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Covid-19 – Emergency measures announced

In the last few days, the Government has made major announcements about help for small businesses and individuals affected by coronavirus. Below is a summary of the significant points, although details are awaited as to how some of these schemes may be accessed.

The following measures were announced in the Budget and have not (to date) been updated.

    • Statutory Sick Pay (SSP) to be paid from the first day of absence, not the fourth, where people have the virus or have to self-isolate, or care for such people.
    • Support through Universal Credit and Employment and Support Allowance for self-employed people and others not entitled to SSP.
    • Full funding of the cost of two weeks’ SSP for small and medium-sized employers whose workers have claimed SSP as a result of coronavirus.
    • Businesses and self-employed individuals in financial distress will be able to negotiate ‘time to pay’ arrangements with HMRC without incurring late payment penalties.

At a press conference on Tuesday 17 March, the following additional measures were announced.

    • Any business that needs access to cash to pay their rent, salaries, suppliers, or to purchase stock, will be able to access a government-backed loan on “attractive terms” (which have not yet been specified).
        • That support will be delivered to small and medium businesses via the new Business Interruption Loan Scheme (announced at the Budget), which will now provide loans of up to £5 million, with no interest due for the first six months.
        • The scheme will be up and running by the start of next week.
    • Retail, hospitality and leisure sectors
        • All businesses (not just those with a rateable value of less than £51,000, as previously announced), will pay no business rates for 2020/21.
        • Those businesses with a rateable value below £51,000 will also be eligible for an additional cash grant of up to £25,000 (i.e. cash payment from the government) per business, to help them through this period.
            • This means that every single shop, pub, theatre, music venue, restaurant , etc. will pay no business rates whatsoever for 12 months and, if they have a rateable value of less than £51,000, they can now get a cash grant as well.
    • The 700,000 or so small businesses that are already eligible for 100% business rates relief will receive a grant of  £10,000 (not £3,000, as previously announced) to help with business costs.

For those individuals in difficulty due to coronavirus, mortgage lenders will offer at least a three-month mortgage holiday, so that people will not have to pay a penny towards their mortgage while they get back on their feet.

 

Separately, speaking in Parliament on Tuesday evening, Chief Secretary to the Treasury Steve Barclay said: “The government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021.”

 

The Chancellor, Rishi Sunak, intends to come forward with proposals next week to help those unable to work due to coronavirus. In some other countries, such support has included the government paying a large proportion (sometimes over 75%) of the person’s normal salary or self-employed earnings for several weeks. We await to see if the UK will go down a similar route.

 

BUDGET 11 MARCH 2020 – key points

Measures to mitigate the impact of Coronavirus

  • £12 billion package of tax and spending measures including grants and hardship funds for people and businesses affected
  • Statutory Sick Pay to be payable from first day’s absence and fully funded by the Government for 14 days; support also for workers in gig economy and self-employed, and relaxed conditions for those who self-isolate
  • Business rates relief for the next year increased from 50% to 100% for retail businesses with rateable values up to £51,000; this relief extended to leisure and hospitality businesses as well, and further relief for small pubs
  • Small businesses already eligible for 100% rates relief to receive £3,000 cash payment
  • Businesses and individuals with cash flow difficulties promised ‘Time to Pay’ their taxes with a dedicated HMRC helpline

Tax measures with immediate effect

  • Lifetime limit for gains eligible for Entrepreneurs’ Relief (taxed at 10% instead of 20%) reduced from £10m to £1mfor disposals from Budget day
  • Duties on alcoholic drinks and fuel frozen

Tax year 2020/21

  • No changes to personal income tax allowances and rates: 2019/20 figures continue for a second year, as expected
  • Increase in threshold for National Insurance Contributions from £8,632 to £9,500
  • Increase in thresholds for ‘Annual Allowance pensions taper’ from £110,000 and £150,000 to £200,000 and £240,000
  • Lifetime Allowance for pensions increased in line with inflation to £1,073,100
  • ISA allowance remains £20,000 per year, but Junior ISA/Child Trust Fund limits rise from £4,368 to £9,000
  • As announced in advance, Corporation Tax rate remains 19% rather than being reduced to 17%
  • No changes announced to ‘off-payroll working’ (IR35) rules, so they will apply to larger private sector employers from 6 April 2020 as previously announced
  • No change announced to new rules for reporting and paying CGT on chargeable residential property, so deadline becomes 30 days
  • Employment Allowance for small businesses increased from £3,000 to £4,000 of Employers’ NIC
  • Research & Development expenditure credit increased from 12% to 13%
  • Structures and Buildings Allowance increased from 2% to 3%

Tax measures coming into effect later

  • VAT ‘Domestic Reverse Charge’ on construction services, deferred from 1 October 2019, confirmed for introduction on 1 October 2020
  • VAT zero-rating to apply to digital versions of newspapers and books as well as printed versions from 1 December 2020
  • Abolition of VAT on women’s sanitary products from 1 January 2021
  • VAT on imports to be dealt with by ‘postponed accounting’ (on the VAT return, not on the docks) by businesses from 1 January 2021
  • Stamp Duty Land Tax surcharge of 2% introduced for non-resident buyers of UK property from 1 April 2021
  • Tax relief on ‘red diesel’ removed for most sectors but retained for agriculture, home heating and rail in April 2022
  • New plastic packaging tax for manufacturers in April 2022, as well as a shift in Climate Change Levy from electricity to gas

END OF YEAR TAX PLANNING IDEAS 2019/20

With the end of the tax year fast approaching, now is the time to think about whether anything can be done to minimise your tax burden.

