What does the future have in store for cash?
We look at the future of cash.
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The use of cash has been declining for some years now, with electronic payments in multiple formats increasing to take its place. This was a trend accelerated by the COVID-19 pandemic, when health was added to the list of reasons not to use cash. Some predictions have suggested that the UK could become cashless in little over a decade. If this were to happen, nobody yet knows what it really means for consumers or for the UK economy. However, the government has now begun to take steps to protect access to cash.
Here, we look at the future of cash.
UK could go cashless
The Access to Cash Review was set up by ATM network provider Link to help understand how consumers use cash and how behaviours will change as we head into the 2030s. It predicted that society would be at the point of being 'virtually cashless' by 2035, with fewer than 10% of transactions being made in cash. Between March 2019 and March 2020, it found that 13% of free UK ATMs closed as they have become 'economically unviable'.
There are fears that these issues with the country's cash infrastructure will only get worse following the pandemic.
In addition, a growing number of retailers are 'going cashless' as they find the costs of banking cash rise, particularly as branches close making it more challenging to deposit their cash takings. This is already starting to exclude people.
Data from the National Audit Office (NAO) shows how cash was used in 60% of transactions before 2010, but that number fell to less than 30% by 2019.
The data suggested that the Covid-19 outbreak may have accelerated this trend further, as market demand for notes and coins declined by 71% between early March and mid-April during the first lockdown of 2020.
Meanwhile, consumer group Which? found that over a third of UK consumers were blocked from paying for goods with cash during the pandemic.
Which? surveyed more than 2,000 people across the country in and found 34% had had cash as a means of payment refused.
The NAO has warned that without co-ordinated effort there is a risk that vulnerable people who rely on cash will be excluded from the economy.
This was also reflected by a report commissioned by the Royal Society of Arts (RSA). This suggested that millions of individuals in the UK would struggle if cash was phased out as a form of tender.
Despite just 17% of payments being made with notes and coins, the RSA said that ten million people would struggle to cope in a cashless society. An additional 15 million people stated that going cashless would make budgeting more challenging.
The report found that many individuals felt that they have been pushed into a world they're ill equipped for, despite millions making use of contactless and smartphone payments.
The Access to Cash Review, the NAO and the RSA have all called upon the government to take action to protect the use of cash in the UK. The government has responded with a provision in the Financial Services and Markets Bill, which will protect cash by ensuring continued access to cash facilities.
Under the new rules, the financial regulator – the Financial Conduct Authority (FCA) – will be granted new powers over the UK's largest banks and building societies, to ensure that cash withdrawal and deposit facilities are available in communities across the country.
The FCA's new powers will allow it to address cash access issues at both a national and local level. To support the FCA, the government will in due course set out its expectations for a reasonable distance for people to travel when depositing and withdrawing cash. This will reflect the existing spread of cash withdrawal and deposit facilities in the UK.
Economic Secretary to the Treasury, John Glen, said: 'Millions of people across the UK still rely on cash, particularly those in vulnerable groups, and today we are delivering on our promise to ensure that access to cash is protected in communities across the country.
'I want to make sure that people are still able to use cash as part of their daily lives, and it's crucial to ensure that no person nor community across the UK is left behind as we embrace a more digital world.'
Here to stay
Despite the dominance of electronic payments, cash is still the second most frequently used method of payment in the UK. Now, with the government taking steps to protect access to cash, it looks like it is here to stay for a while longer yet.
Outlining the government's Energy Strategy
We take a look at the Energy Strategy in greater detail.
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The government recently unveiled its new Energy Strategy, which aims to boost UK energy independence and tackle rising prices. Under the government's new plan, up to 95% of the UK's electricity could come from low-carbon sources. Here, we take a look at the Energy Strategy in greater detail.
Support with energy bills
As part of the Energy Strategy, the government unveiled a £9.1 billion package of support, including a £150 non-repayable council tax rebate for most households in England, to be paid from April. Comparable provisions are being made available in the devolved administrations.
