Business Planning for 2021
Business Planning for 2021: Reflections on our Situations
Business Planning for 2021: Resilience
Business Planning for 2021 – As we enter the fourth week of lockdown in England and reflect on improved testing, new vaccine trial results and a host of experts talking on the news about the timing of rollout and when Covid-19 will no longer be a threat to normality, it is worth remembering our lives are and will remain different for the remainder of 2020 and most of 2021. With that in mind we need to be resilient as individuals, families and businesses.
Business Planning for 2021: Economy
The latest indicators for the UK economy found nearly half (49%) of currently trading UK businesses reported a decrease in their turnover below what is normally expected for this time of year. On 8 November, overall UK footfall dropped to 33% of the level seen on the equivalent day last year as national restrictions were introduced in England.
Support Schemes
Clearly we are living in tough times and it makes sense to take advantage of Government supports both directly such as the extended job retention and self-employed support schemes, deferring tax and using bounce back loans. There are also grants available to help firms with Brexit changes for import and export administration.
Business Planning: Practical Steps
1. Review your budgets and set realistic and achievable targets for the remainder of 2020 and for 2021.
2. Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues.
3. Use ‘bottom up’ budgeting where everyone in the business gives input on areas over which they have control – target a 10% cost saving.
4. Review and flowchart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
5. Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about efficiencies and cost reduction).
6. Put extra effort into making sure your relationships with your customers are solid.
7. Review your list of products and services and eliminate those that are unprofitable or not core products/services.
8. Review efficiency of business processes and consider alternatives such as outsourcing certain activities locally or overseas.
9. Agree extended payment terms with all suppliers in advance.
10. Pull everyone together and explain the business strategy and get their buy-in.
Help and Advice
Please talk to us about cashflow planning for the next six months. We can help with a template so you can do this yourself or we can work together to produce estimates for a variety of scenarios.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
FURLOUGH: UPDATES TO THE CJRS
FURLOUGH: UPDATES TO THE CORONAVIRUS JOB RETENTION SCHEME (CJRS)
FURLOUGH: UPDATES TO THE CJRS
Furlough: Updates to the CJRS – The scheme has been extended. Government guidance has been updated with details of how to claim for periods after 1 November 2020. The CJRS will remain open until 31 March 2021. From 1 November 2020 employers can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.
THE CORONAVIRUS JOB RETENTION SCHEME DETAILS
Furlough: Updates to the CJRS – Employers can claim for employees who were employed on 30 October 2020, as long as they have made a PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where they have re-employed an employee after 23 September 2020. All employers with a UK bank account and UK PAYE schemes can claim the grant. They do not need to have previously claimed for an employee before the 30 October 2020 to claim for periods from 1 November 2020.
ELIGIBILITY
Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked. Employers might need to contribute towards the cost of their furloughed employees’ wages for these periods. For periods from 1 November 2020, they will need to pay for the cost of employer NICs and pension costs.
CLAIMS FOR NOVEMBER 2020
Claims for furlough days in November 2020 must be submitted by 14 December 2020. This is a tight deadline, so it is important we work together to get any claims submitted promptly. We can also guide you through the information you need to gather, ensure you follow the rules and record any changes of employment terms with your employees.
GOVERNMENT SITE
See details on the Government site here. Please feel free to contact us here.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Furlough Scheme Extended until December
Furlough Scheme Extension at 80% Pay
The Coronavirus Job Retention Scheme (CJRS) Furlough Extension
Furlough scheme extended until December: On 22 October the Chancellor announced that the CJRS furlough scheme would end on 31 October 2020, to be replaced by a new Job Support Scheme (JSS). However, at 6.45 pm on 31 October 2020 when the Prime Minister announced a month long lockdown for England, he announced that the CJRS furlough scheme would be extended for one further month. This means the CJRS has now been extended until December.
Furlough Scheme Extended until December
Furlough Scheme extended until December: The grant will allow employers to be able to claim 80% of employees’ usual pay for hours that they are unable to work. Businesses will have flexibility to bring furloughed employees back to work on a part time basis or furlough them full-time. Employers will be asked to cover National Insurance and employer pension contributions. As with the existing CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
More Information on the CJRS Scheme
Further details can be found here. Please also feel free to contact us.
Job Support Scheme (JSS)
The JSS scheme that replaces CJRS was originally announced in September. The scheme was originally scheduled to commence on 1 November 2020 but will now commence when the extended CJRS scheme ends and will run until the end of April 2021.
Details of JSS
It has been made more generous than in the original announcement to support businesses that are legally forced to close their premises as a direct result of Coronavirus. This is referred to as JSS Closed. For those employers that are able to operate safely but continue to face reduced demand such that they may need extra support over the winter to help keep their employees attached to their workforce, there is JSS Open.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
The Coronavirus Job Support Scheme
The Coronavirus Job Support Scheme
The Job Support Scheme starts on 1 November
The Coronavirus Job Support Scheme: The Chancellor has announced a new 6 month Job Support Scheme to help businesses and employees survive the winter months. We are still awaiting full details of the scheme that will replace the current “flexible furlough” scheme but the main features are highlighted below. Please get in touch with us if you would like to discuss this further.
Employer Eligibility
The Coronavirus Job Support Scheme: Employers of all sizes will be eligible for the new scheme but large organisations will need to demonstrate that their turnover is reduced as a result of COVID-19.
Employee Eligibility
Eligible employees will be those on the PAYE payroll at 23 September 2020 that are working for at least 33% of their usual hours. For example an employee whose usual pay is £450 a week who works 2 days a week would be paid £180 for the 2 days worked and £180 for the other 3 days. The employer could claim a grant of £90 from the Government.
Other Measures
In addition to the Job Support Scheme the Chancellor announced that the Self-Employed Income Scheme would also be extended for a further 3 months but the grant will be 20% of average monthly profits capped at £1,875.
VAT
The temporary 5% rate of VAT for the hospitality sector, accommodation and attractions will be extended to 31 March 2021. Businesses that have deferred their VAT payments will be able to pay back the deferred amount over 11 months.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
The Coronavirus Job Retention Scheme: The Final Phase
The Coronavirus Job Retention Scheme
The Final Phase
The Chancellor, Rishi Sunak, presented A Plan for Jobs at the time of the Summer Economic Update on 8 July 2020. This included incentives for employers who retain furloughed staff and who offer training and apprenticeships.
