Newsletter – January 2021

Enews January 2021

In this month’s Enews we consider the latest lockdown grant package, the extension of the Job Retention Scheme and guidance on the VAT deferral. We also update you on action to disrupt tax avoidance scheme promoters, the approaching self assessment deadline and a warning against potential capital gains tax rises. With guidance on making festive charitable donations and the Self-Employed Income Support Scheme there is a lot to update you on.

Chancellor announces £4.6 billion lockdown grant package

Chancellor Rishi Sunak has announced a new £4.6 billion package of grants to support businesses through the latest national lockdown.

UK businesses in the retail, hospitality and leisure sectors are to be given one-off grants worth up to £9,000.

The payments are expected to support 600,000 business properties across the UK. A further £594 million will be made available to councils and devolved nations to support businesses not covered by the new grants.

The Chancellor said:

‘The new strain of the virus presents us all with a huge challenge, and whilst the vaccine is being rolled out, we have needed to tighten restrictions further.’

‘Throughout the pandemic we’ve taken swift action to protect lives and livelihoods and… we’re announcing a further cash injection to support businesses and jobs until the spring.’

‘This will help businesses to get through the months ahead – and crucially it will help sustain jobs so workers can be ready to return when they are able to reopen.’

Internet link: GOV.UK news

Extension of the Job Retention Scheme

Chancellor Rishi Sunak has extended the Coronavirus Job Retention Scheme (CJRS) until the end of April 2021.

Businesses adversely affected by the coronavirus (COVID-19) can make use of the CJRS until the end of April, with the government continuing to pay 80% of employees’ salaries for hours not worked. Employers will only be required to pay wages, national insurance contributions (NICs) and pensions for hours worked, and NICs and pensions for hours not worked.

Additionally, Mr Sunak stated that he is extending COVID-19 business loan schemes until the end of March 2021. Businesses will be given until the end of March to access the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These schemes had been due to close at the end of January.

The Chancellor also confirmed that the 2021 Budget will be delivered on 3 March 2021 and will outline the next phase of the government’s plan to combat COVID-19 and protect jobs.

The Chancellor said:

‘Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy recover and protecting livelihoods across the country.

‘We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support.’

Internet link: GOV.UK news

VAT Deferral

HMRC has issued some guidance to taxpayers that deferred their VAT payments between 20 March and 30 June 2020 and still have payments to make.

HMRC is advising taxpayers who deferred their VAT payments to:

  • pay the deferred VAT in full on or before 31 March 2021
  • or opt in to the VAT deferral new payment scheme when it launches in 2021
  • or to contact HMRC if they need more help to pay.

Taxpayers can pay their deferred VAT in full by 31 March 2021. There is no need to contact HMRC. However, if taxpayers want to use the new payment scheme they will need to opt in. The new online opt in process will be available in early 2021. Taxpayers will need to opt in themselves as this cannot be carried out by tax agents.

Where taxpayers opt in to the VAT deferral new payment scheme instead of paying the full amount by the end of March 2021, they can make up to 11 smaller monthly instalments which are interest free. All instalments of the outstanding amount must be paid by the end of March 2022.

In order for taxpayers to use the scheme they must:

  • still have deferred VAT to pay
  • be up to date with their VAT returns
  • opt in before the end of March 2021
  • pay the first instalment before the end of March 2021
  • be able to pay the deferred VAT by Direct Debit.

Taxpayers must prepare to opt in by:

  • creating their own Government Gateway account if they do not already have one
  • submitting any outstanding VAT returns from the last four years. You will not be able to join the scheme if you have not done so
  • correcting errors on their VAT returns as soon as possible. Corrections received after 31 December 2020 may not show in their deferred VAT balance
  • ensuring they know how much they owe, including the amount they originally deferred and how much they may have already paid.

Internet link: GOV.UK guidance

HMRC and Advertising Standard Authority launch new action to disrupt promoters of tax avoidance schemes

HMRC and the Advertising Standards Authority (ASA) have launched a new joint enforcement notice to cut out misleading marketing by promoters of tax avoidance schemes.

The joint enforcement notice aims to disrupt the activity of promoters and protect individuals from being presented with misleading adverts which may tempt them into tax avoidance.

