Self Employed Support Coronavirus 26 March 2020

The Self Employed Income Support Scheme released by Chancellor Rishi Sunak this evening.

The Government will provide the self-employed with a taxable grant of up to 80% of their average monthly income taken over a 3 year period up to a maximum of £2,500 per month. If you do not have 3 years accounts, it will be based on best available data.

You will not qualify if you started after 6 April 2019 and only those who completed tax returns for the year ended 5 April 2019 and remain self employed will be included.

This will be available for an initial 3 months and may be extended if necessary. The payment will not be released until early June, but will be backdated. You will be able to claim the grant and continue to do business.

The grant will be available to people with trading profits of up to £50,000 and for those where the majority of their income comes from self employment. For those struggling right now, there are business interruption loans available.

If you have not submitted your tax return for the year ended 5 April 2019, you now have 4 weeks to do so. This is very important so if you know anyone who needs help ask them to get in contact.

Income tax second payments on account due on 31 July have been deferred until 31 January 2021. Access to Universal Credit is available and advance payments are in place rather than a 5 week check (as per the Chancellor)

There will be a form available for completion soon

Compliance checks will be added to this form

Coronavirus Business Support Fund

Councils have released online application portals to claim the grant available to help businesses deal with the impact of COVID-19.

The Scottish Government has now made available the Coronavirus Business Support Fund which are one of grants available to help protect jobs, prevent business closure and promote economic recovery.

How to Apply? Each council has made a portal available to click as shown below in the How to Apply section. There will be a click to the form and the details you need to supply and the email address to return completed form to. For businesses who do not pay rates we will update as details are released. A list of eligible business is available at Scottish Government website under business which qualify.

This is the link https://www.mygov.scot/non-domestic-rates-coronavirus/

Business Interruption Loan Scheme

Amid the ongoing Cornavirus crisis, the government yesterday unveiled a series of measures to help businesses cope with the almost inevitable disruption this will cause and as part of this month’s budget announcement. One of these was the introduction of  the Coronavirus Business Interruption Loan Scheme (CBILS).

This scheme will take the place of the current Enterprise Finance Guarantee (EFG) over the coming weeks and aims to provide businesses with easier access to finance during these challenging times.

While the borrower will remain fully liable for repayment of the facility, security to the lender will be provided by the government who will guarantee 80% of the amount borrowed – which will make this an attractive proposition to lender and borrower alike. A range of revolving and term finance options will be made available through CBILS, including:

Business loans and asset finance (terms up to ten years)

Overdrafts

Invoice finance and revolving facilities (terms up to three years)

CBILS is aimed at small UK businesses which are otherwise viable, yet experiencing cash flow problems and interruption to trade due to the escalating spread of COVID-19. Eligibility, therefore, is limited to those companies with an annual turnover not exceeding £41 million and those without adequate security to obtain funding directly from the lender under ordinary circumstances.

We have has fostered close relationships with a range of lenders and can assist eligible companies in accessing finance from between £1,000 to up to £1.2 million, depending on their circumstances and funding requirements.

As trusted advisers we regulary work with these companies to provide specialist input, adding value to the services they offer, and ensuring our clients receive the best advice possible during challenging times.

We have taken the time to understand our client’s business and its finance requirements, we can provide expert advisers who will search the lending market to source the most appropriate funding channel satisfying both the short-term and long-term needs of the company in the most cost-effective and time-efficient manner possible.

Coronavirus update 18 March 2020

The UK and Scottish Governments have been updating businesses and the public with guidelines to cope with the current situation and we would like to update on current status within our organisations.

As of today all staff are working as normal in office but we are asking clients to try to communciate with us by email. We will endevour to answer emails within 24 hours but will prioritise those we feel require quicker reply. It has also been announced that at lunchtime on Friday schools may be closed and the period of closure will be advised. At this time we will then update further but we see no factors which will affect our ability to complete work as we are now. We have heavily invested in processes and technology to allow for this situation naturally by becoming a cloud based company. It is likely on a day to day basis staff may be affected with working in office but they have the same access at home using company laptops as they do here. This is why it is important e-mails are sent as they will not have access to calls. Calls can be answered by senior staff who have access through apps on phone. However there may be need to support families as will clients. 

IR35 The latest updates to off-payroll working

A easier and softer approach has been agreed with contractors in light of the new laws to try to help them make sense on whether their subcontractors are within the new off-payroll rules or not.

HMRC and the Chancellor commented last week that there will be a transitional period of 12 months for the new off-payroll working rules for the 12 months following implementation. But this is not in relation to the rules it is really only about the penalties which would be applied should the engagement be considered classed as wrong. The new rules will not however be used as a justification to go back to previous years and enquiry into a status previously. That would only come about if there was suspected fraud or criminal behaviour.

