by Acuaccounts | Sep 21, 2021 | accounting, eis, r&d credits, seis, tax, tax return
Research and Development (R&D) are essential drivers of economic growth. A vibrant economy relies on sustainable global competitiveness and support for businesses investing time and funds into R&D.
R&D tax credits, SEIS, and EIS are three ways the UK government supports business innovation.
What are R&D tax credits and how do they work?
R&D tax credits can today be claimed by a range of companies seeking to research or develop an advance in their field. Even for unsuccessful projects.
Research and Development tax credits are a UK government incentive launched to reward UK companies for funding innovation. The tax credits can be a precious source of funds for businesses to invest in expediting their R&D, hiring new personnel and ultimately scaling up their business.
Businesses in every sector of the economy, which have invested or are investing funds to develop new products, processes or services; or enhancing existing ones, may qualify for R&D tax relief.
An R&D tax credit can be claimed in the form of a payment and/or Corporation Tax reduction. Businesses claiming for the first time can typically claim R&D tax relief on their previous two completed accounting periods.
What kind of projects can claim R&D tax credits?
The work qualifying for R&D relief must be part of a specific project aimed at advancements in science or technology. Progress within social sciences or theoretical fields does not qualify.
The project needs to relate to the company’s business – either to an existing trade, or a trade intended to launch based on the results of the R&D.
To qualify for R&D relief, the project needs to meet the following criteria:
- looked for an advance in science and technology
- tried to or succeeded in overcoming uncertainty
- could not be easily worked out by a professional in the field
Advances in the field must relate to the overall industry and field of work, not just the business.
In addition, the project requires a level of complexity which a professional in the field could not have worked out with ease.
To prove scientific and/or technological uncertainty businesses need to show the uncertainty of experts at the beginning as well as the research, testing and analysis required for development. For example, in a description of the successes and failures during the project.
What types of R&D relief are available in the UK?
Different types of R&D relief are available, depending on company size and whether the project has been subcontracted or not.
SME R&D Relief
Companies can claim SME R&D relief if they operate with:
- less than 500 employees
- a turnover of under 100 million euros or a balance sheet total under 86 million euros
SME R&D relief allows companies to:
- deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, for a total deduction of 230%
- claim a tax credit if the company is loss-making, worth up to 14.5% of the surrenderable loss
Research and Development Expenditure Credit
Large businesses can claim a Research and Development Expenditure Credit (RDEC) for their R&D projects.
SMEs and large companies who have been subcontracted for R&D work by a large organisation can also claim RDEC.
The RDEC is a tax credit at 11% of qualifying R&D expenditure up to 31 December 2017.
It has since been increased to:
- 12% from 1 January 2018 to 31 March 2020
- 13% from 1 April 2020
What else do I need to know about R&D relief?
While the number of companies filing for R&D tax credits is growing rapidly, with over 50,000 R&D claims made by SMEs last year, not all companies realise that they may be eligible to claim that R&D cash back.
R&D relief cannot just be claimed by traditional tech companies or laboratories. The company needs to demonstrate that some of that work in developing a product or project, was done with the aim of making an advance in science or technology.
The main eligible costs for R&D relief are employee costs, subcontractor costs, software, consumable items, prototyping and clinical trials volunteers.
In addition costs of subcontractors can be claimed, even if they are not in the UK.
Many companies are unaware that the project does not have to achieve commercial success to be eligible for the R&D credit. The aim of the tax incentive is after all to de-risk innovation.
What is SEIS, and EIS?
The Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are two UK government initiatives granting private investors a significant tax break when investing in early-stage, ‘high-risk’ companies.
SEIS is focused on very early-stage companies, while EIS focuses on medium-sized startups.
SEIS allows for a 50% tax break in return for an individual investing up to £100,000 per tax year. EIS allows individual investors to invest up to £1 million per tax year, receiving a 30% tax break in return.
Most trades qualify for SEIS and EIS funding, but a number are excluded entirely, for example, those dealing in land or commodities, trades involved with banking, insurance or money-lending and more.
