Preparing for the end of the Brexit transition period
Considering the changes set to take effect from 1 January 2021.
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It is now less than a month until the Brexit transitional period comes to an end. Although the UK officially left the European Union (EU) on 31 January 2020, it has since been in the 11-month transition period, during which time it has remained part of the Single Market, the EU Customs Union and the VAT Territory. The UK will leave the EU VAT Territory on 31 December 2020. After this date, Great Britain (England, Wales and Scotland) will not be subject to EU VAT legislation. Northern Ireland will remain subject to EU VAT legislation in respect of transactions involving goods, but not for services. Here we take a look at what will change and how businesses can prepare.
Acquisitions (purchases of goods from EU member states) will be treated as imports. A new system, Postponed Accounting, will be introduced and will apply to imports received from all over the world, with some exceptions such as low-value consignments. The system is intended to mitigate the cashflow disadvantage posed by paying import VAT upfront and waiting to reclaim it in a later VAT return. Under the new system, import VAT can be deferred and declared to HMRC in the VAT return for the period of importation. The VAT can be reclaimed in the same return subject to the normal rules for reclaiming input tax.
Dispatches (zero-rated sales of goods to business customers in EU member states) will be treated as exports. Exports are zero-rated, provided certain conditions are met. Distance sales (sales of goods to non-business persons in the EU) will also be treated as exports. The EU distance-selling regime and thresholds will no longer apply to UK suppliers.
When the UK leaves the EU Customs Union on 1 January 2021 the UK will operate a full, external border with the EU. New border controls on imports from the EU to Great Britain will be introduced in stages, with customs declarations for goods which are not controlled being delayed until 30 June 2021.
From 1 January 2021, there will be new rates of Customs Duty for imports – called the UK Global Tariff. To check the tariffs that will apply to different categories of imported goods, please see https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021.
It is important to be ready for these changes. Some practical actions to take now include:
Obtaining an Economic Operator Registration and Identification (EORI) number, which will be required when trading with the EU post Brexit. It is free to obtain an EORI number and you can do so by visiting https://www.gov.uk/eori.
Deciding whether to use an agent freight forwarder to help with making customs declarations. The following guidance outlines the services they can provide: https://www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf
If you buy goods from the EU, checking whether those goods are 'controlled'. Ascertaining which declarations are required and when they will need to be made. For more information please see https://www.gov.uk/guidance/list-of-goods-imported-into-great-britain-from-the-eu-that-are-controlled.
Checking the UK Global tariff to see the rate of Customs Duty that is likely to apply to the goods you import.
Deciding whether to use the Postponed Accounting system (https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return) to defer import VAT and familiarising yourself with the procedure for declaring the deferred import VAT on the VAT return.
The end of the Brexit transition period will affect many businesses across the UK. We can help you plan for tax and administrative changes. Please contact us for further advice.
Is it time to re-evaluate business rates?
Looking at how business rates can be reformed and re-evaluated.
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A number of voices in the business community have been calling for an overhaul of business rates for some time due to the perceived unfairness of the system. The need for reform has now been magnified by the economic disruption caused by the coronavirus (COVID-19) pandemic. In response, the clamour for the government to act from business groups, including the Institute of Chartered Accountants in England and Wales (ICAEW) and the Confederation of British Industry (CBI), has become louder. Here, we take a look at business rates and consider some of the options for fairer, better solutions to support businesses.
Critics acknowledge that business rates are and should remain an important source of revenue across the UK, for both central and local authorities. However, the government has recognised the need for reform by launching a fundamental review and a subsequent call for evidence.
Unfairness and uncertainty
Many of the problems businesses face with rates are caused by a lack of information about the calculation of rateable values, which only serves to highlight the perceived unfairness of the system. This in turn is exacerbated by the lack of certainty around how much businesses need to pay.
In addition, although the government is committed to completing revaluations every three years, more timely data would maintain a more accurate valuation. These problems mean that a fundamental rethink of property and business tax is needed in order to find a long-term solution.
According to the ICAEW, better use of technology and more transparency could help to address some of the unfairness within the business rates system.
The cost to business
Business rates aim to provide revenue for local government and are a combination of business tax and property tax. According to data published by the ICAEW, business rates generated £30 billion in tax revenue across the UK during the 2018/19 financial year. However, the business rates holiday introduced to support organisations through the COVID-19 pandemic is estimated to result in foregone revenues of £10 billion.