Despite this being one of the most dramatic changes in contractual employment in the UK there are options still available and sight should not be lost of the true contractor and subcontractor engagement. Remember this is all about (IR35) which is the engagement  with someone who is an employee ‘in all but name’ and mainly affects the medium to large business. In the past it was the contractor and freelancer who set the status not it is the company so many fear the loss to SME businesses which are now affects but the current rules.

So it is not all at a end but the new regulations will mean many companies simply don’t want to take the risk with this arrangement and will either get rid of contractors or move them to effectively being full time employees, full time employees who will not get sick pay, holiday or parental rights.

Please get in contact with Brendan Kelly on 0141 2040930 if you require further guidance and a case by case review.

Fixed fee or time basis Accountancy

We all received emails from companies offering us a opportunity for a fixed fee accountancy service. Is this something which works for clients. There are pros and cons like many things.

An accountancy firm like your operation is a business. It has overheads the most important being the staff. Good staff come with a associated cost based on level of experience. As a traditional rule accountancy firms calculate their staff hourly rate based on their pay, a allocation of overheads and a profit margin.

So whilst a fixed fee basis might have its merits, are you getting the level of service you require. The answer needs consideration. The fixed fee companies operate on the basis of clients not asking them to many questions to ensure the time staff spend on their work is less. So what happens if you have a business that needs more support than the normal business. It is likely that is where frustration sets in as the time taken is normally then assessed.

With a traditional accountancy form the fees will not be fixed but will be reviewed on a annual basis but you get the best of service as someone isn’t sitting with a stop watch to get things done as quick as possible or questions answered with minimal thought. A good Accountancy firm will give you a estimate of fees then assess normally at end of year time to budget. They then work with the client to assess how they can help the client realise benefits.

Contact us for more detail. We pride ourselves on being proactive and reactive which many fixed fee services don’t provide.

Vat myths

Client is adamant that their car dealer has advised them that VAT incurred on the purchase of an electric car is recoverable in full.

Myth! An electric car is no different to a car which runs on any other fuel; input tax is blocked from recovery unless the car meets one of the exception conditions detailed in VAT Notice 700/64, section 3, summarised briefly below:-

The Exceptions are for a car which:

  • is stock in trade of a motor manufacturer or dealer
  • is intended to be used primarily as a taxi, for driving instruction, or for self-drive hire
  • will be used exclusively for the purposes of the business and would not be made available for the private use of anyone

A building or a piece of land is itself opted to tax, and that option continues after the building is transferred to a new owner.

 Myth! It is not the land or building which is opted to tax, but the “interest in” that land or building held by the entity which has made the decision to opt to tax, and the option to tax is only binding on that entity, or a relevant associate of theirs in a VAT group situation. An ‘interest in’ property means any interest in, right over or licence to occupy property.

In most cases the decision to opt to tax is driven by the wish to recover input tax incurred in relation to the building, but can also be a requirement for the purchaser of a building opted to tax by the seller, to acquire it “VAT free” as part of the transfer of a business as a going concern.

To illustrate this point: if the landlord of a building has opted to tax, that option does not flow through to the tenants. If the tenant is subletting, and wants the rent they receive to be taxable income, they will need to notify HMRC of their own option.

Detailed information on Opting to Tax Land and Buildings is provided by HMRC in VAT Notice 742A

The conditions required to be met when transferring property as part of a transfer of a going concern are covered in section 2.3 of VAT Notice 700/9.

Exempt and outside-the-scope supplies of goods and services do not form part of taxable turnover for VAT registration or Making Tax Digital threshold purposes, but zero rated supplies of goods or services do (including exports).

Correct! Taxable Turnover includes supplies of goods and services at the standard, reduced and zero rate of VAT. Exempt supplies are not taxable supplies.

Examples of outside-the-scope supplies are:-

  • Business to business services supplied to customers outside the UK which under the place of supply of service rules are supplied where the customer belongs (See VAT Notice 741A),
  • Supplies of goods which never come into the UK, e.g. goods purchased from a supplier with stock held outside the UK and delivered direct to a customer’s premises outside the UK.

Both the above are examples of “supplies which would be taxable if made in the UK” but as the supplies are not made in the UK, they do not count as taxable turnover in the UK.

Exempt and zero rated supplies are both included when calculating the gross turnover on which VAT is to be declared on the Flat Rate Scheme (FRS). Outside-the-scope supplies of goods and services are not.

Correct! It is a common misconception that exempt supplies in particular are excluded from the FRS turnover calculation. This often catches out FRS users with property letting income.

Information on supplies to be included/excluded from FRS Turnover is provided in the Flat Rate Scheme VAT Notice 733 Sections 6.2 and 6.3.

