Accountancy News August 2021
Hayvenhursts Accountants have compiled the most relevant news stories relating to accounting and business that were published in August 2021 including incorrect tax calculations being sent to tax payers.
Furlough Support Decreasing Risks Huge Job Losses
As of 1st October 2021, the UK’s Furlough Support Scheme will cease. It has been predicted by the British Chambers of Commerce (BCC) that one in five businesses are likely to have to make colleagues redundant in response to the end of the scheme and the progressive changes between now and then.
- From 1st July 2021, the government paid 70% of wages up to a maximum cap of £2,187.50 for the hours the employee is on furlough.
- From 1st August 2021, the government will pay 60% of wages up to a maximum cap of £1,875 for the hours the employee is on furlough.
- During the furlough period, employers will top up employees’ wages so they receive 80% of wages (up to £2,500). The caps depend on how many hours you don’t work.
- Employer National Insurance contributions and employer pension contributions are still required to be paid and these cannot be claimed for.
- From 1st October 2021 the Furlough Support Scheme will cease completely
The Treasury’s latest median forecast predicts there will be a rise in unemployment of around 5.4% between October and December 2021 and the New Economic Foundation says that the end of the furlough scheme could result in an additional 250,000 people out of work in the UK.
A BCC survey has also reported that one-quarter of businesses will look to reduce hours or move staff to part-time shifts to deal with the end of the furlough scheme which although not wholly positive it will mean that many people won’t lose their jobs completely.
The Government recently rejected furlough extension requests which the majority have come from the travel sector.
Furlough Scheme Numbers:
May 2021 – 2.4m
June 2021 – 1.9m
July/August 2021 – 1.1 and 1.6m
Apprenticeship Funding Scheme
If you are a business needing to employ more staff a “new, flexible” apprenticeship funding scheme was revealed on 3rd August which will help you financially. The government announced that businesses will be able to benefit from a new £7 million fund to create “new, flexible” apprenticeships.
A select number of agencies will set up new “Flexi-job apprenticeships” which will allow apprentices to work for several employers for a range of assignments over a year.
Recently the Department for Digital, Culture, Media and Sport announced an investment of £100,000 to boost film and TV apprenticeships. They have reported that the kickstart scheme has filled over 36,000 roles out of the 100,000 that are currently available.
Gillian Keegan – Minister for Apprenticeships and Skills:
“We want to build an apprenticeship system that enables everyone to get the experience and knowledge they require to get the job they want while ensuring employers have a diverse talent pipeline to meet their skills needs.”
P800 Calculations Incorrect by HMRC
It has been reported that HMRC is sending out P800 tax calculations to taxpayers and they do not adhere to the legal requirement to apply allowances in the taxpayer’s favour.
Many experts, including tax experts, professional bodies and software developers reported cases where P800 assessments differed from usual self-assessment (SA) calculations.
In response to questions from software developers, HMRC said it was using different methods to calculate P800s and liabilities under SA – one operated by the PAYE team and one by the SA team based on its specification documentation
According to the department, the PAYE team at HMRC that is responsible for the P800 process is aware that this is not always in the best interests of taxpayers, as stipulated in legislation, but is not in a position to update its logic.
HMRC has a review process in place to find affected calculations and will recalculate them manually, it added.
Absolute Software director and tax lecturer Tim Good uncovered the discrepancies after taxpayers asked him to review their P800 calculations. He traced the issue back to how HMRC’s default sequence for applying the personal allowance.
“Legislation has always required personal allowances and relief to be allocated in the most favourable way to the taxpayer,” Good said. “Until we discovered it, HMRC’s calculator allocated them using the same hierarchy as the allocation to the rate band: non-savings income; savings income; and dividends.
“The Revenue’s use of that hierarchy worked until George Osborne introduced the personal savings rate band, personal savings allowance and dividend income allowance in 2016. Those tweaks made the shortcut allocation inaccurate.”
Tim Good noted: It has taken HMRC until 2020/21 to get the specification right, which is the current year for which accountants are now filing. But now it appears HMRC is using a different program to calculate the PAYE tax that displays the sort of problem that goes back to those 2016-17 complications.
“I guess they didn’t get the memo about the updated calculation. I don’t care if the errors are to the Revenue’s or the taxpayers’ advantage. All I’m concerned with is let’s just get the calculation right.”
Rebecca Cave, AccountingWEB’s tax editor consultant, reiterated the call for independent oversight on the tax software specifications in light of the failure of HMRC’s tax computations to follow the logic.
“HMRC cannot be bothered to correct its software, so people have been overpaying tax for years. Even if it’s £10 or £100, it’s still not what the law says,” she said. “All of this could be avoided if there was an independent and competent third party that checked HMRC’s specification and spreadsheet against the tax law before it was released to developers.”
