18th December 2020 – Hillmans Weekly Update
Below I have summarised all the main tax related updates we have seen this week.
- Furlough scheme extended for another month
- New Penalties for Over claimed Grants
- Christmas Gifts to Charity
- Business evictions ban extended until March
- What Hope For The Recovery?
If you have any queries about this week’s content, or if you need any assistance please do not hesitate to contact me.
I hope you have a good weekend.
Stay safe and well.
Steven Hillman BSc (Hons) ACA
Tel: 01934 444100
Furlough scheme extended for another month
Chancellor Rishi Sunak has yesterday extended the Governments furlough scheme for another month until the end of April 2021.
The Government will continue to pay up to 80% of an employees wage who has been furloughed.
Bounce Back Loan Scheme
The Chancellor also confirmed the Government guaranteed COVID-19 business loan schemes would be extended until the end of March 2021.
Finally the chancellor has also confirmed the next budget would take place on 3rd March 2021.
New Penalties for Over claimed Grants
HMRC have announced that they will be imposing penalties of up to 100% of the amounts over claimed on CJRS, SEISS and Eat Out to Help Out Grants.
The penalties depend on whether or not the over claim is the result of a deliberate error and whether or not the disclosure was prompted by HMRC. The penalty may be reduced where the taxpayer assists HMRC in correcting the error.
Many over claims may be the result of careless errors or a misinterpretation of the rules which have changed many times in the last 9 months so we hope that HMRC will apply the rules with a light touch and focus on those that have abused these schemes.
We understand that HMRC are writing to 4,000 catering establishments that they suspect may have over claimed under the “Eat out to help out” scheme that ran in August. Traders are being asked to check their claims and respond within 60 days or face an HMRC compliance check.
Christmas Gifts to Charity
Christmas is a time for giving. This often extends beyond family and friends to charity donations. Where possible taxpayers should “Gift Aid” any payments to charity to provide additional benefit to the charity. Higher rate taxpayers obtain additional tax relief on the grossed up amount donated.
For example, where an individual makes a £20 cash donation to charity the charity is able to reclaim a further £5 from HMRC making a gross gift of £25. Where the individual is a 40% higher rate taxpayer he or she is able to claim a further £5 tax relief under self-assessment, reducing the net cost of their donation to £15.
Note that the donor is required to make a declaration that they are a UK taxpayer and those that have not suffered sufficient UK tax to support the Gift Aid amount will taxed on the shortfall.
Remember that Gift Aid does not just apply to gifts of cash. Many charity shops will now sell donated items on your behalf and are able to treat the sale proceeds as Gift Aided donations. It is also possible to gift quoted securities and land and buildings to charity and claim Gift Aid on the market value of those assets.
Business evictions ban extended until March
Business owners affected by the pandemic will be protected from eviction until the end of March 2021.
The Government states: “The majority of commercial landlords have shown flexibility, understanding and commitment to protect businesses during an exceptionally challenging time.
This final extension to protections from the threat of eviction will give landlords and tenants 3 months to come to an agreement on unpaid rent. The government is clear that where businesses can pay any or all of their rent, they should do so.”
Further guidance to support negotiations between landlords and tenants will also be published shortly.
What Hope For The Recovery?
The latest economic indicators for the UK economy from the Office for National Statistics (ONS) show 77% of UK businesses are currently trading, with 14% of trading business’ workforce on furlough leave. Their latest figures show that monthly gross domestic product (GDP) rose by 0.4% during October 2020 but was still 7.9% below February 2020 levels.
Output is expected to shrink again in November after England's second shutdown forced many businesses to close.
October 2020 saw the sixth consecutive month of growth, but the rate of recovery has slowed each month since the largest rise of 9.1% in June 2020. Across services, the monthly growth was driven by health, wholesale, retail and motor trades, and education, while accommodation and food and beverage service activities declined. Within manufacturing there was widespread growth, led by a rise of 6.8% in motor vehicle production. Monthly construction output growth slowed to 1.0% in October 2020, the sixth consecutive month of growth but the lowest rise in that time, with the level of construction output in October 2020 still 6.4% below the February 2020 level.
The figures are gradually improving although it is going to be a long haul. It is clear the hospitality, travel, arts and retail sectors are hardest hit and whilst there are regional grants to support them we believe these sectors will take the longer to recover.
A “No Deal” Brexit will have a negative impact on the economy in early 2021 and any recovery will take longer as a result. The Confederation of British Industry (CBI) predict the UK won’t get back to its pre-pandemic level until the end of 2022 and if there is “No Deal” this could take up to 2024.
Despite the pandemic and the possibility of “No Deal”, we still continue to be impressed with the resilience of our clients and how they have energetically repurposed or pivoted their businesses into new areas, products and services.
Please do talk to us about planning for 2021 and beyond, we have considerable experience in helping businesses project their figures forward and perform “What if” analysis to look at a range of scenarios.