Funds raised must be used for qualifying business activity and solely to promote the growth and development of the company, like hiring new employees, developing the product or marketing activities.
Companies can raise up to £150,000 in SEIS funding and no more than £12 million in EIS funding. Individual investors under SEIS or EIS are not allowed to hold more than 30% of the company’s overall shares.
Do you have questions about how to claim an R&D tax credit for your business? Are you interested in SEIS and EIS funding for your business? Have a look at our services and feel free to get in touch with us.
You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Jul 9, 2021 | accounting, covid19, Loans, lockdown, tax
The Bounce Back Loan Scheme (BBLS) closed officially on 31 March 2021. Launched in April 2020, Government-backed Bounce Back Loans permitted businesses to borrow between £2,000 and £50,000 based on up to 25 per cent of turnover. More than 1.5million loans have been issued by participating banks, worth an overall £46.6 billion with a 100% government guarantee. Loans were issued quickly with little checking, and the government now estimates that up to 60% of the money loaned under the scheme may never be paid back. With repayments now due, or due to start soon, for many loan applicants, here’s an overview of what comes next.
From financial lifeline to mounting debt for many
The length of the bounce back loan was set as six years. Businesses deciding to pay it back early will be able to do so without incurring a fee. For most businesses, the BBLS repayment is due now or will be due shortly. Thankfully there has been some respite given to those businesses still recovering from the pandemic. The Pay As You Grow (PAYG) scheme announced in September grants businesses struggling to repay the loan various options in collaboration with their lender.
- Businesses with a Bounce Back Loan can request a loan extension from six to ten years, with a fixed interest rate of 2.5 per cent.
- Borrowers can request three times during the loan period to reduce monthly repayments for six months by paying interest only.
- Businesses can request to take a single repayment holiday for up to six months.
What happens to businesses that think they can’t repay the loan?
Businesses worried that they may be unable to pay back their loan, should have a conversation with their accountant and their lender. The lender should review the Pay As You Grow options mentioned above. Lenders are likely to want to establish whether the business is viable. This is also a conversation to have with your accountant or financial advisor and you can contact AcuAccounts for any questions regarding business viability and cash flow.
Even if a business is deemed not viable it still remains liable for the loan, despite the government guarantee. The lender might place the business into their debt recovery and collections process. If a business decides to take advantage of any of the Pay As You Grow options, both lender and borrower need to have a clear understanding of how these options will affect future repayments. If a business is considering making Bounce Back Loan repayments but also has other debts to repay, it is vital to make a plan and analyse which repayments should be prioritised – depending on factors like the overall cost of the debt and monthly repayment amounts.
Can a company be liquidated if it has taken out a Bounce Back Loan?
Striking off a business is an option only available to businesses with no company debts. The bounce back loan is considered a company debt and therefore the business cannot be dissolved if the BBLS remains due. Company directors ignoring the interests of their creditors risk finding themselves in the firing line of an Insolvency Service investigation when the company enters liquidation.
If a limited company wants to pursue a company strike off with an outstanding Bounce Back Loan, rather than a formal insolvency route, it risks an “Objection to Company Strike Off Notice” and this can trigger an investigation by the Insolvency Service. If a business becomes insolvent because it is unable to recover from the impact of COVID-19, and cannot repay its loan, liability lies with the company and not the directors or other shareholders. However, this only applies if the directors have complied with their statutory and fiduciary duties, and the loan has been used per its terms and conditions.
How to evaluate financial viability with a Bounce Back Loan?
Aside from the options of the PAYG scheme, it is understandable that businesses might be unable to repay their BBLS, especially if the business was unable to operate for long periods of time. For business owners who are struggling, it is key not to spend all of the BBLS and then look to liquidate.
Directors need to take a long hard look at their company finances and their business model to evaluate, potentially with the help of an accountant, whether the business has a realistic chance of survival and can continue trading.
If a company director believes in a positive outcome, then as well as the PAYG scheme, there are alternative means of finance available like invoice financing and commercial finance. If a company director believes the business doesn’t have a viable future, it could be time to look at closing the company down and entering a formal insolvency process.
