News

Accountancy and Tax update

Self Assessment taxpayers have been offered extra time to complete their 2020/21 tax return and make their payment. HMRC has waived the £100 penalty for late filing and payment until 28 February, due to the impact of Covid-19. This means that people have until 28 February to file their Self Assessment tax return and make their payment in full, no penalties will be levied if filed during February. However any tax owing at 31st January is still due and will incur interest if paid late.

For those struggling to pay their tax bill, there is also an option to set up a Time to Pay arrangement before 1 April with no penalty.

For more information

Below is a cautionary tale regarding fraudulent claims for Bounce Back loans. The two businesses in question did not fit the criteria and used the loan to make payments to family members. They were investigated by the Insolvency Service and received significant bans.

Bounce Bank Loans fraudulent claims

Two Yorkshire-based directors have been banned for a total of 21 years after they fraudulently claimed £100,000 in bounce back loans

Aamer Aslam from Huddersfield has been handed a ban for 11 years and Razwan Ashraf from Keighley for 10 years after they claimed bounce back loans (BBL)

The duo were co-directors of Scholars Academy Ltd which is a specialist tuition centre for children aged five to 17 in West Yorkshire and in May 2020 Aslam applied for a bounce back loan by providing an estimated company turnover of £200,000.

Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021 which triggered the investigation from the Insolvency Service. At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000, but the bank later notified the liquidator that it was owed £50,000 by the company due to the bounce back loan.

The Insolvency Service investigation found that the duo was inflating the company’s turnover with Scholars’ bank statements showing a maximum monthly income of just £640 which means their turnover was only £7,680 and did not meet the criteria to apply for a bounce back loan.

It was also found that Aslam and Ashraf used the bounce back loan money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money. Aslam and Ashraf told the Insolvency Service that that these payments were genuine business expenses but they were unable to provide evidence to support this.

Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd, and in May 2020 he applied for a bounce back loan and fraudulently declared in the application form that annual turnover in 2019 was £200,000 when Progress’ bank statements showed that turnover was £38,973.

This resulted in Progress receiving the full loan of £50,000 when it would only have been entitled to a loan of £9,927.

As with Scholars, Ashraf claimed that the money was used to pay for company expenses however, regular payments were made to three individuals, and no evidence was produced to show that these payments were genuine business expenditures.

Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan, and a further £25,000 in settlement of claims against both directors in relation to the loans taken out by Scholars.

Mike Smith, chief investigator, Insolvency Service said: ‘Government loan schemes have provided a lifeline to millions of businesses across the UK, preserving their existence during the pandemic and protecting millions of jobs.

‘As these cases show, the Insolvency Service will not hesitate to investigate and use its powers against those who appear to have abused the Covid-19 support schemes.’

Autumn Budget 2021

The Chancellor Rishi Sunak presented his third Budget on 27 October 2021. In his speech he set out the plans to “build back better” with ambitions to level up and reduce regional inequality.

Main Budget proposals

Tax measures include:

• a new temporary business rates relief in England for eligible retail, hospitality and leisure properties for 2022/23

• a change in the earliest age from which most pension savers can access their pension savings without incurring a tax charge. From April 2028 this will rise to 57

• the retention of the £1 million annual investment allowance until 31 March 2023

• individuals disposing of UK property on or after 27 October 2021 now have a 60 day CGT reporting and payment deadline, following the completion of the disposal.

Other measures include:

• a complete overhaul of alcohol duties that will see drinks taxed on their strength

• the cancellation of the previously announced rise in fuel duties

• pubs supported with a reduction in draught beer and cider duty

• increases in the National Living Wage and the National Minimum Wage rates

• an ultra-long-haul band of air passenger duty introduced.

Some Budget proposals may be subject to amendment in the Finance Bill 2021-22. Should you need any further help or support please contact us.

For the full report

SEISS 5th grant is different to its predecessors. Here’s how:

The fifth Self Employed Income Support Scheme (SEISS) Grant will be available from the end of July, with the criteria for applications the same as the fourth grant. However, the level of grant awarded this time depends on whether your turnover has fallen by more or less than 30%.

For a turnover that has dropped by 30% or more, the grant is calculated at 80% of the three months’ trading profits, capped at £7,500. And for a turnover that has fallen by less than 30%, the grant will be based on 30% of three months’ trading profits, capped at £2,850.

HMRC expects that your business will be impacted by COVID-19 between May and September 2021 in order to claim the fifth SEISS grant. Claims must be made before 30 September 2021.

Confused already? HMRC has produced this guide to working out your turnover and the other eligibility criteria that must be met.

Government Guidance

Clued up on Self Employed Income Support Scheme (SEISS) Grants?

Have you taken full advantage of the government’s SEISS grants during the pandemic? They may have been heavily criticised for not being available to all self-employed people but they were certainly a lifeline for many during extremely testing times.

In the March 2021 Budget, the government announced details of the fourth and fifth SEISS instalments. From this month, it is possible to claim for the fourth grant (covering February to April 2021) but there are significantly different criteria for this and the fifth instalment (covering May to September 2021).

If you weren’t able to apply for the first three SEISS grants, you may now be eligible, so it’s worth reading this comprehensive article from Sage with all the details of the grant criteria. Make sure you’re claiming what is available if it will help to get your business back on its feet post-COVID.

Find out more:

SEISS: What you must do to claim the fourth and fifth Self Employed Income Support Scheme grants | Sage Advice United Kingdom

Top tax planning tips for individuals

Are you making the most of tax reliefs and allowances to make your personal tax as efficient as possible? We outline areas for consideration here:

Inheritance Tax & Capital Gains Tax planning
It’s never too soon to distribute assets and minimise IHT. Transfer items that are IHT-exempt and remember your deeds of variation. Assets transferred to a spouse are CGT-exempt and transferring into joint names is tax efficient.

Personal allowance
Additional rate taxpayers making personal pension contributions, salary sacrifice and gift aid donations preserve their personal allowance and reduce additional rate tax paid. Income tax reductions can be made by investing through tax efficient schemes. 

Spouses
Make the most of a spouse’s tax allowance if you are a higher rate payer and plan carefully for your jointly owned property income.  

Families
It may be worth claiming tax credits, especially if self-employed. Plus, child benefit for those earning over £50,000 must be repaid, so utilise gift aid donations and pension contributions.

Residency
Don’t fall foul of the statutory residence test and elect just one of your properties as your main residence. 

Want to find out more? Read our full article here. 

Top tax planning tips for businesses

Are you making the most of tax reliefs and allowances to make your business as tax efficient as possible? We outline areas for consideration:

Business structuring for tax efficiency

The decision to have a Limited Company, LLP, Partnership or Sole Trader has commercial and tax implications for your business. It is also wise to manage your succession planning to avoid costly pitfalls. Adapt your expenses claims and dividends to achieve maximum cash flow advantages and consider two Enterprise Investment Schemes that offer ways to raise finance.

Employee taxation

Are you making the most of pension contributions for employees and have you considered tax-efficient share option schemes?

Allowances and Reliefs

Make sure you’re up to speed on Capital Allowances, Business Property Relief, Entrepreneurs’ Relief, Loss Relief and Research & Development Tax Credits that may be relevant for your business.

Want to find out more? Read our full article here.