“Coronavirus Job Retention Scheme”

Improvements to “Business Interruption Loan Scheme”

Support through the tax system

Self-employed

We will continue to update you as more details are released.

During the 2020 Budget which was held last week, the Chancellor announced that a ‘Coronavirus Business Interruption Loan Scheme’ would be available ‘over the coming weeks’. However, due to the rapidly changing circumstances surrounding Covid-19 it has now been announced that this will be brought forward and we can expect the new scheme to become available to SME’s in the week commencing 23rd March 2020.

The loan is to be provided by the British Business Bank through participating providers, and will offer more attractive terms for both businesses applying for new facilities and lenders, with the aim of supporting the continued provision of finance to UK businesses during the Covid-19 outbreak.

The scheme provides the lender with a government-backed guarantee against the outstanding facility balance, potentially enabling a ‘no’ credit decision from a lender to become a ‘yes’. NB – the borrower always remains 100% liable for the debt.

The maximum value of a loan provided under the scheme will be £5m (the original announcement suggested a maximum loan size of £1.2m).

The Government will also cover the first 6 months of interest payments, so businesses will benefit from lower initial repayments. The business remains liable for repayments of the capital.

As well as loans, there are many other types of finance supported by the programme, depending on the provider. You can find out what type of finance the British Business Banks partner page.

This measure is targeted towards SMEs. It is open to businesses with a turnover of less than £41m (as long as the business is long-term viable and is UK based) which meet the scheme’s eligibility criteria. Full details on the eligibility criteria will be announced shortly.

The British Business Bank Coronavirus Business Interruption Loan Scheme webpage has the latest source of information.

As always, we are here to support in any way possible. Please don’t hesitate to give a member of our team a call and we will be able to provide you with as much information as possible.

A report out in January shows that around 20% of those on apprenticeship schemes are not being paid the National Minimum Wage (NMW), while apprenticeships themselves have fallen in number.

The figures in the Apprenticeship Pay Survey from the Department for Business, Enterprise and Industrial Strategy (BEIS) show the strange anomaly that correct levels of the NMW are largely paid in the first year of an apprenticeship, but often fall below it during the second and third years.

The highest levels of compliance were in management apprenticeship schemes, and the lowest in hairdressing (at 47% non-compliance) and child care (at 34%). Those on formal training for at least a day a week reported that they were less likely to receive compliant pay than those in more informal training.

The Apprenticeship Levy, introduced in 2017, was designed to increase people in apprenticeships by making companies offer formal apprenticeship training. Companies paying over £3 million in wages a year must pay the levy but can claim it back to cover apprenticeship training costs. Firms paying below that level in wages can apply for funding. But since the scheme came in, the number of apprenticeships has declined by 200,000 places between 2016 and 2018.

One issue has been the rise of companies offering apprenticeship training in the more office-based, soft skills and management sector, rather than the technical skills needed, for example, in construction and engineering. This focus has skewed the market towards sectors taking advantage of recuperating the levy funds, to the disadvantage of key sectors. With some traditionally employer-offered training courses rebranded as ‘apprenticeship schemes’, the concept has become watered down as the funding available is swallowed up.

At the end of 2019, the government announced that, the NMW will rise in April by 6.2% to £8.72 an hour. A report from the Resolution Foundation has found that while levels of non-compliance with the NMW fell from the turn of the century, they have risen since the introduction of the National Living Wage (NLW) in 2016. For companies failing to comply with their minimum wage obligations overall, there doesn’t appear to be much incentive to change their ways, with only a one in eight chance of being caught and penalised.

Paying your staff fairly and transparently, and engaging in genuine apprenticeship, training and development practices, is a key element in maintaining staff loyalty, productive recruitment and brand reputation.

For taxpayers who have trouble affording their tax bills, HMRC has updated its process for setting up time to pay arrangements.

If you have missed the self-assessment filing deadline of 31 January, and are struggling to cover your tax payments, you can now set up a time to pay arrangement online with HMRC.

The online option is only available once the initial deadline has passed, allowing taxpayers until the end of February to set up a plan for 2018/19. Any submission of a time to pay arrangement is still subject to approval. You will need to set up a Government Gateway ID if you don’t already have one.