Meanwhile, the Energy Bills Support Scheme will see households in Great Britain given a £200 reduction in energy bills from October. This will be recovered through energy bills and will help to spread the cost of the energy price shock over five years from next year. Additionally, the government will invest £500 million in a Household Support Fund to be used by local authorities in supporting vulnerable households with food and utility bills.
Help for businesses
In recognition of UK industrial energy prices being higher than those of other countries, the government is extending the Energy Intensive Industries (EII) Compensation Scheme for a further three years and will increase the aid intensity to up to 100%.
The government stated that it will also consider other measures to help businesses, including increasing the renewable obligation exemption to 100%.
Business groups' reactions to the Strategy
Business groups, including the Confederation of British Industry (CBI), the British Chambers of Commerce (BCC) and the Trades Union Congress (TUC) reacted to the publication of the Energy Strategy.
The CBI stated that the Strategy 'sets an ambitious bar for a more resilient, low carbon energy system for the future'. Rain Newton-Smith, Chief Economist at the CBI, said: 'Bold words must now be matched by bold actions from the government. The proof will be in the Strategy's delivery, in partnership between business and government. Business believes greater energy independence must go hand-in-hand with delivering a net-zero, higher growth economy.'
The BCC labelled the Strategy as a 'missed opportunity'. Alex Veitch, Director of Policy and Public Affairs at the BCC, said: 'The transition to the cheaper, cleaner energy sources of tomorrow is vital, however prices are soaring today, and businesses need support now. This strategy is a missed opportunity to provide that which is why we are urging the government to introduce a temporary SME price cap, expansion of the energy bills rebate scheme to include SMEs and a six-month extension to the Recovery Loan Scheme.'
The TUC said that the Strategy 'fails to rise to the challenge of the climate emergency'. Frances O'Grady, General Secretary of the TUC, said: 'It does little to reassure the millions of workers facing big falls in their living standards due to soaring energy costs.
'A mass home insulation programme would slash bills and create over 200,000 jobs. But it is entirely missing from the strategy.'
The Energy Strategy can be found in full here.
What happened at Spring Statement?
We look at the Chancellor's announcements at Spring Statement.
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Chancellor Rishi Sunak faced a tough task at this year's Spring Statement. He delivered his Statement against a backdrop of soaring inflation with rising fuel, energy and food prices hitting both businesses and households. This created pressure from business groups, consumer groups, politicians and charities for the government to take action.
Here, we look at the Chancellor's announcements at Spring Statement.
Tax cutting measures
The Chancellor started and finished his Spring Statement speech with two tax-cutting flourishes. It began with the widely expected cut to fuel duty, which saw 5p per litre cut from petrol and diesel. Although this was welcomed by motoring groups it also drew criticism as the cut will likely be swallowed up by rising costs and may not be passed on fully by retailers.
Mr Sunak's grand finale saw him pledge that the basic rate of income tax will be cut by 1p in the pound in April 2024. By then the Chancellor said that the Office for Budget Responsibility (OBR) expects inflation to be back under control, with debt falling sustainably.
Giving and taking on NICs
In between these announcements the Chancellor disappointed those who hoped he would cancel the Health and Social Care Levy, which adds 1.25% to national insurance contributions (NICs) and will be implemented this April.
However, he softened the blow of this rise by raising the starting thresholds for NICs to £12,570, which brings them into line with income tax thresholds.
The Chancellor also gave some businesses a boost with a £1,000 increase to the Employment Allowance, which will benefit SMEs.
Meanwhile, he revealed that no business rates will be due on a range of green technology used to decarbonise buildings, while there will also be 50% business rates relief for eligible retail, hospitality and leisure properties from April 2022.
The Federation of Small Businesses (FSB) gave one of the more enthusiastic responses to the Spring Statement. It said that uprating the Employment Allowance and cutting fuel duty would 'provide crucial breathing space' to small businesses.
However, other business groups did not hide their disappointment that the Chancellor had not laid out further measures. The British Chambers of Commerce (BCC) said the Statement fell short of the action needed and 'did not fundamentally address the huge cost pressures [businesses] are facing'.
Meanwhile, the Confederation of British Industry (CBI) warned that the measures announced by the Chancellor 'don't do enough to tackle the current challenges facing firms'.