Forbes Computer founder David Forbes linked the P800 issue directly to MTD for income tax (MTD for ITSA), which becomes mandatory in 2023. “At the moment HMRC gives you a tax return and the accountant does a calculation with their software. HMRC does the same and checks for any discrepancies. Come MTD ITSA, our software will no longer calculate tax. HMRC will do that and the software will do an API call on the result. There won’t that double-check.”
Corporate Insolvencies on the Rise
Coronavirus has affected every area of our lives in the last 18 months and now more than ever it is driving an increase in company insolvencies.
The latest figures from the Insolvency Service have shown that in the first 6 months of 2021 there were 5,869 corporate insolvencies and unfortunately it seems this figure is on the rise.
As Colin Haig, President of insolvency and restructuring trade body R3 and head of restructuring at Azets explains, “There were just over 4,600 fewer corporate insolvencies between 2019 and 2020, and both the first and second quarter’s corporate insolvency figures for this year are much lower than in 2019.
“Based on this, we estimate there have been around 7,500 fewer corporate insolvencies over the last 18 months than we would normally see. This is largely because of the government support measures, which have been a lifeline for many businesses. But we expect corporate insolvencies to increase as they wind down.”
The furlough scheme ends as of 30th September this year and there is the prospect of the Covid-19 support loan repayments looming for around 1.7m businesses in the UK with the need for business support to continue over the next 12 months at least.
Hayvenhurst Accountancy Services can support you at this time and have the skills and experience to review the financial health of your business and offer you advice for both the short and long term. Don’t leave it too late, there could be lots of options available and our experienced team are on hand to help. It is a fact that the earlier you intervene when your business is going into decline, the better the chances of bringing it back to health.
Here are some of the key strategies to think and act on if you are concerned about your businesses financials.
1. Increase the cash flow in your business
You need cash to both survive and grow and a business’s downfall is normally down to running out of cash as it is then deemed as insolvent as unable to pay its bills when they are due.
- Review which customers owe you money and tighten up your credit control and collection processes
- Review better payment terms with your customers
- Enforce payment terms with your customers and use a credit control business to support you with this if you need to
- Offer your customers prompt-payment discounts
- Enforce late payment terms for customers – all invoices not paid within your payment terms will be subject to late payment interest and compensation charges under the Late Payment of Commercial Debts 1988 Act.
- Write strict payment terms into any new customer contracts
2. Use factoring or invoice discounting
Use invoice finance techniques such as factoring or discounting services. Hayvenhurst Accountancy Services can help and advise you on both of these options.
3. Review all suppliers and their costs with a view to reduce or change
4. Negotiate better payment terms from suppliers
5. Reduce your stock levels
6. Lease assets rather than purchase directly
7. Review all operational and stock costs and reduce
8. Review and improve all processes to achieve better efficiencies to achieve greater profit
9. Review structure, roles and responsibilities within your business to ensure they are achieving what is required
10. Request that every department conducts a review of their budget, costs and processes and set a target to reduce costs and outgoings by a percentage and review all processes as a way of doing this
Capital Gains Tax Receipts – Record High of £9.9bn in 2019/20
The amount of money HMRC collected from capital gains tax (CGT) receipts hit a record high in the tax year 2019/20, bringing in £9.94 billion, figures from HMRC show.
Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. It is the gain you make that’s taxed, not the amount of money you receive.
As an example:
You bought a painting for £5,000 and sold it later for £25,000. This means you made a gain of £20,000 (£25,000 minus £5,000).
Some assets are tax-free. You also do not have to pay Capital Gains Tax if all your gains in a year are under your tax-free allowance.
Receipts were £243 million higher than 2018/19 when £9.7bn was collected, and higher too than in 2017/18, when £9bn was collected.
You can find out more about Capital Gains Tax here: https://www.gov.uk/capital-gains-tax
The number of taxpayers paying CGT decreased for the 2nd year in a row, however, from 288,000 in 2017/18 to 265,000 in 2019/20, indicating that taxpayers pay more in CGT on average than they did in previous years.
A small number of taxpayers accounted for most of the CGT payments. In the 2019/20 tax year, 41% of tax came from those who made gains of £5m or more, a group representing less than 1% of taxpayers.
Based on early estimates, HMRC expects to collect in the 2020/21 tax year £10.61bn, although HMRC has yet to confirm the figure.
Over the next five years, CGT tax receipts are expected to rise even further and are predicted to reach £14.4bn in 2025/26, based on estimates from the Government.
Government Live Events Insurance Scheme Worth £750m
The government has listened to the live events sector and has introduced a Government-backed insurance scheme worth over £750 million to support planning for future events. The scheme will be available for event organisers from September 2021 through to the end of September 2022.,
Chancellor Rishi Sunak has announced that as part of the Government’s ‘plan for jobs’, the live events reinsurance scheme will see the Government act as a ‘reinsurer’, where they will step in with a guarantee to make sure insurers can offer the products events companies need.
While the Treasury said the UK “can learn to live with COVID-19 without the need for strict economic social restrictions”, the scheme will cover costs of live events cancellation if it were legally unable to happen “due to Government COVID-19 restrictions”.