If your instalment plan is agreed, you will not face a charge or penalties for late payment from the time that arrangement is agreed. However, any payments made after the deadline of the arrangement will be subject to interest, currently at 3.25%.

Outside of this window, you will need to deal directly with HMRC to negotiate settling outstanding tax debts. Time to pay arrangements are assessed against each individual’s financial circumstances, including income, expenditure and disposable assets, taking into account what they can afford and how long they may need to pay.

Once an arrangement is in place, it can be amended to take advantage of an upturn in your circumstances, or, if necessary, extended if your situation remains difficult. In these cases, you will accrue interest from the due date to the end of the arrangement, with the amount payable included in your overall debt under the arrangement.

In extremes, HMRC can force taxpayers to use savings or assets such as second properties to pay off their final debts, which would be discussed on a case by case basis. Your primary home and pension income are protected from any realisation of assets, although a charge can be made against your property to secure your debt.

Ideally you will never need to set up a time to pay arrangement if you plan your expenditure to include your tax liabilities. If you do find yourself in difficulty over tax payments, please contact us so we can look at ways to help.

The allowance effectively sets the maximum pension contributions from all sources (including your employer) on which you may be able to claim income tax relief. In recent times it has been the subject of much controversy because of the way the allowance is tapered from the ‘standard’ £40,000 to as little as £10,000 for high earners.

One reason why the taper rules have come to the fore is another aspect of the annual allowance which has received far less press coverage: the carry forward rules. These allow you to mop up unused annual allowance from up to three tax years ago – i.e. from 2016/17 onwards during the 2019/20 tax year. In theory this could mean that, before 6 April 2020, tax-relievable pension contributions of up to £160,000 could be made (£40,000 a year for 2016/17 – 2019/20 inclusive).

As you might expect, there is some complex legislation setting out how carry forward operates. For example:

Calculating how much can be carried forward is sometimes a difficult exercise, requiring detailed contribution records, so if you want to beat the deadline for using up your remaining allowance from 2016/17, start seeking advice now. Contact one of our dedicated tax team members on 01226 298 298 to find out how we can help you.

The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice. The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

It happens every year – the countdown to the end of January. Many of us make pre-new year’s resolutions to get our self-assessment forms done early. However, according to HMRC data, just over 3,000 people submitted their returns on Christmas Day, taking advantage perhaps of the lull in festivities or an escape from cooking commitments. Getting the job out of the way even earlier was more popular, with over 22,000 submissions filed on Christmas Eve, while over 9,000 saved the task for Boxing Day.

New year resolutions may have played a part in the nearly 34,500 returns filed on New Year’s Eve, while those submitting on New Year’s Day, at under half that number, hopefully didn’t do so while feeling the worse for wear.

With over half of returns already in as of the beginning of January, over 5 million returns are left to submit before the 31 January deadline. The majority of people are now filing online, which means that anyone submitting by post needs to get a bit ahead. Those who completed self-assessment tax returns last year but didn’t have any tax to pay still need to submit a tax return for 2018/19, unless HMRC has written to inform them that it’s not required.

If you or your spouse or partner have received child benefit, and either of you have an income of more than £50,000, you will need to complete a return for the high income child benefit charge (HICBC). While HMRC undertook a review in 2018 of ‘failure to notify’ notices issued across tax years from 2013 to taxpayers who failed to register for the HICBC, this is unlikely to take place again. If you are in any doubt as to your status, please ask.

There are several reasons why you might need to submit a self-assessment return. For example, you will need to submit if you have received income of over £2,500 of untaxed income in any of the following ways:

Penalties will be applied for late tax returns, ranging from £100 fixed penalty notices to daily penalties and percentages as time goes on. You can find additional help and resources online for self-assessment at GOV.UK or of course get in touch with us with your queries, although you will have to be quick! 

As many families across the country waved off students into the next stage of growing up and taking control of their own finances, advice from HMRC on student-targeted scams, coupled with a wider tax knowledge survey, highlight potentially dangerous gaps in public understanding of the tax system.

Cybercrime is far from confined to big banks or financial institutions, as anyone who has had their accounts hacked knows. With more than 620,000 scam emails related to tax reported last year, HMRC has issued advice to universities about potential scams targeted at first year students finding their feet away from home.

