Rent moratorium for business extended to March
The ban on commercial evictions has been extended to 25 March next year to support businesses facing financial hardship due to the ongoing lockdown limitations.
Expenditure on plant and machinery – make sure you get the timing right
The £1m temporary increase in the Annual Investment Allowance (AIA) expires on 31 December 2021 when it reverts to £200,000. As expenditure will be split into periods before and after the reduction, this can be unhelpful if you get the timing of the expenditure wrong. For example, if you have a 31 January 2022 year end and you spend £100,000 on plant in January 2022, you will only be entitled to claim Annual Investment Allowance of £16,667 (being 1/12 x £200,000). Therefore, if you are planning any large purchases over the next few months, please speak to us so we can advise you.
As an alternative, limited companies (not sole traders or partnerships) can claim the Super Deduction Between 1 April 2021 and 31 March 2023 when investing in qualifying new and unused plant and machinery. This is separate from the AIA and is a form of first-year capital allowances.
Under this measure a company will be allowed to claim:
a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
In some cases it will be more beneficial to claim AIA especially where assets are expected not hold their value and not be held for very long as 130% of the proceeds will need to be accounted for when sold, creating a Balancing Charge which would increase taxable profits.
A reminder of the IR35 changes from 6 April 2021
The aim of IR35 is to seek to prevent contractors avoiding tax and national insurance contributions (NIC) by treating them as employees for tax purposes.
From 6 April 2021, responsibility for making IR35 decisions fell onto the end client, rather than the personal services company (PSC) or another intermediate organization providing the worker.
If the status is established as an employee, then the employer deducts tax and NIC at source from the worker’s pay under the Pay As You Earn (PAYE) system.
The new rules do not apply to organisations that are small and are not part of a medium/large size group. In that case, the existing rules continue unchanged, which means that responsibility for IR35 decisions remains with the sub-contractor’s company.
This is a complex area so do not hesitate to get in touch if you think this affects you or your workers.
Recovery Loan Scheme (RLS)
The scheme which, subject to review, remains open until 31 December 2021 and is for businesses of any size in the UK affected by Covid-19. The funds can be used for any legitimate business purpose, including managing cashflow, investment and growth.
RLS guarantees many products, covering term loans, overdrafts, asset finance and invoice finance facilities. Businesses can borrow up to a maximum of £10m, available on repayment terms up to six years (for term loans and asset finance) and up to three years (for overdrafts and invoice finance facilities). Businesses will be required to meet the costs of interest payments and any fees.
Businesses with other government backed coronavirus loans can still access the scheme, subject to a lender’s assessment of affordability.
A list of the current accredited lenders offering this scheme and further details of the eligibility criteria and FAQs from the British Business Bank are available.
Start Up Loans
This is a government-backed loan scheme for start-up businesses and those trading less than two years. Loans up to £25,000 are available with a fixed interest rate of 6% with repayment terms between one and five years. Other features include no set up or early repayment fees, 12 months of free mentoring, and support and discounts on certain business products.
Further details and applications can be accessed at the Start Up Loan's website.
Are you aware of the options to help with Bounce Back Loan Scheme (BBLS) repayments?
Applications for BBLS loans and top-ups closed on 31 March 2021.
To help manage repayments, a variety of Pay As You Grow (PAYG) options are available to give borrowers more time and flexibility to pay back their loan.
There are three PAYG options to consider:
Request an extension of the loan term to 10 years from six years, at the same fixed interest rate of 2.5%.
Reduce the monthly repayments for six months by paying interest only. This option is available up to three times during the term of the Bounce Back Loan.
Take a repayment holiday for up to six months. This option is available once during the term of the Bounce Back Loan.
These options can be used individually or in combination with each other.
The British Business Bank has a range of guidance and resources, including help on managing debt.
Help to Grow your Business
The programme is designed help small and medium sized businesses learn new skills, reach new customers and boost profits.
You could get:
A government subsidised Executive Development programme that could help you improve business performance and growth potential through Help to Grow: Management
free online advice and money off software that could help you save time and cut costs through Help to Grow: Digital
Help to Grow - Management - Small Business Charter
Businesses need to be careful when dealing with HMRC over debt calls
HMRC’s softer approach to debt collection can still leave companies facing problems.
Engagement with HMRC is vital at the earliest point when you think you will struggle with a future tax payment as open discussions will decrease the risk of HMRC jumping quickly to formal insolvency proceedings.
Repayment proposals need to be commercial, clearly explained and supported with financial evidence. Too often out of desperation, companies agree quickly to HMRC payment plans that they will struggle to meet in six months’ time and it is better to manage expectations realistically from the start of discussions than default on repayments.
New advisory fuel rates for drivers of company owned vehicles
HMRC have published new advisory fuel rates for company car drivers which apply from 1 June 2021.
VAT road fuel scale charges – new rates from 01 May 2021
Please remember that if you pay the VAT road fuel scale charges to account for private consumption of fuel on a business vehicle, the rates have changed for VAT periods starting on or after 01 May 2021. The new rates can be found here.