Introducing the Recovery Loan Scheme
The Recovery Loan Scheme was announced by the government at the beginning of March 2021 to support access to finance for UK businesses in the process of growing and recovering from the disruption of the COVID-19 pandemic. The Recovery Loan Scheme aims to help businesses of any size access loans and additional finance with up to £10 million available per business. However, the amount and terms offered are at the discretion of participating lenders. The government guarantees 80% of the finance to the lender while the borrower remains 100% liable for the debt.
Loans are available through a network of accredited lenders, listed on the British Business Bank’s website.
Businesses can apply for a loan if the company is trading in the UK and can show that the business:
- would be viable were it not for the pandemic
- has been adversely impacted by the pandemic
- is not in collective insolvency proceedings
Businesses that have received support under the earlier COVID-19 guaranteed loan schemes like the BBLS are still eligible to access finance under this scheme if they meet all other eligibility criteria. Businesses from any sector can apply, except banks, building societies, insurers and reinsurers (excluding insurance brokers), public-sector bodies and state-funded primary and secondary schools.
Businesses can get term loans or overdrafts of between £25,001 and £10 million per business as well as invoice or asset finance of between £1,000 and £10 million. No personal guarantees are taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security. The maximum length of the borrowing facility depends on the type and will be:
- up to 3 years for overdrafts and invoice finance facilities
- up to 6 years for loans and asset finance facilities
The Recovery Loan Scheme scheme is open until 31 December 2021, subject to review.
Do you have questions about your business’s financial future or want to evaluate your loan options? Have a look at our services and feel free to get in touch with us.
You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Apr 30, 2021 | accounting, latest news, self assessment, selfemployed, tax
The changes to off-payroll working (IR35) rules for the private sector have been implemented from 6th April 2021. The new rules will significantly impact contractors working through a Personal Service Company, Recruitment Agencies, all large and medium-sized end-clients in the private sector and all organisations in the public sector.
What is IR35?
IR35 is tax anti-avoidance legislation, officially called Intermediaries Legislation and referred to as ‘off-payroll working’.
IR35 was designed to combat tax avoidance where workers supply their services to clients via an intermediary, such as a limited company. The relationship would be deemed employer-employee if without the intermediary.
What is the purpose of IR35?
IR35 is designed to identify ‘deemed employees’, who are contractors working at a company in the same way that full-time employees do.
The goal of the legislation is to legally define what a contractor is and how they differ from an actual employee. IR35 ensures those who are, for all intents and purposes, ’employees’ are taxed accordingly.
Where IR35 applies, a contractor is required to pay a Deemed Employment Payment. This ensures the contractor pays the same amount of tax compared to a regular employee.
What are personal service companies (PSC)?
A personal service company (PSC) is a limited company established by a contractor to render their services to clients. It’s frequently the ‘intermediary’ in the context of IR35 (the off-payroll working rules).
When it comes to contracting work, many clients and agencies favour working with businesses rather than individuals (sole traders). Even in the event of hiring sole traders on short-term contracts, the relationship may point towards employer and employee, rather than client and contractor. The client may be liable for employment benefits, like sick pay and holiday pay.
The contractor pays him or herself for the work via a salary or dividends taken from the PSC. This is not fundamentally wrong unless the contractor is a disguised employee. Such a case is considered a form of tax avoidance.
Does IR35 apply to sole traders?
No, IR35 does not apply to sole traders. Contractors who are sole traders and not invoicing via a company are not affected by IR35. The self-employed pay tax and NI on their earnings in the same way that an employee does.
Who is affected by IR35?
You may be affected by IR35 if any of these apply to you:
- you are a worker who provides services through an intermediary
- you are a client who receives services from workers through an intermediary
- you are an agency providing workers’ services through their intermediary
If the IR35 rules apply, employee National Insurance contributions and Income Tax must be subtracted from compensations and paid to HMRC.
Apprenticeship Levy, if applicable, must also be paid to HMRC.
What is changing for IR35?