The enforcement notice requires promoters to be clear about the potential consequences of tax avoidance in any online adverts.

Immediate sanctions include having their paid advertising removed from search engines and follow-up compliance action, which can include referral to Trading Standards. The enforcement notice has been published as HMRC launches its ‘Tax avoidance: don’t get caught out’ awareness campaign warning and educating contractors about how to identify if they are being offered a tax avoidance scheme, and the pitfalls of using these schemes.

Jesse Norman MP, the Financial Secretary to the Treasury, said:

‘The government has made clear its determination to clamp down on the promoters of tax avoidance schemes.’

‘Today HMRC and the ASA are taking an important further step in this direction by action against misleading advertisements by promoters.’

‘As always, we would encourage people to pay close attention to HMRC’s warnings not to enter tax avoidance schemes. If it looks too good to be true, it almost certainly is.’

Internet link: GOV.UK news

Self assessment deadline approaching

The deadline for submitting your 2019/20 self assessment return is 31 January 2021. The deadline applies to taxpayers who need to complete a tax return and make direct payments to HMRC in respect of their income tax, Classes 2 and 4 National Insurance Contributions (NIC), capital gains tax and High Income Child Benefit Charge liabilities.

There is a penalty of £100 if a taxpayer’s return is not submitted on time, even if there is no tax due or the return shows that they are due a tax refund.

The balance of any outstanding income tax, Classes 2 and 4 NIC, capital gains tax and High Income Child Benefit Charge for the year ended 5th April 2020 is also due for payment by 31 January 2021. Where the payment is made late interest will be charged.

The first payment on account for 2020/21 in respect of income tax and any Class 4 NIC or High Income Child Benefit Charge is also due for payment by 31st January 2021.

HMRC revealed that more than 2,700 taxpayers filed their return on Christmas Day. If you would like help with your return or agreeing your tax liability, please contact us.

Internet links: GOV.UK self assessment GOV.UK news

Institute of Directors warns Capital Gains Tax (CGT) rise would adversely affect entrepreneurs

The Institute of Directors (IoD) has warned the government that a rise in CGT would affect Britain’s entrepreneurial spirit.

The business group believes CGT could be targeted by the Treasury and increased in order to help put public finances back on a stable footing following the coronavirus (COVID-19) pandemic.

Tej Parikh, Chief Economist at the IoD, said:

‘But any reform would have to be done with extreme care to prevent a knock-on effect. Positive entrepreneurialism will be more important than ever in the months ahead.’

‘All told, ramping up CGT will pour cold water over Britain’s entrepreneurialism just when we need it most. It’s not an answer to the costs of COVID-19, but rather paves the way for a stunted recovery.’

Additionally, increasing CGT ‘would only add to the impression held by some that wealth creation is falling down the list of priorities’, the IoD said. It has urged the government to consider the UK’s international standing as a destination for business, arguing that the UK has ‘long held a strong reputation as a place to start, run and grow a company’.

Internet link: IoD news

Individuals urged to remain vigilant when making festive charitable donations

Action Fraud has warned the public to remain vigilant when making festive charitable donations as the number of scams rises.

Figures published by Action Fraud showed that £350,000 in charitable donations ended up with criminals over the festive period in 2019. It warned that fraudsters often set up fake charities or impersonate well known charitable organisations in order to deceive victims.

Action Fraud has advised individuals to look for the registered charity number on charity websites; check if a charity is registered with the Fundraising Regulator, never click on links or attachments in emails and never respond to unsolicited messages or phone calls.

Pauline Smith, Head of Action Fraud, said:

‘Charities do incredibly important work, helping those in need, especially at this time of year. Unfortunately, criminals will try to abuse the generosity and goodwill of others and this can have a huge financial impact on charities and the good causes they support.’

‘We would encourage people not to be put off donating to charities, but instead to be vigilant.’

Internet link Action Fraud news

Check if you can claim a grant through the Self-Employment Income Support Scheme

HMRC is advising the self employed that the Self-Employment Income Support Scheme (SEISS) has been extended. Taxpayers who were not eligible for the first and second grant will not be eligible for the third.

