Easing back from lock-down

Boris Johnson made his long-awaited statement on the government’s plans to ease lock-down (7pm, Sunday 10 May 2020). No great surprises and we have included a brief business-related summary in this post.

In his address he said:

And the first step is a change of emphasis that we hope that people will act on this week.

We said that you should work from home if you can, and only go to work if you must.

We now need to stress that anyone who cannot work from home, for instance those in construction or manufacturing, should be actively encouraged to go to work.

And we want it to be safe for you to get to work. So, you should avoid public transport if at all possible – because we must and will maintain social distancing, and capacity will therefore be limited.

So, work from home if you can, but you should go to work if you cannot work from home.

And to ensure you are safe at work we have been working to establish new guidance for employers to make workplaces COVID-secure.

And when you do go to work, if possible do so by car or even better by walking or bicycle. But just as with workplaces, public transport operators will also be following COVID-secure standards.

There are copious instructions for employers, on safeguarding the workplace, and these can be found on the gov.uk website.

On your bike…

Last week the government announced a £2bn package to create a new era for cycling and walking.

As walking and cycling are two of the most effective ways to get from A to B whilst respecting social distancing measures, this announcement is good news.

In the news story published at the time of the announcement, changes to be undertaken are summarised as follows:

Following unprecedented levels of walking and cycling across the UK during the pandemic, the plans will help encourage more people to choose alternatives to public transport when they need to travel, making healthier habits easier and helping make sure the road, bus and rail networks are ready to respond to future increases in demand.

The government will fund and work with local authorities across the country to help make it easier for people to use bikes to get around – including Greater Manchester, which wants to create 150 miles of protected cycle track, and Transport for London, which plans a “bike Tube” network above Underground lines.

Fast-tracked statutory guidance, published today and effective immediately, will tell councils to reallocate road-space for significantly increased numbers of cyclists and pedestrians. In towns and cities, some streets could become bike and bus-only while others remain available for motorists. More side streets could be closed to through traffic, to create low-traffic neighbourhoods and reduce rat-running while maintaining access for vehicles.

Vouchers will be issued for cycle repairs, to encourage people to get their old bikes out of the shed, and plans are being developed for greater provision of bike fixing facilities. Many more will take up the Cycle to Work scheme, which gives employees a discount on a new bike.

The final statement, regarding the Cycle to Work Scheme, could be a relevant option for employers to consider as there are tax benefits for employees.

Chancellor extends Furlough scheme

The Chancellor announced further support for employers (12 May 2020) by extending the Coronavirus Job Retention Scheme (CJRS) until the end of October 2020.

This will be a welcome change for those business owners endeavouring to find a constructive way to manage the present lock-down and other disruptions and emerge from the process with a viable business.

Details announced to CJRS today are:

• Support will continue until the end of October 2020.
• Furloughed workers will continue to receive 80% of their current salary up to the existing £2,500 maximum.
• New flexibility will be introduced from August 2020 with the intention of getting employees back to work. Initially, part-time.
• From the same date, 1 August 2020, employers may be asked to contribute.

Regarding the August changes the Chancellor said:

As we reopen the economy, we need to support people to get back to work. From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.

Detailed information regarding the new flexible approach – part-time working – will be published towards the end of May 2020.

Employers will need to factor these changes into their business plans as we emerge, all-be-it slowly, from lock-down.

Claim now for the Self-Employed grant

HMRC have now updated their instructions regarding the claims process for the Self-Employed Income Support Grant (SEISS).

Originally, the grants were promised – for eligible individuals – for early June 2020.

The good news? You can now make claims from today for payment this month IF you qualify for the SEISS.

This involves checking to see if you are eligible. You will need your Unique Tax Reference number and NIC number to do this. You will then be advised if you are eligible to claim and when you should apply.

We currently have a very unusual set of circumstances and the spread, inevitably, of this virus will mean times when people need to, at the very least, self isolate. We are conscious therefore we need to have in place systems which mean we can, as far as possible, continue to ensure your affairs are looked after.

