The Budget - CJRS & SEISS

Coronavirus Job Retention Scheme

This scheme has been further extended until 30 September 2021. There will be no change to the amount payable to furloughed staff (80% up to a cap of £2,500 per month) but, from July, employers will be asked to make a contribution to the cost. This will amount to 10% in July and 20% in August and September.

Self-employment Income Support Scheme

It was announced in November that a fourth grant would be forthcoming under this scheme and this has now been confirmed. Eligibility for this grant (and the 5th instalment) will be based on the submission of the tax return for 2019/20 but otherwise on similar criteria to the previous tranches. The fourth grant will be 80% of average trading profits for 3 months up to a maximum of £7,500 - broadly in line with the payments under CJRS.

There will be a fifth grant, probably payable in July, covering the period from May to September. Not all the details are available but it appears that the maximum grant will be the same as before ie 80% of 3 months profits up to a maximum of £7,500. However this will only be payable to those businesses whose turnover has reduced by more than 30% between April 2020 and April 2021. If the reduction is less than 30% the payment will only be 30% of 3 months profits capped at £2,850. This seems, on the face of it, to be far less generous than the CJRS given that it only covers 3 months for a 5 month period and could be a much lower percentage.

The Budget - Personal & Business Tax

Here are a few highlights from the Chancellor's statement, we'll cover some of these in more detail once fuller information is available.

Personal tax

The personal allowance is determined for all of the UK and rises to £12,570 for 2021/22. The basic rate of tax for the UK remains at 20% with the higher rate of 40% kicking in at £50,270. Scottish rates start at 19% rising to 21% then up to 41% on income over £43,662. The difference is becoming quite noticeable.

The personal allowance will now be frozen until April 2026 as will the annual exempt amount for Capital Gains Tax (£12,300), Inheritance Tax thresholds, and pension allowances. Any inflation will erode the real value of these allowances probably by around 8-10% over the period.

Business tax

Corporation tax is to be increased to 25% from April 2023. This will not apply to companies with profits of less than £50,000 who will continue to pay 19%. There will be transitional relief for profits between £50,000 and £250,000.

There is a temporary adjustment to the rules for utilising trading losses incurred between 1 April 2020 and 31 March 2022. It will, in most cases, be possible to carry back these losses against profits of the previous 3 years, rather than the usual 1 year. This will apply to both incorporated and unincorporated businesses.

Purchases of new plant and machinery between 1 April 2021 and 31 March 2023 will qualify for capital allowances at a "super" rate of 130% instead of the usual 18% (or 100% if eligible for AIA). Items which would usually only qualify for a 6% WDA will get 50% instead.

The VAT threshold for registration is frozen at £85,000 until 31 March 2024. The current temporary rate of 5% for hospitality and tourism will stay until 30 September 2021 and will then rise to 12.5% until 31 March 2022.

Penalties for late returns

At the last minute it has been decided that HMRC will not impose penalties on late submission of self-assessment returns until 28 February. Taxpayers therefore have been given an extra month to complete and submit their returns and pay any outstanding tax. This will come as good news to some, hopefully not very many, of our clients. Interest will still accrue on any payments after the normal due date of 31 January.

Grants for taxis

The Scottish Government announced this week that funding had been made available through local authorities to provide grants of £1,500 to those who have registered taxis or private hire vehicles. The plan is that local authorities will contact those eligible to invite them to apply for the grant. I think, if it was me, I'd be getting in touch with my council to make sure I'm on the list.

Business Interruption Insurance

The ruling by the Supreme Court broadly in favour of the appeal brought by the FCA on behalf of a group of SME's may provide some small businesses with an unexpected financial lifeline. If you have tried to claim on your business interruption insurance as a result of the impact of Covid-19, but been rejected, now may be the time to try again.

It appears that a number of insurers were taking the view that many of these policies did not cover this unprecedented situation and it does seem that some did not. However, the court ruling does give hope that many policies will be valid and the insurers will have to pay out. If you have already made a claim the insurer should be getting back in touch with you but you may wish to make contact now and make sure you are in the queue.

Tax return records

As you know, from Boxing Day we will all be moving into Tier 4 of the Covid restrictions regime. This means that we will have to completely close our office once again and operate entirely from our various homes. This is not a massive change for most of our staff although we have relied on occasional office access to stock up on stationery, swap around client files, and collect/return client paper records. Any such access will be severely curtailed in at least the early part of January and this will make the completion of tax returns especially challenging.

Gathering the information from clients for the returns will be the biggest problem. If you can provide details in an electronic form that would be ideal. If you have records on paper then you may be able to scan or photograph the important stuff and send it attached to an email. If you can only provide the information on paper then it will have to be posted or delivered directly to one of us (hopefully someone will live in the same council area). Should you be in any doubt please give us a call and we'll try to find a practical solution.

We will be stopping work as usual over the festive period from Wednesday 23rd at lunchtime until Monday 4th January.

HMRC scam calls

It appears that we have once again reached the season of scam tax calls to all men (and women). We have received reports from clients of some very aggressive phone calls purporting to come from the Inland Revenue demanding overdue tax. These calls are bogus! HMRC do not phone and ask for money, even when they are as cash strapped as they are at the moment.

If you receive one of these calls do not provide any bank or other personal details at all and don't try to pay them any money. If you are in any doubt contact our office and we will check whether you are due anything and when and how to make any the appropriate payment.

Merry Christmas.