In addition, a report issued by the CBI showed that the burden of business rates in England – at nearly 50p in the pound – will continue to climb without reform. The analysis revealed that this could cost businesses at least an extra £6 billion over the next five years.
Critics of business rates say the current system means they fail to reflect either property values or business activity accurately.
The call for change
The growing consensus that the current business rates system is out-of-date and unsustainable has only been magnified by the strain businesses have been under during the COVID-19 pandemic, further fuelling the calls for change.
The ICAEW says there must be a clearer link with current market values. It says better use of technology could provide a better link between market rents and business rates. It also says that the roll-out of digital tax systems should make it possible to enable more timely maintenance of valuations.
Furthermore, the ICAEW suggests that the government investigates whether the Valuation Office Agency could share more details about assessments, including how a valuation was calculated.
In addition, the CBI has set out a package of measures for England, which it says would save business £21.8 billion over the next five years.
It says the government should delay the next valuation date until 1st October 2021, shortening the valuation period to 18 months. This would ensure bills reflect the current economic situation and the property market in a post COVID-19 world. Also, the CBI says subsequent revaluations should consider reducing this period to 12 months.
The CBI proposes that the government should also remove transitional arrangements for properties whose rateable value decreases following a revaluation. The business rates bill of those properties reflects the true rateable value, while upwards transitional relief should be maintained to allow a smooth transition to a new higher business rates bill for those properties.
Supporters of these changes say that without them business rates will continue to rise, sinking many investment plans, hitting bottom lines and inadvertently growing inequality between England's richest and poorest areas.
To prevent this the current government review must be the catalyst for a system that is fairer, encourages investment and supports the levelling up agenda.
Although the CBI has focussed on England in its measures the case for reform to business rates applies across the UK.
How we can help
Business rates affect businesses of all sizes. As your accountants, we can help you plan tax your tax payments as efficiently as possible. Please contact us for further advice.
Outlining the extension of the Job Retention Scheme
Considering the changes to the Coronavirus Job Retention Scheme.
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On 5 November, Chancellor Rishi Sunak extended the Coronavirus Job Retention Scheme (CJRS) until the end of March 2021. The CJRS was supposed to have ended after being scaled back to cover 60% of salaries during October. However, on 31 October Prime Minister Boris Johnson announced a new national lockdown for England that runs from 5 November until 1 December. Here, we consider the changes.
Extension of the CJRS
The extended CJRS applies to all of the UK. The scheme follows the flexibility of the CJRS and so can be used for employees for any work pattern, including full-time furlough. Employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month. Employees will be paid for worked hours by their employer on the terms in their employment contract.
Under the scheme, employers can claim for the salary received by the employee for hours not worked. Employers will need to cover the employer Class 1 national insurance contributions (NICs) and employer pension contributions. There is no gap in support between the previously announced end date of the CJRS and the extended CJRS.
The government will review the amount of support given in January 2021 to decide whether economic circumstances are improving enough so that employers will need to make more contributions for hours not worked.
All employers with a UK bank account and a UK Pay as You Earn (PAYE) scheme can make a claim. Neither the employer nor the employee needs to have previously claimed or have been claimed for under the CJRS to make a claim under the extended CJRS.
An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
In addition, employees who have recently been made redundant or stopped working for the employer can be re-employed. The employees must have been employed and on the payroll on 23 September. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Making a claim
The extended CJRS will operate as the previous scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am on Wednesday 11 November.
Claims made for November must be submitted to HMRC by no later than 14 December 2020.
Claims relating to each subsequent month should be submitted by day 14 of the following month to ensure prompt claims following the end of the month which is the subject of the claim.
Job Support Scheme
As part of the Winter Economy Plan, Chancellor Rishi Sunak announced the introduction of the government's new Job Support Scheme (JSS). There have been two revisions to the plan since then. The JSS was due to be introduced from 1 November until 30 April 2021. The JSS may be introduced after March.
Please contact us if you have any queries on the extension of the CJRS.
Analysing the Job Support Scheme
The JSS Open and JSS Closed are introduced from 1 November 2020.
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Chancellor Rishi Sunak presented his Winter Economy Plan on 24 September. A Job Support Scheme (JSS) was announced, which is designed to support viable UK employers who face lower demand due to the coronavirus (COVID-19), and to keep their employees attached to the workforce.