From 1 April 2016, landlords who acquire new property to let as residential accommodation will be required to pay SDLT at significantly higher rates. The increase is also expected to apply to private householders who buy a second home.

The new rates will be:

*SDLT rates apply to the nominated bandings apart from properties purchased over £40,000 and up to £125,000 which will pay 3% on the total purchase price from 1 April 2016. Published information from the Treasury on these SDLT changes is thin on the ground, but informed opinion would seem to indicate that the additional 3% charge will not apply if you replace your main residence or if you are a significant corporate or fund investor in residential property.

A property purchased for £275,000 that is subject to the new rates will see an increase in SDLT from £3,750 (on property purchased prior to 1 April 2016), to £12,000 if purchased after 1 April 2016.

If you are presently negotiating to buy a new residential property for letting, or a second home, make sure that your advisors complete before the end of March 2016.

If a property is let furnished – with sufficient furniture, furnishings and equipment for normal residential use – landlords can only claim tax relief for the furniture and equipment by way of the WTA. Prior to April 2013, landlords had the option of claiming the cost of replacement furniture instead.

 The WTA is calculated as 10% of the gross rents less any tenant’s costs (e.g. water rates and council tax) met by the landlord.

WTA does not cover repairs, which continue to be tax deductible. The question is then raised can replacement of an item be counted as a repair? In this respect, landlords that let furnished property need to distinguish between:

1. Replacement of items that are integral to the building, and
2. Replacement of items that are not integral to the building.

 Needless to say there are grey areas!

 Replacement of items that are integral to the building

 Fixtures integral to the building are those that are not normally removed by either tenant or owner if the property is vacated or sold. Examples include:

• Baths
• Washbasins
• Toilets
• Immersion heaters
• Fitted kitchens and fitted white goods.

This list is not intended to be complete but gives an idea of the assets that are integral to the building and fall outside the wear and tear allowance. As these items are integral to the building, the cost of replacing these items is normally an allowable expense as a repair to the building.

 Replacement of items that are not integral to the building.

 Expenditure of this type will be covered by the WTA. Examples given on HMRC’s website in this category include:

• movable furniture or furnishings, such as beds or suites,
• televisions,
• fridges and freezers,
• carpets and floor-coverings,
• curtains,
• linen,
• crockery or cutlery,
• beds and other furniture

Unfortunately, these examples are not definitive: is a carpet glued to the floor a permanent fixture, or not part of the integral features?

As an accountant I like to think that I understand the concepts of business, finance and economics but the concept of Capitalism is steadily, for me, starting to become a mystery. The basic concept of Capitalism is that everyone should be able to gain rewards for their own labours and in a free market be able essentially buy and sell anything they wish in the hope of making a profit. However, in those nations which claim to be based on the free capitalist principle laws have been created which essentially control and bring some level of socialism (i.e. State provision to everybody regardless of means) to moderate the extremes. To do this Nations are run as businesses in their own rights essentially selling public services in return for payment. The difference between the National model and the Capitalist model is that the sale price of those services is driven to a large degree by ability to pay. Ergo the National income of taxes is geared to levels of income and spending.

The socialist side of the National business comes about because the Government decides what services it will provide and the customer (in theory the tax payer/resident/citizen) has to pay regardless of whether they want/use the service. We currently are seeing legislation to try in some way to restrict the access to public service to those who have right to them; but that is not my main concern.

As I said at the beginning of this thought flow Nations are essentially run as businesses and have to manage their finances in the same way as any business, and for that case any individual too. This means the management of cashflow and of the balance sheet.  We are aware that the UK has for the last generation been running on a deficit each year and Wilkins Micawber‘s saying about overspending and misery comes to mind. After all the current Government is preaching that we need to go through a difficult period to come out the other side.

The problem I have with the principle of Government finances is there removal from the reality of personal and business finance. We are seeing the reckless lending of the banks to individuals and businesses of the past being reeled in and even the Government with its assistance for home buyers emphasising not only the ability to service but the ability to repay debt. The USA now has a problem that it again needs to increase its allowable debt ceiling and this highlights the issue I have with Government finances.