Culture secretary Oliver Dowden said:
“We’ve been here for live events throughout the pandemic with billions of pounds of rescue funding.
“Today is an important next step as we develop live events insurance to give them the confidence they need to plan for a brighter future.”
Employers Fined for Not Paying Minimum Wage
According to the Government, 191 employers underpaid their workers by £2.1 million between 2011 and 2018. The list includes some “major household names”.
Over 34,000 employees were not paid at least the minimum wage by the named employers, who have now been fined an additional £3.2m for the underpayment.
Business minister Paul Scully said:
“Employers that short-change workers won’t get off lightly”.
The Government said not all underpayments were intentional but emphasised that it is the employers’ responsibility to follow the law.
Employers underpaid workers in the following ways:
- 47% of workers’ wages were wrongfully deducted, including for uniforms and expenses
- 30% of workers were not paid for all the hours they worked
- 19% did not pay apprentices the correct rate.
Bryan Sanderson, chair of the Low Pay Commission, said:
“These are very difficult times for all workers, particularly those on low pay who are often undertaking critical tasks in a variety of key sectors including care.
“The minimum wage provides a crucial level of support and compliance is essential for the benefit of both the recipients and our society as a whole.”
Company’s Converting their Fleet Vehicles to Electric or Low Emission
It is a coveted benefit-in-kind (BIK) to offer employees a company car, and the incentives to go electric cannot be ignored.
What are the benefits of electric cars?
- They help reduce carbon emissions
- Our infrastructure is constantly improving
- They are significantly cheaper to run
- There are significant tax saving for employers and employees
According to comparethemarket.com, electric cars cost £1,091 a year in running costs, compared to £2,062 for their petrol counterparts.
Furthermore, employees can receive a much lower reimbursement rate for business-related trips when they use an electric vehicle at a rate of only 4p per mile.
There are Government incentives for the way zero-emissions vehicles are treated from a company tax perspective.
Here’s why for those businesses who are considering making the switch to a fleet of electric vehicles:
Plug-in Car Grant
- The plug-in grant is worth £2,500 for electric vehicles and worth up to £35,000 in 2021/22
- This scheme is open until 5 April 2023
- It provides a discount on the price of a wide range of brand new electric and low-emission vehicles, including cars, vans, trucks, and more
- The Government gives the grant to vehicle dealerships or manufacturers, who then use this to deduct the value of the grant from the purchase price
Not all low-emission vehicles will qualify for a grant. The program is open only to government-approved vehicles.
Workplace Charging Scheme
The workplace charging scheme is designed to help companies to install an electric charging infrastructure within their business.
A portion of the upfront expenses associated with charging electric vehicles will be covered by the scheme.
Support is available for qualifying businesses, charities, and government-sponsored organisations up to:
- 75% of purchase and installation costs
- a maximum of £350 can be paid for each charging socket
- a maximum of 40 across all sites for each applicant.
- BIK is assessed and subject to tax at the employee’s marginal rate if an employee receives a company car.
- Companies who provide company cars are assessed for Class 1A National Insurance contributions on the BIK value.
- The list price, CO2 emissions, and electric range of the company car determine the tax responsibilities of the employer and their employees.
- In general, the greater the electric range and the lower the CO2 emissions, the lower the tax bill.
These are all great reasons to change your company’s fleet of vehicles to electric or part electric vehicles.
Some information in this article has been sourced from: https://www.accountingweb.co.uk/
Why Choose Hayvenhursts Accountancy Services?
We offer a personal and professional service focused on the needs of each individual customer, business or family across South Wales and the whole of the UK.
Our service and reputation is built on our ability to understand your business plans for the short, medium and long term to ensure we are by your side and can support you when you need us. We have the expertise and experience to refine and distil key business decisions and possible outcomes and are always thinking, advising and refining your tax position as needed.
We take the time to work with you to understand your business, its needs, your needs and your business plans, and we offer the personal services of a local accountant with the infrastructure and experience of a large national accountancy practice.
Let us help you with your business planning, business decisions, payroll, business recovery and much more. Our team of experts are picked to match you and your business requirements.
Contact us today to find out how we can help you drive your business forward.
- Accounts Preparation
- Bank Accounts
- Book-keeping Health Check
- Business Growth
- Business Health Check
- Business Plans
- Business Valuations
- Commercial Property
- Company Formation
- Company Secretarial
- Contractors and IR35
- Furlough Advice
- Inheritance Tax Planning
- Management Accounts & Information
- Management Systems
- Pension Tax Relief
- PAYE Health Check
- Payroll & PAYE Returns
- Personal Tax
- Property Tax
- Raising Finance
- Reduce your SRA Audit Costs
- Registered Office
- Strategic Planning
- Tax Disputes
- Tax Enquiries & investigations
- Tax Planning
- Tax Returns & Self-Assessment
- VAT Deferrals
- VAT Temporary Reductions
- VAT Health Check
- VAT Planning & Disputes
- VAT Registration
- VAT Returns