18thJun
News article

Businesses urged to reinstate VAT direct debits

Business have been reminded to reinstate their direct debit mandates before the deferral of VAT payments due to the coronavirus (COVID-19) comes to an end on 30 June.

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Business have been reminded to reinstate their direct debit mandates before the deferral of VAT payments due to the coronavirus (COVID-19) comes to an end on 30 June.

The VAT payment deferral means that all UK VAT-registered businesses have the option to defer VAT payments due between 20 March and 30 June 2020 until 31 March 2021.

However, businesses need to take steps to reinstate their direct debit mandates so that they are in place in time for payments due from July 2020 onwards. Any outstanding returns should be filed and three working days should be allowed to elapse before reinstating the direct debit mandate.

The Tax Faculty at the Institute of Chartered Accountants in England and Wales (ICAEW) said: 'HMRC has confirmed to the Tax Faculty that it will not collect the outstanding balance of deferred VAT when the direct debit mandate is reinstated. HMRC has made the necessary systems change to avoid this happening for businesses in Making Tax Digital for VAT (MTD for VAT).

'Arrangements will also need to be made to pay the deferred VAT by 31 March 2021; further guidance is awaited from HMRC on the mechanism.'

18thJun
News article

HMRC begins sending MTD for VAT 'nudge' letters to firms

HMRC has started to send Making Tax Digital for VAT (MTD for VAT) 'nudge' letters to firms it thinks should've signed up to the scheme but have not yet done so.

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HMRC has started to send Making Tax Digital for VAT (MTD for VAT) 'nudge' letters to firms it thinks should've signed up to the scheme but have not yet done so.

According to the Institute of Chartered Accountants in England and Wales (ICAEW), HMRC first sent nudge letters to VAT-registered firms in 2019. It is now following up on those letters and contacting businesses which have not yet signed up for MTD for VAT but are required to do so.

The ICAEW stated that HMRC is only writing to firms it is confident should have signed up. HMRC does not intend to write to businesses that previously got in contact to advise that they are not in the mandated group.

A small number of firms which are not required to comply with MTD for VAT may be sent compliance letters: the ICAEW advises such firms to contact HMRC and explain their circumstances 'to avoid further contact when the compliance activity starts'.

17thJun
News article

HMRC updates CJRS guidance for employers

On 12 June, HMRC updated its guidance for employers who have furloughed employees under the Coronavirus Job Retention Scheme (CJRS).

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On 12 June, HMRC updated its guidance for employers who have furloughed employees under the Coronavirus Job Retention Scheme (CJRS).

From 1 July, employees will no longer have to be furloughed for a minimum period of three weeks. From this date the CJRS will have more flexibility to allow claims on a pro rata basis. Employers will be able to permit employees to work some of the week and be furloughed for the rest.

An employee needs to have been furloughed for at least three consecutive weeks between 1 March and 30 June to be eligible for furlough from 1 July. Additionally, after 1 July, employers will be subject to a cap on the number of CJRS claims they are able to make.

The CJRS changes have effect from 1 July until the closure of the scheme on 31 October.

Parents returning from statutory maternity leave, paternity leave, adoption leave, shared parental leave and bereavement leave are exempt from the CJRS changes. The Treasury recently announced that parents who are returning to work over the coming months will be eligible for the CJRS despite the scheme closing to new entrants on 30 June.

More information on the changes can be found here.

17thJun
News article

Research suggests SMEs expect to borrow £48 billion post-coronavirus lockdown

Research carried out by banking group Aldermore has suggested that small and medium-sized enterprises (SMEs) in the UK expect to borrow £48.3 billion once the coronavirus (COVID-19) lockdown ends.

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Research carried out by banking group Aldermore has suggested that small and medium-sized enterprises (SMEs) in the UK expect to borrow £48.3 billion once the coronavirus (COVID-19) lockdown ends.

Three in five SMEs stated that they expect to borrow £65,000 in the year following the COVID-19 pandemic. The research also revealed that a third of SMEs believe that good communication with their clients will help get their business back on track after the lockdown.

Meanwhile, 25% of SMEs polled said that receiving ongoing government support will be beneficial to their business.

Commenting on the research, Tim Boag, Group Managing Director of Business Finance at Aldermore, said: 'Helping SMEs recover following the pandemic will be crucial to the economic future of the UK. As our research has shown, SME income has been hit hard by COVID-19, with many having borrowed funds in order to survive, and with some expecting to continue to do so in the year ahead.'

16thJun
News article

HMRC updates guidance for self-employed coronavirus scheme

HMRC has updated its guidance regarding the eligibility of businesses for the two Self-employment Income Support Scheme (SEISS) grants.

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HMRC has updated its guidance regarding the eligibility of businesses for the two Self-employment Income Support Scheme (SEISS) grants.

The tax authority has published a number of examples that show when a business has been 'adversely affected' and meets the criteria for the first and second grants.

Those self-employed individuals (including those trading as a partnership) adversely affected in the period up to 13 July 2020 can claim the first grant. If they are adversely affected in the period from 14 July 2020 they can claim the second grant.

The first taxable grant is worth 80% of average monthly trading profits, paid out in a single instalment covering three months' worth of profits and capped at £7,500.

A second and final grant can be claimed in August 2020. It is worth 70% of average monthly trading profits and will also be paid out in a single instalment covering three months' profits. The grant is capped at £6,570.

HMRC confirmed that those who are self-employed and able to return to work as normal in June will not be eligible for a second grant, although they can claim a grant for the first period. HMRC's guidance of how a business might be adversely affected includes such reasons as shielding and supply chain disruption.

A full list of circumstances can be found here, and details of the SEISS can be found here.

16thJun
News article

UK economy could contract by 8% in 2020, data suggests

Data published by economic forecasting group EY Item Club has suggested that the UK economy could contract by 8% in 2020.

