All posts by Lewis Hughes

Less than one month left to apply to SME Brexit Support Fund, businesses reminded

There is less than one month remaining to claim grant funding through the SME Brexit Support Fund, businesses have been reminded.

The initiative – which helps new and established businesses adapt to post-Brexit importing and exporting processes – will close to new applications on 30 June 2021.

If you need help trading overseas, here’s what you need to know.

What is the SME Brexit Support Fund?

Launched in response to Brexit, the grant funding scheme enables traders to access specialist training to help them adapt to new customs and tax processes, such as the rules of origin and VAT.

According to recent research, the vast majority of small businesses who trade overseas only do so with the EU, meaning many are unfamiliar with the complex international trading rules introduced at the end of the transition period.

How much can I get?

Traders who currently trade with the EU, or plan to do so in the future, can access up to £2,000 in grant funding. The cash can be used to pay for specialist training and professional advice – including accountant’s fees.

Who is eligible for support?

Eligible businesses will have been established in the UK for at least 12 months before applying, or currently hold Authorised Economic Operator status, and:

  • not have previously failed to meet its tax or customs obligations
  • have no more than 500 employees
  • have no more than £100 million turnover; and
  • import or export goods between Great Britain and the EU, or move goods between Great Britain and Northern Ireland.

The business should also:

  • complete (or intend to complete) import or export declarations internally for its own goods

OR

  • use someone else to complete import or export declarations but requires additional capability internally to effectively import or export (such as advice on rules of origin or advice on dealing with a supply chain).

When is the deadline?

The final deadline for applications is 30 June 2021, but the Institute of Chartered Accountants in England and Wales (ICAEW) has urged businesses to apply as soon as possible. This is because there is a limited amount of grant funding available.

How do I apply?

For more information about the application process, please click here.

Get expert advice today

For help and advice with related matters, please get in touch with our expert business advisory team today.


Just one month left to apply to EU Settlement Scheme: what employers need to know

EU workers have just one month left to apply to the EU Settlement Scheme to secure the right to live and work in the UK.

If you employ EU nationals, here’s what you need to know.

What is the EU Settlement Scheme?

European Union, European Economic Area (EEA), and Swiss citizens who lived and/or worked in the UK before the end of the transition period will be offered permanent residence, providing they meet the relevant criteria to stay.

The application process is free, but applicants must demonstrate that they are in the UK as a worker, student, or self-sufficient person. They are also required to provide a form of official ID (such as a passport or driver’s licence) and their National Insurance (NI) number, if they have one.

Workers who have lived in the UK for at least five years can apply for “settled status”, while those who have lived in the UK for less than five years can only apply for “pre-settled status”.

When is the deadline?

The scheme will close to new applications on 30 June 2021. If EU workers do not apply by that time, they may be forced to return to their country of nationality.

What do I need to do as an employer?

Employers should ensure that eligible workers are aware of the scheme and the consequences of not applying in time. You should encourage your employees to apply as soon as possible to avoid uncertainty and offer assistance where possible.

After 30 June 2021, a new digital system will be launched to help employers check proof of settled status. If you continue to employ a worker who has not received settled status, your business may be fined.

Where can I get more information?

To learn more about the EU Settlement Scheme, please click here.

Get expert advice today

For help and advice with related matters, please get in touch with our expert team today.


Make sure to include SEISS grants on your next tax returns

People who enrolled in the Self-Employment Income Support Scheme (SEISS) have been reminded that they must include income from their grants on tax returns to HM Revenue & Customs (HMRC), as it is subject to Income Tax and National Insurance.

They should liaise with their accountants so an accurate return can be sent to HMRC, covering the various periods of the scheme to avoid any penalties.

This scheme was set up by the Government to provide support during the Coronavirus pandemic for those who are self-employed, either as a sole trader or a partner in a partnership.

It was originally announced on 26 March 2020 and provided an initial grant for self-employed individuals whose businesses were adversely affected on or before 13 July 2020.

A second grant was then made available for individuals who were ‘adversely affected’ on or after 14 July 2020.

Subsequently, on 1 July 2020, the scheme was extended to provide payments to certain self-employed individuals (or partners in partnerships) who did not originally qualify.

On 24 September 2020, a further extension to the SEISS scheme was announced under which a third and fourth grant would be provided.

The third grant notionally covered the three months from 1 November 2020 to 29 January 2021.

On 3 March 2021, it was announced that the fourth grant would take account of 2019/20 trading profits on tax returns submitted by midnight at the end of 2 March 2021.

A fifth grant was also announced when Chancellor Rishi Sunak presented his 2021 Budget on 3 March, he announced a further extension which will now run until the end of September this year. It was welcome news for many self-employed people throughout the UK.

The fifth and final SEISS grant will cover lost earnings from May onwards, and self-employed individuals and partners can claim it from late July 2021 (the exact date is to be confirmed).

It covers 80 per cent of average self-employed profits if your turnover has fallen by more than 30 per cent; those who haven’t been as badly affected can still get a 30 per cent SEISS grant.