When first introduced, the IR35 legislation said the PSC had to self-identify as a personal service company. It was down to the contractor to examine their working conditions, determine their employment status and take action should they find they are a disguised employee.
In 2017, the IR35 requirements were expanded to employers for the first time, although just in the public sector. Public sector employers have to evaluate if the contractor was a disguised employee and if so pay them respectively, by deducting employee tax and National Insurance contributions (NICs) at source, via PAYE, including the employer NICs too, as with any other worker.
This obligation to identify and correctly pay the relevant taxes on disguised employee contractors will be extended to medium and large-sized private businesses in April 2021.
What do the IR35 changes mean for contractors?
Expanding the rules from public sector employers to include the private sector means that many more contractors will be affected.
Some businesses will find themselves with a notable additional bureaucratic strain and financial burden when contractors have to be transferred to their payroll and employer NICs added to the expense of hiring contractors.
Likely affected businesses may refuse to hire contractors after April 2021 in response to the IR35 expansion. Contractors may be expected to join the payroll as an employee, or provide their services elsewhere.
Who do the IR35 rules apply to?
As of April 2021, IR35 places the legislative requirements on medium and large private companies. The rules for identifying the size of a business are based on those set out in the Companies Act 2006, section 382.
In general, a limited company is considered medium or large if two or more of the following apply in a given financial period, and also applied for the prior period:
Annual turnover is more than £10.2m
The balance sheet total is more than £5.1m
The average number of employees is more than 50.
What does my business have to do to comply with the new IR35 rules?
If your business is public or a medium or large private employer as of April 2021 you will have to:
Determine the employment status of each contracted worker who works via an intermediary ensuring that they ‘take reasonable care’ in making the determination. HMRC’s Check Employment Status for Tax (CEST) tool can be used for this.
Once the status has been defined, provide a Status Determination Statement (SDS). They must share the statement and reasons for the determination with the party with which they contract as well as the off-payroll worker.
Keep detailed records of contractors and their SDSs, including the grounds for the determination and fees paid. This will require creating a system to securely keep records.
Have processes in place to deal with any disputes that arise from such determinations. Disagreements may arise from the contractor or the company paying the contractor (the agency recruiting and paying the contractor on behalf of the business, for example). There is no time limit for challenging.
Establish if you are the ‘fee payer’ – because this directly impacts who has to run the payroll for the off-payroll contractor(s). See “What are the new IR35 requirements if I use an agency to hire contractors?” below.
Small companies don’t need to do anything because they are not affected by the new IR35 requirements unless they work as contractors.
Contractors should persist in making their own determinations about the nature of the engagement with the company they work for. Working for companies that aren’t covered by the IR35 changes, such as a small private entity, will require the contractor to self-determine if IR35 includes them.
How do I pay a contractor who turns out to be a deemed employee under the new IR35 requirements?
If a contractor is classified as a deemed employee, the fee payer has some distinct requirements when it comes to processing the payment.
The fee payer is accountable for calculating the PAYE, employee and employer NICs (and the apprenticeship levy, if applicable).
The fee payer must report any payments to the PSC, or to the agency the contract is with. A Full Payment Submission (FPS) must be made through the Real-Time Information (RTI) system listing the taxes and National Insurance contributions deducted. A payslip can be issued to the deemed employee, or this tax and NIC information can be listed on a remittance notice.
The fee payer will be accountable for issuing an end of year taxable summary form (P60) or end of employment taxable summary form (P45).
The fee payer must not deduct student loan repayments, or auto-enrol the worker, or make statutory payments (SSP, SMP, etc). The PSC should do this as required.
It’s good practice to always provide a payslip and inform the PSC how much tax has been deducted so they can reconcile, but these aren’t currently demanded by HMRC.
RTI has a new off-payroll worker flag – OPW (off-payroll worker) – that must be used for deemed employees. Fee payers can use the same payroll as for other employees, and simply deploy the OPW flag as required, or run a separate payroll where all employees have the OPW flag set.
