27th November 2020 – Hillmans Weekly Update

27^th November 2020 – Hillmans Weekly Update

Below I have summarised all the main tax related updates we have seen this week.

• Summary of the Chancellor's Spending Review
• Brexit Update
• Reminder on Changes to Entrepreneurs' Relief
• Nightclubs, Dance Halls, or Adult Entertainment Businesses
• Bring Your Tax Affairs up to Date

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. 

Kind regards,

Steve

Steven Hillman BSc (Hons) ACA

Chartered Accountant

Tel: 01934 444100

https://www.hillmans.co.uk/covid-19-updates 

Summary of the Chancellor's Spending Review

In his spending review on Wednesday, the Chancellor Rishi Sunak said the "economic emergency" caused by Covid-19 has only just begun, as he warned the virus would mean lasting damage to growth and jobs.

Official forecasts now predict the biggest economic decline in 300 years.

The UK economy is expected to shrink by 11.3% this year and not return to its pre-Covid size until the end of 2022. Government borrowing will rise to its highest outside of wartime to deal with the economic impact.

The Office for Budget Responsibility (OBR) expects the number of unemployed people to increase up to 2.6 million by the middle of next year.

This means the unemployment rate will hit 7.5%, its highest level since the financial crisis in 2009.

Amongst other announcements made yesterday, the minimum wage - which has been rebranded as the National Living Wage - will increase by 2.2% - or 19p - to £8.91 an hour, with the rate extended to those aged 23 and over. Other rates were also increased. From April 2021, 16 and 17-year-olds will see their pay go up to £4.62 per hour, from £4.55 today.

The chancellor also announced a £4.3bn package of support to help the jobless get back into work.

So what does the spending review mean for businesses?

Clearly the situation is unprecedented in peace time.  The size of the cost of Covid-19 is huge and the Government will need to find more money from spending cuts and taxes just to balance revenues on a day to day basis.

So businesses can expect to see tax rises announced in the March 2021 budget.

There is already speculation that the government could raise money from changes to Capital Gains Tax, pensions relief or self-employment taxes. However this will not be sufficient to cover the Covid-19 costs so we predict there will be some corporation tax, income tax, VAT or national insurance increases.

The big decision for the government will be to decide when to stop the support to the recovering economy - and when to start strengthening public finances by tax rises. The extreme uncertainty underlines how difficult that decision could be.

Businesses should strengthen their cash flow management now ahead of the end of supports and tax changes.

The most important advice we can give our clients is to take some time to plan ahead to look at maximising revenue and minimising or streamlining operating costs. We can provide you with templates and forecasts to do this or we can help you prepare accurate forecasts based on a number of scenarios and do a “what if” exercise on your business.

Please talk to us about how we can help you make it through the next few months and preparing for recovery.

Brexit Update

There will be new rules for trade, travel and living in the UK and EU from 11.00pm on the 31 December 2020. Our aim is to provide you with information and resources to help you manage the change as smoothly as possible.

The UK Prime Minister, Boris Johnson, UK Chief negotiator David Frost and EU negotiator Michel Barnier continue to offer differing messages to the public about Brexit, some are positive, some ambivalent and occasionally negative remarks about the negotiations. It is hard to see through the comments made and whether we can take them at face value as, after all, there is a negotiation going on.

So what can we expect with less than 43 days to go?

Firstly, remain positive about the UK and EU reaching some kind of free trade deal or arrangement. It does not benefit anyone for the UK to leave the EU without a deal of some kind.

Secondly, if there is no deal, expect both parties to return to the negotiating table in the new year.

Whatever the outcome there are significant changes ahead for travel and trade.

Read our full Brexit update here: https://blog.hillmans.co.uk/2020/11/brexit-update.html 

Reminder on Changes to Entrepreneurs' Relief

In the March 2020 Budget it was announced that CGT Entrepreneurs’ relief (ER) was replaced by CGT Business Asset Disposal relief (BADR) for disposals on or after 11 March 2020.

It was also announced that the 10% CGT rate would only apply to the first £1 million of qualifying gains in the taxpayer’s lifetime and many business owners have misinterpreted how this limit applies.  Unfortunately claims under the predecessor ER need to be taken into consideration so if £750,000 ER has already been claimed only the first £250,000 of qualifying gains after 11 March 2020 would qualify for BADR. 

Any gains in excess of that amount would be taxed at normal CGT rates, currently 20% for higher rate taxpayers.

Nightclubs, Dance Halls, or Adult Entertainment Businesses

Businesses that have been required to close due to the national restrictions introduced in March 2020, and which have not been able to re-open, may be eligible for LSRG (Sector).

Read our blog post for more information: https://blog.hillmans.co.uk/2020/11/nightclubs-dance-halls-or-adult-entertainment-businesses.html 

Bring Your Tax Affairs up to Date

2018/19 tax returns can be amended by the taxpayer up until 31 January 2021. Where the omitted property income or gain relates to earlier tax years the taxpayer should consider disclosing using HMRC’s let property campaign.

If this affects you we can assist you in putting together the details that HMRC require.