Soaring energy costs
Coming into the Spring Statement, soaring energy costs had been one of the major issues facing the Chancellor.
The government had previously announced that over £9 billion in state-backed loans will be made available in England, Scotland and Wales, with households set to be given up to £350 to help with their energy bills this year. Many were hoping the Chancellor would go much further in the Spring Statement.
However, he made just three announcements on energy, including the fuel duty cut.
The other measures saw the removal of 5% of VAT from the cost of energy saving materials. In addition, vulnerable households will be aided by £500 million of new funding.
No rabbit from the hat
These measures drew a scathing response from consumer champion Martin Lewis.
Taking to social media, he said: 'If that's all he's doing on energy - it is limited and won't impact the majority of households who will see a likely £1,300 average increase in year-on-year bills by October. My head has sunk. I just hope there's a rabbit to come out of the hat.'
However, the only rabbit to come out of Mr Sunak's hat saw him pledge to make a cut to income tax in two years' time.
Tough times ahead
The response to the Chancellor's Spring Statement has highlighted that there are some tough times ahead due to the crises in the costs of both living and doing business. We are here to help: if you need advice on improving your cashflow, please contact us.
The cost-of-living crisis
A look at some of the issues households are facing.
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News about the cost-of-living crisis hitting the UK this year has become unavoidable. A toxic combination of soaring energy bills and rising food prices is forcing inflation to levels that haven't been seen for 30 years. Meanwhile, borrowing costs are also increasing, while wage growth is struggling to keep up. Here, we take a look at some of the issues households are facing.
It has been 30 years since inflation ran at the levels seen this January. The start of the year saw fewer January sales and discounts than usual, which pushed prices up by 5.5% January – up from 5.4% previously – as retailers reined in seasonal discounts on clothing and footwear.
Inflation is now outpacing wage growth as energy, fuel and food costs continue to rise, squeezing household budgets. Wage growth in the UK struggled to keep up with increasing inflation between October and December 2021, according to Office for National Statistics (ONS) data.
Average weekly pay packets across Britain fell in December by negative 1.2%, reflecting how wages are struggling to keep up with the rising cost of living. Things are likely to get worse as inflation is forecast to climb above 7% this year, putting pressure on the government to offer more support.
Surging business costs
Around threequarters of UK businesses say they are putting up prices in response to surging costs such as wages, energy and raw materials, according to a survey conducted by the British Chambers of Commerce (BCC).
The survey of more than 1,000 firms showed that businesses across the country are under intense pressure from a variety of costs. It found that prices were likely to rise as a result, further fuelling the cost-of-living crisis for households.
Rising energy bills were cited as the driving factor by 62% of respondents, rising to 75% for manufacturers. Meanwhile, 63% cited increased wage bills as driving prices rises.
The BCC called on the Chancellor to adopt their five-point plan to address these challenges. These include a temporary energy price cap for small businesses and the extension of the financial support announced for households last week to include small firms.
The base rate and the cost of borrowing
The Bank of England has responded to rising inflation by increasing the base interest rate to 0.5% from 0.25% at the beginning of February. The base rate is used by the central bank to charge other banks and lenders when they borrow money – and influences what borrowers pay and savers earn.
This increase means that lenders may raise standard variable rate (SVR) or 'discount' mortgages, while those on a tracker mortgage will see monthly mortgage payments increase.
Those borrowers on SVRs are close to the end of fixed rate deals should check whether remortgaging to a new deal could save them money in the medium to long term.
The Bank of England is expected to raise the base rate again this year so fixing a mortgage rate before this happens could prove advantageous.
Spiralling energy costs
The recent decision by energy as regulator Ofgem to ever increase to the price cap level on energy bills by the steepest level ever is due to hit household bills in April. Some estimates predict an average increase of £693 a year for energy bills that affects 22 million households.
The increase is down to Ofgem raising the price cap on standard and default tariffs by 54%. On 'typical' energy use, this means the price cap will rise from £1,277/year to £1,971/year from Friday 1 April. More than 60% of households are on these standard tariffs.