Following the initial announcement, the Chancellor announced an extension of the JSS. The Job Support Scheme Closed (JSS Closed) is designed to provide further support for businesses that have been legally required to close as a direct result of the COVID-19 restrictions set by one or more of the four governments of the UK. On 22 October the government revised the JSS to increase the scale of support available.
The JSS Open and JSS Closed are introduced from 1 November. The existing Job Retention Scheme, known as the furlough scheme, ends on 31 October.
Taking a look at the JSS
For employers to participate in the scheme:
- employees will need to work a minimum of 20% of their usual hours
- for every hour not worked, the employer will pay 5% of the employee's 'usual hourly wage' up to a cap of £125
- for every hour not worked, the government will pay 61.67% of the employee's 'usual hourly wage'
- the government contribution will be capped at £1,541.75 per month
- Class 1 employer national insurance contributions (NICs) and pension contributions will be due on the employee's earnings and will be payable in full by the employer.
'Usual wages' calculations will follow a similar methodology as those for the furlough scheme. The scheme will run for six months from 1 November 2020.
Full details will be set out in guidance which is to follow.
Employees using the scheme will receive at least 77% of their pay, where the government contribution has not been capped. The government has issued some examples of how the JSS will work. Here we set out the details of one of these examples.
Dave normally works five days a week and earns £1,400 a month working in a restaurant. His employer is experiencing reduced sales due to COVID-19. Rather than making Dave redundant his employer puts Dave on the JSS, working 20% of his usual hours.
Under the JSS:
- his employer pays Dave £280 for these hours
- for the time he is not working (80%) he will get 66.67% of his pay for that time. His total wage package is 73%, being £1,027
- the government will give a grant worth £691 (61.67% of hours not worked) to Dave's employer and his employer will pay a further £56 for hours not worked (5% of wages).
All small and medium-sized enterprises will be eligible and will not be subject to financial assessment. Large businesses will have to meet a financial assessment test, so the scheme is only available to those businesses whose turnover has stayed level is lower now than before experiencing difficulties from COVID-19. The government also expects that large employers will not be making distributions while using the scheme.
Job Support Scheme Closed
The JSS Closed provides temporary support to businesses whose premises have been legally required to close as a direct result of COVID-19 restrictions set by one or more of the four governments of the UK.
The scheme will be available from 1 November for six months and will be reviewed in January. Employers will be able to make a claim on a monthly basis online through gov.uk from December.
Claims must not overlap and must be made monthly in arrears. The payments will be taxable and employers will be required to cover employer NICs and automatic enrolment pension contributions in full, where applicable. HMRC will check claims and payments may be withheld or need to be paid back if a claim is found to be fraudulent or based on incorrect information.
The grant per eligible employee is two thirds of their 'normal pay', up to a limit of £2,083.33 per month. The government will provide further detail on how normal pay is calculated.
Employers will be able to use the JSS Closed whilst their premises are closed and move employees onto the JSS Open if they are eligible when they are able to re-open.
Further details on the JSS will be issued by the end of October. The government has produced a policy paper on the JSS and a factsheet on the JSS Open.
Please contact us for further information on the JSS.
Who can claim the Job Retention Bonus?
Taking a look at the Job Retention Bonus.
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One of the most headline-grabbing announcements of Chancellor Rishi Sunak's Summer Economic Statement saw the promise of a Job Retention Bonus (JRB) aimed at encouraging employers to keep employees on the payroll until the end of January.
The JRB is designed to follow the end of the Coronavirus Job Retention Scheme (CJRS), which is being wound down and will finish at the end of October. The Chancellor said furloughing had been the right step to take to protect jobs during the first phase of the coronavirus (COVID-19) pandemic. Here, we look at the JRB and assess which employers and employees will be eligible.
What is the JRB?
The JRB is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the CJRS and who remains continuously employed through to 31 January 2021.
Eligible employees must earn at least £520 a month on average between 1 November 2020 and 31 January 2021. Employers will be able to claim the JRB after they have filed PAYE for January and payments will be made to employers from February 2021.
Which employers can claim the JRB?
An employer will be able to claim the JRB for any employees that were eligible for the CJRS whom they have claimed a grant for. Where a claim for an employee was incorrectly made, a JRB will not be payable.
