There were a number of reliefs in the recent budget to support small business owners during the present Coronavirus outbreak. We have listed below some of the issues covered in a recent government news item.

Statutory sick pay (SSP)

The government will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19.

The eligibility criteria for the scheme will be as follows:

• This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19
• Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020.
• Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
• Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
• The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force.

The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible. Existing systems are not designed to facilitate employer refunds for SSP.

NOTE: This final paragraph is significant. Initially, employers will not be able to reclaim SSP as there is no existing system to facilitate the process. Employers affected should keep adequate records to record SSP payments made so that as soon as a repayment process is announced claims can be made.

The Chancellor may not have gone far enough in offering this support as many employees asked to self-isolate and then get well if they do develop COVID-19 symptoms, will likely exceed the 14 day refund on offer.

 

 

Business Rates

The government will increase the Business Rates retail discount to 100% for one year, expand it to the leisure and hospitality sectors and increase the planned rates discount for pubs to £5,000. Taken together with existing small business rate relief (which provides full relief for businesses using a single property with a rateable value of £12,000 or less), an estimated 900,000 properties, or 45% of all properties in England, will receive 100% business rates relief in 2020/21:

• Businesses that received the retail discount in 2019-20 will be rebilled by their local authority as soon as possible.
• Those businesses eligible for the newly expanded retail discount and/or the new pubs discount may need to apply to their local authority to receive the discount.
• Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority.
• The government will provide an additional £2.2 billion funding for local authorities to support small businesses that already pay little or no Business Rates because of Small Business Rate Relief (SBBR). This will provide a one-off grant of £3,000 to around 700,000 business currently eligible for SBRR or Rural Rate Relief, to help meet their ongoing business costs. For a property with a rateable value of £12,000, this is one quarter of their rateable value, or comparable to 3 months of rent.

Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch in a matter of weeks to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

Extended payment facility for tax payments

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. These businesses can contact HMRC’s new dedicated COVID-19 helpline from 11 March 2020 for advice and support. To ensure ongoing support, HMRC have made a further 2,000 experienced call handlers available to support firms and individuals when needed. For Time to Pay support if you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

OUR SUMMARY

There has never been a time when British businesses have been subject to so many outside threats to their continuing business activities. Consequently, planning is absolutely key in order to survive the inevitable downturn and disruption.

No doubt, normal service will be resumed as soon as possible, in the meantime we will need to be vigilant and rethink our planning options if we are to survive the process. If you need help with this “re-think” please call.

In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.

Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.

Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below.

Personal Tax and miscellaneous matters

 

Statutory Sick Pay (SSP)

SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.

Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.

Local Authority Hardship Fund

Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.

Most of this funding will probably support the extension of council tax relief.

Personal Tax allowance

The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500).

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:

• Basic rate band £37,500 (2019-20 £37,500)
• Higher rate band £37,501 to £150,000 (2019-20 £37,501 to £150,000)
• Additional rate, no change, applies to income of more than £150,000.

Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

Earlier payments of Capital Gains Tax (CGT)

As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.

The changes have applied from April 2019 for non-UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government is making two changes to the private residence relief:

1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.

Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.

Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.

CGT annual allowance

The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).

The equivalent allowance for trustees is £6,150 (£6,000 2019-20).

Tax benefit charges for low CO2 vehicles

In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).

Tobacco Duty Rates

All tobacco products will see an increase in duty by 2% above the current rate of inflation.

Hand-rolling tobacco will see an increase of 6% above the rate of inflation.

These changes will impact prices from 6pm, 11 March 2020.

Vehicle Excise Duty

Rates are due to be increased in line with the Retail Prices Index from April 2020.

Fuel Duty

Is frozen for another year.

Alcohol duty rates

Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.

ISA limits 2020-21

Adult savings limits remain unchanged at £20,000.

Junior ISA limits are increased to £9,000.

Zero-rating of VAT for women’s sanitary products

This measure is to be introduced from 1 January 2021.

Bank support from mortgage lenders

Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.

Banks are also considering increasing credit card limits and cash withdrawal limits.

 

Business Tax changes

 

National Insurance

It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.

Relief for Statutory Sick Pay payments

Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.

Watch this space as this is a welcome cost saver for smaller businesses.

Business Rates Retail Discount Scheme

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues.