Unfortunately, there is little that households can do to avoid those price hikes as no cheap deals are available in the market for those looking to switch supplier.
However, the government announced that over £9 billion in state-backed loans will be made available in England, Scotland and Wales, with households set to be given up to £350 to help with their energy bills this year.
Pressure on pensions
Those already claiming the state pension are expected to find meeting the cost of living a challenge this year. This is because the government dropped its triple lock promise for pensions, even though inflation continues to rise.
Under the triple lock policy, the state pension increased every year by whichever is the highest of inflation, earnings growth or 2.5%. However, earnings growth, which was running at 8%, was dropped to create a double lock. The state pension will now increase in April 2022 by 3.1%, which was September's inflation figure.
However, inflation is now running ahead of this figure, exacerbated by higher energy and food bills, which pushed up the cost of living by 5.5% in January.
Rocky road ahead
The cost-of-living crisis will hit both households and businesses this year, if you need advice on improving your cashflow please contact us .
Taking a look at self assessment
A review of the deadlines and process.
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The annual rush to complete self assessment tax returns before midnight on 31 January will not have the same urgency this year after HMRC announced it would waive late filing and late payment penalties for one month. The measure will give those taxpayers affected by the pandemic extra time, if they need it, to complete their 2020/21 tax return and pay any tax due. Here, we take a look at the tax authority's decision and the wider self assessment process.
Although it has granted taxpayers valuable breathing space HMRC is still encouraging them to file and pay on time if they can. It says that millions of the 12.2 million taxpayers who need to submit their tax return by 31 January 2022, have already done so.
The deadline to file and pay remains 31 January 2022. The penalty waivers will mean that:
- anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February; and
- anyone who cannot pay their self assessment tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April.
However, interest will be payable from 1 February.
Angela MacDonald, HMRC's Deputy Chief Executive and Second Permanent Secretary, says: 'We know the pressures individuals and businesses are again facing this year, due to the impacts of COVID-19. Our decision to waive penalties for one month for self assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.'
The self assessment cycle
Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated, and any tax owing is paid on time.
Tax returns are issued shortly after the end of the fiscal year. The fiscal year runs from 6 April to the following 5 April. Tax returns are issued to all those whom HMRC are aware need a return including all those who are self-employed or company directors. Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due, they should notify HMRC who may then issue a return.
A taxpayer has normally been required to file his tax return by 31 January following the end of the fiscal year. The return must be filed by 31 October 2022 if submitted in 'paper' format. Returns submitted after this date must be filed online otherwise penalties apply.
Late filing penalties
For those that fail to file their returns on time there is an automatic £100 penalty (even if there is no tax to pay or the tax due has already been paid). This year that date will be 28 February due to the reasons set out above.
The full penalty of £100 will always be due if your return is filed late even if there is no tax outstanding. Generally, if filing by 'paper' the deadline is 31 October and if filing online the deadline is 31 January.
Additional penalties can be charged as follows:
- over three months late – a £10 daily penalty up to a maximum of £900
- over six months late – an additional £300 or 5% of the tax due if higher
- over 12 months late – a further £300 or a further 5% of the tax due if higher. In particularly serious cases there is a penalty of up to 100% of the tax due.
Calculating your tax liability
The taxpayer does have the option to ask HMRC to compute their tax liability in advance of the tax being due in which case the return must be completed and filed by 31 October following the fiscal year.
Whether you or HMRC calculate the tax liability there will be only one assessment covering all your tax liabilities for the tax year.
Changes to the tax return
HMRC may correct a self assessment within nine months of the return being filed in order to correct any obvious errors or mistakes in the return.
An individual may, by notice to HMRC, amend their self assessment at any time within 12 months of the filing date.
HMRC may enquire into any return by giving written notice. In most cases the time limit for HMRC is within 12 months following the filing date.
The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.
If there is an enquiry, we will also receive a letter from HMRC which will detail the information regarded as necessary by them to check the return. If such an eventuality arises we will contact you to discuss the contents of the letter.
HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.
Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.
How we can help
We can prepare your tax return on your behalf and advise on the appropriate tax payments to make.
