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Latest updates: 28 June 2021

Welcome to our latest newsletter, which contains a variety of updates and some important deadlines to be aware of.

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:

1. Request an extension of the loan term to 10 years from six years, at the same fixed interest rate of 2.5%.

2. 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.

3. 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.

https://www.gov.uk/guidance/advisory-fuel-rates

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.

Tax credit renewal confusion

Many tax credit claimants, who had their claims auto-renewed last year due to the coronavirus pandemic, will have to complete and return renewal declaration forms this year by 31 July or lose their entitlement.

When renewing claims please check all coronavirus-related payments you have received to see if they count as income for tax credits, and if so, how they need to be declared, as there is much confusion as to what does and does not count.

Fraudsters targeting tax credit claimants

Tax credits claimants should be vigilant and alert to potential scams. HMRC are urging all of claimants to be very careful if they are contacted out of the blue by someone asking for money or bank details.

HMRC help towards the cost of children’s summer holiday activities

Tax-Free Childcare can be used to help pay for accredited holiday clubs, childminders or sports activities. It is available for children aged up to 11, or 17 if the child has a disability. For every £8 deposited into an account, families will receive an additional £2 in government top-up, capped at £500 every 3 months, or £1,000 if the child is disabled.

Tax-Free Childcare - GOV.UK (www.gov.uk)

First Homes scheme offers 30% discounts

Discounted homes for key workers and local residents will now be available through the First Homes scheme providing 30% discounts for first time buyers. Buyers will not be able to sell on their property at market values but will have to retain the 30% discount level. That same percentage will then be passed on with the sale of the property to future first-time buyers, meaning homes will always be sold below market value.

Stamp Duty Holiday

From 1 July 2021 the nil rate band is reducing to £250,000 from £500,000 and will return to the standard amount of £125,000 on 1 October 2021.

The rate of SDLT which applies to your purchase depends on the date that you complete your purchase, and not the date that you exchanged contracts.

Cryptoassets for individuals – what are the tax implications?

Even though cryptoassets are more commonly referred to as cryptocurrencies, HMRC does not regard them as either currency or money but as an intangible asset which means that selling them gives rise to a gain which will be subject to Capital Gains Tax.

Changes to the Coronavirus Job Retention Scheme (CJRS) from July

From the beginning of July, CJRS grants will only cover 70% of employees' usual wages for the hours not worked, up to a cap of £2,187.50. In August and September, this will reduce to 60% of employees' usual wages up to a cap of £1,875. Employers will need to pay the difference so that furloughed employees are paid at least 80% of their usual wages for unworked hours, up to a cap of £2,500 per month.

HMRC have updated their claims procedure including the ability to download a template if employers are claiming for 16 or more employees.

Further details can be found here Coronavirus Job Retention Scheme - GOV.UK (www.gov.uk)

P11D and P11D(b) submission deadline 06 July 2021

Forms P11D record taxable benefits provided to employees in a given tax year and the P11D(b) notifies HMRC of these benefits and the amount of employer National Insurance due on them.

Although it is rare for HMRC to impose late penalties for late submission of P11D forms, a maximum initial penalty of £300 per form can be charged. If the P11D(b) is late employers will be charged a penalty of up to £100 per 50 employees for each month or part month the P11D(b) is late.

Penalties and interest are charged if you are late paying HMRC. The Employer’s Class 1A National Insurance is due by 19 July 2021 (or 22 July if paid electronically).

Penalties for late filing under Real Time Information (RTI)

HMRC has confirmed that late filing and late payment penalties under PAYE Real Time Information (RTI) will remain ‘risk-assessed’ for 2021/22. Where the full payment submission (FPS) is filed late but within three days of the payment date no action will be taken. However, HMRC have said that employers who persistently file in this timeline may be considered for a late-filing penalty or contacted as part of HMRC’s risk-based approach.

The first penalties for this tax year will be issued in August 2021.

Restart Business Grants – Claim deadline 30 June 2021 for Craven District Council

The Restart Grant is a one-off grant for businesses on the Rating List only. Time is running out as you only have until Wednesday to make a claim.

Grants of up to £6,000 will be paid to non-essential retail business premises, to help them reopen safely with grants of up to Grants of up to £18,000 for hospitality, accommodation, leisure, personal care and gym business premises.

Fifth Self-Employment Income Support Grant (SEISS)

Claims for the fifth grant covering May 2021 to September 2021 will be open from late July 2021.

As with grants 3 and 4 you must either be currently trading but are impacted by reduced demand due to coronavirus or have been trading but are temporarily unable to do so. To claim you must declare that you intend to continue to trade, and 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.

The amount of the fifth grant will be determined by how much turnover reduced in the year April 2020 to April 2021. If turnover was more than 30% down on the previous year the grant will be 80% of 3 months of average trading profit capped at £7,500 or if the reduction was less than 30% the grant will be 30% of 3 months average trading profits, capped at £2,850. Guidance has not been published at the time of writing as to how the reduction in turnover will need to be calculated.

We are here to help and support you. Please get in touch with us if you want to discuss any matters raised in this newsletter.

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Disclaimer

In preparing this newsletter, every effort has been made to ensure the content is up to date and accurate. However, available information changes continually, so we cannot guarantee its applicability or correctness.

The newsletter is intended for general guidance only. Before making any decisions based on information or matters relating to its content, please take professional advice for your individual circumstances.

Please contact Shepherd Partnership for support and advice tailored to you and your business.