The Job Retention Bonus
The Coronavirus Job Retention Scheme (CJRS) is now in its final phase. Government support under the scheme is withdrawn gradually from August and the scheme comes to an end on 31 October 2020. Where staff are still furloughed in October, employers will need to decide whether they can bring their furloughed employees back to work.
The Coronavirus Job Retention Scheme: What is the Bonus?
To encourage employers to retain furloughed staff, a bonus – the Job Retention Bonus – of £1,000 will be paid to the employer for each furloughed employee who is employed continuously from the end of the CJRS until 31 January 2021. However, to qualify for the bonus, the employer must pay the employee, on average, earnings that are at least equal to the lower earnings limit for Class 1 National Insurance purposes, set at £120 per week (£520 per month) for 2020/21.
The Coronavirus Job Retention Scheme: Timeline
The Government will pay the bonuses from February 2021.
The Scheme: Details
The scheme is not without its critics, with Jim Harra, Chief Executive of HMRC, questioning whether it offers value for money. Some employers, including Primark and Rightmove, have stated that they will not claim the bonus. Please contact us to find out how you may be able to benefit from the incentives on offer.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
HOSPITALITY VAT REDUCTION
DETAILS ON HOSPITALITY VAT REDUCTION
HOSPITALITY VAT REDUCTION: WHAT IS IT ALL ABOUT?
When the Chancellor announced a temporary cut in the rate of VAT for the hospitality sector and attractions in his Summer Statement on 8 July there were a number of areas that needed clarification. The reduction applies to supplies made between 15 July 2020 and 12 January 2021. HMRC have now set out more details of which supplies will attract the 5% temporary rate as well as the impact on invoicing, deposits and the flat rate scheme.
WHAT DOES THE 5% TEMPORARY VAT RATE APPLY TO?
Hospitality VAT: The temporary 5% rate applies to supplies such as catering, including hot takeaway food, accommodation in hotels, guest house and similar places and tourist attractions such as theme parks, zoos, theatres and cinemas. Please note this is not an exhaustive list.
HOSPITALITY VAT REDUCTION: WHAT ABOUT ALCOHOLIC DRINKS?
Hospitality VAT: Note that as far as catering is concerned, the 5% rate only applies to food and non-alcoholic drinks. The 20% rate continues to apply to alcoholic drinks.
HOSPITALITY VAT REDUCTION: HAVE YOU PAID A DEPOSIT?
It is fairly common, particularly in the summer holidays, to pay a deposit when booking a hotel or self-catering accommodation but how should the deposit be accounted for? HMRC have confirmed that the hotel has the option of charging VAT according to the ‘basic tax point’ (dates of the stay) rather than the ‘actual tax point’ (invoice/payment dates).
DEPOSITS: DO YOU HAVE AN EXAMPLE?
For example where the customer paid a non-refundable £300 deposit in February 2020 for a £1000 holiday in Cornwall in August, using the actual tax point, the hotel would account for 20% VAT on the deposit received in February 2020 and 5% on the balance payable after 15 July 2020. The hotel could choose to use the basic tax point rule which would mean that the 5% rate would apply to the entire cost of the stay and make an adjustment for the VAT already accounted for.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
Deferring July Self-Assessment Payment
DEFERRING JULY SELF-ASSESSMENT PAYMENT: OPTION TO DEFER JULY SELF-ASSESSMENT PAYMENT ON ACCOUNT
Deferring July Self-Assessment Payment: Taxpayers facing financial difficulties as a result of the COVID-19 pandemic can opt to delay making their second self-assessment payment on account for 2019/20, due by 31 July 2020. As long as the amount is paid in full, together with any outstanding balance for 2019/20, by 31 January 2021, HMRC will not charge any interest or penalties.
Under the self-assessment system, taxpayers are required to make payments on account of their tax and Class 4 National Insurance liability if their self-assessment bill for the previous tax year was £1,000 or more, unless at least 80% of the tax owed for that year was deducted at source, for example, under PAYE.
Each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. Although Class 2 National Insurance contributions are collected via the self-assessment system, they are not taken into account when working out payments on account. Payments on account are made on 31 January in the tax year and on 31 July after the end of the tax year, with any balance being paid by the tax return filing date of 31 January after the end of the tax year. If the payments on account are more than the eventual liability, the excess is refunded or set against the next year’s liability.
The first payment on account for 2019/20 was due by 31 January 2020. The second payment would normally need to be paid by 31 July 2020.
DEFERRING JULY SELF-ASSESSMENT PAYMENT: OPTION TO DEFER
This year, taxpayers have the option to defer the second payment on account if they are finding it difficult to make the payment by 31 July 2020 due to Coronavirus. There is no obligation to defer – taxpayers can still make the payment by 31 July 2020 if they so wish.
Where a taxpayer takes the deferral option, the outstanding payment can be made whenever the taxpayer is able to meet the payment, as long as this is no later than 31 January 2021. Any balance owing for 2019/20 must be paid by the same time, together with the Class 2 National Insurance liability for the self-employed and the first payment on account for 2020/21.
Taxpayers choosing the deferral option do not need to tell HMRC – they simply pay the tax by 31 January 2021; nor do they have to provide evidence that they were adversely affected by the COVID-19 pandemic.
Guidance on the deferral option is available on the Gov.uk website. Please also contact us for any advice.
Delaying the payment will no doubt help those struggling as a result of the COVID-19 pandemic. Indeed, it may provide a lifeline for particular groups of taxpayers, for example, those who are self-employed and who do not qualify for a grant under the Self-employment Income Support Scheme and who have been unable to work due to the restrictions.
However, the deferred tax has to be paid eventually, and the payback for having nothing to pay in July is a big bill in January 2020. Not only will the deferred tax be payable then, but also any balance due for 2019/20 and the first payment on account for 2020/21.