Employers must keep their payroll up to date and accurate and address all requests from HMRC to provide missing employee data in respect of historic CJRS claims. Failure to maintain accurate records may jeopardise an employer's claim. HMRC will withhold payment of the JRB where it believes there is a risk that CJRS claims may have been fraudulently requested or inflated until the enquiry is completed.
Which employees can an eligible employer claim the JRB for?
Claims will only be accepted for employees that were eligible for the CJRS. Employers will be able to claim for employees who meet the following criteria.
- Were furloughed and had a CJRS claim submitted for them that meets all relevant eligibility criteria for the scheme.
- Have been continuously employed by the relevant employer from the time of the employer's most recent claim for that employee until at least 31 January 2021.
- Have been paid an average of at least £520 a month between 1 November 2020 and 31 January 2021. The employee does not have to be paid £520 in each month but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via RTI.
- Have up-to-date RTI records for the period to the end of January.
- Are not serving a contractual or statutory notice period that started before 1 February 2021 for the employer making a claim.
How is the £520 a month average minimum earnings threshold calculated?
Only earnings recorded through RTI records can count towards the £520 a month average minimum earnings threshold.
Where employees are on fixed-term contracts or have been on statutory parental leave, the calculations become more complex. Please contact us for additional assistance.
How can employers claim the JRB?
From February 2021, employers will be able to claim the JRB through the GOV.UK website. The bonus will be taxable, so the business must include the whole amount as income when calculating their taxable profits for corporation tax or self assessment.
Employers should ensure that their employee records are up to date, including accurately reporting their employees' details and wages on the Full Payment Submission through RTI. Employers should also make sure all their CJRS claims have been accurately submitted and any necessary amendments have been notified to HMRC.
Further information on the JRB can be found here.
We are here to help and advise you in these difficult times. Please contact us for more information.
Closing the UK's skills gap
Outlining ways in which the UK can boost employment.
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Employers and business groups have been issuing warnings about the UK's skills shortage for some time now, but the gap between the skills needed to fill vacancies and those possessed by applicants has widened still further during the coronavirus (COVID-19) lockdown. Despite the rise in unemployment and the flood of applications for each vacancy, many recruiters are unable to find the employees they need.
It is a problem that will require both government and employers to look beyond the short-term and focus on future investment in skills. Here, we look at the areas where the issue is most acute and consider some of the solutions being proposed.
Prior to the pandemic, a 2019 report by the Industrial Strategy Council estimated that 20% of the workforce will be significantly under-skilled for their jobs by 2030.
According to the Quarterly Recruitment Outlook for the second quarter of 2020 published by the British Chambers of Commerce (BCC), of the firms that have still been attempting to recruit during the pandemic, 65% faced recruitment difficulties, particularly for skilled manual/technical or managerial roles.
The COVID-19 recession is doing significant damage to the UK labour market and unemployment is rising. This is also being accompanied by a slump in the number of self-employed individuals as freelancers fall through the cracks of the government's support schemes. The situation has led to fears of a 'brittle' and 'rigid' UK workforce that lacks the vital skills the economy requires in order to forge a recovery.
The BCC urged the government to take further action to support, upskill and reskill employees as businesses adapt to change. The Chartered Institute of Management Accountants (CIMA) says that while the government must tackle immediate issues such as restoring jobs and increasing consumer spending, it must also put greater emphasis on creating long-term recovery, including boosting social mobility.
The CIMA believes investing in education and skills development in sectors such as digital technology, education technology, healthcare, financial services, engineering and construction will be critical.
Funding boosts are needed for vocational and technical education, for apprenticeships and for incentives to help more employers provide high-quality job-related training.
To address the ongoing challenges that the economy faces, the Chancellor of the Exchequer, Rishi Sunak, announced a large-scale plan to support people in finding jobs in his July Summer Economic Update. The Chancellor made funds available to enable jobseekers to gain the skills they need to get jobs and provide targeted help for young people to get into work.
The Kickstart Scheme
One of the main announcements in the Update was the introduction of a new Kickstart Scheme designed to 'fund the direct creation of high-quality jobs for young people at the highest risk of long-term unemployment'.
This is a £2 billion fund aimed at creating hundreds of thousands of high-quality, six-month work placements for those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage (NMW) for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions.
Training and apprenticeships
The government is also funding high-quality traineeships for young people by paying employers who provide trainees with work experience £1,000 per trainee.
Additionally, there is now a payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over. This applies from 1 August 2020 to 31 January 2021.