To support small businesses, in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19, the discount will be increased to £5,000.

Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.

One-off grant for small businesses

The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.

Businesses that think they may be eligible should contact their local authority.

Coronavirus Business Interruption Loan Scheme

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.

Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

HMRC’s Time To Pay Scheme

HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.

 

Corporation Tax

The previously announced reduction in Corporation Tax from 19% to 17% – from April 2020 – has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.

Structures and Buildings allowance

The annual writing down rate is to be increased from 2% to 3% from April 2020.

Digital Services Tax

Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.

This will be a major revenue raiser for HMRC.

Capital loss restriction from 1 April 2020

For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.

Employment Allowance

The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.

Car and van benefits charges

Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.

R&D expenditure credit

This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.

Zero-rating of e-publications

From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.

VAT reverse-charge for the construction sector

A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.

Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Clamp-down on tax evaders

As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.

Bank support for small businesses

In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms.

Climate issues

The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals.

The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.

Most pundits agree that the growing disruption posed by the Coronavirus outbreak combined with continuing Brexit uncertainty – exactly what will our trading relationship with the EU be from January 2021 – are likely to have a dampening effect on demand and supply; a combination that will lead to a slow-down in global economic activity.

It is doubtful that Budget announcements this week will do much to quell the anxieties of small business owners.

There are concerns about the cost of meeting sick-pay obligations as increasing numbers of employees self-isolate in response to government advice to contain the spread of the virus.

Will business owners be offered more time to pay their taxes?

As the outbreak in the UK is at an early stage expect a staged approach to business support. It is feasible that the government will have to print money – so-called quantitative easing – to cover the funding support required by the UK business community. This is the method used during the banking crisis of 2008 when the banks were the recipients of government’s largesse.

Without a doubt, on its own the Coronavirus poses a significant challenge for all of us and in particular the survival of vast number of a small and medium sized business in the UK, the backbone and engine room of our UK economy.

Fingers crossed that Rishi Sunak and his Treasury advisors come up with adequate support this week. Watch this space for our budget summaries to be published later this week.

We have reported earlier this year that from 6 April 2020, residential property sales that are subject to capital gains tax will need to be reported to HMRC within 30 days of the sale. Any CGT due will also need to be paid in this 30 day period.

Property sales affected will include:

• a property that you’ve not used as your main home
• a holiday home
• a property which you have let for people to live in
• a property that you have inherited and have not used as your main home

Property sales that will not be subject to this 30 day reporting deadline include:

• a legally binding contract for the sale was made before 6 April 2020
• you meet the criteria for Private Residence Relief
• the sale was made to a spouse or civil partner
• the gains (including any other chargeable residential property gains in the same tax year) are within your tax free allowance (called the Annual Exempt Amount)
• you sold the property for a loss
• the property is outside the UK

Accordingly, if you are contemplating a sale after 5 April 2020, please let us know in advance of the sale. In this way we can gather together all the information required to calculate any capital gain and ensure that returns are made in good time.

There are penalties for late disclosure.

Disposals by non-resident owners

If you are a non-UK resident you must continue to report sales or disposals of interests in UK property or land, regardless of whether there is a Capital Gains Tax liability, within 30 days of completion of the disposal.

You will no longer be able to defer payment of Capital Gains Tax via your Self-Assessment return, and any tax owed must be paid within the 30-day reporting and payment period.

This includes disposals of residential properties, non-residential properties and indirect disposals.

Pubs will benefit from £1,000 business rates discount from April 2020.

The cut is on top of previously announced plans to slash the bills of small shops by 50%.

In a fresh demonstration of the government’s support for communities up and down the country, a new Pubs Relief will be introduced in April, with £1,000 being taken off the business rates bills of small pubs who qualify.

As many as 18,000 pubs are expected to benefit from the discount.

The relief will come on top of an extended retail discount which smaller pubs are also eligible to claim. Those able to claim both reliefs will benefit from a possible £13,500 off their annual bills.

From April this year:

• small shops and cafes will see their bills halved as the retail discount, currently a third off, is extended to 50%
• music venues and cinemas will become eligible for the retail discount
• a £1,500 discount for local newspapers office space will be extended for a further five years

Regional variations may apply. Check with your local rating authority to see how this announcement will affect your rates bill in 2020-21.