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Data published by economic forecasting group EY Item Club has suggested that the UK economy could contract by 8% in 2020.

It estimates a record 15% contraction in the second quarter of 2020. The EY Item Club said that the figures 'reflect a poor economic performance in April due to the coronavirus (COVID-19) lockdown, and deeper than expected contraction' in the first quarter of 2020.

In positive news, EY Item Club now predicts year-on-year GDP growth of 5.6% in 2021, a rise when compared to its previous estimate of 4.5%. However, the data also suggested that the UK economy is not expected to return to its late 2019 size until 2023.

'The impact of COVID-19 on the UK economy will depend on just how long the pandemic lasts, how many people are affected and how long restrictions to activity have to be in place,' said Howard Archer, Chief Economic Adviser to EY Item Club.

'The UK economy had been disappointingly lacklustre over the first two months of 2020, even before COVID-19 started to become a factor. After a challenging first half, our forecast shows that the UK economy is expected to start to recover in quarter three 2020 on the assumption that the government continues to gradually relax lockdown restrictions.'

15thJun
News article

Jobs and training for the young must be prioritised to boost economy, says CBI

The Confederation of British Industry (CBI) has called on the government to prioritise jobs and training for young people in order to help boost the UK economy once the coronavirus (COVID-19) lockdown ends.

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The Confederation of British Industry (CBI) has called on the government to prioritise jobs and training for young people in order to help boost the UK economy once the coronavirus (COVID-19) lockdown ends.

In a letter to Prime Minister Boris Johnson, the CBI stated that unemployment is the biggest threat to livelihoods. The business group outlined an economic recovery plan that would 'help secure a jobs-rich, fair and sustainable future for the UK economy'.

The CBI has urged the government to make jobs, skills training and opportunities top priorities, especially for young people. It also promotes targeted financial support to help kick-start consumer demand and reinvigorate UK competitiveness.

Investing in the green economy will also help to create new jobs, according to the CBI.

'The last few months have seen a nation rightly and relentlessly focused on health,' said Carolyn Fairbairn, Director General of the CBI.

'That will remain the case for some time. But this must not stop the country from implementing an ambitious economic recovery plan. Time is of the essence. Smart, fast policy is needed now to accelerate the process to minimise the human cost and in particular protect the futures of our young people.'

15thJun
News article

MPs call for VAT reduction to help firms affected by coronavirus

MPs have urged the government to reduce VAT for firms in the tourism sector in order to help them recover from the coronavirus (COVID-19) lockdown.

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MPs have urged the government to reduce VAT for firms in the tourism sector in order to help them recover from the coronavirus (COVID-19) lockdown.

A report published by the All-Party Parliament Group (APPG) for Hospitality and Tourism has called for a reduction in VAT for businesses in the hospitality sector, alongside an overhaul of the business rates system in England and Wales and the creation of a new autumn Bank Holiday.

Just 11% of businesses in the UK hospitality sector have been able to trade through the COVID-19 pandemic, according to the APPG. Figures published recently by the Treasury also revealed that accommodation and food services companies have furloughed 1.4 million people, and have claimed £2.6 billion in furlough funds.

Commenting on the matter, Steve Double, Chair of the APPG, said: 'The UK's hospitality and tourism sectors have been devastated by the COVID-19 crisis, and this report highlights the scale of the damage done to businesses.

'Whilst the support provided to the sector so far has been very welcomed, we are under no illusions that the path to recovery will be tough.'

12thJun
News article

LITRG warns self-employed that SEISS is taxable

The Low Incomes Tax Reform Group (LITRG) has warned self-employed individuals that the government's coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS) is taxable.

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The Low Incomes Tax Reform Group (LITRG) has warned self-employed individuals that the government's coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS) is taxable.

The group is concerned that many may wrongly assume that the SEISS funds are exempt from tax, particularly as they are termed 'grants' by the government. It is warning that many people may have to pay a third of the grant back in tax and Class 4 national insurance contributions (NICs).

The LITRG said that grants made to the self-employed via the SEISS are likely to be included in claimants' 2020/21 self assessment tax returns.

Commenting on the issue, Victoria Todd, Head of the LITRG, said: 'Many claimants of the SEISS grants might, understandably, use the money as soon as they get it, for example to catch up on liabilities or to meet essential living costs – but they need to think now about budgeting for income tax and national insurance on it.'

More information on the SEISS can be found here.

12thJun
News article

UK economy shrinks record 20.4% as result of coronavirus lockdown

The UK economy shrank by 20.4% in April as the coronavirus (COVID-19) lockdown paralysed business activity, according to the Office for National Statistics (ONS).

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The UK economy shrank by 20.4% in April as the coronavirus (COVID-19) lockdown paralysed business activity, according to the Office for National Statistics (ONS).

The record month-on-month decline in Gross Domestic Product (GDP) completely eclipsed the previous record contraction of 5.8%, which was recorded in March.

The services sector – which constitutes around 80% of the UK's economic output – fell by 19.0% in April. Industrial output fell by 20.3%.

There were also significant falls in the manufacturing and construction sectors, which decreased by 24.3% and 40.1% respectively. In addition, import and export trade with the rest of the world was badly affected by the pandemic, according to the ONS.

Some businesses began to reopen in May, so analysts expect April's contraction to represent the worst of the impact.

In the three months to the end of April, the UK economy contracted by what the ONS called an 'unprecedented' 10.4%, with widespread falls across nearly all industries.

Commenting on the figures, Jonathan Athow, Deputy National Statistician for Economic Statistics at the ONS, said: 'April's fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost ten times larger than the steepest pre-COVID-19 fall. In April the economy was around 25% smaller than in February.

'Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall.'