You don’t need to repay a SEISS grant – it is not a loan. However, SEISS grant awards are subject to Income Tax and Class 4 National Insurance contributions and your accountant can advise on this.

The SEISS grants are taxable in the tax year in which they are received. So, the first three SEISS grants are taxable in the 2020/21 tax year and they should be reported in full in your 2020/21 Self-Assessment tax return.

If you’re self-employed and your sole trader business receives a SEISS grant in the fourth or fifth rounds, they’re taxable in the 2021/22 tax year and should be reported on your 2021/22 Self-Assessment return.

To make it easier for self-employed people to enter money received from SEISS grants, HMRC will include a box on the 2020/21 and 2021/22 Self-Assessment tax return forms.

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


Beware of the HMRC scammers, but ignoring calls can be costly

There are many problems associated with the pandemic, apart from the obvious one of the illness caused by the virus itself.

Conmen and scammers have taken advantage of the situation, bombarding people and businesses with bogus claims about tax owed in the hope that just a few respond.

For businesses, the accountant is the first and last line of defence and can save you thousands by preventing you from getting on the wrong side of the taxman.

With people on furlough or working from home, communications have become fractured with much reliance on phone and digital communications. So, it’s vitally important to keep in close touch with your accountant.

We have all had those dodgy calls and voicemails, with the curious numbers, not to mention suspicious emails and texts.

Many will have received a scam/phishing email, supposedly from HMRC, only to discover it’s a fake, however, be warned that not all messages are bogus – as some taxpayers are finding out at their own cost.

This is where your accountant can help with their expert knowledge of tax affairs and the ability to discover whether communications from HMRC are legitimate.

Take the case of someone who contacted a national newspaper after he mistook HMRC for a scammer.

The person was so wary of being tricked, he ignored the messages saying he owed £5,000 and now faces a big tax bill.

Determined to avoid falling victim to email and phone scams purporting to be from HMRC, the person involved ignored the genuine emails amongst the scam phone calls and messages.

After completing his tax return last May, he ignored automated reminders by email telling him to pay the balance due.

In fact, the scammers’ messages were so realistic, he couldn’t tell the difference and had to pay £300 in late payment penalties and interest.

With this case in mind, a quick check with your accountant, who will have a handle on your tax affairs, could save you financial grief in the long run.


Carry back scheme brings welcome relief for business

For many businesses, the pandemic has turned the world on its head, with many who might have expected to be profitable experiencing a loss.

Sometimes losses happen simply because the business is very new, or because costs have unexpectedly risen.

However, COVID-19 has thrown another dimension into the mix, seeing thousands of companies fail to turn a profit due to closures and restrictions placed on their business.

Relief is now available through an extension to the carry back scheme, which the Government announced as part of the Budget earlier this year.

For accounting periods ending between 1 April 2020 and 31 March 2022, this will carry back relief be extended to three years, with losses required to be set against profits of most recent years first before carry back to earlier years.

Trading losses occur if the expenses and costs of a business are more than its income for a particular accounting period. Losses are calculated in the same way that you work out your yearly profits.

Under general rules, businesses can carry back trading losses from one year and put them against profits in the previous year. This reduces the amount of profit for the previous year – less profit generally means a lower Corporation Tax bill.

But because the business has already paid its tax bill for the previous year, it can then claim a reimbursement of the Corporation Tax or Income Tax that it paid in the previous year.

Here is an illustrative example of carry back losses:

  • The business made a loss of £7,000 in the accounting period 1 January 2018 to 31 December 2018, and a profit of £19,000 in the previous 12 months.
  • Under the carry back rules, the company’s £7,000 loss can be offset against the profits for the previous accounting year.
  • It reduces the previous year’s profit from £19,000 to £12,000. Lower profit means less tax, but because the business has already paid tax on the full £19,000, the company gets a rebate for the difference.

The Chancellor announced a temporary extension to the carry back period from one to three years for trade losses of up to £2 million (adjusted for groups of companies), for two years.

This measure will provide a welcome cashflow benefit to businesses, both incorporated and unincorporated, who have suffered increased trading losses as a result of the COVID-19 outbreak by providing extended relief for those losses, thereby generating repayments of tax paid for two additional years.

The relief is capped at £2 million of unused losses per year. Groups with companies that have the capacity to carry back losses in excess of a minimum of £200,000 will be required to apportion the £2 million cap.

For groups of companies the maximum cashflow benefit is £760,000 (£2 million at 19 per cent for two years) so claiming the extended relief is likely to be a worthwhile exercise for many.

Details can be found in HMRC’s policy paper.


New recommendations in sweeping CGT review

The second part of a sweeping review of Capital Gains Tax (CGT) has been published with 14 key recommendations.

In July 2020, the Chancellor asked the Office of Tax Simplification (OTS) to carry out a review, to “identify opportunities relating to administrative and technical issues as well as areas where the present rules can distort behaviour or do not meet their policy intent”.

Given the wide scope of the review, the OTS has produced two reports. The first report ‘Simplifying by Design’ was published in November 2020 and considered the policy design and principles underpinning the tax.

