Category: Business Support

Costs are defined as something that has to be paid or spent to acquire something. Costs include the acquisition of:

• An object, say material required to convert into saleable goods.
• A service, for example, sub-contact labour or
• A right, the rates you pay to occupy business premises.

In your accounts, these costs would appear as expenses or costs of the sales in your profit and loss account. All of these costs have something in common, their usefulness tends to be restricted to the time at which they were purchased.

But what about costs – say the purchase of a computer – that should have a working life of say five years? This type of expenditure will not appear as a deduction from your profits as an expense, instead, it will appear as a fixed asset on your balance sheet and will be written off – over five years in the case of our computer – by depreciation.

We need a new word to describe this type of expenditure and the one we use is “investment”.

The distinction between a cost and an investment is significant. Generally speaking, a cost has value for a limited time period whereas an investment has the ability to impact current and future trading prospects.

As we emerge from lockdown, do not underestimate the recovery value of an investment for your business. And the government has offered company investors a timely tax incentive to invest.

In his recent budget, Rishi Sunak announced that qualifying investment in equipment would attract a 130% deduction for tax purposes (applies to companies from 1 April 2021 to 31 March 2023). It’s worth considering this distinction. Costs will sustain your current trading performance, but investment expenditure will have the potential to create new opportunities in future years.

Self-employed individuals (including partnerships) who have overclaimed the Self Employed Income Support Scheme (SEISS) must pay back the overpayment to HMRC. The rules for repaying HMRC state that you must tell HMRC if you were not eligible to have claimed the grant.

For example:

• for the first or second grant, your business was not adversely affected
• for the third or fourth grant, your business had not been impacted by reduced activity, capacity or demand or inability to trade in the relevant periods
• you did not intend to continue to trade
• you’ve incorporated your business since 5 April 2018

You must also tell HMRC if you:

• received more than we said you were entitled to
• amended your tax return on or after 3 March 2021 in a way which means you’re entitled to a lower grant than you received

If you have overclaimed you must tell HRMC within 90 days of receiving the grant or face additional penalties. If the amount in question is £100 or less then there is no requirement to notify HMRC or pay back any grant received.

All qualifying self-employed businesses can continue to claim SEISS grants until 30 September 2021, if they continue to be adversely affected by the coronavirus pandemic. A fourth grant covers the period from 1 February 2021 to 30 April 2021 and a fifth and final grant will cover the period from May onwards.

The fourth grant will provide support covering 80% of average trading profits, up to a maximum of £7,500 for those who meet the eligibility requirements. The fifth and final grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant whilst those whose turnover has fallen by less than 30% will receive a 30% grant.

HMRC is going to go strict on those who have over-claimed under Coronavirus Job Retention Scheme (CJRS).

Recently HMRC issued guidance on paying back any amount overclaimed. Any claims based on inaccurate information can be recovered by HMRC.

If you’ve overclaimed a grant and have not repaid it, you must notify HMRC by the latest of

• 90 days after the date you received the grant you were not entitled to.
• 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed.

It is important to note that there may be interest and penalties if overclaimed grants are not repaid within the stated timeline.

The Coronavirus Job Retention Scheme (CJRS) claim form allows businesses to advise HMRC if they have identified previous errors and over-claimed. If you use this form to confirm that your business has been overpaid, the new claim amount will be reduced to reflect this overpayment.

If you have made an error in a CJRS claim and do not plan to submit further claims, then you should request a payment reference number and pay HMRC through their card payment service or by bank transfer.

The same options can also be used by employers who would like to make a voluntary repayment because they do not want or need the CJRS grant.

Having to repay HMRC is unlikely to be a cost that employers will have thought about, so it is important to ensure that all claims made for furloughed employees are accurate. Employers are required to keep the full records relating to any CJRS claims (including adjustments) for a period of six years. HMRC has said that they will not be actively looking for innocent errors in their compliance approach.