There’s no obligation to add deemed employees to your existing payroll unless this serves your business. However, you will have to create a new payroll if the payments are not otherwise reported under your existing PAYE scheme.
The likely tax code will be BR because the deemed employee is considered to have primary employment with their own intermediary.
How does IR35 affect construction workers?
Sub-contractors could be affected by IR35 if they operate as an incorporated business. IR35 takes priority over the Construction Industry Scheme (CIS) requirements. In other words, medium or large construction contractors coming within the new IR35 requirements should always consider incorporated sub-contractors as deemed employees if the IR35 rules outlined above apply. They should therefore not apply the CIS.
Guidance for businesses adopting the new IR35 requirements
- Start the preparation process as early as possible if IR35 applies
- Review your current workforce including current contractor engagements as well as your supply chain
- Decide how the status determinations will be made
We do not advise the blanket approach certain organisations have decided to adopt. Each status determination statement should be separate for each individual and engagement.
IR35: What now?
The government is reviewing IR35 in light of this lack of understanding. If nothing else, the accounting impact for medium and large businesses is going to be significant – those paying the contractor will have to examine their double-entry and accounting processes.
Do you have questions about how IR35 might affect you as a business or as a contractor?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Mar 10, 2021 | accounting
The 2021 Budget was announced by Rishi Sunak on 3 March. Measures announced in the Budget included the extension of furlough and Covid financial support, while the Treasury keeps business rates suspended for a range of sectors.
What the 2021 Budget means for business
The chancellor has announced extensions to key elements of the Covid-19 economic support package as well as efforts to jumpstart business investment. The prospect of a higher corporation tax was not welcomed by big companies, however, it does not come into force until April 2023 and small businesses will remain at 19%.
Extension of Furlough until September with grant reduction from July
The Coronavirus Job Retention Scheme has been extended until 30 September 2021 and the level of grant available to employers under the scheme will stay the same until 30 June 2021.
From 1 July 2021, the level of grant will be reduced to 70% in July, and 60% in August and September. Employers will be asked to contribute towards the cost of their furloughed employees’ wages. To be eligible for the grant employers must continue to pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.
Corporation tax hike exempts small businesses
Corporation tax is set to increase from April 2023 to 25% from the current 19%. However, there is good news for small businesses.
The corporation tax rate for small business profits under £50,000, which represents 70% of actively trading companies, will remain at 19%, and there will be tapered relief for businesses with profits under £250,000. Only businesses with profits greater than £250,000 will be taxed at the full 25% rate.
R&D tax credits for SMEs will be capped at £20,000 in one year (plus three times a company’s total PAYE and NICs liability).
Restart grants to help the high street
Grants will be made available in England, worth up to £6,000 per premises for non-essential retail businesses, and up to £18,000 per premises for hospitality and other sectors that are opening later this year. The Restart grants are administered by local councils. The scheme replaces the monthly Local Restrictions Support Grant (Closed) and Local Restrictions Support Grant (Open) programmes, which will both close at the end of March.
Business rate updates: Retail, hospitality and leisure properties in England will continue to receive 100% business rates relief until the end of June. This will be followed by two-thirds relief for the period to the end of March 2022, with some caveats. 50,000 retail, hospitality and leisure properties in England will pay no business rates for three months from 1 April when combined with Small Business Rates Relief, with further relief available for the rest of the year.
Help to grow scheme for digital and management tools
‘Help to Grow: Management’ is a new UK-wide management programme to upskill SME leaders, 90% subsidised by the government.
‘Help to Grow: Digital’ will allow SMEs to get a discount of up to 50% on the costs of approved software, worth up to £5,000, alongside free impartial advice.
Both schemes apply to businesses with between 5 and 249 employees which are registered at Companies House and trading for more than 12 months.
With the cost of software being reduced drastically over the past couple of years by a series of SaaS solutions, Help to Grow: Digital is, however, not expected to be highly impactful for a wide range of sectors.
For more information about Help to Grow, including management courses and software to manage finances and accounting get in touch with us via email at info@acuaccounts.com or by calling us directly on 0203 907 9027.