If there is an enquiry into your tax return, we will assist you in answering any queries HMRC may have. Please do contact us for help.
What the first TAM Day means for business
A review of the implications for business.
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The inaugural Tax Administration and Maintenance (TAM) Day probably passed most businesses by. The name rather leaves the impression that this is a day that has been set aside for tax advisors and accountants. However, closer inspection by business will have been rewarded by some welcome announcements.
The aim of TAM Day is to continue simplifying the UK tax system. Documents released to mark the first one included a range of topics, including modernising the UK tax system so it is fit for the 21st Century; research and development (R&D); business rates; updates to Making Tax Digital (MTD) for companies; and capital gains tax (CGT) administration. Here, we look at some of the key announcements.
Business rates review
In response to a long campaign by business groups, the government has opened a technical consultation setting out further detail on the conclusions to the government's review of business rates in England. This has promised more frequent revaluations, improvement relief, exemptions for green technology and administrative reforms.
Another Budget announcement promised that R&D tax reliefs will be reformed from April 2023 to support modern research methods. The consultation around these changes has now been completed and the report published. This will expand qualifying expenditure to include data and cloud costs. The objective is to more effectively capture the benefits of R&D funded by the reliefs by refocusing support towards innovation in the UK. It is also intended to target abuse and improve compliance.
CGT time limits
As already revealed during the Autumn Budget, the time limit for making a CGT return and associated payments on account when disposing of UK residential property by UK residents and UK land and property by non-UK residents has been extended from 30 to 60 days.
MTD for Corporation Tax
The government also confirmed its plans to extend MTD to corporation tax (CT) following a consultation with businesses. It confirmed the timeline, which will see the rules applying for companies from April 2026.
The government says it is committed to ongoing collaboration with stakeholders to help shape a service design that works for all and will provide sufficient notice ahead of implementation following any decision to mandate MTD for CT, to allow businesses time to prepare.
A point to note is that there is no de minimis exemption for smaller businesses. A pilot is expected in April 2024, allowing practice before the system is mandatory.
An update on reforms to Small Brewers' Relief will see the government invest around £15 million of additional funding into the craft brewing sector. This will enable small breweries to expand without losing tax relief and addresses concerns raised by stakeholders that the current scheme fails to incentivise growth.
The government says its aim is to deliver a modern, simple and effective tax system which helps taxpayers get their tax right the first time. This is all part of the ten-year plan, which was published in July 2020, to modernise the tax administration framework; make better use of real time and third-party information; and progress MTD to improve the experience for taxpayers and businesses, thereby helping to reduce the tax gap and increase resilience.
How we can help
The issues raised here may have implications for your business. To discuss any related matter, please contact us.
Cryptoassets - the view from HMRC
A review of cryptoassets and their treatment by the taxman.
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Although cryptoassets are still a relatively new asset class and they remain mysterious to many people, there is no doubt they are becoming ever more mainstream.
They continue grow in popularity with investors appearing to overlook pricing volatility in the hope of gaining a profit if valuations soar. Cryptoassets are not just an asset class for investments either, increasingly they can be used as a form of currency too.
However, HMRC takes an interest when trades and gains are made. The tax authority can access data from crypto exchanges, so it is important to ensure that all activity is fully compliant and reported where appropriate. Here, we take a look at cryptoassets and their treatment by the taxman.
What are cyrptoassets?
Cryptoassets – it's a broad term, encompassing cryptocurrency and tokens. HMRC defines cryptoassets as cryptographically secured digital representations of value or contractual rights that can be transferred, stored, traded electronically and use some form of distributed ledger technology (DLT).
HMRC guidance recognises four main types of cryptoassets: exchange tokens (which include cryptocurrency, like Bitcoin), utility tokens, security tokens and stablecoins. Exchange tokens are the main focus of its guidance.
HMRC's view of crypto
HMRC aims to cut through to the underlying transaction, rather than getting hung up on crypto terminology. And it reserves its right to amend its guidance as cryptoassets themselves evolve.