FLEXIBLE FURLOUGHING
The Coronavirus Job Retention Scheme (CJRS) has provided a lifeline for many employees and employers during the COVID-19 pandemic. As at 21 June 2020, 9.2 million employees had been furloughed by 1.1 million employers who had, collectively, claimed grants totalling £22.9 billion.
Prior to 30 June 2020, employees who had been furloughed could not work for their employer while on furlough. This changes from 1 July 2020 with the introduction of flexible furloughing.
The CJRS runs until 31 October 2020. As the scheme draws to a close, the grant support provided to employers is gradually reduced from 1 August 2020.
The CJRS enters its second and final phase from 1 July 2020. While employees will continue to receive 80% of their wages for furloughed hours up to the maximum amount for the duration of the scheme, the amount that employers can claim changes each month.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
“Flexible Furlough” and Self Employed Grants
“FLEXIBLE FURLOUGH” AND SELF EMPLOYED GRANTS: “FLEXIBLE FURLOUGH” STARTS 1 JULY
“Flexible Furlough” and Self Employed Grants: From 1 July the new CJRS “Flexible furlough” grant scheme starts, which will allow employers to gradually bring their furloughed employees back to work part-time. The new scheme will be in place until the end of October and the Government will gradually reduce the amount of grant towards employees’ furlough pay to 70% in September and 60% in October.
The grant paid by the Government via HMRC will remain at 80% of the employee’s normal pay for July and August but they will stop reimbursing NICs and pension contributions from 1 August 2020.
Further details on the operation of the new scheme were announced on 12 June 2020 which are summarised below.
We will of course continue to assist you in making furlough claims.
“FLEXIBLE FURLOUGH” AND SELF EMPLOYED GRANTS: KEY CONDITIONS FOR NEW “FLEXIBLE FURLOUGH”
Only those employees who have been furloughed and included in a claim under the original CJRS scheme may be included in a claim for the new flexible furlough. That means they must have been furloughed on or before 10 June to allow a full 21 days prior to the end of the original scheme.
A further restriction is that the maximum number of employees that can be included in a flexible furlough claim cannot exceed the maximum number included in a claim under the original scheme.
Thus if the employer has 8 employees split into teams of 4 and furloughed team A for three weeks and then team B for 3 weeks the maximum number of employees that can be included in a flexible furlough claim will be limited to 4.
Unlike the original CJRS furlough scheme there is no minimum furlough period as the intention is to allow employers the flexibility to gradually bring employees back to work. The hours/days worked will need to be agreed between employee and employer which is likely to involve amending the employees’ contracts.
Employees will be entitled to their normal contractual pay for the hours that they work and must be paid at least 80% of their normal pay for the hours that they are furloughed, even when HMRC are only reimbursing 70% or 60%.
Employers will need to notify HMRC of the employee’s usual hours and the hours worked in the claim period. The furloughed hours will be the difference. This will be complicated where the employee’s hours vary. There is currently a lack of clarity in the HMRC guidance on the calculation of “usual hours” and we will of course be available to assist you in making your claim. We will also be able to make the claims on your behalf.
Each claim made by an employer must be for a week or more and no claim period can straddle a calendar month end.
SECOND SELF-EMPLOYED INCOME SUPPORT GRANTS TO BE PAID IN AUGUST
On 29 May the Chancellor announced that the grant scheme to support the self-employed would also be extended with a further payment based on 70% of average profits for the 3 years ended 2018/19, limited to £6,570 rather than £7,500.
The eligibility criteria remain broadly the same as the first grant claim. Self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income.
If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019.
Self-employed traders need not have claimed a grant under the old scheme to qualify for the August payment and are required to confirm that their business continues to be adversely affected by Covid-19. The deadline for making a claim for a grant under the original SEIS scheme is 13 July 2020.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Government Schemes: Furlough and Self Employment
GOVERNMENT SCHEMES: JOB RETENTION “FURLOUGH” SCHEME EXTENDED TO OCTOBER
Chancellor Rishi Sunak announced on 12 May that the CJRS scheme will be extended until the end of October. The scheme will continue in its current form until the end of July with the Government paying 80% of employees wages up to £2,500 a month. For accounts purposes the amounts received should be credited to a “grants received” account, and this will therefore increase taxable profits of the business.
From 1 August to the end of October, HMRC will introduce more flexibility so employers will be able to bring their furloughed employees back to work part-time and contribute to paying employees’ wages while still receiving support from the scheme.
On Friday 29 May the Chancellor announced that the Government will stop reimbursing NICs and pension contributions from 1 August 2020. From 1 September 2020 the amount reimbursed by the Government will be reduced to 70%, limited to £2,190. There will be a further reduction to 60% from 1 October 2020, limited to £1,875.
We will of course continue to assist you in making furlough claims.
GOVERNMENT SCHEMES: SELF-EMPLOYED INCOME SUPPORT GRANTS ALSO EXTENDED
Sole traders and members of partnerships started making claims under the Self-Employed Income Support Scheme on Wednesday 13 May and many have already received their grant.
Unfortunately, unlike the CJRS furlough scheme, claims could not be made by agents on behalf of clients although we can of course check that you have received the correct amount and request a review if the amount is incorrect.
In order to be eligible your self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income. If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019.
The amount of the grant that can be claimed is 80% of average profits for the three years to 5 April 2019. The grant is capped at £2,500 a month and the maximum amount is £7,500 for the initial 3 month period. The Chancellor has now announced that this scheme would be extended for 3 months from 1 June but reduced to 70% of average profits, limited to £6,570.
There are a number of anomalies, for example if the trade commenced 6 October 2017 the profits for 2017/18 and 2018/19 are divided by 2 to establish an annual profit figure rather than divided by 18 months which we consider to be unfair.
Like the CJRS furlough payments the amounts received are included in your trading profits and thus subject to income tax and national insurance.
CAN WE “FURLOUGH” THE COMPANY CAR?
During the lockdown period many employees and directors have not been using their company cars and it has been sitting on their driveway. You might think that means that the benefit of having a company car does not apply but unfortunately HMRC do not agree.
HMRC have recently confirmed that there continues to be a taxable benefit unless the car is unavailable for private use for 30 or more consecutive days. They would continue to regard the car as available to the employee unless the keys or fobs are returned to the employer or to a third party as instructed by the employer.