Many businesses are still suffering from a cash crunch and reduced demand despite the welcome interventions made in the Summer Economic Update. Those looking to the future must invest wisely, using the available government support, to develop a skilled and motivated workforce.
We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.
Extending Making Tax Digital
Taking a look at the extension of Making Tax Digital to other taxes.
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The government's landmark Making Tax Digital (MTD) initiative, which sees taxpayers move to a fully digital tax system, is to be gradually extended over the next three years.
The Treasury's roadmap for MTD is currently going through Parliament as part of this year's Finance Bill. New legislation will make MTD compulsory for all VAT registered businesses, including those with a turnover below the VAT threshold from April 2022. In April 2023 MTD will apply to taxpayers who file income tax self assessment tax returns for business or property income over £10,000 annually. Here, we look at MTD and what the extension means for small businesses and those filing self assessment returns.
What is MTD?
Making Tax Digital for Business was introduced in the 2015 Spring Budget. The government's 'Making Tax Easier' document was published shortly after, which outlined plans for the 'end of the tax return'. It also set out the government's vision to modernise the UK tax system, with digital tax accounts set to replace tax returns for ten million individuals and five million small businesses.
Under the rules, businesses with a turnover above the VAT threshold (currently £85,000) must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software. Since it was introduced in 2019, more than 1.4 million businesses have joined the programme, submitting over six million returns.
The advantages of MTD
According to the government, MTD only changes the way that taxes are reported, not the level of tax that is collected. It says MTD will help to minimise avoidable mistakes, saving the Treasury billions in lost taxes.
In addition, the government states that MTD makes it easier for businesses to keep on top of their tax affairs. It points to the 300,000 smaller VAT-registered businesses that are not yet required to use MTD, but have chosen to do so voluntarily because of the wider benefits the digital tools offer, including fewer errors and increased productivity.
Under MTD, self assessors will have to make quarterly submissions of income and expenses. HMRC says this will allow it to give taxpayers an estimated tax calculation based on the information provided to help them budget for their tax. At the end of the year, they will be able to add any non-business information and finalise their tax affairs using MTD-compatible software.
According to the government, the long lead-in time for the extension of MTD will allow businesses, landlords and agents time to plan. It will also give software providers enough notice to bring a range of new products to market, including free software for businesses with the simplest tax affairs.
Errors and costs
However, a survey of businesses and their advisers carried out by the Chartered Institute of Taxation (CIOT) and the Association of Taxation Technicians (ATT) revealed that nearly 90% of respondents said that Making Tax Digital for VAT (MTD for VAT) had not reduced errors and just 14% of respondents said there had been an increase in productivity in their organisation as a result of MTD for VAT.
The Low Incomes Tax Reform Group (LITRG) is urging HMRC to make effective use of the next three years, running full pilots and supporting taxpayers in making the transition to the new MTD system.
Using third party software and keeping digital records
Businesses must keep specified records in 'functional compatible software', which calculates the VAT return and submits it to HMRC via an Application Programming Interface (API).
HMRC acknowledges there are different ways to do this. However, the transfer of data to HMRC, from the mandatory digital records to the filing of the return, must be entirely digital.
Under MTD, the required digital records can be held within more than one piece of software, however there must be a digital link between them: the data cannot be transferred manually between software products. HMRC has confirmed that all businesses now have until their first VAT return period starting on or after 1 April 2021 to ensure digital links are in place.
A HMRC communications pack on Making Tax Digital can be found here.
How we can help
No matter if your business is big or small, MTD affects you. As your accountants, we can help you to stay compliant with the MTD rules and advise on suitable software packages for your business.
For more information, please contact us.
Chancellor unveils a plan for jobs
Analysing the measures announced in the Summer Economic Update.
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On 8 July Chancellor Rishi Sunak unveiled a three-point plan to support jobs as the UK economy begins its recovery from the coronavirus (COVID-19) lockdown. The first phase of the COVID-19 pandemic created extraordinary challenges for businesses and the wider economy, prompting the UK government to respond with a raft of unprecedented measures.
As lockdown rules are being relaxed and support schemes are being wound down, the Chancellor announced a raft of measures to create jobs, protect jobs and help people find work. Here, we look at Mr Sunak's Summer Economic Update and what it means for businesses and individuals.
Furlough scheme replaced with job retention bonus
The Coronavirus Job Retention Scheme (CJRS) and Self-employment Income Support Scheme (SEISS) are being wound down after helping support 11 million people through the crisis.
