Bounce Back Loans fraud

The companies who have borrowed money from banks under Bounce back Loans (BBL) without fulfilling the qualifying requirement could be facing trouble in the days to come.

https://www.gov.uk/government/news/fraudulent-companies-shut-down-after-abusing-covid-loan-support

This is based on our views on a recent interesting case where a haulage company based in the West Midlands have their operator licence revoked. This followed a public inquiry into the company by the traffic commissioner for the West Midlands.

The traffic commissioner found that almost all the company’s financial resources had been provided by a £50,000 Bounce Back loan in May 2020. The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing revenue, and seeing their cashflow disrupted, because of the COVID-19 pandemic. The scheme allowed qualifying small businesses to borrow between £2,000 and £50,000 with no fees or interest to pay for the first 12 months.

However, the company in question had a turnover that was far below the £200,000 necessary to qualify for such a loan – the maximum permissible being 25% of turnover or £50,000, whichever is the lower.

There were also issues with the company’s bank statements that were provided as evidence of financial standing. The company also had a very poor maintenance record and numerous tachograph infringements.

 

Please book a free consultation with us if you wish to know more about the implication.

VAT of second-hand goods

The VAT Margin scheme is where VAT is not charged in a conventional way.

Under the margin schemes, VAT is calculated on the profit margin i.e., on the difference between the cost of acquiring an item and its sale price rather than on the full selling price.

https://www.gov.uk/guidance/the-margin-and-global-accounting-scheme-vat-notice-718

Without the margin scheme the business would have to account for VAT on the full selling price of each item. If an item is sold for less than was paid for it, then no VAT is due on the sale.

The eligible goods are:

  • Second-hand goods – defined as tangible movable property that is suitable for further use as it is or after repair, other than works of art, collectors’ items, or antiques and other than precious metals or precious stones as defined.
  • Works of art and collectors’ items. The legal definition of works of art includes pictures, paintings, collages, and drawings executed by hand by the artist
  • Antiques. The legal definition of an antique is an item, other than a work of art or a collectors’ item, which is over one hundred years old.

If you are looking to know more about how the scheme works, please get in touch with us.

Tax on Properties owned by limited companies

The Annual Tax on Enveloped Dwellings (ATED) is a tax payable by limited companies that own interests in residential properties valued at more than £500,000.

https://www.gov.uk/government/publications/annual-tax-on-enveloped-dwellings-technical-guidance

These provisions affect certain companies, partnerships with company members and managers of collective investment schemes described in the legislation as NNPs.

To value a property, you can use a professional valuer or determine your own valuation. The valuation of the property must be in pounds sterling. Valuations must be on an open-market willing buyer, willing seller basis and be a specific amount.

The valuation date depends on when you owned the property.

The valuation dates are:

  • an initial valuation date,
  • a revaluation date.

There are fixed revaluation dates for all properties, every 5 years after 1 April 2012, for example on 1 April 2017, 1 April 2022 and so on, regardless of when the property was acquired.

The value of the property for any chargeable period is therefore the later of:

  • its initial valuation date,
  • the revaluation date.

There is no ATED or ATED-related Capital Gains Tax payable if an individual owns a property directly, rather than through a company. There are also reliefs if a property is used for commercial purposes.

If you need any help understanding in more depth, please get in touch with us.

How EIS scheme could help small business

There are different options available for small businesses to attract investment into their businesses. One of the schemes is called Enterprise Investment Scheme (EIS).

The Enterprise Investment Scheme (EIS) has been designed to increase investment in the early development of high potential growth businesses.

Companies seeking EIS investment are typically more developed than those looking for funding using the Seed Enterprise Investment Scheme (SEIS) and the investment limits and tax reliefs available reflect this.

The criteria:

The maximum amount of funds that a company can raise through investments qualifying for the EIS is £5M in any 12 months with a maximum of £12m over the company’s lifetime.

The company must receive investment under a venture capital scheme within 7 years of its first commercial

sale.https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterprise-investment-scheme

There is a maximum limit on the number of employees that the investee company can have when shares are issued. The company must have less than 250 full-time employees or their part-time equivalents. For groups of companies, the limit applies across the group.

Have look at our SEIS services.

The company’s gross assets (or of the group assets where the company is a parent company) must not exceed £15 million before any shares are issued and not be more than £16 million immediately afterwards.

There are also time limits when investments can be raised by the company and how and when the money must be spent.

There are different rules, typically more generous criteria, for ‘knowledge-intensive’ companies that carry out a significant amount of research, development or innovation.

If you need any help understanding these schemes, please get in touch.

Change of VAT rate for Hospitality businesses

HMRC had in the past lowered the VAT rate (5%) for hospitality, holiday accommodation and attractions businesses. This privilege has ended on 30 September 2021.

However, the government had previously decided that reverting to the standard rate would be too much for many businesses and had announced a further step before reverting the rate back to the standard rate.

This means that we now have a new reduced rate of 12.5% from 1 October 2021 that will be in effect until 31 March 2022 at which point it is expected that the rate will go back to the 20% standard rate.https://www.gov.uk/government/publications/introduction-of-a-new-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions/introduction-of-a-new-reduced-rate-of-vat-for-hospitality-holiday-accommodation-and-attractions

Although many businesses had campaigned for the rate to remain at 5% at least there is still some temporary reduction to help the continuing recovery of the sector.

Please have a look at our VAT services.

Affected businesses are advised to check that they have updated their billing and pricing software to provide for this change. There will also be increases in the VAT flat rate scheme percentages for catering services, hotel accommodation and pubs to accommodate this change.

If you need any help understanding how these changes will impact your VAT accounting, please get in touch.

If you are looking to know about the impact of new rules on your business, feel free to contact us.

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