To make a claim for the third grant the taxpayer’s business must have had a new or continuing impact from coronavirus between 1 November 2020 and 29 January 2021, which they reasonably believe will have a significant reduction in their profits.

The third taxable grant is worth 80% of a taxpayer’s average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.

The online service to claim the third grant is open. Taxpayers should make their claim from the date HMRC give taxpayers either by email, letter or within the service. Eligible taxpayers must claim the third grant on or before 29 January 2021.

The grant does not need to be repaid, but will be subject to Income Tax and self-employed National Insurance and must be reported on the taxpayer’s 2020 to 2021 Self Assessment tax return. Taxpayers must keep evidence to support their claim.

Internet link: GOV.UK guidance

Newsletter – August 2020

Enews – August 2020

In this month’s Enews, we report on the Job Retention Bonus as HMRC publishes further details regarding requirements and what employers need to do now to claim the bonus. There have been plenty of other developments. We look at some of them here and analyse changes to tax policy and the wider economy. As the COVID-19 pandemic continues to dominate the news, there are lots of issues to update you on.

HMRC outlines Job Retention Bonus criteria

HMRC has outlined the eligibility requirements for the Job Retention Bonus (JRB) that follows the furlough scheme as part of the government’s measures to support the economy through the COVID-19 lockdown.

The government’s Coronavirus Job Retention Scheme ends on 31 October 2020 and the JRB aims to provide additional support to employers who keep on their furloughed employees in meaningful employment.

The JRB is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 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.

All employers are eligible for the scheme including recruitment agencies and umbrella companies. They should ensure that they have complied with their obligations to pay and file PAYE accurately and on time under the Real Time Information (RTI) reporting system, maintained enrolment for PAYE online and have a UK bank account.

Employers will be able to claim for employees who were furloughed and had a Coronavirus Job Retention Scheme claim submitted for them that meets all relevant eligibility criteria for the scheme.

They must have up-to-date RTI records for the period to the end of January and not be serving a contractual or statutory notice period, that started before 1 February 2021, for the employer making a claim.

HMRC will publish further details about this process before the end of September 2020.

Internet link: GOV.UK publications

Treasury sets out next steps for Making Tax Digital

On 21 July, the Treasury set out the next steps in its plan to extend Making Tax Digital (MTD) to all businesses and those taxpayers that file self assessment returns.

Currently, businesses above the VAT threshold of £85,000 are required to comply with Making Tax Digital for VAT (MTD for VAT).

From April 2022, the initiative will be extended to all VAT-registered businesses including those with turnover below the VAT threshold. From April 2023 MTD will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.

According to the Treasury, the MTD changes will affect the way that taxes are reported, not the level of tax that is collected. They will help to minimise avoidable mistakes, which cost the exchequer £8.5 billion in 2018/19.

Jesse Norman, Financial Secretary to the Treasury, said:

‘We are setting out our next steps on MTD… as we bring the UK’s tax system into the 21st century.

‘MTD will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.’

Internet link: GOV.UK publications

Government announces review of business rates scheme

The government has published a call for evidence on the overhaul of the business rates system that applies in England.

The government announced at the 2020 Budget in March that it would conduct a review of the business rates system in England. It is seeking views from businesses, business representative organisations, local authorities, rating agents, others involved in the operation of the system and anyone interested in the business rates or wider tax system.

The call for evidence seeks views on how the business rates system currently works, issues to be addressed, ideas for change and a number of alternative taxes.

The government stated that it welcomes views on the multiplier and reliefs sections of the call for evidence by 18 September 2020, to inform an interim report in the autumn.

Internet link: TM Treasury consultations

Eat Out to Help Out now up and running

On 1 August, the government’s Eat Out to Help Out scheme began operating at eateries across the country.

The scheme was announced by Chancellor Rishi Sunak in his Summer Economic Update. It provides a 50% reduction of up to £10, for sit-down meals in participating cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.

Those establishments taking part in the scheme will display stickers and posters in their windows. Diners can take advantage of the offer as many times as they like during the month and do not need to present a voucher.

Chancellor of the Exchequer Rishi Sunak said:

‘Our Eat Out to Help Out scheme’s number one aim is to help protect the jobs of 1.8 million chefs, waiters and restaurateurs by boosting demand and getting customers through the door.