Politicians seem to consider it a massive success if they can even match their income and expenditure but never in their wildest dreams do they consider repayment. They look at debt as a percentage of National GDP and therefore so long as GDP goes up they seem to be happy to borrow more – this is exactly what has lead in some degree to our individual debt problems in the UK. The value of our house went up so we borrowed more money against that value and then spent it on day to day expenses.

A time must come when Nations, UK included, need to repay their debt not just service it and the only way to do that is to spend less than you earn. Many of the large corporations are sitting on large cash reserves I look forward to the day when politicians aim for the Country to do the same.

I am writing this on the morning that we are told the Eurozone is probably out of recession and having listened to radio 4 on the way to work being told about the misuse of statistics. The example I enjoyed, and forgive me if my percentage is not quite right, was that in a recently survey 73% of the British public cannot speak a foreign language well. But this means that 27% can speak a foreign language well – that I find hard to believe but, of course, with our multicultural make up if that survey was done in areas with a high migrant population it could well be true because I am sure we are all aware of areas where the prevalent language is not English.

However, this made me consider how we get misled by statistics and information. I am neither saying that the information is wrong nor the statistics incorrect but that often the way they are presented can often give us a false impression.  The problem is that then flows into Government and many in Public office make decisions based upon this sort of information.  Much is made of the plight of small business and more importantly because it is believed that small businesses are the businesses which will bring UK out of recession the need to make the commercial environment better for them. The Government harks on about the barriers to growth for small business such as red tape, lack of finance and lack of skilled staff but as someone advising many small businesses I know the majority do not want to grow. The reason is that they are lifestyle businesses which are there to produce family income and the owners don’t want to grow the business past their own individual needs and capabilities. But where does Government get its information. Well often it is from surveys and statistics produced for them by others.

Only last week I received a copy of an excellent glossy report looking at the problems facing small business and how they might be addressed. I was looking at some of the conclusions and was thinking that it had elements of truth within it but it did not overall tally with the main points that I heard from my clients. It was then that I came to the page explaining how they had found their information – they had surveyed ‘small companies’ which had turnovers (again forgive me if I’m not quite right but it will give you the feel) of between £50 million and £250 million and employing less than 500 people.  My practices acts for well in excess of 500 small businesses and less than 1% would fall into this bracket!

It is when you start realising how removed from reality the information reaching our decision makers might be you can understand, though possibly not forgive, some of the misconceptions that create policy.  We see this in so many small ways not least being the issue of pay and remuneration. The BBC has been called to task over severance packages being more than contractually entitled but even the contractual entitlements seem to the ‘normal’ business to be out of the ordinary. This may be because the media and statistics are all about the excesses seen in big businesses and not the reality of small everyday business. I always wonder why public severance deals are not just statutory entitlements as after all it was Government that set those statutory entitlements. Do we presume that Public employees will leave their superannuation pension schemes and be enrolled into the auto enrolment schemes of insurance backed pensions which ordinary employees are being forced to take out. This, at a time, when the returns on Financial Investments are being shown to be less than just leaving money in a building society and paying tax on it; because of all the charges that are levied by the financial intermediaries.

At the moment political capital is being traded over zero hour contracts – I am certainly not going to say what my view of them is – but will make the observation that of my clients who use them almost all are in businesses being paid controlled monies by Government – in particular care providers.  Providers of care in the community tell us all the time that nothing meaningful can be delivered in under and hour but it is the QCC and Social Services who still insist of 15 minute delivery.

I look forward to the day when some PLC director on his large basic salary, bonus scheme, share options and benefits is asked to give a personal guarantee supported by a charge on his house for the money the bank is about to lend to the company.

We so often hear that politicians do not have a connection with the grass roots economy and the real world – when you look at the information they receive maybe we can understand why but that does not mean we should condone it.

HMRC closed their consultation on the proposed changes to the taxation of partnerships and LLPs on 9th August.

Any subsequent changes will be introduced in the Finance Bill 2014, and be effective from 6 April 2014. Two possible changes are worth highlighting.

1. Disguised employment

HMRC aim to create a new concept for LLPs, a salaried member. They believe that the present presumption, that all members of an LLP are self-employed, has been abused. In effect, salaried employees have been elevated to member status and their previous employed status changed to self-employed status. In certain circumstances this can lead to significant National Insurance savings.

From April next year it is likely that this type of arrangement will be reversed.

2. Allocation of profits

The second area that HMRC want to tackle is the artificial allocation of profit and losses by partnerships with corporate members and schemes involving the transfer of profits between members with different tax status.

Many partnerships allocate profits to corporate partners in order to pay tax at the lower corporation tax rates. In this way the partnership retains more of its working capital.

Partnerships likely to be affected should start to reconsider their planning options, although it would be sensible to delay implementation of changes until the scope of the new legislation is confirmed.

Online betting companies that have based their operations in offshore tax jurisdictions, to avoid Britain's gambling taxes, will be hit with a new levy to be introduced from December 2014. It is estimated that the new tax may raise £300m for the UK taxpayer.

The Government is to impose a 15% tax on operators in the £2bn remote gambling market. In a somewhat controversial approach, the UK will tax gambling revenues based on where the customer is located, rather than where the business is based.

Economic Secretary to the Treasury, Sajid Javid, said:

"It is unacceptable that gambling companies can avoid UK taxes by moving offshore, and the Government is taking decisive action to ensure this can no longer happen. These reforms will ensure that remote gambling operators who have UK customers make a fair contribution to the public finances."

The shift will affect some of the industry's largest players including: Ladbrokes, William Hill and Betfair, all of which have online operations based in Gibraltar, where taxes are levied at 1% and capped at £425,000.

If introduced, the 15% levy would mean that offshore operators are taxed at the same level as domestic internet betting companies.
 

The Office for Tax Simplification has published a new list of tax issues for review. They include:

• Increasing the present £8,500 limit, below which employees (not directors) do not suffer benefit in kind charges. This limit was introduced in 1979 and was apparently based on the amount at which a married man started to pay higher rate tax. An inflation adjusted figure now would be close to £40,000. It’s unlikely HMRC would seek to increase the present limit to this level!

• Payrolling certain benefits so that tax is paid as the benefits are provided rather than at the end of the tax year.

• Changes to the cycle to work scheme.

There are also a number of suggestions to smooth the differences between the tax and National Insurance treatment of certain benefits.
OTS director John Whiting says:

“It is clear the current system for reporting expenses and benefits is simply not working well for employers or employees and also, in many cases, HMRC.

Time and again, through our workshops and in submissions, people have told us the rules around travel and subsistence, accommodation or HMRC admin, are causing them problems and costing them time.”

The Treasury will now have to consider whether the OTS proposals are worthy of serious consideration and new legislation.
 

Ten new tax defaulters have been added to HMRC’s rogues’ gallery. This follows the publication of twenty tax offenders’ details last year. So far only one of the original twenty has been caught.

HMRC has statutory authority to “name and shame” taxpayers who they consider to be deliberate tax defaulters. Generally speaking these are persons who have received penalties for:

• deliberate errors in their tax returns or

• deliberately failing to comply with their tax obligations.

HMRC may publish information about a deliberate tax defaulter where:

• HMRC have carried out an investigation and the person has been charged one or more penalties for deliberate defaults, and

• those penalties involve tax of more than £25,000.

However, their information will not be published if the person earns the maximum reduction of the penalties by fully disclosing details of the defaults.
HMRC will publish sufficient information to identify the deliberate tax defaulter, the penalties imposed for their deliberate defaults and the amount of tax on which those penalties are based.

HMRC publish this information once these penalties are final. A penalty becomes final on

• the day after the end of the appeal period if the person does not make an appeal, or

• the date when an appeal is finally determined, or

• the date when a contract settlement is made.

The law requires that HMRC do not publish any information about the person for more than 12 months from the date HMRC first publish it.