Thousands of attempts were made to defraud students, often through using an apparently benign university email address to alert them to bogus tax refunds. For those on budgets, the offer of a tax rebate may sound tempting, particularly for those unfamiliar with the tax system. Any replies could use valuable student identity information to steal money, purchase goods or subscriptions online or potentially take control of their computers.

HMRC has advised universities to both raise awareness for new students to be aware of potential tax scams and to include information in their induction material for all new intakes.

Lack of understanding

The advice from HMRC comes in the wake of a YouGov survey which revealed that much of the public have a scanty understanding of tax, with younger people especially at a loss. The survey of 2,000 people, carried out by Deloitte, asked a series of questions scored out of 30. Nearly half of respondents scored just 10 or under. The student group aged 18-24 had the lowest score, with those over 55 unsurprisingly achieving the highest average scores, still just around 12.

The areas of most knowledge were interestingly around taxation of additional income. For example, around 79% understood that tax is payable over a threshold for income from a holiday let of a second property or on income from advertising for an Instagram influencer (61%). But 46% did not understand the relationship of tax codes and tax allowances and only less than 20% knew what the top rate of income tax was. There was also a lack of understanding of how gift aid works, including only around 16% of those earning over £50,000 knowing that they can claim back tax on their charity donations.

Unsurprisingly again, the greater the lack of understanding of the tax system, the greater the feeling that it is generally unfair – revealed as around 80%. That feeling decreased as understanding of the system increased.

It’s clear that the tax knowledge gap has some potentially serious consequences for individuals’ finances. While there are increasing calls for financial education to be included in the national curriculum, the current lack of understanding still needs to be addressed. Starting on the basics with any young people in your family, or employment, might be the first step on an increasingly important ladder.

A recent report looking at who pays the most income tax reveals some interesting findings.

The Institute for Fiscal Studies (IFS) published a briefing note in early August with a detailed answer to the question of what it takes to enter the 1% club. Around 310,000 people make up this cohort, with some predictable and not so predictable traits:

Top 1% IT

However, being a member of the 1% taxpayers club also means accounting for 27% of all income tax collected by HMRC. So failing to qualify may reflect some careful and expert financial planning…

If you require help regarding your financial planning, please don’t hesitate to call our tax department on 01226 298 298.

Is a state pension age (SPA) of 75 looking more likely?


Recommendation

The SPA should better reflect the longer life expectancies that we now enjoy and be used to support the fiscal balance of the nation. The SPA in the UK is set to rise to 66 by 2020 (Pensions Act 2011), to 67 between 2026 and 2028 (State Pension Act 2014) and to 68 between 2044 and 2046 (State Pension Act 2007). We propose accelerating the SPA increase to 70 by 2028 and then 75 by 2035.


The statement above in the report Ageing Confidently – Supporting an ageing workforce, released in August by the Centre for Social Justice (CSJ), is slightly misleading. A SPA of 68 is pencilled to be phased in between 2037 and 2039. Further legislation will not be introduced until after another SPA review is completed, which, by coincidence, won’t happen until after the next election is due.

The CSJ is not a think tank that regularly makes the headlines, but it does have a high-profile chairman – Iain Duncan Smith, the former Conservative leader and former Secretary of State for Work & Pensions. During that tenure he pushed through some of the SPA increases outlined above. With this in mind, the statement by the CSJ could be interpreted as kite-flying on behalf of the Conservative government, just as the Institute of Public Policy Research (IPPR) plays a similar role for the Labour Party.

The CSJ’s argument for raising SPA with such haste is financially driven. The report notes that at present there are 28.2 pensioners for every 100 people of working age, but by 2050 this is projected to increase to 48 per 100 – almost one pensioner for each two working age members of the population. As the state pension system is funded on a pay-as-you-go basis, that jump has serious consequences even before the impact of rising healthcare costs is considered. Raising SPA to 75 by 2035 would keep the ratio at between 20 and 25 per 100.

Such a steep rise in SPA would be politically problematic as the ongoing protests and resulting court cases about increases in women’s SPA prove. However, the CSJ’s point about whether the current SPAs will continue to be affordable isn’t going away. If nothing else, it’s a reminder that supplementing the state pension with private provision is a surer path to a reliable retirement income.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. The value of tax reliefs depends on your individual circumstances.