‘More than 72,000 establishments will be serving discounted meals across the country, with the government paying half the bill. The industry is a vital ingredient to our economy and it’s been hit hard by coronavirus, so enjoy summer safely by showing your favourite places your support – we’ll pay half.’

Internet link: GOV.UK publications

Scottish government cuts LBTT to help home buyers

On 15 July, the Scottish government reduced the rate of Land and Buildings Transaction Tax (LBTT) following a similar reduction to the rate of residential Stamp Duty Land Tax (SDLT) announced by Chancellor Rishi Sunak in the recent Summer Economic Update.

LBTT is payable by the purchaser in a land transaction occurring in Scotland. SDLT applies to land transactions in England and Northern Ireland.

The threshold at which residential LBTT is paid has been raised from £145,000 to £250,000 in order to help homebuyers following the coronavirus lockdown. Announcing the change, Finance Secretary Kate Forbes said that 80% of homebuyers will be exempt from paying LBTT.

Scottish Finance Secretary Kate Forbes said:

‘Overall, increasing the LBTT threshold will help increase housing market activity, boost the construction sector and stimulate our economy.

‘Alongside this distinctive Scottish approach to raising the starting threshold for LBTT, I am also targeting further support in other areas. For example, we are injecting £50m into our First Home Fund, which provides first time buyers with up to £25,000 to buy a property. This will help an estimated 2,000 first time purchases.

‘To mitigate the immediate adverse impact on the housing market in Scotland as a result of the Chancellor’s announcement, we are now working at pace on the necessary legislation and to ensure Revenue Scotland is ready to collect and manage the tax.’

Internet link: Scottish government LBTT

Wales reduces LTT rate

On 27 July, the Welsh government reduced the rate of Land Transaction Tax (LTT) following the cuts made to SDLT and LTT across the rest of the UK.

LTT is payable by the purchaser of residential or non-residential property occurring in Wales.

From 27 July 2020, the starting threshold for residential LTT rose from £180,000 to £250,000. This applies until 31 March 2021. The tax reduction does not apply to purchases of additional properties, including buy-to-let and second homes.

The Welsh government predicts that around 80% of homebuyers in Wales will pay no tax when purchasing their home, and that buyers of residential property who would have paid the main rates of LTT before 27 July will save £2,450 in tax.

Rebecca Evans, Welsh Minister for Finance, said:

‘These rates and thresholds have been set so they more closely reflect the property market in Wales and will ensure that we retain a progressive regime that expects those with the broadest shoulders to contribute a larger share in tax.’

Internet links: Welsh government website written statement

Chancellor asks OTS to review capital gains tax

Chancellor Rishi Sunak has asked the Office of Tax Simplification (OTS) to carry out a thorough review of capital gains tax (CGT).

In a letter to the OTS, the Chancellor requested that the independent office review CGT and aspects of the taxation of chargeable gains in regard to individuals and small businesses.

Mr Sunak requested that the review identifies and offers advice on the opportunities to simplify the taxation of chargeable gains to ‘ensure the system is fit for purpose’.

In the letter, the Chancellor said that he would be interested in proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, in addition to the interaction of how gains are taxed compared to other types of income.

The OTS has published a call for evidence in the form of an online survey, which seeks views on CGT. The OTS wants to hear from businesses, individuals, professional advisers and representative bodies about which aspects of CGT are complex and difficult to get right, as well as suggestions on how the tax can be improved.

Internet links: GOV.UK publications letter

Overclaimed COVID grants

Taxpayers who have received CJRS or SEISS grants are urged to doublecheck their entitlement as the 90 day period to inform HMRC of any overclaimed amounts is now law.

Finance Act 2020 includes legislation that the Coronavirus Job Retention Scheme (CJRS), Self-employment Income Support Scheme (SEISS), Coronavirus Statutory Sick Pay Rebate Scheme and coronavirus business support grants are taxable. As well as including HMRC powers to recover grant payments to which the taxpayer is not entitled and penalty provisions.

