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resources 26 may

The challenges we can expect next

The Easy Part Has Now Passed. Whilst we won’t deny the fact that the past few weeks and months have been challenging; as we fast approach a further announcement regarding the potential easing of lock down, more troubled times await us in the business world.

I have said on a number of occasions already that the business curve is most definitely behind the health curve and will be very different to it also.

We don’t say this to make people feel uneasy as we want to remain calm, but we don’t want people to grow complacent over the coming weeks and months.  To maintain this calm, we must retain control to the best of our ability and that means not letting up as we strike back against the current challenges that we have faced and those that still await us.

Let’s first start with some fairly obvious issues that lie ahead:

  1. These Government-backed loans will need repaying and whether they are 80% backed or 100% backed, if they are not repaid, it will impact your credit rating as a minimum.
  2. Aside from the loans, the Government has provided significant financial support such as local authority grants, furlough payments, self-employed grants etc.  These will all need to repaid but indirectly; in some shape or form, and we expect this to be via any or all of the following:
    1. Increase in personal tax rates
    2. Increase in company tax rates
    3. Increase in national insurance
    4. Increase in VAT

Some of these may come subtly through the reduction of some allowances and some may just be in terms of a hike in rates such as a jump in company tax from 19% to 30% would not be beyond the realms of possibility.  Whilst it would unreasonable and probably unlikely that these hikes will come immediately; we would be shocked if they don’t come at all, and whilst some industries might benefit from some respite such as hospitality, they may also not benefit at all nor may anybody be given any degree of leniency.

  1. Whether you have accessed any of the financial support or not, we cannot realistically see any way in which you will not be part of the repaying of it!

There are then the operational challenges that may await such as:

  • Suppliers reducing or revoking credit terms
  • Delivery timescales for materials being longer
  • Staff not wanting to return to work
  • Customers delaying orders, cancelling them or wanting extended credit
  • All of the above and more!

You might even think a lot of the above might not apply to you but it will impact you in some way or another as prices just in day to day life with regards to shopping are likely to rise!

Our key message and support

The support you have benefited from to date must continue in some shape or form to help you through the times we have ahead.  We encourage you to engage with us over the coming days and weeks to discuss this support in greater detail as we grow our team and other resources to be able to deliver this on an ongoing basis for you.

We know concerns will remain and cost will be a barrier for some if not many, but we have worked hard to find solutions to this that we can discuss at the same time.

Remember these two messages

  1. With the government support to date and the announcements made and pending, they may have whetted our appetite with regards to more positive times ahead, but it will not go far enough to quench our thirst.
  2. Finally, never forget – calm is the word but not complacency.

Webinars (NOT TO BE MISSED)

With us coming back of the bank holiday we have focused on just the one webinar this week that is ran alongside our software partner that assists with cash flow management.

Cash flow planning beyond COVID-19
Friday 29 May, Midday (book here)

Would you like to have the answers to all of the questions I have raised in the section above?

Join us for this webinar to hear how we as a business have adapted, how other businesses have adapted and how you too could to not just survive but really strike-back!

summary covid19

COVID-19 Summary (28 March 2020)

Wow, it has been quite a week and I appreciate that we have been sending quite a few newsletters with updates so we thought we would summarise where things are here.  In addition, we have provided more detail below this regarding furloughed employees and finally provided an update regarding accessing the government grants.
The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.

This includes a package of measures to support businesses including:

  • a Coronavirus Job Retention Scheme
  • deferring VAT and Income Tax payments
  • a Self-employment Income Support Scheme
  • a Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
  • a 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

More detailed guidance around each of the areas above can be found here

Furloughing Employees Update from HMRC

What is it?

It is a grant for employers to help fund employee wages, where certain conditions are met, that has temporarily been put in place for 3 months initially, but this may be extended.

Note that this is a grant and not a loan, so it will not be repayable.

Which Businesses can claim?

  • It is open to all UK employers who have created and started a PAYE payroll scheme on 28th February 2020
  • Any UK organisation can claim it is not based on profits but business must have a UK bank account
  • Special rules apply to those public sector employers, who are funded primarily from public grant funding, mainly as they are expected to still be delivering a public service.  Please do seek further guidance around this area though if you think it might impact you.

Which employees are eligible?