Expense recharges are disbursements

Myth! When a consultant or any other kind of businesses recharges the costs it has itself incurred in the course of providing its services to its customers, that recharge is not a disbursement.

As per HMRC guidance on disbursements in section 25 of Notice 700: The VAT Guide, a disbursement is the result of acting as a disclosed agent between your customer and a third party to facilitate a supply of goods or services between those parties, and the supply made must be used by your customer – not by you!  There are eight conditions which need to be met for a payment made to a third party on behalf of your client to be treated as a disbursement:-

  • you acted as the agent of your client when you paid the third party
  • your client actually received and used the goods or services provided by the third party (this condition usually prevents the agent’s own travelling and subsistence expenses, phone bills, postage, and other costs being treated as disbursements for VAT purposes)
  • your client was responsible for paying the third party (examples include estate duty and Stamp Duty payable by your client on a contract to be made by the client)
  • your client authorised you to make the payment on their behalf
  • your client knew that the goods or services you paid for would be provided by a third party
  • your outlay will be separately itemised when you invoice your client
  • you recover only the exact amount which you paid to the third party
  • the goods or services, which you paid for, are clearly additional to the supplies which you make to your client on your own account

Recharges of a business’s own travel, subsistence or other costs are not disbursements – the customer is not using the transport, eating the meal or doing the miles in the case of a mileage rate. The recharge is correctly treated as further consideration for the goods or services supplied. In the case of a consultant, the fee for the job is in effect a daily rate for the job plus costs.

New rules coming from 06 April 2020

This will affect only a few clients but is always worth looking at especially in relation to the basic allowance. Currently there is an allowance for employer NI allowance of £3,000 per year but from 6 April 2020, employers with a National Insurance contributions liability of £100,000 or more, or employers who are connected to other employers where their cumulative secondary Class 1 NICs liability is £100,000 or more, will no longer be able to claim the Employment Allowance.

It is being brought in to actually benefit smaller businesses so the limitation that companies will only be able to claim the Allowance moving forward if their NIC liability in the previous year was less than £100,000.

De minimis State Aid

The Employment Allowance moving forward will mean businesses will need to be aware if they are already claiming any other de minimis State aid(s). There is a three year cap on the total de minimis State Aid a business can claim – this cap is €200k over a three year rolling period.

How can I claim if my company is eligible?

A company could get up to £3,000 a year off their National Insurance bill if they are an employer.

The allowance will reduce your employers’ (secondary) Class 1 National Insurance each time you run your payroll until the £3,000 has been reached or the tax year ends (whichever is sooner).

You can only claim against Class 1 National Insurance you’ve paid, up to a maximum of £3,000 each tax year. You can still claim the allowance if you pay less than £3,000 a year.

Employment Allowance claims will need to be submitted each tax year. Claims will not automatically roll over from the previous tax year. Look out for more information in the coming months.

The benefits of cloud software

We live in an age of instant accessibility to almost everything. Amazon delivers same day, we have most information available on internet and the greatest option to both client and accountant is good online software.

We are certified in Quickbooks, Xero, Sage, Free Agent and Receipt Bank.

Tax due on Air BNB & Holiday Let income

A subject of interest to many of our readers will be the rental of property/rooms such as Airbnb and Holiday lets.

Each year we can all have an available tax free personal allowance of £12,500 (Subject to other factors) which we utilise against mainstream income. There are also separate capital gains allowances which are £12,000 for tax year to 05 April 2020 with varying rates liable based on total income after the £12,000 is used and the gain on type of asset, property being at 18% and 28% where other assets are 10% and 20%

In addition to these for clients with earnings from Airbnb this income is not exempt from tax, however if you rent out a room in your main residence, you may qualify for the “rent a room” relief, the amount of relief is currently up to £7,500 or £3,750 if let jointly.

The amount of tax you will be due to pay on Airbnb income will be affected by whether the room you are renting out is in your main residence or not and then subject to rates of tax. If you are letting an Airbnb in a separate property, you will be due to pay the tax on profits just like any other business owners are.

Don’t forget about VAT. If your total income from Airbnb rentals exceeds the VAT threshold (£85,000) then you will need to consider registering for VAT.

Draft legislation from HMRC may be tightening on the rent a room relief. The current level of £7,500 per year will remain, however if you rent your own home, you must be present some or all of the time that it is let out.

Garrison Accountancy are your local leading experts for all areas of property taxes and income, this includes commercial property, buy-to-let properties, hotels and bed & breakfast, residential letting  If you require any support or guidance in relation to this area please contact Garrison Accountancy Tax Manager Brendan Kelly on 01397 600167 or email him at bkelly@garrisonaccountancy.com.