HMRC has published guidance on how to repay overclaimed grants. This guidance confirms that the onus is on the taxpayer to notify HMRC if they have overclaimed a CJRS or SEISS grant and this must be done by 20 October 2020 or 90 days of receipt of the grant, whichever is the later.

Internet links: CJRS guidance SEISS guidance

Newsletter – June 2020

Enews – June 2020

In this month’s Enews, we report on the progress of the government’s schemes to help businesses during the COVID-19 pandemic. Chancellor Rishi Sunak announced important changes to the Coronavirus Job Retention Scheme, which will run until the end of October while HMRC has once again delayed the introduction of the VAT reverse charge. We look at the latest guidance and also analyse the impact of COVID-19 on tax policy and the wider economy. As the COVID-19 pandemic continues to dominate the economy, there are lots of issues to update you on.

Chancellor announces changes to Job Retention Scheme

Chancellor Rishi Sunak has announced changes to the government’s Coronavirus Job Retention Scheme (JRS), which will be slowly wound down between July and October.

The changes mean businesses will be able to bring furloughed employees back on a part-time basis from 1 July.

Furloughed staff will continue to get 80% of their salary until the scheme finishes at the end of October. However, employers will be expected to gradually contribute more towards furloughed employees’ salaries.

The taxpayer contribution will remain at 80% during August but employers will have to pay national insurance and employer pension contributions.

In September, employers will be asked to start paying 10% towards people’s wages, which will rise to 20% in October.

JRS closes to new entrants from 30 June, but more critically, 10 June is the last date by which an employee can be put on furlough for the first time.

Dame Carolyn Fairbairn, Director-General at the Confederation of British Industry, said:

‘Introducing part-time furloughing as more stores and factories start to open will help employees to return to work gradually and safely. Many more businesses will feel supported during this vital restart phase.

‘Firms understand the scheme must close to new entrants at some point and that those using it in future will need to make a contribution to help manage the costs.

‘However, previously viable firms not able to open until later, particularly in leisure, hospitality and the creative industries, may need further assistance in the coming months.’

Internet link: GOV.UK publications

COVID-19: delay to VAT reverse charge on construction services

On 5 June 2020, HMRC announced a five-month delay to the introduction of the domestic VAT reverse charge for construction services, due to the impact of the COVID-19 pandemic on the sector.

The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of moves to reduce fraud in the sector. Under the domestic reverse charge, the customer receiving the service must account for the VAT due on these supplies on their VAT return, instead of paying the VAT to the supplier..

The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months, after industry bodies highlighted concerns about lack of preparation and the impact on businesses.

Now the start date has been put back from 1 October 2020 to 1 March 2021.

There will also be an amendment to the original legislation. Businesses are excluded from the reverse charge on relevant supplies where they are end users, or intermediary suppliers. If so they must inform their subcontractors, in writing, that they are end users or intermediary suppliers.

HMRC says the additional amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for subcontractors as to the correct treatment for their supplies.

HMRC says it will continue to focus additional resources on identifying and tackling existing perpetrators of fraud in the construction supply chain. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.

Internet link: GOV.UK publications

Loan size increased to £200 million under large business interruption scheme

Several changes to the CLBILS scheme have taken effect from 26 May. The government has extended the maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50 million to £200 million.

However, companies borrowing more than £50 million through the CLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan. This will include a ban on dividend payments and cash bonuses, except where they were previously agreed.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:

‘It is good to see the government continue to listen to business concerns and make improvements to existing schemes.

‘These important changes could make a real difference to larger firms in particular, and alongside the other lending support schemes will help ensure that more businesses of all sizes get access to the finance they need to help weather this unprecedented economic storm.’

Internet link: British Business Bank website

Future Fund launches to give start-ups coronavirus support

On 20 May 2020, the government launched its Future Fund package, which aims to support start-up businesses not eligible for other COVID-19 rescue measures.

The Future Fund offers government loans of between £125,000 and £5 million to UK-incorporated companies, provided private investors at least match the funding supplied by the state.

The package is aimed at supporting innovative early stage companies not eligible for existing COVID-19 support.

The Future Fund is administered by the government-backed British Business Bank (BBB). The loans can be repaid or converted into shares in the Investee Company in a variety of circumstances, including fundraisings, exit events and upon the maturity of the loans.