This guidance needs to be taken into consideration when form P11Ds are completed.
Note also that where the employee is provided with a motor car with zero CO2 emissions there is no taxable benefit in kind for 2020/21.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
The Budget – 11 March 2020
The Budget – 11 March 2020: MORE MONEY FOR THE NHS AND INFRA-STRUCTURE IN THE BUDGET
Rishi Sunak received a “hospital pass” when he was appointed Chancellor and was required to deliver the first Budget in nearly 18 months within a month of his appointment. He announced extra spending on roads, rail, broadband and other infrastructure projects as well as extra money for the NHS to help cope with the coronavirus epidemic. But what we were waiting to hear was where the extra money was going to come from? Had he found a “magic money tree”, or would tax and borrowing have to increase? The Office of Budget Responsibility had already downgraded growth forecasts for the UK economy to just 1.1% before the global coronavirus pandemic, which may temporarily plunge the UK into recession.The Chancellor announced a number of measures that will hopefully protect businesses until the economy recovers.
The Budget – 11 March 2020: STATUTORY SICK PAY (SSP) RELIEF
The Government are predicting that up to 20% of the workforce may be unable to work due to the virus at any one time. It had already been announced that employees would be entitled to SSP from day 1 not day 4. It was announced in the Budget that the Government will fully reimburse employers with fewer than 250 employees the SSP paid for the first 14 days of absence, equivalent to the self-isolation period.
The Budget – 11 March 2020 – MORE RATES RELIEF FOR SMALL BUSINESSES
There has again been much lobbying from the small business sector to reduce business rates to enable traditional retailers in particular to compete with internet traders. The Chancellor announced a long term review of the future of business rates, but in the meantime there are some very welcome measures to assist small businesses. The 100% business rates retail discount will be extended to the leisure and hospitality sectors where the rateable value is no more than £51,000. In addition, very small businesses who already pay no business rates at all will be able to claim a £3,000 cash grant.
The Budget – 11 March 2020 – PERSONAL ALLOWANCE AND HIGHER RATE LIMIT FROZEN
The personal allowance for 2020/21 is frozen at £12,500, the same as in 2019/20. The higher rate tax threshold is also frozen at £50,000.
The Budget – 11 March 2020 – NO CHANGES TO INCOME TAX RATES
The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000. There had again been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. Note that the first £2,000 of dividend income continues to be tax-free. The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2020/21. There will be a significant increase in the Junior ISA limit to £9,000 for 2020/21. Despite a thorough review of all tax reliefs by the Treasury, the much rumoured restrictions in pension tax relief again failed to materialise.
The Budget – 11 March 2020 – TAPERING OF PENSION ANNUAL ALLOWANCE
One welcome change, particularly among hospital consultants and GPs, is the increase in the threshold at which the pension annual allowance starts being tapered. From 2020/21 the adjusted income limit will increase from £150,000 to £240,000 which means that most doctors will not be caught by the restriction.
The Budget – 11 March 2020 – IR35 “OFF-PAYROLL” RULES TO GO AHEAD
Despite considerable opposition from businesses, the Government have decided to go ahead with the new rules for workers providing their services through personal service companies from 6 April 2020. This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to workers supplying their services through personal service companies. If the new rules apply to the arrangements, then income tax and NIC will need to be deducted from payments to the personal service company.
The Budget – 11 March 2020 – NIC CHANGES
Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,500 of earnings from 2020/21, a significant increase from the £8,632 limit in 2019/20. Note that employers will be required to pay 13.8% on earnings over £169 per week, £8,788 per annum. The employment allowance that can be set against employers NIC increases to £4,000 from 2020/21 but will not be available to employers with total employer’s NIC liabilities in excess of £100,000 p.a.
The Budget – 11 March 2020 – STATE BENEFITS INCREASED
Many State Benefits have been frozen, or increases limited, for a number of years. The Government have however decided to increase many State Benefits from 2020/21 including Child Benefit. The amount payable in respect of the oldest child has been increased to £21.05 and £13.95 for each subsequent child. Note however that you may have to pay a tax charge if one of the parents has income in excess of £50,000.
The Budget – 11 March 2020 – CAPITAL GAINS ENTREPRENEURS’ RELIEF RESTRICTED
There were many rumours in the run up to the Budget that CGT entrepreneurs’ relief that allows certain business owners to pay just 10% tax on disposal would be abolished. Rather than abolish the relief the Chancellor has announced that from 11 March 2020 onwards the relief will only be available against the first £1 million of lifetime gains instead of the previous £10 million limit. The relief will therefore still benefit most small business owners.
COMPANY TAX RATE FROZEN AT 19%
As previously announced the corporation tax rate is to remain at 19% for the time being. It was scheduled to reduce to 17% from 1 April 2020.
The Budget – 11 March 2020 – STRUCTURES AND BUILDINGS ALLOWANCE INCREASED TO 3%
In the October 2018 Budget a new tax relief was introduced for the cost of construction or renovation of commercial buildings and structures. As announced in the Conservative Party manifesto the original 2% straight line allowance is to be increased to 3% from 1 April 2020 for companies, 6 April 2020 for unincorporated businesses.
The Budget – 11 March 2020 – R&D TAX CREDIT CHANGES
The Conservative Party manifesto also included a promise to increase R&D expenditure relief for non-SMEs from 12% to 13% and this was confirmed in the March Budget. However, a measure originally announced in the 2018 Budget and consulted on in 2019 will limit the amount of repayable R&D tax credit for SMEs to three times the company’s total PAYE and NIC payments for the period. This measure will now take effect from 1 April 2021 not 2020.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Business Planning for 2021
Business Planning for 2021: Reflections on our Situations
Business Planning for 2021: Resilience
Business Planning for 2021 – As we enter the fourth week of lockdown in England and reflect on improved testing, new vaccine trial results and a host of experts talking on the news about the timing of rollout and when Covid-19 will no longer be a threat to normality, it is worth remembering our lives are and will remain different for the remainder of 2020 and most of 2021. With that in mind we need to be resilient as individuals, families and businesses.