The Chancellor said furloughing had been the right measure to protect jobs through the first phase of the crisis and it will be followed by a Job Retention Bonus. This will see UK employers receive a one-off payment of £1,000 for each furloughed employee who is still employed as of 31 January 2021. To qualify for the payment, the employee must be paid at least £520 on average in each month from November to January. Payments will be made from February 2021 and further details on this scheme will be announced by the end of July.
Kickstart Scheme for young people
The Chancellor also launched a £2 billion Kickstart Scheme that will aim to create high-quality, subsidised six-month placements for young people at risk of long-term unemployment.
The aim of the scheme is to give young people the chance to build their confidence and skills in the workplace and then to gain experience that will improve their chances of going on to find long-term, sustainable work.
The Kickstart Scheme will see the creation of work placements aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment. Funding available for each job will cover 100% of the relevant National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions. Employers will be able to top this wage up if they so wish.
More changes to support jobs
To address the ongoing challenges that the economy faces, the government has a large-scale plan to support people in finding jobs, enable them to gain the skills they need to get jobs and provide targeted help for young people to get into work.
Measures will include a boost to the National Careers Service, enhanced work search support and payments of £1,000 for employers who hire new apprentices.
Eat Out to Help Out
One of the more eye-catching announcements made by Mr Sunak is the launch of a 'eat out to help out' scheme designed to encourage people to return to eating out in restaurants and cafés.
This will entitle every diner to a 50% discount of up to £10 per head on their meal at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid Monday to Wednesday on any eat-in meal (including on non-alcoholic drinks) for the month of August across the UK. Participating establishments will be fully reimbursed for the 50% discount.
In order to further support the hospitality and tourism sector, the Chancellor cut the rate of VAT from 20% to 5%. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, as well as supplies of accommodation and admission to attractions, including theme parks and zoos, across the UK.
Stamp duty temporarily reduced
The Chancellor also introduced measures to bolster the construction sector and boost confidence in the flagging housing market in his Summer Economic Update.
Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential Stamp Duty Land Tax (SDLT) in England and Northern Ireland from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021.
However, both Scotland and Wales have their own versions of SDLT, namely the Land and Buildings Transaction Tax (LBTT) and the Land Transaction Tax (LTT). Neither of the devolved governments have yet commented on their plans in regard to the taxes.
Additionally, the Chancellor announced a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. The scheme aims to upgrade over 600,000 homes across England, helping to reduce energy bills and support the green economy.
Changes to tax rules and rates can be complex. We would be only too pleased to provide any further assistance you may need: please contact us.
Tax relief while working from home
Considering the tax reliefs available to those working from home because of COVID-19.
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Millions of employees have been forced to work from home during the coronavirus (COVID-19) pandemic, which has meant significant changes to both working practices and home life. For many, these changes have proved to be a boon, and some employees may never return full-time to their workplaces. For others, the reopening of their place of business cannot come soon enough.
As more people turned their homes into offices, tax-related questions have arisen over the availability of reliefs, and HMRC has responded with guidance and temporary exemptions. Here, we provide answers to some frequently asked questions around expenses related to equipment, cars and travel.
The Treasury took action in response to the unprecedented situation with a temporary tax exemption that is in effect from 16 March 2020, the date the government recommended working from home, until 5 April 2021.
The exemption ensures that home office expenses do not attract tax and national insurance contribution (NIC) liabilities where reimbursed by an employer. The exemption is designed to support employees who are working from home as a result of the COVID-19 pandemic and need to purchase home office equipment.
To be eligible for relief, the expenditure must meet two conditions:
- The equipment must be obtained for the sole purpose of enabling an employee to work from home as a result of the COVID-19 pandemic.
- The provision of the equipment would have been exempt from income tax if it had been provided directly to the employee by or on behalf of the employer.
However, HMRC has also confirmed that a taxable benefit charge will arise if the ownership is subsequently transferred to the employee.
In addition, HMRC has also confirmed that employees working from home because their workplace shut, or following advice to self-isolate, meet the requirements for 'regular' homeworking. This means that employees are covered by the rules regarding homeworking expenses and can claim £6 a week or £26 a month, either through an employer or by claiming tax relief themselves.
There is also the potential to claim a larger sum if necessary. However, this does involve providing analysis of costs and is more cumbersome. Employees can claim online, by phone or post, or via their self assessment tax return, if they usually file one.