The fund is currently due to run until at least the end of September.

Internet links: Investor information and company information

Coronavirus Statutory Sick Pay Rebate Scheme goes live

On 26 May 2020, HMRC opened up its Statutory Sick Pay (SSP) rebate claim service.

Eligible employers are able to recoup up to two weeks’ worth of SSP payments made to employees off work for COVID-19-related reasons since 13 March 2020 (16 March 2020 if the employee was shielding). This is an ongoing scheme for which an end date has not yet been announced.

The scheme is potentially worth up to £191.70 per employee that an employer has made SSP payments to for COVID-19-related reasons.

For the purposes of making a claim, it does not matter whether the employee was displaying symptoms themselves or was living with someone who was displaying symptoms. It also does not matter whether the employer topped up their earnings (although only the SSP element is eligible for the rebate).

A rebate cannot, however, be claimed in relation to employees who were furloughed at the time of illness or absence, and for whom the separate Coronavirus Job Retention Scheme grant was claimed.

Employers will be eligible for an SSP rebate if they had a Pay as You Earn (PAYE) scheme as of 28 February 2020, and (along with any connected employer) employed fewer than 250 employees as at that date. Employers must also be within their State Aid limits under the EU Commission temporary framework.

Internet link: GOV.UK publications

Changes to insolvency and company law going through Parliament

The government is making changes to insolvency and company law as a result of the COVID-19 pandemic.

The Corporate Insolvency and Governance Bill outlines that struggling companies will be given extra time to consider rescue plans presented to them. As part of the changes, companies will have 20 business days to consider a rescue plan, which can be extended to 40 days at the discretion of creditors or the Court.

The Bill stipulates that a company will remain under the control of directors; however, the insolvency process must be overseen by a licensed insolvency practitioner.

Additionally, restructuring plans have been introduced in the Bill, which will bind creditors and allow the insolvency process to adjust as the COVID-19 pandemic changes.

Colin Haig, President of insolvency trade body R3 said:

‘This Bill represents the biggest change to the UK’s insolvency and restructuring framework for almost 20 years.

‘The measures contained in this Bill will support the profession’s efforts to help businesses navigate the enormous economic damage caused by the pandemic.’

Internet link: Parliament website

UK sets out post-Brexit tariff regime

The UK government published its plans for a new import tariff regime following the end of the Brexit transition period.

Following its departure from the EU, the UK has the ability to set its own rules and charges.

The scheme includes the abolition of tariffs on imports worth over £30 billion, although economists say the impact on the cost of living will be small.

Some tariffs will be maintained on imported items such as beef and cars to protect British producers. Other items will have tariffs simplified, and expressed in pounds instead of euros.

Josh Hardie, Deputy Director General at the Confederation of British Industry (CBI), said:

‘The new tariff scheme will provide businesses with much-needed clarity on post-Brexit trade.Simplifying the system, scrapping tariffs under 2%, reducing duties on sustainable products are all things firms can work with.

‘Sticking closely to many existing tariff levels will give other countries incentive to agree trade deals with the UK.

‘However, businesses will need time to assess the detail, and ensuring there’s a system in place to address issues as they arise will be critical. Crucially, firms’ number one priority is for the government to strike a deal with the EU and ensuring continuity of existing trade deals.’

Internet link: GOV.UK publications

MPs open inquiry into £155 billion of tax reliefs

The Public Accounts Committee (PAC) has opened an inquiry into the UK’s management of £155 billion of tax relief.

The inquiry follows the February publication of a National Audit Office (NAO) report that identified over 300 such tax interventions, totalling £155 billion per year.

The NAO raised concerns about the effectiveness of management of tax expenditures by the Treasury and HMRC.

It found that there is no formal framework governing the administration or oversight of tax expenditures.

The NAO said that although the Treasury and HMRC have begun steps to increase their oversight of tax expenditures and more actively consider their value for money, these will not be enough on their own to address concerns.

Commenting on the inquiry, John Cullinane, Tax Policy Director at the Chartered Institute of Taxation, said:

‘We greatly welcome the PAC taking up this important issue.