  • To claim for an employee that you decide to furlough, they must have been on your payroll as at 28 February 2020 and this is includes various types of contract such as full time, part time etc.
  • We understand the furloughing of employees can be done on an individual basis, however, you need to be aware of employment law, particularly around discrimination.
  • The scheme also covers employees who were made redundant after 28 February 2020, as long as they are rehired by their employer.
  • Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
  • Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this, whilst employees who are shielding in line with public health guidance can be placed on furlough.
  • If the employee is on maternity leave and receiving maternity pay, SMP or maternity allowance, this will continue.  However, if you top the statutory payment up this can be claimed back through the furlough scheme as long as both parties agree; this also applies to other statutory payments such as Statutory Adoption Pay

Employee salaries and entitlements

  • During the furlough period the employee’s wages will still be subject to the normal income tax and national insurance deductions etc
  • If your employee reduces their hours, then they are still deemed to be  working for you, so the scheme will not apply.
  • If your employee has more than one employer they can be furloughed for each job. Each job is separate and the cap applies to each employer individually based on current guidance.
  • A furloughed employee can take part in volunteer work or training, as long as it does not provide services to, or generate revenue for, or on behalf of your organisation.
  • Employees that have been furloughed have the same employment rights as they did previously.
  • The government has also announced changes to carrying over annual leave, allowing workers up to 2 years to take unused holiday, for more info click here.

Making a claim

  • Employees will have had to have been furloughed before any claim can be made.
  • The reclaim amount which will be repaid into employers’ bank accounts by BACS, that is likely to be in arrears, can be up to 80% of an employee’s regular wage plus on-costs up to a maximum amount of £2,500.  Therefore a maximum amount that can be claimed is £2,500 salary plus on-costs for employer’s National Insurance and the required minimum pension contributions.  Employers will need to pay 80% of normal, regular salary without bonuses, commission etc. included or £2,500 whichever is lower. We are awaiting further guidance from HMRC on the calculation of the NI and pension contributions on the subsidised wages paid, so expect further updates on this one.
  • There are a couple of calculation methods for those on variable pay, either the same month’s earnings in the previous year, or average monthly earnings for the year (pro rata for less than a year)
  • As a worker will have been furloughed National Minimum Wage and National Living Wage will not be relevant unless training is being undertaken whilst furloughed
  • Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme
  • Payments received by a business under the scheme are made to offset these deductible revenue costs and thus will be taxed as income.
  • Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.
  • There are a number of data items that HMRC will require when making a claim via their portal.  It isn’t yet clear what the portal might look like, or the format required for the data.

If you would like to share guidance with your employees to help them understand this legislation, please ask them to visit: https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme

 

Some further queries you might have

 

Do employers have to backdate the 80% March payment values in April payroll/tax year 2020/21 or does it all have to be completed on the March payroll tax year 2019/20?

Currently, our understanding is that furloughing applies from the date that you notify your employees that they are being furloughed, not the date that you make the payments. Our suggestion would be to notify your employees now that you intend to furlough, with the amount that you intend to pay. Naturally guidance around this might change and we always recommend you take professional HR advice around this.

If a worker is furloughed, can they be brought back into work early if say work commitments change? 

Yes, we believe you can bring back your employees early but again take HR advice around how this is worded to enable the option to be considered at some point during the period of being furloughed.

For owner/Directors who are on the payroll, will they be treated as employees or self-employed?

Legally, directors of a limited company are employees and should be treated as such.  Like employees, any claim will be based in the same way BUT WILL NOT take account of any dividends.

If it is a single director company, are they eligible for this scheme?

Based on the latest ICAEW interpretation of the HMRC guidance; as HMRC are silent on this matter, they too are eligible and can make a claim provided they meet the same eligibility criteria that other employees need to meet.

Will you guys help us out as a business when this scheme is launched fully?

Of course we will and just watch out for further guidance coming but we will coordinate this all as part of the payroll process.

For those clients that handle payroll themselves internally, we will also help you through the same process if you wish so you’re not alone.

Any further questions that you might have which are are not covered above; and any action taken regardless, we always suggest is taken with the sign off of a qualified HR person with the above to act as a guide as to what can be interpreted from what HMRC has issued.  Use this accordingly to plan ahead, we will keep things right with regards to the declaration and reclaiming of amounts from HMRC then; you alongside an HR expert, can ensure the paperwork and implementation side of things can be handled correctly.