Budget day is 11 March. We don’t know yet what will be in it, but it is worth considering the following before it is too late.

For business owners, this might be drawing dividends to make use of your tax bands. It might be making pension contributions to make use of brought forward annual allowances or to preserve your personal allowance.

If you are planning on selling a property that has been your main residence for a part but not all your ownership, now would be the time since the rules are changing on 6 April 2020.

 DIVIDENDS
For the year ended 5 April 2020 the dividend allowance, on which dividends are tax free is £2,000.  For dividends above this, basic rate taxpayers will have a 7.5% tax liability, higher rate 32.5% and additional higher rate taxpayers 38.1%. Taxpayers with income above £100,000, will lose £1 of their personal allowance for every £2 of income above £100,000 so the effective rate on dividends shoots up between £100,000 and £123,700 for 2019/20.

For business owners, it may be more tax efficient to take dividends before 5 April 2020. Please call us before 5 April 2020 to discuss your situation.

PENSION CONTRIBUTIONS
Reviewing your pension contributions should form part of your end of year planning, whether it’s to make use of your annual allowances and those unused from earlier years (2016/17 onwards) or to preserve your personal allowance when your income is over £100,000. The maximum that can be held as a Lifetime Allowance is currently £1,055,000.

The annual allowance remains at £40,000 for those with income below £150,000. Whether or not you are earning, any UK resident under 75 can contribute up to £2,880 into a stakeholder pension each year. HMRC will add an additional 20% to make it £3,600.

CAPITAL GAINS TAX
All UK tax residents are entitled to an annual CGT exempt amount which for 2019/20 is £12,000.  This is especially useful for those with readily realisable assets such as shares. Please note that if you buy back the shares within 30 days, anti-avoidance rules will kick in. However, these will not apply if another person such as a spouse acquires the shares. Inter-spouse transfers or gifts of assets remain free of CGT. Married couples can therefore look to maximise their combined allowances of £24,000.

The buy back rules do not apply if you are moving your investments into an ISA tax wrapper (see below). This tax planning is sometimes called “Bed and ISA” and is an effective way of using your CGT annual exemption and ISA allowance.

Now might be a good time to consider whether any assets or investments have fallen in value and are now worthless. This may include a loan to a UK business which is now irrecoverable.  If the loss relates to shares in an unquoted company that carried on a trade, it may be possible to offset the loss and reduce your income tax liability.

INHERITANCE TAX
The annual gift exemption of up to £3,000 can be used in each tax year. If unused, the allowance can be carried forward one year, so if you did not make gifts last year, you may consider making gifts of £6,000 before the end of the tax year. ‘Gifts out of income’ is still a further valuable exemption and records should be kept if you wish to make use of these exemptions. Please contact us so that we can advise what records should be kept and the format they should be in to ensure that they comply.
The nil rate band currently remains frozen at £325,000. Wills should be regularly reviewed to take advantage of the new residence nil rate band which was introduced from 6 April 2017.

Parents and grandparents can also pay into a Lifetime ISA opened by their adult children or grandchildren (i.e. aged 18 or over), which could be a useful part of inheritance tax planning.

ISAs
Individual Savings Accounts (ISAs) are savings accounts that are completely free of tax on both the income and capital growth. There is no lock-in period, minimum subscription or lifetime limit. The maximum contribution for 2019/20 remains £20,000.  The limit for a Lifetime ISA is currently £4,000 and there is an additional allowance of £4,368 that can be placed by parents into a junior ISA for children, there is also a Child Trust Fund into which you can place £4,260.

ENTERPRISE INVESTMENTS SCHEME (EIS), SEED ENTERPRISE INVESTMENT SCHEME (SEIS) and VENTURE CAPITAL TRUSTS (VCTs)
The EIS, SEIS and VCT reliefs were introduced to provide incentives to investors to invest in small unquoted companies, which are generally perceived to be higher-risk investments. The main incentive is income tax relief but there are also other valuable tax reliefs including CGT deferral relief, loss relief on disposal, CGT exemption and IHT relief where conditions are met.

ANNUAL PROPERTY OR TRADING ALLOWANCE
From 6 April 2017, you can get up to £1,000 a year in tax-free allowances for gross property or trading income. If you have both types of income, you’ll get a £1,000 allowance for each. If you are in receipt of such income then you should consider claiming the allowance. Gross income means the total amount you get before any allowances or expenses. Please note that you can’t deduct any other expenses or allowances if you claim this allowance.

If any of the above are of interest to you, please call us on 0207 384 2647

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