‘Governance of tax reliefs in the UK is not systematic or proportionate to their value or the risks they carry. There is a mismatch between the significant effort in government and to an extent Parliament that rightly goes into new tax measures, and the relative lack of attention to how effective those measures prove over time. This is particularly the case with tax expenditures.

‘Unless HMRC and the Treasury actively monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, we cannot assume that these reliefs will be value for money.’

Internet link: Parliament website

Newsletter – May 2020

Enews May 2020

In this month’s Enews, we report on the progress of the government’s schemes to help businesses and the self-employed during the COVID-19 pandemic. Bounce Back loans for small businesses were the latest in a raft of measures announced by Chancellor Rishi Sunak, which are starting to make a practical difference to businesses. We look at the latest guidance and also analyse the impact of COVID-19 on tax policy and the wider economy. As the COVID-19 lockdown continues to dominate the economy, there are lots of issues to update you on.

Government launches small business micro loan scheme

On 4 May 2020 the government launched a micro loan scheme for small businesses as it continues to try and mitigate the economic damage caused by the coronavirus (COVID-19) lockdown.

The Bounce Back Loan Scheme allows small businesses adversely affected by COVID-19 to apply for up to £50,000, with the government guaranteeing 100% of the advance.

Businesses can apply for a minimum of £2,000, up to a maximum of £50,000 with the government paying the interest for the first 12 months.

Businesses will be able to access the loans through the existing network of accredited lenders and the government said it expects most applications to be approved within 24 hours.

Chancellor of the Exchequer, Rishi Sunak, said:

‘I know that some small businesses are still struggling to access credit.

‘They are, in many ways, the most exposed businesses to the impact of the coronavirus, and often find it harder to access credit in the first place.

‘If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through the crisis.

‘Some businesses will not want to take on more debt, which is why our focus has been on cash grants, tax cuts and tax deferrals. But for others, loans will be part of the answer.’

Internet link: GOV.UK publications

Lenders relax evidence requirements for business interruption loan scheme applications

On 27 April 2020 the UK’s seven largest small business lenders announced they had relaxed their evidence requirements for applications to the Coronavirus Business Interruption Loan Scheme (CBILS).

The lenders will use their own information when processing and approving applications, rather than relying on businesses providing forecasts and business plans.

In a joint statement, the seven lenders and trade association UK Finance stated:

‘The reforms to CBILS announced by the British Business Bank and HM Treasury with the support of the regulators provide welcome changes that should enable banks to provide finance to businesses more quickly alongside other forms of support including capital repayment holidays.

‘Lenders are working hard to ensure we provide support swiftly and responsibly and we will continue to work closely with customers to help them identify the finance that is right for their business and financial circumstances.

‘Following the changes to the scheme announced today lenders will only ask businesses for information and data they might reasonably be able to provide at speed and we will not require the provision of forward-looking financial information or business plans from businesses applying for CBILS-backed lending, relying instead on our own information to assess credit and business viability.’

Internet link: UK Finance press release

Job Retention Scheme goes live

On 20 April 2020 the government’s Coronavirus Job Retention Scheme went live for applications.

The scheme allows businesses to furlough their employees, with the government paying 80% of their wages up to a maximum of £2,500.

The Coronavirus Job Retention Scheme is open for four months and was backdated from 1 March 2020 to the end of June. Chancellor Rishi Sunak stated that the scheme would be kept under review and extended if necessary.

There were applications from over 430,000 employers covering over three million employees in the first week of the scheme’s operation.

The Chancellor said:

‘We’ve taken unprecedented action to support jobs and businesses through this period of uncertainty, including the UK-wide Job Retention Scheme. With the extension of the coronavirus lockdown measures… it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.

‘It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so.’

Internet link: GOV.UK publications

HMRC releases guidance for self-employed scheme

HMRC has released guidance on the COVID-19 Self-employment Income Support Scheme.

Under the scheme, self-employed individuals will be able to claim a taxable grant based on an average of their earnings over the past three years. To be eligible, workers must have filed all relevant income tax self assessment returns; have traded in the 2018/19 and 2019/20 tax years, and intend to carry on trading in the 2020/21 tax year. Profits, based on an average of the last three years, must be no more than £50,000, and at least equal to any non-trading income, such as employment income, dividends or rental income.

