With children returning to school we are starting to see some level of normality, traffic levels are increasing, public transport is filling up (at least out of the cities), employees returning to workspaces. Nearly all the team are back in the Covid-safe HK office, Per earlier updates, we started the process of returning to the office from mid-June, using a phased return to change the office and working practices and enable us to work safely.
For the month of September we are not planning to issue our Business Forward monthly update, the most recent issue being at the end July which can be found HERE.
August, as a holiday month, is always a quiet month for Government news and releases (other than the press stories on potential tax rises- see below), which even in this strange year we recall it was the same last year. If you have not seen the July edition, we recommend you take a look as it contains a number of changes/new announcements by Government pre-holiday season relating to the Covid-19 pandemic Government support packages.
There are a few key points in respect of the Government support packages and measures to get the economy moving which have been released in early September:
Key points detailed below:
CBILS closes at the end of September
Unless there are further Government announcements, CBILS will close to new applicants on 30 September 2020. Applications received after this date will not be eligible for CBILS funding. Lenders have until 30 November 2020 to process applications that are with them by the 30 September 2020 deadline. A rush of applications is expected, so if you are intending to apply, you need to submit your application asap. Currently there is no replacement for the CBILS, and it is understood that the EFG (the Government guarantee backed loan pre-Covid-19) is not going to be restarted. Harbour Key have been involved in feedback and consultation with the British Business Bank and understand that a decision is to be made on what if anything will replace CBILS.
Bounce Back Loans
Applications, for the maximum loan (£50,000), at the moment is due to close on 4 November 2020.
Job Retention Bonus
Further information on the Government’s one-off bonus 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, have been released and can be found HERE.
This is the Treasury measure to protect and support young adults in the challenging, post-lockdown job market, by helping them into work and thus dampening the shockwaves of the pandemic felt by future generations.
The main premise of the scheme is that the Government will essentially reward businesses that employ young adults, by paying 100% of their salaries (at the national minimum wage) for 25 hours of work per week over a six month-long work placement. Further details can be found below.
Although the Budget is not expected until November, with no date confirmed, the debate, reviews and speculation has commenced on tax increases required to cover the cost of the Government’s Covid-19 support measures. A number of newspapers printed articles over August bank holiday weekend speculating on tax increases suggesting The Treasury are considering ways to raise £30 billion.
In addition, The Treasury Committee held the first oral evidence session of its "Tax after Coronavirus" inquiry on 1st September, calling economists and leaders of business representative organisations to give evidence. Further sessions will take place over the month.
We are not going to get into the political debate whether tax increases should take place. Questions being considered are: is it too early with a fragile recovering economy, should we wait or is now the time to do a root and branch review of UK taxation, etc.? The speculation will continue, as The Treasury review continues (we highlighted in our August newsletter that a review of capital gains tax has been requested) with it being reported that the Chancellor has already had meetings with Conservative MPs to advise that there will be tax rises, but not a “horror show of tax rises with no end in sight." We have summarised in our main article, "Tax changes on the cards?", what is being reported as being the areas under review. We have summarised the recent Budget changes to capital gains tax in the article along with some planning ideas.
In pre-empting any tax rate increases and/or the abolition of any tax reliefs, action should be taken now, but this could be difficult in the tough economic climate. For example, if you are concerned that higher rate pension tax relief is going to be abolished, a contribution should be made now if you or your company can afford it. As we believe there will be some changes to capital gains tax, if possible complete the transaction asap to try and capture the current low rates. However, we have to flag that The Treasury could introduce as part of any changes anti-forestalling measures (backdating) that cancel the benefit. Caution should be taken where tax planning is being taken purely for the purpose of capturing a tax rate, which can result in a dry tax charge, i.e. no funds to pay the tax, when it becomes due. For example, many are concerned that the £1m business asset disposal relief (formerly entrepreneurs’ relief - see main article) will be abolished. It may be possible to protect this relief now but in January 2022 funds will be required to pay the tax liability and if there are no plans to sell the business or cannot sell it in time, unless there are personal funds available, cash will have to be extracted from the Company which will incur income tax charges.
Should you wish to discuss your position and the possible risk of tax increases, please do not hesitate to contact us.
HMRC investigation activityWe reported in our August newsletter that HMRC will be under pressure to increase the tax take and close the tax gap, using their artificial intelligence software, known as Connect (more details can be found here), Statistics released in August support our view:
- HMRC is investigating 23 of Britain’s largest companies for tax evasion. The businesses, which each have a turnover of at least £200m or assets worth £2bn, were referred to the HMRC tax evasion referral team. In addition, HMRC have stepped up its investigations into wealthy individuals it believes could be hiding funds offshore;
- Tax evasion informer pay-outs reached £473k for the 12 months to April 2020, up from £290k in the previous 12-month period. Separate figures show that there has been a 10% increase in the number of whistleblowing reports about potential tax evasion, with HMRC receiving 73,000 tip offs in the year to March 31 compared to 66,000 in the previous year. One of the reasons for the increase is tougher anti-money laundering rules for accountants and other advisers to report all possible cases where there is a suspicion of tax evasion (note it only has to be a suspicion);
HMRC is investigating hundreds of football players over the use of image rights to avoid paying tax, an increase on earlier years with the taxman concerned that “lesser-known” players are avoiding tax by getting paid huge sums for image rights that are overpriced. Football agents are also being probed over their financial arrangements as part of a wider clampdown.
This month Emily, our trainee accountant, will be taking part in a Charity event with British Red Cross; Miles for refugees. Completing a total of 300 miles throughout September. Emily will be walking, cycling and using various other methods of movement, including completing the Cheltenham 3 Peaks Challenge and climbing Pen Y Fan.
Dates for your diary
- 11 September 2020, Jobs, Skills and Apprenticeships 'Lift Off 2020' event at Gloucester Rugby Club.
1 October 2020, Corporation tax due for those companies with a 31 December year-end. (If you cannot pay or will have difficulty in paying due to Covid-19, please contact HMRC to seek a payment plan).
As ever, matters are still developing and we will endeavour to keep you up to date, flag to you opportunities and signpost to the key details as best as we can via our updates. A summary of the Government’s support schemes can be found at our website, including a list of non-Government funding opportunities, which we update regularly and can be found HERE.
We know that this is a very difficult time for all businesses and some difficult decisions are having to be made. We have spoken to many of you and for those we have not, we would like you to know that we are here ready to help if you need us to provide advice, deal with queries, or just be a business sounding board.
It's vital that everyone follows the guidelines & remember: