|This is a longer budget update then usual and we’ve put some general notes about cashflow etc as several clients have asked us about this and the recent Government updates. Please also call/email if you’re unsure of anything or need some advice.|
Also please note that we’ve only tried to put the relevant budget changes here, there are many more in the official Budget documentation: https://www.gov.uk/government/publications/budget-2020-documents/budget-2020
1) Coronavirus & recent Government announcements
Business Interruption loans
The Government announced approximately £330 billion of loans/grants for businesses. The details are not confirmed yet, however, smaller businesses would need to apply for a loan from a lender joined upto the scheme. The way it works is that the lender would review your business loan proposal in the normal way. But if “the computer says no”, then they can re-try the assessment with the Government guaranteeing 80% of the loan. So if you’re not able to pay the lender will get repaid by the Government.
But your business will still be liable for the full debt.
You can see more here:
Also, the following are not on the list of partners but have been quite helpful in giving loans to our clients in the past:
-Capital On Tap
Your normal business bank may also be able to provide an overdraft or a loan (and many bank are part of the above scheme).
If you call HMRC you may be able to defer payments or agree a payment plan with them.
If you don’t call them and then don’t pay, HMRC could charge penalties/surcharges for late payment as well daily interest. They will also chase you and usually after 1-2 pass debts on to debt collectors.
Coronavirus helpline: 0800 015 9559
Payment Support Service: 0300 200 3835
Reminder of taxes:
PAYE/NI payable every month by 22nd
VAT: payable 1 month and 7 days after quarter end
Corp Tax: payable 9 months after year end
Self assessment: 2 instalments a year, 31 July and 31 January
Historically not many of our clients have used the sickness pay scheme, but with the potential for long absences, you may wish to consider how you deal with sick staff:
– If you have the money available, you could pay them the usual wage as normal
– You could use up their annual leave (with employee’s permission)
– Pay statutory sickness pay
Statutory sickness pay
Staff are paid £94.25 per week for upto 28 weeks. It usually starts from the 4th consecutive day of sickness (including non-working days). So days 1-3 are unpaid.
But if staff are self isolating or have symptoms of the Coronavirus then SSP can start from day 1.
SSP cannot usually be reclaimed, but you can reclaim upto 2 weeks per employee SSP due to Coronavirus from HMRC.
You can ask staff for a sick note after 7 days illness, but cannot delay SSP if they don’t give it.
Please let us know if you wish to pay SSP as we’ll need to update the payroll for this.
There are also complex rules about laying off staff. We would recommend that you take legal advice before firing any staff or making them redundant.
We would advise you to make a list of outgoing payments you need to make (both in the business and your personal expenses) and calculate your budgeted expenditure for the next 6 months.
Then see if any of these can be deferred or cut back.
If you contact your mortgage lender you may be able to defer payments without impacting your credit score if you are affected by the coronavirus.
Its possible that some landlords may be willing to offer a payment holiday. For example, we were looking at new offices and landlords are currently offering 3-9 months rent free period. They may say no, but it might be worth asking them. We’re not sure about any Government assistance for residential tenants yet.
Keep a close eye on debts that you are owed. But you may wish to strike a balance between agreeing extended payment terms and formally/aggressively chasing debts depending on the relationship with your customers.
You may also wish to defer large expenditure on equipment, cars or home/office improvements etc if they’re not urgent due to these uncertain times.
Insolvency / Administration
The business impact of the Coronavirus is unprecedented in living memory for most of us. Even in the 1991 recession when interest rates were sky high, businesses were still able to trade. But now many businesses cannot even trade and there will be a knock on effect that could potentially affect everyone else in time.
We believe that most of our clients should be able to survive but wanted to mention that there are strict rules about continuing to trade and to order goods and services if you know that the business is not viable and that you won’t be able to pay creditors. If you are worried about this, you may wish to speak with an Insolvency practioner.
In a worst case scenario, if directors are found guilty of wrongful trading, they can be held personally liable for the company’s debts from the point they knew the company was insolvent.
Business rates relief
Unfortunately this won’t apply to the majority of our clients at the moment as offices still have to pay rates. However, retail, hospitality and leisure businesses will have a rates holiday for 1 year from April 2020.
Grants for small businesses
£10,000 grant (was previously £3,000) – This is only for businesses who qualify for Small Business Rates Relief (rateable value is under £15,000 ) and don’t pay much business rates. It will be paid directly by your local council in April if you qualify. We doubt that businesses who work from home will be able to claim it.
£25,000 grant – this will also be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
2) Updates to taxes
IR35: the reforms that were due to take place from April 2020 have now been delayed for 1 year
Corporation tax will now remain at 19% from April 2020. It was supposed to drop down to 17% but this has been cancelled
Employer’s Allowance has been increased to £4,000 (it was £3,000 previously) to save on employer’s NIC.
Entrepreneur’s relief reduced to £1m of lifetime gains.
Working from home: allowance will increase from £4/week to £6/week
Currently the annual allowance of £40,000 is reduced if gross pay + pensions contributions (e’ee + e’er) exceeds £150,000. But from 2020-21, the threshold will increase to £240,000.
The highest earners who earn more than £300,000 (gross pay + pensions) will receive an allowance of £4,000 only (currently its £10,000)
There will be more funding for R&D and mathematics research. This is likely to be delivered through grants.
You can check on the funding available through Innovate UK (used to be called Technology Strategy Board): https://apply-for-innovation-funding.service.gov.uk/competition/search
R&D tax credits
The refund rate is unchanged at 14.5%.
Previously we mentioned that the SME scheme which allows for cash refunds would be restricted to the amount of PAYE paid. This has now been delayed 1 April 2021.
The government will introduce a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021.
Also we wanted to remind you that from 1 April 2020 mortgage interest tax deductions will be restricted to basic rate at 20%. The last few years the higher rate relief has been gradually decreasing and from now on there will only be relief at the basic rate.
The rules are quite complicated but if you’re thinking of buying or leasing a company soon please let us know the make/model you’re considering and we can check the tax situation. There are some generous tax reliefs if you buy or lease brand new cars, especially if they are very efficient/green.
Zero rate of VAT to e-publications (ebooks etc) from 1 December 2020
VAT Postponed Accounting – From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including from the EU
VAT exemption for fund managers: the exemption for special investment funds has been extended to pension funds