If you need to discuss it further; feel free to contact us.

Protecting Your Business Since the time COVID has started business owners specially in vulnerable sectors predominantly retailers, leisure and entertainment trades, will have seen their hard-won capital all but exhausted by the needs to meet fixed costs when income generation has been restricted or eliminated by lock-down directives. The situation is more or less the same for the rest of the business sectors.

And this is in spite of the valiant attempts by the Treasury to provide financial support to those businesses in the COVID firing-line.

Even with a gradual taming of COVID infections as the vaccines start to do their work, we probably have at least another six months of disruption to cope with before its back to business as usual.

Protecting Your Business In the face of these challenges, what can beleaguered business owners do to protect their capital base and be in a position step back into the ring as and when consumers start to edge out of their front doors and start spending?

I suggest the businesses should look at their business in the following way:

• List all of your fixed costs, those that you have to pay even if you have no income coming in and cancel as many as you can that can be re-established when markets open up again. Obviously, many will be tied to contracts that cannot be broken. In which case:
  • Contact suppliers, landlords, service providers etc., and see if you can negotiate a moratorium on payments for a period, a reduction in payments or the cancellation of contracts.
  • When this work is done rework your business plan for the next year and speak to your bank or other sources to secure any cash required to meet the likely dips in cash resources.
• Start to think about waking up your business when consumer interest in spending starts to increase demand for your goods or services.

Finally, speak to us.

There is no substitute for sharing this planning process with your professional adviser. We know your business.

We can, and we want to help. Contact us now so we can start to unravel your options.

Landlords – Tax Year End Planning Tips A few housekeeping tips for landlords of buy to let or holiday let properties to think about and action – if applicable – before the end of the current tax year on 5^th April 2021.

Buy-to-let Properties:

Have you experienced a drop in rental income since April 2020? If yes, make sure you let us have estimates of your buy-to-let income and expenses to say 31 December 2020 (covering the nine months from 1 April 2020) and we will see if an election to reduce tax payments on account is possible.

If you are contemplating repairs to your property(ies) consider the timing of expenditure. Incurring costs before or after 5 April 2021 will affect your tax payments.

Have a look at our Tax planning page.

If you have improved your rental property during 2020-21, please keep details as we will need those if and when you come to sell the property.

In 2023, you may need to computerise your record keeping meeting HMRC’s Making Tax Digital regulations. There are a number of cloud based software packages you could use.

Holiday Let Properties:

To retain the tax advantages you enjoy – holiday let property businesses are treated as trades – you must meet certain occupancy rules. As it is likely occupancy has dropped during 2020-21 due to lock-down periods, a review is critical.

Please contact us if you would like to discuss your options.

HMRC are slowly rolling out their Making Tax Digital (MTD) scheme through Digital Approach. Eventually, selected landlords submitting their rental income and outgoings via self-assessment will need to embrace this new MTD requirement.

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital#helping-businesses-self-employed-people-and-landlords-get-it-right-first-time

What will it involve?

Self-employed landlords with property income above £10,000 will need to follow the MTD for Income Tax rules from their next accounting period starting on or after 6 April 2023.

Essentially, affected landlords will need to upload quarterly figures – kept electronically – from their accounting software directly to HMRC’s servers. Most accounting software providers will provide this functionality.

Have a look at our Tax planning page for details.

And therein lies the rub. If your property business has income above £10,000, from April 2023, you need to be using accounting software that complies with MTD.

Many landlords still record their income and outgoings manually or use spreadsheets. Unless the spreadsheets can be adapted to provide the necessary upload functionality a more digitally responsive approach will be necessary.

Time to embrace a digital approach?

Although the MTD requirement is still some two years away, converting manual systems to a computerised approach takes time. We can help you select and convert your present accounting records to a software solution that can cope with MTD.

And there are real benefits. With a click of your computer mouse, you can access reports that give you real time information about your property business as well as satisfying the needs for MTD digital uploads to HMRC.