End of BBL and CBILs and new Recovery Loan Scheme
A new UK-wide Recovery Loan Scheme is set to make available loans of between £25,001 and £10 million, and asset and invoice finance between £1,000 and £10 million, to help businesses of all sizes through the next stage of recovery.
The Recovery Loan Scheme is scheduled to run until 31 December 2021, subject to review.
Details of the Recovery Loan Scheme include:
- Up to £10m facility per business: The maximum value of a facility provided under the scheme will be £10m per business. Minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts
- Turnover limit: There will be no turnover restriction for businesses accessing the scheme
- Wide range of products: Businesses will be able to choose from a variety of products: term loans, overdrafts, asset finance and invoice finance facilities
- Term length: Term loans and asset finance facilities are available for up to six years, with overdrafts and invoice finance available for up to three years
- Interest and fees to be paid by the business from the outset: Businesses will be required to meet the costs of interest payments and any fees associated with the facility
- Access to multiple schemes: Businesses which have taken out a CBILS, CLBILS or BBLS facility will be able to access the new scheme, although the maximum they are allowed to borrow will depend on their lender’s assessment and scheme requirements
- Credit checks for all applicants: Lenders will be required to undertake credit and fraud checks for all applicants. When making their assessment, lenders may overlook concerns over short-to-medium term performance owing to the pandemic. The checks and approach may vary between lenders
Incentives for capital investment
Between April and March 2023, companies investing in qualifying new plant and machinery assets will be able to claim a 130% super-deduction capital allowance on qualifying plant and machinery investments, and a 50% first-year allowance for qualifying special rate assets. See here for details.
Apprenticeships and Traineeships
Apprenticeships: The government will extend and increase payments made to employers in England which hire new apprentices. Employers who hire a new apprentice between April and September will receive £3,000 per new hire.
Traineeships: Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
What the 2021 Budget means for the self-employed
Self-Employment Income Support Scheme (SEISS) extended
Chancellor Rishi Sunak has confirmed that two more rounds of grants will be made available for the self-employed via the Self-Employment Income Support Scheme (SEISS). The new grants will finally be based on tax returns for 2019-2020 allowing hundreds of thousands of the newly self-employed, who were ineligible until now, to be able to claim support.
According to the government, 600,000 more people who have filed a tax return for 2019-20 will be able to claim for the first time. The online claims service for the fourth grant will be available from late April 2021. The fourth SEISS grant will be set at 80% of 3 months’ average trading profits, paid out in a single instalment, capped at £7,500. For more information about the fourth grant visit the government website or get in touch with us via email at info@acuaccounts.com or by calling us directly on 0203 907 9027.
Reactions to the Budget
The Federation of Small Businesses (FSB) reaction to the budget:
Responding to the Chancellor’s Budget Speech in the House of Commons, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said:
“This Budget will help many small firms with their final push through to September, but there is little here to aid job creation or help people return to work. Ensuring the newly self-employed can now access support marks a big step forward – we’re pleased our campaign has been heard – but directors, who appear to have been left out yet again, will be incredibly disappointed.
Support measures should continually evolve. The challenge over the summer, and leading up to the autumn statement, will be to switch focus from survival to growth. We look forward to working with policymakers on that progression.”
Association of Independent Professionals and the Self-Employed (IPSE) reaction to the budget:
IPSE has welcomed the announcement by the Chancellor that people who were newly self-employed in 2019/2020 will be able to receive the fourth SEISS grant as a big step in the right direction. This group had previously been excluded because the government was concerned that without a full annual tax return, there would be too great a risk of fraud. Now, however, for people who filed a return before 2nd March, this is no longer a worry. This was one of IPSE’s key asks in their Budget submission, and it is very good news government took this up.
“It is troubling, however, that the government still have not taken up any of the various proposals presented to them to get support to sole directors of limited companies – a group of, by our estimate, approximately 700,000. We are continuing to push hard on this.”