Further guidance can be found here.
Tax and travel
HMRC has updated its guidance information on paying travel and subsistence for employees travelling to temporary workplaces during the pandemic. Where an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is part of the period of continuous work at that temporary workplace (for the purposes of the maximum period of 24 months). The same applies to a period of working from home.
In regard to cars, although most have clocked up little or no mileage during the lockdown, the usual rules do remain in place for furloughed employees and those working at home because of COVID-19. This means a car is still treated as 'available for private use' for tax purposes.
HMRC will accept a car is unavailable in limited circumstances, applying only where COVID-19 restrictions on movement prevent it from being returned to the employer or collected.
Business as usual
In most cases it is business as usual and the normal rules on taxable benefits still apply during the pandemic: for example, the provision of one mobile phone and SIM card per employee, with no restriction on private use. This doesn't count as a taxable benefit.
This applies to a range of equipment providing it meets three conditions:
- It's provided solely to enable the employee to perform the duties of the employment.
- Any private use is not significant.
- It isn't an 'excluded' benefit – such as a car.
The rules on tax relief and home working can be complex. We are happy to advise in detail on the best approach to suit your circumstances. Please contact us for more information.
Looking ahead: exiting lockdown
Considering how businesses can restart operations once the COVID-19 lockdown ends.
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The coronavirus (COVID-19) lockdown happened quickly and with relatively little warning. Businesses were forced to make a rapid transition to home working where this was possible or pause operations altogether. Few firms were fully prepared for this shift and some have adapted better than others. Although the lockdown caused major disruption, it also meant new operating practices were established and new efficiencies gained.
The emergence from lockdown looks likely to be a more gradual process; it may even by a cyclical one if we face further peaks of infection. Here we look at some of the practical issues that firms will need to address if they are to map out a successful recovery from the pandemic.
The 'new normal'
Nobody can say for certain how workplaces will look and function when we return to them. One thing is for sure though: they will look different to the ones left behind in March. However, where working practices and newly adopted technologies have proved a success during lockdown, businesses will be keen to keep digital alternatives in place rather than return to conventional working practices.
Because of the benefits outlined above and the imperative to maintain social distancing, many organisations will be planning for a greater volume of employees requesting to work flexibly. The ability to implement social distancing in the workplace will be key to a successful return. However, it will mean reduced capacity in most workspaces, so staffing requirements and working patterns will have to be reviewed.
Crucial to managing a flexible return to work will be technological capabilities that support a combination of office and remote working, which will mean a continued reliance on video conferencing in many cases.
Updated hygiene practices will also be vital to a safe return, especially if a business is expecting to welcome visitors onto its premises. Firms will need to consider measures such as creating one-way walkthroughs, installing hand sanitising stations, opening more entrances and exits and changing seating layouts in break rooms. Where people cannot be two metres apart, employers must manage the risk of transmission.
An event such as the COVID-19 pandemic triggers the need to review risk assessments and record the findings of the review. Firms will need to follow all normal safety practices while also incorporating any new regulatory policies, procedures and control measures (for example, using the latest guidance published by the Health and Safety Executive). Additionally, employees will need to be informed of any new procedures and protocols that must be followed, for example the use of hot desking and deep cleaning.
Keep the cash flowing
As well as keeping a close eye on order books, stocks and supply chains, managing cashflow will be vital for firms aiming to exit the lockdown successfully. This means having a thorough understanding of your business's cash position both prior to exit and for the immediate future.
Understanding the cash position in the short and medium-term will help firms assess what steps they need to take in order to keep the business moving. Devising forecasts with different scenarios will help gain an understanding of what the organisation's options might be.
Many businesses are likely to need some additional help as they start back up again. Existing banks and lenders should be the first port of call, but remember there are other sources of finance available. These include the various government COVID-19 support schemes: we can provide help and advice if your business needs to raise finance.
Also, businesses must make sure that they utilise the tax reliefs available to them. There are various reliefs available for business owners which can assist with tax planning. We can offer advice and guidance to make sure your business is benefiting from the appropriate reliefs.
The road ahead may not be an easy one. It is unlikely to be straightforward and setbacks are probable. However, careful planning will help businesses be prepared to take advantage of a surge in economic activity and return of market confidence.
Our team can help businesses with a range of financial planning issues. For more information, please contact us.