Don’t forget, as clients of ours, you have access to unindemnified advice from the HR team at Avensure or you can contact ACAS whose details are here.

As local authorities start to develop varying strategies around issuing the grant funding being provided by the Government, we suggest all businesses who feel that they meet the eligibility requirements contact their local councils through their websites to lodge a claim.

Grant Update

The links for Newcastle, North Tyneside, South Tyneside and Northumberland Council Councils can be found below:

Newcastle City Council click here
North Tyneside Council click here
South Tyneside Council click here
Northumberland County Council click here

The process seems quite straightforward and we have already lodged our claim but any queries around this please direct these towards your local authority.
Brexit, Vat returns

Brexit. VAT returns.

So we’ve recently heard that Brexit is being pushed back but that hasn’t stopped us so we thought we’d revisit everything we have done in advance of this and the impending making tax digital.

For those who weren’t aware, making tax digital comes in 1 April 2019 and is basically going to mean that if you are VAT-registered and your turnover exceeds the current VAT registration threshold of £85,000, you will no longer be able to submit your VAT returns through the HMRC portal. Instead, you will either need to use some accounting software or equivalent software to submit your VAT return.

Focusing first on making tax digital; we are now helping clients go digital with piece of mind and without fear through the following:

1. We introduced Receipt Bank that helps you maintain your receipts so much more easily and reduces the risk of losing them and subsequently any potential tax or VAT relief thereon where applicable.

2. We’ve partnered up with two of the biggest accounting software providers on the market – Xero and Sage, which subsequently now allows us to offer them both at prices that cannot be matched by going direct. These pieces of software; alongside ourselves, then help you control your finances and cash flow and plan for tax and VAT liabilities before they arise. We’re even offering free training to get to you set up at the minute.

3. We have introduced further partnerships; outside the world of accountancy, to support you in other day to struggles including experts in HR, branding, marketing, financial advisors, solicitors and many more.

All of the above will help make you compliant with making tax digital when it arrives 1 April 2019 with minimum fuss, time or effort and will make your lives easier. There will however be more newsletters focused on this over the coming months.

And there is more to come:

1. We will soon be introducing road maps for clients to better help them achieve those goals that they first set out to achieve i.e. retire at 55.

2. As we enter the crazy tax return season and the build up towards Christmas we will make it easier than ever to get your self-assessment tax return information to us and signed without ever having to set foot outside through Iris OpenSpace which is basically a further add-on to the benefits we already provided through the portal.

3. We will very soon be launching our own branded app which will bring all of these changes listed above under the one app so you can access everything in one place; all at the click of a button.

Now we might not know what changes Brexit will bring or when Brexit will even happen but we do know that we are helping our clients build stronger, sustainable and more resilient businesses in less time than ever to withstand such challenging economic conditions.

So who doesn’t want an easier life with better results?

Receipt Bank – Fetch

Don’t worry this section isn’t about dogs.

Did you know that through Receipt Bank you can have it ‘fetch’ invoices from other online accounts you have?

‘Wow’ I hear you say. All you do is click on add items when you are logged into your account then the fetch option will be on the screen then just follow the instructions.

Another step on the road to becoming digital and the management of paperwork is getting easier again.

Monthly offer – Xero

Xero rang us earlier the month and put two offers in front of us that we simply couldn’t refuse and which in turn we are sharing with you the customer.

If you know you want to use Xero but cost is the barrier then we have two affordable options:

1. If you only need read-only access we have a package that is comparable in price with Sage Business Cloud Accounting but significantly more comprehensive.

2. If you want the full package we have one that will again be comparable with Sage for the first 12 months but it has full functionality. After the first 12 months the price would rise but this is great opportunity to dip your toes in the water.

We only have limited packages with respect to these two offers and only 9 remaining for the second offer so get in touch as soon as possible if you want to take advantage. You are welcome to share these offers with friends and family who are not clients also.

Tax Return Season

As we enter the crazy season of tax returns; if you haven’t got yours in already then get it in as soon as possible to avoid any nasty surprises before or after Christmas when it comes to finding the money to pay any tax owed.