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

 As predicted in our June newsletter/blog the Covid 19 restrictions due to be lifted on 21 June have been delayed. This only goes to prove the saying that in life you prepare for the worst but hope for the best. Many times, on the television and radio, I have heard this business owner or that moan that the delay in lifting the restrictions will permanently damage their business.

 The date was a target, not set in stone. Whilst these businesses should have been ready to start full trading again, they should also have had a fall back plan in case things did not occur as they thought. Nothing is ever certain in life. It is always best to plan for the future. If these businesses had cash flow predictions for the next few months they could have planned to see what might happen to the business if the restrictions were not raised on the target date.

 We help our clients plan for the future by assisting with cashflow forecasts and discussions about what might happen if…

 If you don’t want to be caught out and totally unprepared for the future have a discussion with us about planning and cashflows.

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

 

 In this month’s issue:

 Take advantage of the Super Deduction

 Self-Employment Income Support Scheme (SEISS)

 Changes to CJRS grant scheme

 Output VAT on the supply of private road fuel

 Recovery of VAT on Electric car charging

 Working safely during coronavirus (COVID-19)

 Are you ready for Making Tax Digital?

 

 Getting back to business

 Why don’t you ask us?

 Portal closing

 

 

Take advantage of the Super Deduction

 

 From 1 April 2021 until 31 March 2023 the Government have introduced a super deduction for capital allowances for companies. This means that for all fixed asset purchases that qualify for capital allowances a business will be able to claim 130% of the cost of the assets as a deduction from its taxable profits for ordinary assets and 50% for assets that qualify for a special writing down allowance.

To benefit from the relief the assets purchased must be new and not second hand or refurbished equipment.

The relief is only available to incorporated companies, but unincorporated businesses continue to benefit from the Annual Investment Allowance (AIA) which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

If you are looking to invest in plant and machinery talk to us first as timing is important. It may be a good time to invest with government loans available at good interest rates.

  

Self-Employment Income Support Scheme (SEISS)

 

 Details of the fifth SEISS grant have now been announced, although full details are not yet available.

 A fifth grant covering May 2021 to September 2021 will be open to claims from late July 2021.

 The grant is taxable and will be paid out in a single instalment. Guidance for claiming the grant will be available by the end of June 2021.

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

 You must have traded in the tax years:

        2019 to 2020 and submitted your tax return on or before 2 March 2021

        2020 to 2021

You must either:

        be currently trading but are impacted by reduced demand due to coronavirus

        have been trading but are temporarily unable to do so due to coronavirus 

To work out your eligibility for the fifth grant, HMRC will first look at your 2019 to 2020 Self-Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

 If you’re not eligible based on your 2019 to 2020 tax return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.

 You must declare that:

        you intend to continue to trade

        you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May 2021 to September 2021

You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.

 How the fifth grant works

The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021. HMRC provide more information and support by the end of June 2021 to help you work out how your turnover was affected.

The amount of the grant

Turnover reduction     How much you will get                              Maximum grant

 

30% or more               80% of 3 months’ average trading profits      £7,500

less than 30%             30% of 3 months’ average trading profits      £2,850

 

When can you claim the grant?

The online claims service for the fifth grant will be available from late July 2021.

If you are eligible based on your tax returns, HMRC will contact you in mid-July 2021 to give you a date that you can make your claim from.

 

Changes to CJRS grant scheme

From the start of July 2021 the amount of CJRS grant paid to employers will reduce as the Government and HMRC start to reduce the grant until it ends.

For the month of July 2021 and until the end of the furlough scheme employers will still need to pay their employees who remain on furlough at least 80% of their “normal” salary for the hours not worked.

The grant paid by Government will start to reduce from 1 July 2021.

For the month of July the repayment will be 70% of the normal salary, subject to a  maximum of £2,187.50 per employee, meaning that employers will need to fund not only the employers NI and pension but also 10% of the normal salary paid to their employees.

For the months of August and September the amount to be refunded will reduce to 60% of the normal salary subject to a maximum of £1,875.00 per employee.

The scheme currently is due to end on 30 September 2021.

 

Output VAT on the supply of private road fuel

HMRC have amended the VAT road fuel scale charges with effect from 1 May 2021.

Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2021.

The valuation rate tables:

        set out the new scale charges (a VAT inclusive amount)

        show the VAT to be charged if you account for VAT on an annual, quarterly or monthly basis

        must be operated in accordance with the notes to the valuation table

You will need to check your car’s CO2 emissions figure if you cannot get this from your log book.

 

Recovery of VAT on Electric car charging

HMRC have issued Revenue and Customs Brief 7 (2021) which explains HMRC’s policy concerning the VAT treatment of charging of electric vehicles when using charging points situated in various public places.

Supplies of electric vehicle charging through charging points in public places are charged at the standard rate of VAT.

Additionally input tax can be recovered on electricity used to fuel a car intended for business use where:

           The charging takes place at the business premises of the VAT-registered business

           The charging is at the home of a sole proprietor

VAT cannot be recovered where the charging is at the home of an employee (director) as the supply is then not made to the company.

Where employees charge an employer’s electric vehicle (for both business and private use) at the employer’s premises the employee needs to keep a record of their business and private mileage so that the employer can work out the amounts of business use and private use for the vehicle.

Speak to us if you have any questions on this.

 

Working safely during coronavirus (COVID-19)

There are 14 guides issued by the Government to cover a range of different types of work. Many businesses operate more than one type of workplace, such as an office, factory and fleet of vehicles. You may need to use more than one of these guides as you think through what you need to do to keep people safe. Priority actions are outlined at the top of each guide. The guide for hotels and other guest accommodation has been updated to reflect changes to Step 3 which apply from 21 June.

See: Working safely during coronavirus (COVID-19) - Guidance - 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.

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 023 for matters such as property landlords and self assessment. Limited companies will be forced to join form around 2026.

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.

 

Getting back to business

With the proposed lockdown restrictions being lifted on 21 June (hopefully!) many businesses are deciding how to recommence trading fully.

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.

 

Portal closing

As I have previously advised, the old portal will be closing on 5 July 2021. This is the last chance for you to download any documents you have saved there before they are lost.

Don’t delay.

To log into the new portal follow this link.

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