It's important to be clear that there are no bespoke rules for cryptoassets: the existing tax provisions flex to accommodate them. In practice, this means that depending on the circumstances, the sale or purchase of cryptoassets could bring any of a number of taxes into play. For individuals, this could include capital gains tax (CGT), income tax and national insurance contributions (NICs). For businesses carrying out activities involving exchange tokens, it could mean corporation tax, corporation tax on chargeable gains, payroll taxes and VAT.
Businesses may increasingly need to consider the tax position where they receive occasional payment in cryptoassets in the course of an existing, non-cryptoasset trade: the glamping site owner who accepts a one-off payment in bitcoin, for example. If a business accepts exchange tokens as payment from customers or uses them to pay suppliers, the tokens should be accounted for within the taxable trading profits.
An asset class
HMRC does not consider cryptoassets to be money or currency. This means, for example, the corporation tax foreign currency rules don't apply. HMRC's view is that cryptoassets don't create a loan relationship for corporation tax purposes.
HMRC does not consider buying and selling cryptoassets to be gambling. This has implications for how proceeds are treated. With gambling winnings, profits are not taxable, and losses are not relieved. This is not the case with cryptoassets.
According to HMRC, most individuals hold cryptoassets as a personal investment, with a view to capital growth. This means there is the normal CGT regime to consider, with its annual exemption (currently £12,300) and rules on taxation of gains above this threshold.
With many crypto investors taking their first steps in the world of CGT and self assessment, it's important to be alert to the possibility that there's a liability to CGT any time assets are disposed of. Details should always be recorded and may need to be reported to HMRC in due course.
Trading in cryptoassets
If purchases and sales of cryptoassets are considered to amount to a financial trade, profits or losses come under income tax rules, with income tax and NICs potentially due. But to constitute trading, HMRC expects considerable frequency, organisation and sophistication in the activity, and treatment as a trade will be the exception rather than the rule.
Where goods or services are sold for exchange tokens by a VAT registered business, VAT is due in the normal way. The value of the supply on which VAT is due is the pound sterling value of the tokens at the point the transaction takes place. Exchange tokens received for mining are generally outside the scope of VAT. This, however, is an area to watch. HMRC flags up the possibility of change, pending other regulatory developments.
How we can help
If you trade, invest or accept cryptoassets as payment for services then there may well be tax implications. Please don't hesitate to contact us to discuss any matters related to cryptoassets and tax.
What will the 2021 Autumn Budget have in store?
A review of what the Chancellor may have in store.
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Chancellor Rishi Sunak will deliver the 2021 Autumn Budget on 27 October. The Budget will follow the Spending Review and is expected to set out how the government will deliver on its promises to the British public. These include leading the transition to net zero across the country; ensuring strong and innovative public services; levelling up across the UK to increase and spread opportunity; and delivering its Plan for Growth.
Here, we take a look at what the Chancellor may have in store in the Autumn Budget.
The UK's trajectory
The Confederation of British Industry (CBI) says the decisions made this autumn at the Budget and Spending Review will 'define the UK's trajectory for the decade ahead'. These will bring an opportunity to generate higher investment and growth with lower carbon emissions and provide UK leadership in new markets.
According to the CBI, corporate cash reserves are now over £900 billion, creating 'a wall of investment waiting to be invested'. However, it says the government must create the right environment to unleash it.
The CBI's recommendations
Smart taxation that rewards investment:
- 'Greening' the tax system and pledging no further increases to the business tax burden to safeguard UK status as a leader in attracting global investment
- Introduce full expensing for capital expenditure beyond 2023 and targeted 'green' investment-focused capital allowance mechanisms
- Reform outdated business rates to reflect green ambitions and reward decarbonisation efforts
- Boost the structures and buildings allowance to incentivise sustainable construction
New skills for new markets:
- Turn the Apprenticeship Levy into a Lifelong Learning Levy to unlock business investment in training
- Turn Job Centres into regionally autonomous Jobs and Skills Hubs to encourage more people to take up lifelong learning and enable closer alignment with changing local jobs markets
- Introduce individual training accounts for unemployed individuals
- Address skills shortages by removing barriers to recruitment
Catalytic public investment:
- Prioritise the UK establishing itself in new and emerging markets by speeding up the development of major infrastructure projects, new industries, and cutting-edge tech
- Designate energy efficiency and heat as a national infrastructure priority
- Provide long-term funding to decarbonise UK transport systems and develop a UK electric vehicle market
- Commit to a new Gigafactory plan to deliver increased capacity by 2040
Government as market maker:
- Deliver on commitments to invest £22 billion in direct domestic R&D funding by 2025
- Grow investment in business-led innovation, while requiring regulators to prioritise innovation, net zero and investment as part of core remits
The CBI says the Autumn Budget is a once-in-a-generation opportunity to change the UK's productivity and growth trajectory, so the government must do what it takes to rapidly unlock private sector investment.