Business Planning for 2021: Economy
The latest indicators for the UK economy found nearly half (49%) of currently trading UK businesses reported a decrease in their turnover below what is normally expected for this time of year. On 8 November, overall UK footfall dropped to 33% of the level seen on the equivalent day last year as national restrictions were introduced in England.
Support Schemes
Clearly we are living in tough times and it makes sense to take advantage of Government supports both directly such as the extended job retention and self-employed support schemes, deferring tax and using bounce back loans. There are also grants available to help firms with Brexit changes for import and export administration.
Business Planning: Practical Steps
1. Review your budgets and set realistic and achievable targets for the remainder of 2020 and for 2021.
2. Get your employees involved in a discussion of likely trading conditions and get their input on reducing costs and maintaining revenues.
3. Use ‘bottom up’ budgeting where everyone in the business gives input on areas over which they have control – target a 10% cost saving.
4. Review and flowchart the main processes in your business (e.g. sales processing, order fulfilment, shipping etc.) and challenge the need for each step.
5. Encourage team members to suggest ways to streamline and simplify processes (e.g. sit down and brainstorm about efficiencies and cost reduction).
6. Put extra effort into making sure your relationships with your customers are solid.
7. Review your list of products and services and eliminate those that are unprofitable or not core products/services.
8. Review efficiency of business processes and consider alternatives such as outsourcing certain activities locally or overseas.
9. Agree extended payment terms with all suppliers in advance.
10. Pull everyone together and explain the business strategy and get their buy-in.
Help and Advice
Please talk to us about cashflow planning for the next six months. We can help with a template so you can do this yourself or we can work together to produce estimates for a variety of scenarios.
Lotuswise Chartered Accountants and Business Consultants can help you and your business succeed. To find out how, please contact us. To also get even more useful business and finance information and tax advice tips, check out our app on Google or Apple stores.
Watch the video here.
FURLOUGH: UPDATES TO THE CJRS
FURLOUGH: UPDATES TO THE CORONAVIRUS JOB RETENTION SCHEME (CJRS)
FURLOUGH: UPDATES TO THE CJRS
Furlough: Updates to the CJRS – The scheme has been extended. Government guidance has been updated with details of how to claim for periods after 1 November 2020. The CJRS will remain open until 31 March 2021. From 1 November 2020 employers can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.
THE CORONAVIRUS JOB RETENTION SCHEME DETAILS
Furlough: Updates to the CJRS – Employers can claim for employees who were employed on 30 October 2020, as long as they have made a PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where they have re-employed an employee after 23 September 2020. All employers with a UK bank account and UK PAYE schemes can claim the grant. They do not need to have previously claimed for an employee before the 30 October 2020 to claim for periods from 1 November 2020.
ELIGIBILITY
Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked. Employers might need to contribute towards the cost of their furloughed employees’ wages for these periods. For periods from 1 November 2020, they will need to pay for the cost of employer NICs and pension costs.
CLAIMS FOR NOVEMBER 2020
Claims for furlough days in November 2020 must be submitted by 14 December 2020. This is a tight deadline, so it is important we work together to get any claims submitted promptly. We can also guide you through the information you need to gather, ensure you follow the rules and record any changes of employment terms with your employees.
GOVERNMENT SITE
See details on the Government site here. Please feel free to contact us here.
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Furlough Scheme Extended until December
Furlough Scheme Extension at 80% Pay
The Coronavirus Job Retention Scheme (CJRS) Furlough Extension
Furlough scheme extended until December: On 22 October the Chancellor announced that the CJRS furlough scheme would end on 31 October 2020, to be replaced by a new Job Support Scheme (JSS). However, at 6.45 pm on 31 October 2020 when the Prime Minister announced a month long lockdown for England, he announced that the CJRS furlough scheme would be extended for one further month. This means the CJRS has now been extended until December.
Furlough Scheme Extended until December
Furlough Scheme extended until December: The grant will allow employers to be able to claim 80% of employees’ usual pay for hours that they are unable to work. Businesses will have flexibility to bring furloughed employees back to work on a part time basis or furlough them full-time. Employers will be asked to cover National Insurance and employer pension contributions. As with the existing CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
More Information on the CJRS Scheme
Further details can be found here. Please also feel free to contact us.
Job Support Scheme (JSS)
The JSS scheme that replaces CJRS was originally announced in September. The scheme was originally scheduled to commence on 1 November 2020 but will now commence when the extended CJRS scheme ends and will run until the end of April 2021.
Details of JSS
It has been made more generous than in the original announcement to support businesses that are legally forced to close their premises as a direct result of Coronavirus. This is referred to as JSS Closed. For those employers that are able to operate safely but continue to face reduced demand such that they may need extra support over the winter to help keep their employees attached to their workforce, there is JSS Open.
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Watch the video here.
The Coronavirus Job Support Scheme
The Coronavirus Job Support Scheme
The Job Support Scheme starts on 1 November
The Coronavirus Job Support Scheme: The Chancellor has announced a new 6 month Job Support Scheme to help businesses and employees survive the winter months. We are still awaiting full details of the scheme that will replace the current “flexible furlough” scheme but the main features are highlighted below. Please get in touch with us if you would like to discuss this further.
Employer Eligibility
The Coronavirus Job Support Scheme: Employers of all sizes will be eligible for the new scheme but large organisations will need to demonstrate that their turnover is reduced as a result of COVID-19.
Employee Eligibility
Eligible employees will be those on the PAYE payroll at 23 September 2020 that are working for at least 33% of their usual hours. For example an employee whose usual pay is £450 a week who works 2 days a week would be paid £180 for the 2 days worked and £180 for the other 3 days. The employer could claim a grant of £90 from the Government.
Other Measures
In addition to the Job Support Scheme the Chancellor announced that the Self-Employed Income Scheme would also be extended for a further 3 months but the grant will be 20% of average monthly profits capped at £1,875.
VAT
The temporary 5% rate of VAT for the hospitality sector, accommodation and attractions will be extended to 31 March 2021. Businesses that have deferred their VAT payments will be able to pay back the deferred amount over 11 months.
