 

National Minimum Wage

Getting back to business

Why don’t you ask us?

 

Self-Employment Income Support Scheme (SEISS)

The online claims service for the 5th SEISS grant opened in late July and closes on 30 September 2021. No late claims will be allowed.

The fifth grant will be determined by a turnover test for most taxpayers. The test considers how much a businesses’ turnover has gone down by in the 2020-21 tax year due to the pandemic. More information is given on the .GOV web site.

In summary you will need to have 2 turnover figures ready when making the claim:

·        The pandemic turnover is for the 12 months from 1 April 2020 to 31 March 2021 no matter your year end. (if you have a 5 April year end this is considered to be the same period).

·        The pre-pandemic turnover is the turnover declared in your 2019/20 tax return. This is can be a different accounting year that you are comparing to. If the 2020 figures are unusual then the turnover in the 2019 return should be taken.

Taxpayers who were not eligible for the fourth grant, will not be eligible for the fifth grant either as HMRC are using the same tax returns to determine eligibility for both grants. If you were eligible but did not claim the forth grant you should be able to claim the fifth grant.

The grant is taxable and will be paid out in a single instalment.

To be eligible for the grant you must be a self-employed individual or a member of a partnership.

For members of a partnership or LLP the turnover comparison is based on the turnover of the partnership. However, where the partner also has another business a proportion of partnership turnover is used.

We cannot make the claim on your behalf as agents. You have to make the claim yourself.

https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme

 

Coronavirus Job Retention Scheme (CJRS) – last month!

 

 

The CJRS has finishes on 30 September 2021.

For September 2021, the government will pay 60% of wages up to a maximum cap of £1,875.00 for the hours the employee is on furlough.

Employers will top up employees’ wages to make sure they receive 80% of wages (up to £2,500) in total for the hours the employee is on furlough. The caps are proportional to the hours not worked.

Off-Payroll Working – Will HMRC accept CEST result?

 

Since 6 April 2021 large and medium-sized organisations, based on the Companies Act criteria, have had to determine whether or not a worker supplying his services via their own personal service company would be treated as an employee if directly engaged. This replaced the IR35 rules for these larger organisations.

HMRC suggest organisations use their Check Employment Status for Tax (CEST) tool on their website to check the worker’s status, although that is not obligatory. The tool is an interactive database of questions and will normally provide a ruling after 15 to 20 questions depending on the answers given about the contractual relationship.

See: Check employment status for tax - GOV.UK (www.gov.uk)

HMRC have recently confirmed that they will be bound by the result of the software provided the information is accurate and it is used in accordance with their guidance.

See: ESM11010 - Employment Status Manual - HMRC internal manual - GOV.UK (www.gov.uk)

HMRC have also stated that they will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. They would see that as deliberate non-compliance, and potentially levy financial penalties.

Note that the end-user organisation is required to issue a Status Determination Statement to the worker with a copy to any agency to be passed to any fee payer in the labour supply chain making payments to the personal service company.

 

Commercial rent debts: policy statement

 

The government will legislate to ringfence rent debt accrued during the pandemic by businesses affected by enforced closures and set out a process of binding arbitration to be undertaken between landlords and tenants.

This is to be used as a last resort, after bilateral negotiations have been undertaken and only where landlords and tenants cannot otherwise come to a resolution. Ahead of the system being put in place, the government will publish the principles which they will seek to put into legislation in a revised Code of Practice, to allow landlords and tenants time to negotiate on that basis.

Section 82 (England and Wales) and Section 83 (Northern Ireland) of the Coronavirus Act 2020, which prevents landlords of commercial properties from being able to evict tenants for the non-payment of rent, will continue until 25 March 2022, unless legislation is passed ahead of this, to provide sufficient time for this new process to be put in place.

Government is clear that those tenants who have not been affected by closures and who have the means to pay, should pay. Additionally, government expects commercial tenants to begin paying rent as per their lease from the point of restrictions being lifted for their sector.

A sign on a windowDescription automatically generated with medium confidenceAs 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.

 This means that landlords will be able to evict tenants for the non-payment of rent prior to March 2020 and after the end of restrictions for their sector and who have not been affected by business closures during this period.

 For the full policy statement see: Supporting businesses with commercial rent debts: policy statement - GOV.UK (www.gov.uk)

 

 

Are you ready for Making Tax Digital?

 

From 1 April 2022 a new tranche of businesses will need to comply with the Making Tax Digital (MTD) regime.

All businesses which are VAT registered will have to sign up for MTD and will need to submit their first VAT return that starts on or after 1 April 2022 digitally. This covers businesses who are under the registration threshold of £85,000 and have voluntarily registered. Maybe now is the time to review your VAT registration with us.

There will be a requirement for these businesses to keep digital records and for these digital records to be used to file the returns. It will be possible to use spreadsheets for record keeping but there will need to be some form of bridging software that is compatible with the HMRC gateway.

Our clients who have already signed up for MTD have found using the software easy to use and have also found other benefits in using the software.

Also be aware that other taxpayers will be required to join the MTD project from 2023 for matters such as property landlords and self assessment. Limited companies will be forced to join form around 2026.

If your VAT quarter end does not align with your year end then you could have to make returns in 8 different months during a year. If there is rental income as well then there could be as many as 12 monthly returns that need to be made. Now is the time to plan so that the number of months in which returns are required is minimised.

