As the end of the 2020/21 tax year rapidly approaches and for several businesses their financial year-end, there is hope, with schools returning this month and further relaxations in Covid-19 measures to follow under the Government’s road map, that the next financial/tax year will be nothing like the current one.
At Harbour Key the start of March was very busy with several transactions that clients wanted to complete before the Budget in case of any tax changes, in particular capital gains tax, which had been discussed since the end of last summer as one of the taxes that would be increased. In the end, the main tax raising measures were an increase in corporation tax to 25% in April 2023 and the freezing of the personal allowance and higher rate threshold for five years (along with other allowances).
The latter will raise revenue by not only dragging more individuals into paying tax with the personal allowance frozen, and higher rate tax with the £50,270 higher rate threshold frozen, but in addition will result in more families having to repay child benefit. The High-Income Child Benefit Charge applies if an individual’s income is over £50,270 and either the individual or their partner receives child benefit.
The increase in corporation tax, although expected was a higher jump than expected, and can be looked at in various ways. Will the increase ever be introduced, it is two years away, a year before an election and the economy may make a quick recovery (fingers crossed). Alternatively, with loss carry back being changed from one year to three years, to enable businesses to reclaim tax to help them trade out of the pandemic and the super tax deduction of 130% on qualifying capital expenditure available until the end of March 2023, it could be viewed that companies will hit the increase in corporation tax having spent heavily on capital and used up their losses, such that tax collection under the new rate will be high. Here at Harbour Key we are more cynical and wonder if the increase has more to do with PAYE collection, as for owner managers with a corporation tax rate of 25%, makes the debate over dividends v salary for profit extraction more interesting! Our Budget summary can be found on this link.
In respect of future tax changes, The Treasury is holding a “Tax Day” on 23rd March to look at long-term changes in government tax policy, including on capital gains and environmental levies. The Treasury said it will simultaneously publish several consultations relating to tax policy on 23rd March 2021.
BREXIT FUNDING SUPPORT
Figures have been released to show the fall in UK trade with the EU in January, which fits with the position we are being advised by our clients. To aid SMES, the Government announced a £20 million SME Brexit Support Fund to help businesses adjust to new customs procedures, rules of origin and VAT rules when trading with the EU. This will open for applications in April. More details can be found HERE
This grant is in addition to the Internationalisation Fund for SME businesses, details of which are in last month’s newsletter.
As part of his Budget speech, the Chancellor announced a new loan to replace the current CBILS and bounce back loans, applications for these existing loans close on 31st March. Details of the new loan can be found HERE and more will be in our Business Forward update later this month, however it is clear the loan is not as generous as the current Government backed loans. Therefore, if businesses are considering borrowing, using the existing schemes would be the preferred option. However, in assisting clients with their applications, we are noting that providers are starting to close to new applicants, so the time to apply is now.
OTHER BUSINESS SUPPORT MEASURES
- Help to Grow: Management & Digital Grants -The management grant has been developed in partnership with business schools with 90% subsidised by government to deliver a programme that will equip SMEs with the tools to grow their businesses and improve their management skills. The digital investment grant is to improve productivity by adopting productivity-enhancing software, this will combine a voucher covering up to half of the costs of approved software up to a maximum of £5,000 and free impartial advice delivered through an online platform.
- HSBC is launching a new £15bn fund to help UK SMEs with £10bn of this focussed on regional allocations.
- Scale Up 4 Growth has launched a funding programme for Gloucestershire businesses with grants available to help the region’s SMEs scale and grow. Grants range from £10,000 to £40,000. For more information and to register your interest please visit www.scaleup4growth.co.uk The application deadline is Wednesday the 5th of May 2021.
FREE RAPID TESTS FOR ALL BUSINESSES
The Government has announced that all businesses in England, including those with fewer than 50 employees, are able to sign up to the free coronavirus workplace testing programme. Businesses can register their interest by 31st March to order free lateral flow tests for their employees. Rapid testing detects cases in under 30 minutes, meaning positive cases can isolate immediately, breaking chains of transmission. The Government initiative can be found HERE.
At Harbour Key we have been using these test kits since the start of the year and have found them a great asset, to keep the business operational.
HMRC has launched a new tax avoidance warning campaign with the opening statement “Tax avoidance is when people bend the rules of the tax system to try to pay less than they owe. It also means that the vital public services we all use, like hospitals and schools, don’t get the money they need.” The campaign warns taxpayers against entering into aggressive schemes. The campaign can be found HERE.
HMRC has a number of tools and tactics to deal with tax avoidance schemes and has successfully challenged nearly every scheme they have attacked. At Harbour Key we thought the market for avoidance schemes was effectively dead. However, we still have individuals asking about schemes they have heard about or planning ideas, all of which are either high risk or, in some cases, verging on illegal. As we tell these individuals, if it sounds too good, then it probably is too good to be true and is most unlikely to work meaning that the planned tax saving will not appear but the costs of the scheme and interest and penalties certainly will! In addition to schemes, also beware of bogus scams pretending to be HMRC. The number of reported HMRC related scams hit 33,053 in January, up 201% from December.
Do not forget that time is running out for tax year end planning.
Our tax planning checklist can be found via this link.
COVID-19 BUSINESS UPDATE
As we continue through lockdown #3, we continue with our Business Forward Covid-19 Updates. The most recent can be found HERE.
DATES FOR YOUR DIARY
- 31 March 2021 – Applications for Bounce Back Loans & Coronavirus Business Interruption Loan Scheme close.
- 31 March 2021 – Final date for 2020 self-assessment payments (originally due 31 January) to be paid or payment plan agreed to avoid late payment surcharges.
- 31 March 2021 – Last date to agree a payment plan for VAT deferred between 20th March 2020 and 30th June 2020.
- 6 April 2021 – Recovery Loan fund opens up.
In these difficult times, scammers and fraudsters will continue to try and exploit the coronavirus pandemic as an opportunity for financial crime, so please be vigilant. For example, HMRC will never request your bank details by phone, email or text. There is expected to be an increase in criminal activity as individuals rush to complete house purchases to beat the 30 June stamp duty holiday. Guard your identity, check post, never make any payments to anyone who rings you, confirm who you are making payments to, check details before giving details or transferring money. A fraud protection checklist.
ASK FOR HELP
We know that this is a very difficult time for all businesses, with constant change and some difficult decisions having to be made. Should you wish to speak with us about a specific matter, or just to be a sounding board or for a chat, please do not hesitate to give us a call.
Please do not hesitate to give us a call - 01452 713277