We appreciate that 2020 has been an extremely difficult year for everyone and although we clearly have some difficult months ahead, we are looking towards 2021 with positivity and renewed optimism. Therefore, as we begin our third national lockdown, we want to reiterate that we are here to provide valuable and practical assistance during these difficult times. Please do not hesitate to get in touch if you need us in any (financial) way.
On 5th January 2021, the Chancellor announced a package of new measures to help businesses through the latest lockdown. One-off grants of up to £9,000 per property will be paid to businesses in retail, hospitality and leisure sectors to support them through the latest restrictions which are expected to last until mid-February.
The grants, provided on a per property basis, will be paid to businesses as follows:-
– £4,000 for businesses with a rateable value of £15,000 or under
– £6,000 for businesses with a rateable value between £15,000 and £51,000
– £9,000 for businesses with a rateable value of over £51,000
Any business which is legally required to close and cannot operate effectively remotely, is eligible for the grant.
We have very limited information available at this point but it appears that businesses will need to apply for the grants through their local authorities. If this is the case, don’t rely on the grant being automatic. Please look out for updates from your local authority over the next week or two.
The announcement from HM Treasury can be found here – https://www.gov.uk/government/news/46-billion-in-new-lockdown-grants-to-…
EXISTING SUPPORT
The new funding above is in addition to the existing support that has previously been announced and we have summarised the various packages and measures below.
LOAN GUARANTEE SCHEMES – Extensions
The application deadlines for the loan guarantee schemes has been extended as follows:
– Coronavirus Future Fund – 31st January 2021– this requires match funding to be available and is intended for innovative companies who are facing financial difficulties. More information can be found here:
https://www.gov.uk/guidance/future-fund
– Bounce Back Loans – 31st March 2021 –more information can be found here:
https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
– Coronavirus Business Interruption Loan (CBILS) – 31st March 2021 – more information can be found here:
https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interrupt…
Please consider carefully if your business requires additional support. Be aware that you may be able to receive additional/further loans from different funding sources. You are not limited just to one loan from one source, such as your local bank.
Don’t miss the opportunity to take out further loans if you need them. We understand the information requirements of Banks and can readily assist in providing valuable support for applications, including the style, contents and format of the documents required. Please let us know if you require further assistance.
CORONAVIRUS JOB RETENTION SCHEME (CJRS) – Furlough
The CJRS has now been extended to the end of April 2021. The current scheme rules are slightly different than those introduced in the first lockdown. Employers can claim up to 80% of usual monthly wage costs (up to a cap of £2,500 per month pro rata) in respect of employees that they have furloughed on either a full-time or part-time/flexible basis.
Employers must pay all Employer NIC and pension contributions on the sums paid. Employees can be placed on furlough if they were on the employer’s payroll on 30th October 2020 and notified to HMRC in a Real Time Information submission between 20th March and 30th October 2020.
New employees for whom the first R.T.I. submission was after 30th October are not currently eligible for the grant. It does not matter what type of contract they were working on and employees do not need to have been furloughed between March and October 2020 to be eligible to be furloughed under the extended CJRS. Also claims must now be made within 14 calendar days of the month end you are claiming for.
Therefore, December claims must be submitted by 14th January 2021. The calculations can be complex and indeed have proved to be challenging for a number of businesses. We can support and assist you with any queries you may have in respect of the CJRS and help you make the relevant claims to HMRC. Please contact your lead person at Afford Bond if you have any queries.
SELF-EMPLOYMENT INCOME SUPPORT SCHEME (SEISS)
The Self-Employment Income Support Scheme (SEISS) has been extended to cover the period 1st November 2020 to 30th April 2021. Two grants have already been paid but the extension is in the form of a third and fourth additional taxable grant. The third grant which covers the period November to January is now open for applications and you have until 29th January to apply. You can get as much as £7,500. This is made up of 80% of three months’ worth of average monthly trading profits capped at £2,500 per month.
To calculate this HMRC looks at your tax returns from 2018/19, 2017/18 and 2016/17. This is exactly what the first grant was worth. Broadly, eligibility for the third SEISS grant is similar to the first two, but your business must have had a new or continuing impact from coronavirus between 1 November 2020 and the end of January 2021, which you believe WILL cause a “significant reduction” in trading profits in this same period.
There will be a fourth grant to cover the period February 2021 to April 2021, but the guidance and criteria in respect of this grant have not yet been announced. As was the case with the previous SEISS grants, the claims will need to be made by the taxpayer directly. However, we will of course be able to provide you with all the relevant information and guidance if required.