Campaign Group ExcludedUK reaction to the budget:
“ExcludedUK welcomes the extension of SEISS with the inclusion of 2019/2020 tax returns in the calculation of trading profits, for which we have been campaigning vigorously over the last year. However, we know that at least three million taxpayers and households have been affected and even with this further support it does not account for this last year of decimated incomes and businesses for those who are now included, for whom this may be too little too late.
“The majority of those who have been shut out of meaningful support thus far will continue to be excluded from the schemes and so many have been plunged into debt and poverty, often in the hardest-hit industries and supply chains.”
Do you have questions about what the Budget 2021 means for you and your business?
Have a look at our services and feel free to get in touch with us. You can book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
by Acuaccounts | Feb 23, 2021 | accounting, covid19, latest news, lockdown
Navigating Brexit and lockdown easing may be a challenge for a lot of businesses, especially small businesses, over the next few months.
The roadmap to easing lockdown restrictions
On February 22nd 2021, the Prime Minister set out the roadmap for easing lockdown restrictions across England.
The roadmap outlines four steps for easing restrictions. At each step, the government will evaluate the data to assess the impact of previous steps.
Businesses are advised to bear in mind that the easing of restrictions is subject to change, dependent on whether the vaccine deployment programme continues successfully. Evidence shows vaccines are sufficiently effective in reducing hospitalisations and deaths in those vaccinated, and infection rates do not risk a surge in hospitalisations which would put unsustainable pressure on the NHS. The current assessment of the risks is not fundamentally changed by new Variants of Concern.
Step 1 from March 8th and March 29th:
- From March 8th all children and students will return to face to face education in schools and colleges. The Stay at Home requirement will remain, but people can leave home for recreation outdoors such as a coffee or picnic with their household or support bubble, or with one person outside their household.
- From March 29th outdoor gatherings of either 6 people or 2 households will be allowed, providing greater flexibility for families to see each other. This includes private gardens. Outdoor sports facilities, such as tennis and basketball courts, will be allowed to reopen, and people can take part in informally organised outdoor sports. At this point, the Stay at Home order will end, although many lockdown restrictions will remain. People however should continue to work from home where possible, and overseas travel remains mostly banned.
Step 2, no earlier than 12th April:
- Non-essential retail, personal care premises, such as hairdressers and nail salons, and public buildings, such as libraries and community centres, will reopen.
- Most outdoor attractions and settings, including zoos, and theme parks, will also reopen although wider social contact rules will apply in these settings to prevent indoor mixing between different households. Drive-in cinemas and drive-in performances will also be permitted.
- Indoor leisure facilities, such as gyms and swimming pools, will also reopen – but only for use by people on their own or with their household.
- Hospitality venues can serve people outdoors only. There will be no need for customers to order a substantial meal with alcohol, and no curfew – although customers must order, eat and drink while seated.
- Self-contained accommodation, such as holiday lets, where indoor facilities are not shared with other households, can also reopen.
- Funerals can continue with up to 30 people, and the numbers able to attend weddings, receptions and commemorative events such as wakes will rise to 15 (from 6).
Step 3, no earlier than 17th May:
- Outdoors, most social contact rules will be lifted – although gatherings of over 30 people will remain illegal.
- Outdoor performances such as outdoor cinemas and outdoor theatres can reopen. Indoors, the rule of 6 or 2 households will apply – although we will keep under review whether it is safe to increase this.
- Indoor hospitality, entertainment venues such as cinemas and soft play areas, the rest of the accommodation sector, and indoor adult group sports and exercise classes will also reopen.
- Larger performances and sporting events in indoor venues with a capacity of 1,000 people or half-full (whichever is lower) will also be allowed, as will those in outdoor venues with a capacity of 4,000 people or half-full (whichever is lower).
- In the largest outdoor seated venues where crowds can spread out, up to 10,000 people will be able to attend (or a quarter-full, whichever is lower).
- Up to 30 people will be able to attend weddings, receptions and wakes, as well as funerals. Other life events that will be permitted include bar mitzvahs and christenings.
Step 4, no earlier than 21st June:
- It is hoped all legal limits on social contact can be removed.
- The government hopes to reopen nightclubs and lift restrictions on large events and performances that apply in Step 3.
