Hello

  

 

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

  

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

 

In this month’s issue:

Self-Employment Income Support Scheme (SEISS)

Coronavirus Job Retention Scheme (CJRS) – update

National Minimum Wage rate reminder

Off-Payroll Working – Will HMRC accept CEST result?

Understanding the possession action process: guidance for landlords and tenants

Are you ready for Making Tax Digital?

Abolition of tax basis periods and new tax year end?

Getting back to business

Why don’t you ask us?

 

Self-Employment Income Support Scheme (SEISS)

Details of the fifth SEISS grant have now been announced. The online claims service opened in late July. If you are eligible HMRC should have contacted you with a date from which you can make the claim. This is the earliest date from which the claim can be made.

If you have not yet been contacted by HMRC then it is possible to check if you can claim on the HMRC web site.

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

HMRC have provided a new video about the SEISS fifth grant.

 

 

 

Coronavirus Job Retention Scheme (CJRS) - update

The CJRS has been extended until 30 September 2021. From 1 July 2021, the government will pay 70% of wages up to a maximum cap of £2,187.50 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.

 

From 1 August 2021, the government will pay 60% of wages for furlough employees up to £1,875. From 1 July 2021, employers will top up employees’ wages to make sure they receive 80% of wages (up to £2,500).

 

National Minimum Wage rate reminder for employers

 

 

All workers are legally entitled to be paid the National Minimum Wage (NMW). This includes temporary seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer.

The National Minimum Wage hourly rates from 1 April 2021 are:

  • £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

 

Employers who do not pay the NMW can be publicly ‘named and shamed’ and those who blatantly fail to comply can face criminal prosecution.

Employers can contact the Acas helpline for free help and advice or visit GOV.UK to find out more.

 

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.

 

Understanding the possession action process: guidance for landlords and tenants

There has been a ban on residential property repossessions since the first lockdown started. Things have now changed since then.

Guidance for landlords and tenants in the private and social rented sectors explains the possession action process in the county courts in England and Wales has been updated to reflect changes to notice periods and bailiff enforcement in Wales.

 

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.

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.

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.

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!

We will keep you updated when more information comes available.

 

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.

 

 

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.

 

Regards

 

Simon

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