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The Coronavirus Job Retention Scheme: The Final Phase
The Coronavirus Job Retention Scheme
The Final Phase
The Chancellor, Rishi Sunak, presented A Plan for Jobs at the time of the Summer Economic Update on 8 July 2020. This included incentives for employers who retain furloughed staff and who offer training and apprenticeships.
The Job Retention Bonus
The Coronavirus Job Retention Scheme (CJRS) is now in its final phase. Government support under the scheme is withdrawn gradually from August and the scheme comes to an end on 31 October 2020. Where staff are still furloughed in October, employers will need to decide whether they can bring their furloughed employees back to work.
The Coronavirus Job Retention Scheme: What is the Bonus?
To encourage employers to retain furloughed staff, a bonus – the Job Retention Bonus – of £1,000 will be paid to the employer for each furloughed employee who is employed continuously from the end of the CJRS until 31 January 2021. However, to qualify for the bonus, the employer must pay the employee, on average, earnings that are at least equal to the lower earnings limit for Class 1 National Insurance purposes, set at £120 per week (£520 per month) for 2020/21.
The Coronavirus Job Retention Scheme: Timeline
The Government will pay the bonuses from February 2021.
The Scheme: Details
The scheme is not without its critics, with Jim Harra, Chief Executive of HMRC, questioning whether it offers value for money. Some employers, including Primark and Rightmove, have stated that they will not claim the bonus. Please contact us to find out how you may be able to benefit from the incentives on offer.
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HOSPITALITY VAT REDUCTION
DETAILS ON HOSPITALITY VAT REDUCTION
HOSPITALITY VAT REDUCTION: WHAT IS IT ALL ABOUT?
When the Chancellor announced a temporary cut in the rate of VAT for the hospitality sector and attractions in his Summer Statement on 8 July there were a number of areas that needed clarification. The reduction applies to supplies made between 15 July 2020 and 12 January 2021. HMRC have now set out more details of which supplies will attract the 5% temporary rate as well as the impact on invoicing, deposits and the flat rate scheme.
WHAT DOES THE 5% TEMPORARY VAT RATE APPLY TO?
Hospitality VAT: The temporary 5% rate applies to supplies such as catering, including hot takeaway food, accommodation in hotels, guest house and similar places and tourist attractions such as theme parks, zoos, theatres and cinemas. Please note this is not an exhaustive list.
HOSPITALITY VAT REDUCTION: WHAT ABOUT ALCOHOLIC DRINKS?
Hospitality VAT: Note that as far as catering is concerned, the 5% rate only applies to food and non-alcoholic drinks. The 20% rate continues to apply to alcoholic drinks.
HOSPITALITY VAT REDUCTION: HAVE YOU PAID A DEPOSIT?
It is fairly common, particularly in the summer holidays, to pay a deposit when booking a hotel or self-catering accommodation but how should the deposit be accounted for? HMRC have confirmed that the hotel has the option of charging VAT according to the ‘basic tax point’ (dates of the stay) rather than the ‘actual tax point’ (invoice/payment dates).
DEPOSITS: DO YOU HAVE AN EXAMPLE?
For example where the customer paid a non-refundable £300 deposit in February 2020 for a £1000 holiday in Cornwall in August, using the actual tax point, the hotel would account for 20% VAT on the deposit received in February 2020 and 5% on the balance payable after 15 July 2020. The hotel could choose to use the basic tax point rule which would mean that the 5% rate would apply to the entire cost of the stay and make an adjustment for the VAT already accounted for.
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Deferring July Self-Assessment Payment
DEFERRING JULY SELF-ASSESSMENT PAYMENT: OPTION TO DEFER JULY SELF-ASSESSMENT PAYMENT ON ACCOUNT
Deferring July Self-Assessment Payment: Taxpayers facing financial difficulties as a result of the COVID-19 pandemic can opt to delay making their second self-assessment payment on account for 2019/20, due by 31 July 2020. As long as the amount is paid in full, together with any outstanding balance for 2019/20, by 31 January 2021, HMRC will not charge any interest or penalties.
Under the self-assessment system, taxpayers are required to make payments on account of their tax and Class 4 National Insurance liability if their self-assessment bill for the previous tax year was £1,000 or more, unless at least 80% of the tax owed for that year was deducted at source, for example, under PAYE.
Each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability. Although Class 2 National Insurance contributions are collected via the self-assessment system, they are not taken into account when working out payments on account. Payments on account are made on 31 January in the tax year and on 31 July after the end of the tax year, with any balance being paid by the tax return filing date of 31 January after the end of the tax year. If the payments on account are more than the eventual liability, the excess is refunded or set against the next year’s liability.
The first payment on account for 2019/20 was due by 31 January 2020. The second payment would normally need to be paid by 31 July 2020.
DEFERRING JULY SELF-ASSESSMENT PAYMENT: OPTION TO DEFER
This year, taxpayers have the option to defer the second payment on account if they are finding it difficult to make the payment by 31 July 2020 due to Coronavirus. There is no obligation to defer – taxpayers can still make the payment by 31 July 2020 if they so wish.
Where a taxpayer takes the deferral option, the outstanding payment can be made whenever the taxpayer is able to meet the payment, as long as this is no later than 31 January 2021. Any balance owing for 2019/20 must be paid by the same time, together with the Class 2 National Insurance liability for the self-employed and the first payment on account for 2020/21.
Taxpayers choosing the deferral option do not need to tell HMRC – they simply pay the tax by 31 January 2021; nor do they have to provide evidence that they were adversely affected by the COVID-19 pandemic.
Guidance on the deferral option is available on the Gov.uk website. Please also contact us for any advice.
Delaying the payment will no doubt help those struggling as a result of the COVID-19 pandemic. Indeed, it may provide a lifeline for particular groups of taxpayers, for example, those who are self-employed and who do not qualify for a grant under the Self-employment Income Support Scheme and who have been unable to work due to the restrictions.
However, the deferred tax has to be paid eventually, and the payback for having nothing to pay in July is a big bill in January 2020. Not only will the deferred tax be payable then, but also any balance due for 2019/20 and the first payment on account for 2020/21.