However, failure to act will impact the UK's recovery and ability to level-up. In addition, inaction risks seeing the UK fall behind competitors, lose international investment, and miss out on its global commitments on net zero.
So, all eyes will be on the Chancellor on 27 October to see what he delivers.
How we can help?
The Budget may bring significant changes to the taxation system or bring new opportunities for investment. As your accountants we can help your business through these changes: please contact us.
The path to net zero
A review of what businesses could be doing.
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The recent assessment of the planet's future by the UN's Intergovernmental Panel on Climate Change (IPCC), a group of scientists whose findings are endorsed by the world's governments, made for sobering reading. The first major review of the science of climate change since 2013 revealed a number of worrying statistics. Its release came in the lead up to the UK's hosting of a key climate summit in Glasgow, known as COP26.
The report and conference have pushed the UK's drive to reach net zero by 2050 back up the agenda. However, the route to net zero appears far from clear to both the UK government and businesses.
Although the Confederation of British Industry (CBI) acknowledges the urgency of the problem, a recent survey from the British Chambers of Commerce (BCC) shows that many businesses still don't measure their own carbon footprint. What do businesses need to do to make themselves fit for net zero?
Here, we take a look at the latest climate science and ask what businesses could be doing.
The IPCC's report has been described as 'a Code Red for humanity' as it highlights how human activity is changing the climate in unprecedented and sometimes irreversible ways. The landmark study warns of increasingly extreme heatwaves, droughts and flooding and a key temperature limit being broken in just over a decade.
But scientists say a catastrophe can be avoided if the world acts fast.
There is hope that deep cuts in emissions of greenhouse gases could stabilise rising temperatures. The CBI says that the report must put to bed any remaining doubts as to the scale of the climate crisis.
It called for COP26 to be the trigger for more urgent action from countries around the world and says joint efforts by governments, businesses and consumers are required.
The CBI says that while the UK government must take the lead, by establishing the policy and tax frameworks to make it possible, businesses must play a vital role.
The carbon footprint mystery
However, a worrying recent survey conducted by the BCC found that carbon footprints remain a mystery to the vast majority of UK businesses. In fact, only 11% of businesses are measuring their carbon footprint.
The research also showed that only 13% of businesses have set targets to reduce their emissions – down from 21%, when firms were surveyed before the pandemic in February 2020.
The findings also show that 22% of businesses don't fully understand the term 'net zero,' and almost a third have yet to seek advice or information to help them develop a net zero roadmap or improve their environmental sustainability.
Similarly, a survey carried out by resource management firm Veolia has revealed that 83% of businesses polled were not aware of the Plastic Packaging Tax, which is due to take effect from April 2022.
The Plastic Packaging Tax is a new tax that will apply to plastic packaging manufactured in or imported into the UK that does not contain at least 30% recycled plastic. The government states that the aim of the tax is to 'provide a clear economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging'.
The BCC described its research as a 'real eye-opener' and says change must come as climate challenge affects everyone.
Low carbon economy
The good news for businesses is that the UK's low carbon economy is now worth more than £200 billion according to research by kMatrix, and is continuing to grow.
Experts say the sector not only has the potential to help tackle the climate crisis but also create sustainable jobs and improve people's quality of life – with cleaner transport, reduced air pollution and better insulated homes.
But they warn that if the UK is to make the necessary rapid and fair transition to a low carbon economy, the government must mobilise all sections of society behind a national programme of transformation.