This second report covers a wide range of areas – from moving home to getting divorced, running or investing in a business and issues affecting land transactions.

It also highlights a broader concern about the low level of public awareness of the tax and the extent to which the administrative systems could do much more to support taxpayers.

The report makes 14 recommendations, including in the following areas.

Integrating Capital Gains Tax into the Single Customer Account

There are three main ways of reporting a capital gain – through Self-Assessment, the UK Property tax return for disposals of UK residential property and the ‘real time’ Capital Gains Tax service.

The OTS recommends that HM Revenue & Customs (HMRC) integrate these into the new Single Customer Account, making it a central hub for Capital Gains Tax data, to ease the administrative burden for the 500,000 or so people who file returns of disposals in a typical year.

UK Property tax return

Around 150,000 individuals make a disposal of UK residential property each year, 85,000 of whom have a taxable gain and need to file a UK Property tax return within 30 days.

Even with adequate awareness and preparation, the OTS considers that 30 days is a challenging deadline, even if this return were integrated into the Single Customer Account.

The OTS recommends that the Government consider extending the reporting and payment deadline for the UK Property tax return to 60 days, or mandate estate agents or conveyancers to distribute HMRC provided information to clients about these requirements.

Private Residence Relief nominations

Private Residence Relief takes main homes outside the scope of Capital Gains Tax. Where taxpayers have more than one eligible home, they can choose which home they wish to benefit from the relief by making a nomination to HMRC.

At present, there is insufficient awareness of the nomination procedure among the 1.4 million people who own second homes. It is also peculiar that nominations are needed even where no capital gain can arise on a rented second home.

The OTS recommends that the Government review the practical operation of Private Residence Relief nominations, raise awareness of how the rules operate, and in time enable nominations to be captured through the Single Customer Account.

Divorce and Separation

Married couples or civil partners can transfer assets between them without triggering an immediate Capital Gains Tax charge.

Divorcing or separating couples continue to benefit from this rule in the tax year in which they separate.

However, after that, transfers take place at market value in accordance with the normal Capital Gains Tax rules.

Treatment of deferred proceeds when a business is sold

Some of these more complex types of business and land sales create practical tax issues which can result in tax needing to be paid upfront before any cash has been received, distorting commercial decision-making, and which are difficult for taxpayers to understand.

The OTS recommends that the Government consider whether Capital Gains Tax should be paid at the time the cash is received in situations where proceeds are deferred, such as on the sale of a business or land, while preserving eligibility to existing reliefs.

At the moment, the recommendations above are just proposals for the Government to consider when amending or creating tax legislation. However, if any changes occur to Capital Gains Tax legislation, we will be sure to update you.

Office Tax Simplification recommends new Capital Gains Tax reforms


Tax saving strategies for landlords

Putting together an efficient tax strategy should be a no-brainer for buy-to-let landlords seeking to maximise their income.

It may not be quite as glamorous as hunting down the perfect property, but when it comes to saving cash, it can make a huge difference to your bottom line.

There are several ways you can reduce your tax bill, so you could:

Set up a limited company: This can be a great way to reduce your tax bill as a landlord in some circumstances. Not only will you be able to buy a property through the company, which will allow you to offset costs against profits, but you will also be able to employ yourself or someone else to manage the properties held within your portfolio.

On top of this, limited companies continue to be exempt from the rules change to Mortgage Interest Relief, meaning that they can continue to reduce their tax bill.

Extend to reduce: Putting money into your existing properties will help you avoid hefty stamp duty charges and should see the value of your portfolio rise at the same time.

Use all available tax bands: Another way to potentially cut your tax bill as a landlord is to transfer your assets to your spouse. Capital Gains Tax is generally not paid when assets are transferred between spouses, so you could effectively make use of their lower tax bands.

There is also the possibility that you will be able to pay less tax on your rental income too if their tax bracket is lower than yours. If the property in question doesn’t have a mortgage associated with it and you are not taking any financial gain from the transfer, you will not have to pay any stamp duty either.

Get the most from your property: Having a more accurate assessment of how much your rental property is worth will strengthen your hand against lenders and get them to re-evaluate your loan to value.

Should your rental property price increase, your loan to value will go down and that could mean more choice and a better mortgage interest rate for your buy-to-let business.

Claim your legitimate expenses: Claim everything you are entitled to if you want to become a tax-efficient landlord.

Keep every receipt and speak to your tax advisor or accountant about exactly what you can and cannot claim for – you will likely be surprised by how quickly these landlord expenses mount up.

Consider short-term lets: If you are in-between tenants, there are ways in which you can lower your tax bill.

Sometimes it can be worth considering the option of taking on a short-term let during a void period to get some money coming in.

Choose the right time to sell: Too often, landlords lose money when they sell a rental property simply because they do not take full advantage of the available tax relief on offer to them.

This is especially true of landlords with multiple properties, as they can reap the benefits of the zero per cent Capital Gains Tax band every year should they decide to sell one of their homes. Currently, the tax-free figure stands at £12,300.

Working out your rental income >>