FLEXIBLE FURLOUGHING
The Coronavirus Job Retention Scheme (CJRS) has provided a lifeline for many employees and employers during the COVID-19 pandemic. As at 21 June 2020, 9.2 million employees had been furloughed by 1.1 million employers who had, collectively, claimed grants totalling £22.9 billion.
Prior to 30 June 2020, employees who had been furloughed could not work for their employer while on furlough. This changes from 1 July 2020 with the introduction of flexible furloughing.
The CJRS runs until 31 October 2020. As the scheme draws to a close, the grant support provided to employers is gradually reduced from 1 August 2020.
The CJRS enters its second and final phase from 1 July 2020. While employees will continue to receive 80% of their wages for furloughed hours up to the maximum amount for the duration of the scheme, the amount that employers can claim changes each month.
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“Flexible Furlough” and Self Employed Grants
“FLEXIBLE FURLOUGH” AND SELF EMPLOYED GRANTS: “FLEXIBLE FURLOUGH” STARTS 1 JULY
“Flexible Furlough” and Self Employed Grants: From 1 July the new CJRS “Flexible furlough” grant scheme starts, which will allow employers to gradually bring their furloughed employees back to work part-time. The new scheme will be in place until the end of October and the Government will gradually reduce the amount of grant towards employees’ furlough pay to 70% in September and 60% in October.
The grant paid by the Government via HMRC will remain at 80% of the employee’s normal pay for July and August but they will stop reimbursing NICs and pension contributions from 1 August 2020.
Further details on the operation of the new scheme were announced on 12 June 2020 which are summarised below.
We will of course continue to assist you in making furlough claims.
“FLEXIBLE FURLOUGH” AND SELF EMPLOYED GRANTS: KEY CONDITIONS FOR NEW “FLEXIBLE FURLOUGH”
Only those employees who have been furloughed and included in a claim under the original CJRS scheme may be included in a claim for the new flexible furlough. That means they must have been furloughed on or before 10 June to allow a full 21 days prior to the end of the original scheme.
A further restriction is that the maximum number of employees that can be included in a flexible furlough claim cannot exceed the maximum number included in a claim under the original scheme.
Thus if the employer has 8 employees split into teams of 4 and furloughed team A for three weeks and then team B for 3 weeks the maximum number of employees that can be included in a flexible furlough claim will be limited to 4.
Unlike the original CJRS furlough scheme there is no minimum furlough period as the intention is to allow employers the flexibility to gradually bring employees back to work. The hours/days worked will need to be agreed between employee and employer which is likely to involve amending the employees’ contracts.
Employees will be entitled to their normal contractual pay for the hours that they work and must be paid at least 80% of their normal pay for the hours that they are furloughed, even when HMRC are only reimbursing 70% or 60%.
Employers will need to notify HMRC of the employee’s usual hours and the hours worked in the claim period. The furloughed hours will be the difference. This will be complicated where the employee’s hours vary. There is currently a lack of clarity in the HMRC guidance on the calculation of “usual hours” and we will of course be available to assist you in making your claim. We will also be able to make the claims on your behalf.
Each claim made by an employer must be for a week or more and no claim period can straddle a calendar month end.
SECOND SELF-EMPLOYED INCOME SUPPORT GRANTS TO BE PAID IN AUGUST
On 29 May the Chancellor announced that the grant scheme to support the self-employed would also be extended with a further payment based on 70% of average profits for the 3 years ended 2018/19, limited to £6,570 rather than £7,500.
The eligibility criteria remain broadly the same as the first grant claim. Self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income.
If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019.
Self-employed traders need not have claimed a grant under the old scheme to qualify for the August payment and are required to confirm that their business continues to be adversely affected by Covid-19. The deadline for making a claim for a grant under the original SEIS scheme is 13 July 2020.
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Government Schemes: Furlough and Self Employment
GOVERNMENT SCHEMES: JOB RETENTION “FURLOUGH” SCHEME EXTENDED TO OCTOBER
Chancellor Rishi Sunak announced on 12 May that the CJRS scheme will be extended until the end of October. The scheme will continue in its current form until the end of July with the Government paying 80% of employees wages up to £2,500 a month. For accounts purposes the amounts received should be credited to a “grants received” account, and this will therefore increase taxable profits of the business.
From 1 August to the end of October, HMRC will introduce more flexibility so employers will be able to bring their furloughed employees back to work part-time and contribute to paying employees’ wages while still receiving support from the scheme.
On Friday 29 May the Chancellor announced that the Government will stop reimbursing NICs and pension contributions from 1 August 2020. From 1 September 2020 the amount reimbursed by the Government will be reduced to 70%, limited to £2,190. There will be a further reduction to 60% from 1 October 2020, limited to £1,875.
We will of course continue to assist you in making furlough claims.
GOVERNMENT SCHEMES: SELF-EMPLOYED INCOME SUPPORT GRANTS ALSO EXTENDED
Sole traders and members of partnerships started making claims under the Self-Employed Income Support Scheme on Wednesday 13 May and many have already received their grant.
Unfortunately, unlike the CJRS furlough scheme, claims could not be made by agents on behalf of clients although we can of course check that you have received the correct amount and request a review if the amount is incorrect.
In order to be eligible your self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income. If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019.
The amount of the grant that can be claimed is 80% of average profits for the three years to 5 April 2019. The grant is capped at £2,500 a month and the maximum amount is £7,500 for the initial 3 month period. The Chancellor has now announced that this scheme would be extended for 3 months from 1 June but reduced to 70% of average profits, limited to £6,570.
There are a number of anomalies, for example if the trade commenced 6 October 2017 the profits for 2017/18 and 2018/19 are divided by 2 to establish an annual profit figure rather than divided by 18 months which we consider to be unfair.
Like the CJRS furlough payments the amounts received are included in your trading profits and thus subject to income tax and national insurance.
CAN WE “FURLOUGH” THE COMPANY CAR?
During the lockdown period many employees and directors have not been using their company cars and it has been sitting on their driveway. You might think that means that the benefit of having a company car does not apply but unfortunately HMRC do not agree.
HMRC have recently confirmed that there continues to be a taxable benefit unless the car is unavailable for private use for 30 or more consecutive days. They would continue to regard the car as available to the employee unless the keys or fobs are returned to the employer or to a third party as instructed by the employer.