The kMatrix reports how low carbon schemes and projects around the UK are not only helping reduce emissions but also improving communities and creating jobs.
How we can help?
As the push towards net zero takes shape, tax laws may change, while new funding streams become available for eligible businesses and projects.
As your accountants we can help with both your tax and finance requirements: please contact us.
Turnover tests and reasonable belief ? applying for the fifth SEISS grant
The fifth instalment of the grant opened for applications in late July
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The fifth instalment of the Self-employment Income Support Scheme (SEISS) grant opened for applications in late July. This is scheduled to be the last instalment of the SEISS grants and unlike its predecessors it introduces a turnover test, which will determine the amount of grant awarded to self-employed workers whose businesses have been hit by the coronavirus (COVID-19) pandemic.
As well as meeting the turnover test, applicants will also need to show that they have a reasonable belief that there is a significant reduction in trading. Here, we take a look at the application process for the fifth SEISS grant.
How much is the grant?
Unlike SEISS grants one to four, the amount of the fifth grant available is determined by how much a self-employed individual's turnover is reduced.
The fifth grant is 80% of three months' average trading profits, capped at £7,500 for those self-employed individuals whose turnover has reduced by 30% or more. Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months' average trading profits, capped at £2,850.
HMRC began contacting taxpayers in mid-July and claims opened in late July. Claims must be made by 30 September 2021. It is the taxpayer who must make the claim: an accountant or agent cannot submit the claim on their behalf.
Who is eligible?
Self-employed individuals (and members of a partnership) are potentially eligible for the fifth SEISS grant where the taxpayer:
- submitted their 2019/20 self assessment tax return by 2 March 2021
- traded in the tax years 2019/20 and 2020/21
- is currently trading but is impacted by reduced demand due to COVID-19, or has been trading but is temporarily unable to do so due to coronavirus
- intends to continue to trade; and
- reasonably believes there will be a significant reduction in their trading profits due to the impact of COVID-19 in the period from 1 May 2021 and 30 September 2021. HMRC has not provided a definition of 'significant reduction'.
The taxpayer's trading profits must be no more than £50,000 and at least equal to their non-trading income. If there is no eligibility based on the trading profits for 2019/20, then previous years will be considered.
The turnover test
Before making a claim, taxpayers must:
- work out their turnover for a 12-month period starting from 1 April 2020 to 6 April 2020
- find their turnover from either 2019/20 or 2018/19 to use as a reference year.
HMRC advises taxpayers will need to have both figures ready when they make their claim.
A taxpayer can calculate their turnover for 2020/21 in several ways:
- by referring to their 2020/21 self assessment tax return if this has already been completed
- by checking the figures on their accounting software
- by reviewing their bookkeeping or spreadsheet records that detail their self-employment invoices and payments received
- by checking the bank account they use for their business to account for money coming in from customers
- by asking their accountant or tax adviser for help in calculating the figures. However, accountants and agents are unable to make the claim on the taxpayer's behalf.
HMRC has confirmed that the turnover figure should not include anything reported as any other income on the taxpayer's tax return. Also, do not include any COVID-19 support payments. For example:
- previous SEISS grants
- Eat Out to Help Out payments
- local authority or devolved administration grants.
HMRC's guidance is available at: https://www.gov.uk/guidance/work-out-your-turnover-so-you-can-claim-the-fifth-seiss-grant.
Turnover for the previous year
In most cases, a taxpayer must use the turnover reported in their 2019/20 self assessment tax return as a reference year. The figure needs to be based on a 12-month period and include the total turnover for the taxpayer's businesses.
In certain limited circumstances where 2019/20 was not a normal year for the taxpayer's business, they can use the turnover reported on their 2018/19 tax return. HMRC gives examples of the circumstances where this would apply. For example, if the taxpayer:
- was on carers' leave, long term sick leave or had a new child
- carried out reservist duties
- lost a large contract
- is eligible for the fifth grant but did not submit a 2019/20 return.
For further guidance on how an individual's circumstances can affect eligibility visit: https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme.
Claiming the fifth SEISS grant is not straightforward. Please contact us for advice on determining your turnover figures or eligibility.