Please Contact Us if you would like to discuss your options.

Any business that has overclaimed a Coronavirus Job Retention Scheme (CJRS) grant must pay back the overclaim repayment to HMRC.

The rules outlined below for paying HMRC back an overclaim also applies to businesses that would like to make a voluntary repayment because they do not want or need the CJRS grant. The CJRS is currently due to continue until 30 April 2021.

Any overpayments can be corrected in your next claim. If you confirm that your business has been overpaid, the new claim amount will be reduced to reflect this overpayment. You will need to keep a record of this adjustment for six years.

https://www.gov.uk/guidance/pay-coronavirus-job-retention-scheme-grants-back#how-to-pay

Alternatively, if you are not making another claim under the CJRS then you can request a payment reference number and pay HMRC back within 30 days. This request needs to be made online.

HMRC’s guidance states that if you have overclaimed a grant and have not repaid it, you must notify HMRC by the latest of either:

• 90 days after the date you received the grant you were not entitled to;
• 90 days after the date you received the grant that you were no longer entitled to keep because your circumstances changed.

Late notifications of overclaimed grants could see the imposition of penalties. Any claims based on inaccurate information can be recovered by HMRC. However, HMRC has stated that they will not be actively looking for innocent errors in their compliance approach.

Having to repay HMRC is unlikely to be a cost that employers will have thought about, so it is important to ensure that all claims made for furloughed employees are accurate. Employers are required to keep full records relating to any CJRS claims (including adjustments) for a period of six years.

Feel free to contact us to book an appointment if you are looking to know more about this news.

Recover CJRS overclaims Those businesses who have over claimed a Coronavirus Job Retention Scheme (CJRS) grant must pay back the overpayment to HMRC.

The rules outlined below for paying HMRC back an overclaim also apply to businesses that would like to make a voluntary repayment because they do not want or need the CJRS grant. The CJRS is currently due to continuing until 30 April 2021.

https://www.gov.uk/government/publications/penalties-for-not-telling-hmrc-about-coronavirus-job-retention-scheme-grant-overpayments-ccfs48

Any overpayments can be corrected in your next claim. If you confirm that your business has been overpaid, the new claim amount will be reduced to reflect this overpayment. You will need to keep a record of this adjustment for six years.

The assessment can include:

• any amounts not used to pay furloughed employees’ wages;
• related costs within a reasonable period.

Employers must pay the amount due within 30 days of the assessment. HMRC can charge interest on any late payments and may also charge late payment penalties if the amount is still not paid 31 days after the due date.

If a company is insolvent and HMRC cannot recover the tax it owes, company officers can become personally liable to pay the tax charged on their companies’ overclaimed CJRS grants. Recover CJRS overclaims

Feel free to contact us to book an appointment if you are looking to know more about this news.

As we expect the coming year/s will be tough for the business. It is really crucial that businesses should plan their activities very carefully and prudently.

If you have managed to retain profits in your business this fat-on-the-bone will help to see you through loss making periods as we endeavor to emerge from COVID disruption, hopefully, later this year.

How long these reserves may last depends on how effectively you manage the process.

If you are impacted by COVID disruption, you will need to ensure that you avail yourself of any Government funded grants via your local authority and wage costs can be 80% covered by the extended furlough scheme. But these will not cover all your fixed costs.

Accordingly, planning is absolutely vital.

You need to figure what your short-term prospects for trading are likely to be and then quantify the minimum level of costs that you will need to carry in order to meet:

Existing fixed commitments, rent for example, and

Other variable costs to deliver any future trade.

If these calculations reveal that you will be trading at a loss for an extended period the only way your business can survive is if:

Your retained profits and personal capital introduced cover these losses, and or

If reserves are exhausted, are you prepared to borrow funds – Government bounce-back loans for example – to fund the excess losses?

We are helping business in devising a business strategy that will ensure that thee business survive during this crises times.

Feel free to contact us to book an appointment.