This guidance needs to be taken into consideration when form P11Ds are completed.
Note also that where the employee is provided with a motor car with zero CO2 emissions there is no taxable benefit in kind for 2020/21.
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The Budget – 11 March 2020
The Budget – 11 March 2020: MORE MONEY FOR THE NHS AND INFRA-STRUCTURE IN THE BUDGET
Rishi Sunak received a “hospital pass” when he was appointed Chancellor and was required to deliver the first Budget in nearly 18 months within a month of his appointment. He announced extra spending on roads, rail, broadband and other infrastructure projects as well as extra money for the NHS to help cope with the coronavirus epidemic. But what we were waiting to hear was where the extra money was going to come from? Had he found a “magic money tree”, or would tax and borrowing have to increase? The Office of Budget Responsibility had already downgraded growth forecasts for the UK economy to just 1.1% before the global coronavirus pandemic, which may temporarily plunge the UK into recession.The Chancellor announced a number of measures that will hopefully protect businesses until the economy recovers.
The Budget – 11 March 2020: STATUTORY SICK PAY (SSP) RELIEF
The Government are predicting that up to 20% of the workforce may be unable to work due to the virus at any one time. It had already been announced that employees would be entitled to SSP from day 1 not day 4. It was announced in the Budget that the Government will fully reimburse employers with fewer than 250 employees the SSP paid for the first 14 days of absence, equivalent to the self-isolation period.
The Budget – 11 March 2020 – MORE RATES RELIEF FOR SMALL BUSINESSES
There has again been much lobbying from the small business sector to reduce business rates to enable traditional retailers in particular to compete with internet traders. The Chancellor announced a long term review of the future of business rates, but in the meantime there are some very welcome measures to assist small businesses. The 100% business rates retail discount will be extended to the leisure and hospitality sectors where the rateable value is no more than £51,000. In addition, very small businesses who already pay no business rates at all will be able to claim a £3,000 cash grant.
The Budget – 11 March 2020 – PERSONAL ALLOWANCE AND HIGHER RATE LIMIT FROZEN
The personal allowance for 2020/21 is frozen at £12,500, the same as in 2019/20. The higher rate tax threshold is also frozen at £50,000.
The Budget – 11 March 2020 – NO CHANGES TO INCOME TAX RATES
The basic rate of income tax and higher rate remain at 20% and 40% respectively, and the 45% additional rate continues to apply to income over £150,000. There had again been rumours that the dividend rate might be increased, but dividends continue to be taxed at 7.5%, 32.5% and then 38.1%, depending upon whether the dividends fall into the basic rate band, higher rate band or the additional rate band. Note that the first £2,000 of dividend income continues to be tax-free. The annual ISA investment limit increased to £20,000 from 6 April 2017 and remains at that level for 2020/21. There will be a significant increase in the Junior ISA limit to £9,000 for 2020/21. Despite a thorough review of all tax reliefs by the Treasury, the much rumoured restrictions in pension tax relief again failed to materialise.
The Budget – 11 March 2020 – TAPERING OF PENSION ANNUAL ALLOWANCE
One welcome change, particularly among hospital consultants and GPs, is the increase in the threshold at which the pension annual allowance starts being tapered. From 2020/21 the adjusted income limit will increase from £150,000 to £240,000 which means that most doctors will not be caught by the restriction.
The Budget – 11 March 2020 – IR35 “OFF-PAYROLL” RULES TO GO AHEAD
Despite considerable opposition from businesses, the Government have decided to go ahead with the new rules for workers providing their services through personal service companies from 6 April 2020. This will represent a significant administrative burden on large and medium-sized businesses who will be required to decide whether the rules apply to payments to workers supplying their services through personal service companies. If the new rules apply to the arrangements, then income tax and NIC will need to be deducted from payments to the personal service company.
The Budget – 11 March 2020 – NIC CHANGES
Employees and the self-employed will not pay national insurance contributions (NIC) on the first £9,500 of earnings from 2020/21, a significant increase from the £8,632 limit in 2019/20. Note that employers will be required to pay 13.8% on earnings over £169 per week, £8,788 per annum. The employment allowance that can be set against employers NIC increases to £4,000 from 2020/21 but will not be available to employers with total employer’s NIC liabilities in excess of £100,000 p.a.
The Budget – 11 March 2020 – STATE BENEFITS INCREASED
Many State Benefits have been frozen, or increases limited, for a number of years. The Government have however decided to increase many State Benefits from 2020/21 including Child Benefit. The amount payable in respect of the oldest child has been increased to £21.05 and £13.95 for each subsequent child. Note however that you may have to pay a tax charge if one of the parents has income in excess of £50,000.
The Budget – 11 March 2020 – CAPITAL GAINS ENTREPRENEURS’ RELIEF RESTRICTED
There were many rumours in the run up to the Budget that CGT entrepreneurs’ relief that allows certain business owners to pay just 10% tax on disposal would be abolished. Rather than abolish the relief the Chancellor has announced that from 11 March 2020 onwards the relief will only be available against the first £1 million of lifetime gains instead of the previous £10 million limit. The relief will therefore still benefit most small business owners.
COMPANY TAX RATE FROZEN AT 19%
As previously announced the corporation tax rate is to remain at 19% for the time being. It was scheduled to reduce to 17% from 1 April 2020.
The Budget – 11 March 2020 – STRUCTURES AND BUILDINGS ALLOWANCE INCREASED TO 3%
In the October 2018 Budget a new tax relief was introduced for the cost of construction or renovation of commercial buildings and structures. As announced in the Conservative Party manifesto the original 2% straight line allowance is to be increased to 3% from 1 April 2020 for companies, 6 April 2020 for unincorporated businesses.
The Budget – 11 March 2020 – R&D TAX CREDIT CHANGES
The Conservative Party manifesto also included a promise to increase R&D expenditure relief for non-SMEs from 12% to 13% and this was confirmed in the March Budget. However, a measure originally announced in the 2018 Budget and consulted on in 2019 will limit the amount of repayable R&D tax credit for SMEs to three times the company’s total PAYE and NIC payments for the period. This measure will now take effect from 1 April 2021 not 2020.