Directors of their own companies who are paid through Pay as You Earn (PAYE) may be able to get support via the Coronavirus Job Retention Scheme.

HMRC began to contact those eligible in early May and invited them to apply online. Payments are scheduled to start later in May and run for three months, but may be extended if necessary.

Internet link: GOV.UK publications

Government launches support finding tool for business

The UK government launched an online platform to help businesses access financial support during the COVID-19 crisis.

The Coronavirus Business Support Finder Tool will guide businesses through the range of loans, tax reliefs and cash grants to combat the adverse economic effects of the COVID-19 lockdown.

The tool asks business owners to fill out a short online questionnaire. It then directs them to a list of financial support for which they may be eligible.

The tool takes the user through various questions about their business, including location, number of employees and turnover.

Chancellor Rishi Sunak said:

‘We’ve launched an unprecedented package of support to protect jobs, businesses and incomes during these challenging times. Millions are already benefiting and this new online tool will allow firms and individuals to identify what help they are entitled to in a matter of minutes.’

Internet link: GOV.UK publications

OBR predicts UK economy will shrink by over a third

The Office for Budget Responsibility (OBR) has warned that the UK economy could shrink by 35% this quarter due to the COVID-19 crisis.

The OBR said that the outcome was modelled on an assumption that the current lockdown would last for three months. It stated that a three-month lockdown followed by three months of partial restrictions would trigger an economic decline of 35.1% in the quarter to June alone.

The lockdown would push up the UK’s borrowing bill to an estimated £273 billion this financial year, or 14% of Gross Domestic Product (GDP).

However, the OBR said extra spending by the Treasury to support the economy was crucial to limit economic damage.

The OBR’s estimate followed a global economic forecast published by the International Monetary Fund (IMF), which predicted a 3% contraction in global growth.

Rain Newton-Smith, Chief Economist at the Confederation of British Industry (CBI), said:

‘This makes for bleak reading and stresses the need for the right policies to support our economy through this crisis. The need for co-ordinated global action to rebuild confidence has rarely been greater.

‘The government will also need to work with businesses and many parts of civil society here at home to create a plan to revive the economy once the lockdown is lifted.’

Internet link: OBR press release

Government borrowing could rise to £300 billion

The Centre for Policy Studies (CPS) has suggested that government borrowing may rise to £300 billion in 2020 as a result of the COVID-19 pandemic.

The think tank has been working to estimate the cost of the COVID-19 crisis to the government’s finances, and has incorporated official data from the Office for Budget Responsibility (OBR).

The CPS’s COVID-19 counter has put forward an estimated £127 billion in direct bailout costs and £119 million in indirect costs, such as lower tax revenue. The data is based on the OBR’s three-month lockdown scenario, followed by three months of ‘looser restrictions’.

The CPS stated that, when these estimated costs are added to the £55 billion of borrowing already forecast for 2020, a deficit of £301 billion is produced. This represents 15% of GDP.

Robert Colvile, Director of the CPS, said:

‘The government has acted throughout this crisis to save lives and protect livelihoods. But while it is clear to everyone that extraordinary times require extraordinary measures, they also incur extraordinary costs.

‘It is vital to get the most accurate possible picture of the burden the government is taking on in order to assess the full scale of the rebuilding that lies ahead.’

Internet link: CPS press release

HMRC extends late reporting deadline for CGT

HMRC has confirmed it will not charge penalties for the late reporting of capital gains tax (CGT) on disposals of UK residential property by UK residents made by 31 July 2020.

On 6 April changes were made so that if a UK resident sells a residential property in the UK, they now have 30 days to tell HMRC and pay any money owed.

The seller must submit a standalone tax return covering the CGT, which can no longer be included as part of a self assessment return.

Failure to tell HMRC about any CGT within 30 days of completion may incur a penalty, as well as interest on the sum owed.

HMRC stated:

‘To help those selling properties familiarise themselves with the change in the rules and a new online process, HMRC is allowing a period of time to adjust and will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.

‘For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020. Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days.

‘Interest will accrue if the tax remains unpaid after 30 days.’

Internet link: HMRC guidance