- This will also guide decisions on whether potentially all limits can be removed on weddings and other life events.
The roadmap can be found in full here. For more information about the easing of lockdown visit https://www.gov.uk/government/news/prime-minister-sets-out-roadmap-to-cautiously-ease-lockdown-restrictions
Face to face businesses especially should start taking bookings and reservations now for April 12th onwards, advising customers that bookings are not set in stone and subject to change. The Government will provide a further week’s notice to individuals and businesses before making changes.
Export and VAT challenges of Brexit
Now that the Brexit transition period has ended, businesses need to be aware of new trade rules and taxes. As of 1 January 2021, the UK government has changed how it collects VAT (Value Added Tax) as well as additional import duties on all overseas goods.
If you rely on European and non-European trade as part of your business, we recommend you to reach out to us at info@acuaccounts.com or call us directly on 0203 907 9027 for a Brexit consultation for small businesses to avoid an unexpected tax bill.
How will Brexit affect your business?
The UK-EU trade deal indicates companies can no longer trade freely under the previous EU VAT and customs agreements. New taxes and rules apply.
This might affect your business if you:
- import/export goods or services from/to the EU
- send items through the post
- sell online goods that cost £135 and under
Import charges in the UK – what has changed?
The UK now operates under different import charges from EU tariffs. Charges vary depending on the goods you’re importing and can be found on gov.uk.
New VAT rules
If your business imports goods from the European Union, speak to your supply chain and make sure all suppliers are set up accurately for UK tax.
Under the new VAT rules, EU sellers should be charging UK VAT at the point of sale, rather than HMRC collecting tax when the goods are imported into the country.
EU businesses aspiring to trade with the UK need to be registered with HMRC. However, some companies have been choosing to avoid the additional admin, which is causing surprise tax bills at the point of delivery.
- for goods up to £135 – the VAT rate ranges between 0 and 20 per cent depending on the item
- for goods over £135 – goods are subject to a 0 to 25 per cent import duty, plus UK VAT (usually 20 per cent), which again should be charged when you’re buying the item
The VAT costs can be passed on to the end-user (your customer) as a reverse charge when you buy from a seller in the EU. This applies exclusively to goods bought to be sold in the UK, rather than to equipment or items needed to run your business for example.
To use the VAT reverse charge:
- your business needs to be VAT registered
- your supplier in the EU needs to be registered with HMRC
- you have to communicate your VAT number to the EU seller when you buy the goods
Extra paperwork and courier fees
If your business has been trading with Europe, additional paperwork and fees apply when importing and exporting goods:
EORI number – businesses moving goods between Great Britain and the EU need an EORI number that starts with GB. To export or import goods to Northern Ireland, your business will need a number that starts with XI. Businesses can apply for an EORI number with HMRC online.
Courier fees – couriers may charge additional fees to businesses buying from EU retailers to cover the additional admin efforts when VAT isn’t applied by the seller. Royal Mail is currently charging £8, UPS is charging £11.50, and Mastercard has increased fees for credit and debit cards.
Licences and certificates – rules apply around importing certain goods needing a certificate, for example, a £150 health certificate for food deliveries.
Sending items through the post – businesses need to fill out customs declaration forms if they’re sending goods to customers outside the UK.
Delaying customs duty on imports
To help businesses adapt to the recent changes, the government allows delaying customs payments until 30 June 2021.
Businesses that regularly import goods as part of their operation, can choose to pay customs charges monthly by applying for a duty deferment account on the government website.
And what about customs duty on exports?
In addition to VAT, businesses need to pay customs duty on items sent outside of the UK. The courier company will provide the details when delivery is arranged.
How to register for VAT
Businesses can register for VAT in the UK online via the government website. If your company is exporting goods to countries within the EU, you may need to register for VAT in every country on your export list. More information is available on the European Commission website.
Do you have questions about VAT, customs and reopening? Have a look at our services and feel free to get in touch with us to book a consultation at info@acuaccounts.com or call us directly on 0203 907 9027.
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