VAT DEFERRAL
Businesses that deferred VAT payments which were due between 20th March 2020 and 30th June 2020 to 31 March 2021 will now be able to pay these in up to eleven interest-free instalments. Businesses must opt in to the scheme before the end of March 2021 and be up to date with their VAT Returns.
All instalments must be paid by the end of March 2022.
SELF-ASSESSMENT TAX RETURNS
Please note, at the time of publication, HMRC have decided not to extend the Self-Assessment Tax Return deadline beyond the 31st January 2021. However, they have acknowledged that delays due to COVID-19 may be a reasonable excuse when appealing late filing penalties. The government also previously announced that they will give self-assessment taxpayers more time to pay taxes becoming due on 31st January 2021.
You will recall that many people deferred their July 2020 tax payment until January 2021 and therefore it is possible that the payment becoming due on 31st January 2021 will be significantly higher than usual.
Taxpayers with up to £30,000 of self-assessment liabilities due will be able to use HMRC’s new online self-service Time to Pay facility to secure a plan to pay over an additional 12 months. Any self-assessment taxpayer unable to take advantage of the online service can continue to use HMRC’s Time to Pay self-assessment helpline in order to agree a payment plan. If you need this facility, please don’t leave it too late to contact HMRC. We would strongly advise that you take the appropriate action well before 31st January 2021.
CASH FLOWS – critical to your survival and future success.
A firm grasp on your cash flows will allow you to take both protective and proactive measures based upon up to date financial information. It facilitates sound business decisions, putting you and your business in the best position to succeed moving forward.
Afford Bond can help by preparing profit and loss account, balance sheet and cash flow projections whether it is to:
– Support a CBILS or other finance application.
– Assess the impact of decreased turnover and slower debt collection.
– Establish the real working capital requirements in this challenging period and just as important, once things start to return to normal.
We can run ‘what if/sensitivity’ scenario’s so you can establish crucial pinch points in your business and help you react more quickly to changing circumstances.
RESEARCH AND DEVELOPMENT TAX RELIEF
As we continue to adapt to the new way of life this relief is potentially a valuable one which may help us as we make changes and innovations in the way that we carry out our business. Our R&D specialists continue to make claims on behalf of clients. Increasingly we find that R&D tax relief can be claimed by significantly more businesses than perhaps would be expected. This is an extremely valuable relief that can potentially generate a significant repayment from HMRC. It’s important to note that there are strict time limits for making such claims.
Please contact your lead person at Afford Bond who can arrange a free assessment of your business activities, by our specialist team, with a view to making a claim.
CLAIMING LOSS RELIEF – Corporation Tax Refund
In certain circumstances clients may able to increase current year losses to take account of expenditure committed to and incurred in later periods. This could result in a substantial and much needed Corporation Tax refund. We could consider changing year ends as part of an overall commercial strategy. There are potentially significant benefits to you and your company. Please speak to your contact at Afford Bond in order to establish if you potentially qualify for this situation.
INHERITANCE TAX
We appreciate that Inheritance Tax (IHT) is understandably a difficult subject for many people. However the Coronavirus period has seen many of our clients reflecting on their own and family members’ work/life balance and mortality. There are plenty of ways in which you can eliminate or significantly reduce the IHT liability imposed on your estate, and ultimately your loved ones.
Lifetime planning is essential if you believe that your estate may be exposed to IHT charges on death.
If you’d like to consider your IHT position, please do not hesitate to speak to your contact at Afford Bond and we can discuss your potential exposure, along with any planning options available to you.
CAPITAL GAINS TAX
It looks like the Chancellor may change the rules and in particular look at Business Asset Disposal Relief (formerly Entrepreneurs Relief) as a potential target. If you have an intention to dispose of business assets, in the not too distant future, then it may be worth considering some planning to take advantage of existing rules. This could have the effect of accelerating the CGT tax point and potentially reducing your longer term tax liabilities.
The next budget is scheduled for 3rd March 2021 so you might want to consider this sooner rather than later. If you’d like to consider your CGT position, please speak to your contact at Afford Bond and we can discuss your potential exposure, along with any planning options available.
OTHER ANNOUNCEMENTS
The Chancellor has confirmed that the temporary reduction of VAT rates from 20% to 5% for the hospitality and tourism sectors will cease on 31st March 2021.
As previously announced, the Government has introduced a “SDLT holiday” for residential property purchases (in England and NI) from 8 July 2020 to 31 March 2021. The change works by increasing the SDLT nil rate band for purchases of residential property from £125,000 to £500,000 for that “holiday” period. However the 3% surcharge for additional residential properties continues to be applied.