We urge all clients to move to a digital record keeping regime as soon as possible. At Stewart & Partners we are Xero Certified Advisors with qualifications in migrating to Xero software. We also are able to work with all other software providers so if you feel that another software is better for you we can work with you to make sure you are compliant.

Speak to us for more details.

 

Abolition of tax basis periods and new tax year end?

We are awaiting further information on MTD from HMRC this summer but one significant announcement on 20 July was draft legislation to abolish basis periods for unincorporated businesses for the 2023/24 tax year to simplify MTD reporting.

This would mean that businesses (not companies) would be taxed on their profits for the period 1 April to 31 March each year, no matter what their year end is. (6 April to 5 April is allowable). This has the potential to cause major problems for some clients who have, for example, December year ends meaning that the December accounts would have to be prepared and finalised in 1 month so that the appropriate information could be extracted. Quarterly reporting for MTD would help this but there would still be little time to get figures together for the return to be filed in January.

You may wish to consider whether a change in year end would be beneficial for your business.

That change would apply to sole traders, partnerships, as well as trusts with trading and property rental income. There would also be complicated transitional rules for 2022/23 which could result in a big tax bill that year for some traders.

A picture containing text, building, outdoor, oldDescription automatically generatedThe 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!

 

We will keep you updated when more information comes available.

 

 

Eviction protection

 

 

Tenants who have been hit hard by the pandemic maybe worried sick that they can’t pay the rent for their business premises and so face eviction.

The good news is that the moratorium against forfeiture of a commercial lease for non-payment of rent, which was due to end on 25 June 2021, has been extended to 25 March 2022.

The temporary restriction stopping landlords from bringing Commercial Rent Arrears Recovery (CRAR) proceedings against commercial tenants in arrears has also been extended to 25 March 2022.

The temporary prohibition that stops landlords from using statutory demands against commercial tenants who are in arrears of rent because of COVID-19 has also been extended, but only to 30 September 2021. This prevents the landlord from petitioning the court to have the tenant wound up if they do not pay a statutory demand for rent within 21 days.

The rent arrears don’t disappear once these restrictions are lifted, and businesses should pay their rent as soon as they are able to trade from their premises again. However, the government is proposing to bring in a new law to require landlords and tenants to go to arbitration to agree to waive some portion of the unpaid rent that built up during the pandemic.

Protection for tenants extended

  

Research & Development – Not for you?

 

For a number of years the Government have been generous in providing tax credits for expenditure on research and Development (R&D).

The grants are there to support companies that work on innovative projects in science and technology. It can be claimed by a range of companies that seek to research or develop an advance in their field. It can even be claimed on unsuccessful projects.

A few people in a labDescription automatically generated with low confidence

The amount that can be claimed as a small business is an additional 130% of the expenditure on the project on top of the actual expenditure incurred.

 

In order to be able to claim the grant the work must be part of a specific project to make an advance in science or technology. It cannot be an advance within a social science - like economics - or a theoretical field - such as pure maths.

 

The project must relate to the company’s trade - either an existing one, or one that you intend to start up based on the results of the R&D.

To get R&D relief you need to explain how a project:

  • looked for an advance in science and technology
  • had to overcome uncertainty
  • tried to overcome this uncertainty
  • could not be easily worked out by a professional in the field

Your project may research or develop a new process, product or service or improve on an existing one.

Many businesses have not even considered that they may be eligible for the R&D tax credits. However if you have recently carried out some research into a new process or system it may be worthwhile considering making a claim.

We have access to a number of specialists who deal with R&D claims and we would be happy to discuss your projects with you and put you in touch with the right specialist. Fees are normally success based so you have nothing to lose from talking to a specialist.

Contact us to see if you could reduce your tax.

 

National Minimum Wage

HMRC have published a list of “excuses” employers have used to defend not paying the minimum wages to their employees.

Whilst some of these are humorous there is no excuse for not paying the minimum wage. Please make sure that you are complying with the legislation.

 

Getting back to business

Most businesses have now opened fully again and although things are slow they are getting back to earning money.

There is a temptation to reduce prices to bring in customers, both old and new. In my opinion this is an error. Your services or products have a value and you should be charging a fair price for what you are offering. If you discount now it will be difficult to raise prices for the same product later once things are starting to look up.

Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. For example, here is a smaller business’s “what if” scenario planning results: 

 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

Why don’t you ask us?

Are you considering starting something new as you come out of Covid hibernation and your business opens up again 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.

In addition to scenario planning mentioned above we have a broad range of experience that goes far beyond just preparing accounts and tax returns. 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.

Also there is the client zoom drop in session which continues for clients at 11.00am every Wednesday.

Zoom meeting details:

Meeting URL: https://us02web.zoom.us/j/83879726978  

Meeting ID: 838 7972 6978

 

 

v\:* {behavior:url(#default#VML);} o\:* {behavior:url(#default#VML);} w\:* {behavior:url(#default#VML);} .shape {behavior:url(#default#VML);} Normal 0 false false false false EN-GB X-NONE X-NONE /* Style Definitions */ table.MsoNormalTable {mso-style-name:"Table Normal"; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-parent:""; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; text-align:justify; mso-pagination:widow-orphan; font-size:11.0pt; font-family:"Arial",sans-serif; mso-bidi-font-family:"Times New Roman"; mso-bidi-theme-font:minor-bidi; mso-fareast-language:EN-US;}