Monthly Archives: March 2021

Student loan thresholds to rise from 6 April 2021

At the start of the new tax year in April the thresholds for student loans will increase, which may affect employees that are repaying their academic fees.

The threshold for student loan Plan 1 will increase from £19,390 to £19,895 from this date, and employees on Plan 2 will see their student loan threshold rise from £26,575 to £27,295.

Employees repay nine per cent of the amount they earn over the threshold for Plan 1 and 2.

Meanwhile, the threshold for Scottish student loans, known as Plan 4 loans, starts at £25,000, with the same rate of repayment applied as Plan 1 and 2, while the threshold for postgraduate loan repayments will begin at £21,000, with earnings above this threshold calculated at six per cent.

Employers must take action to start student and or postgraduate loan (PGL) deductions where the new thresholds are met and record the deductions correctly on each employee’s payslip.

If the earnings are below the student loan and/or PGL thresholds, the employer should update the employee’s payroll record to show they have a student loan and/or PGL and file the start or stop notice with HM Revenue & Customs (HMRC). Deductions should continue until HMRC tells an employer to stop.

Link: Student loan and postgraduate loan repayment guidance for employers

HMRC updates tax rules and calculations on ultra-low emission vehicles

HM Revenue & Customs (HMRC) has released new guidance that brings changes to the company car benefit calculations, as the Government looks to encourage greater use of ultra-low emission vehicles (ULEV).

Under the new rules, if a ULEV has a CO2 emission figure of 1-50g/km, businesses will now need to provide the car’s zero-emission mileage, which covers the distance that the car can travel in miles on a single electric charge.

While there will be no change to the way company car tax data is reported, companies may need to provide additional information on the P11D.

To meet this new requirement for ULEVsfrom 6 April 2021 a new zero-emission mileage field will be shown on the P11D form (both online and offline), which will require a business to provide this new information.

Where a company owns the vehicle, the zero-emission mileage figure can be found on the vehicle’s Certificate of Conformity (CoC), which may display this figure as the ‘electric range’. This may also be referred to as combined or equivalent AER (All-Electric Range).

Where the zero-emission mileage figure is displayed on the CoC in kilometres, it must be converted into miles and rounded up to the nearest mile.

Businesses that are leasing a vehicle(s), should request and obtain this new data in the same way they currently receive information for company car tax reporting. Where a fleet or car leasing company cannot provide this information, businesses can often obtain the zero-emission mileage figure from the car’s manufacturer.

This follows additional changes to banding for ultra-low emission vehicles (ULEVs), which has seen the introduction of 11 new ULEV bands and a separate zero-emissions band.

These latest changes are part of plans to move the calculation of company car tax and vehicle exercise duty over to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP), instead of the New European Driving Cycle (NEDC).

Following this changeover, new cars first registered from 6 April 2020 will use CO2 emission figures based on WLTP, while cars registered before 6 April 2020 will use CO2 emission figures based on NEDC.

To take this additional change into consideration, from 6 April 2021 it will be mandatory to provide the date a car is first registered on the P11D form as well, via a field on the new online and offline forms.

Failure to obtain this data and report it accurately on the P11D form could lead to incorrect company car benefit in kind being calculated.

Link: Tax authority clarifies car tax rules for ultra-low emission vehicles

Almost two-fifths of small businesses are looking to trade overseas

Despite the impact that Brexit has had on trade in the UK, a new survey conducted by YouGov has found that 38 per cent of small businesses are likely to trade overseas this year.

The study, commissioned by Lawbite, found that of the 791 small businesses questioned two-fifths were planning to trade overseas, which scaled nationally could mean that 2.28 million SMEs are seeking opportunities outside of the UK.

Of those surveyed, more than half of the businesses operating in the manufacturing sector said that they still plan to trade in Europe, with slightly more than a third saying they intended to trade with markets in Asia instead.

While the survey reveals an appetite for overseas trade, it also found that nearly a quarter of businesses would conduct more foreign trade if the legal and regulatory barriers were less complicated.

This is not surprising given that nearly half of all British exporters to the EU said they are facing new complications due to mounting red tape and border disruption, according to a similar survey recently published by the British Chambers of Commerce (BCC).

Despite these complications, a follow-up survey from the BCC also found that 44 per cent of UK exporters to the EU market plan to increase activity in the EU export market, while 27 per cent intend to consolidate their current position rather than grow. Only 13 per cent of the businesses surveyed said they intend to reduce exports to the EU.

Links: Nearly a quarter of exporters to the EU considering holding back activity in the EU & More than a third of UK small businesses pushing to trade overseas in 2021

National Living Wage and National Minimum Wage rates to increase from 1 April

The Government is pressing ahead with plans to increase the rates of the National Living Wage (NLW) and the National Minimum Wage (NMW) from 1 April 2021, while people aged 23 and 24 will be entitled to the National Living Wage for the first time.

The NLW will rise from £8.72 an hour to £8.91 an hour, the NMW for people aged over 21 will rise from £8.20 to £8.36, for those aged 18 to 20 it will increase from £6.45 to £6.56, while the under 18 rate will rise from £4.55 to £4.62. The rate for apprentices will rise from £4.15 to £4.30.

Employers who pay workers less than the minimum wage are required to pay back arrears to the worker and HMRC can also issue fines of up to 200 per cent of arrears (capped at £10,000 per worker).

HM Revenue & Customs (HMRC) also has the power to publicly name and shame the worst offenders as a deterrent to others.

Link: National Minimum Wage and National Living Wage rates

Business rates review report delayed

The Government has announced that the final report of its fundamental review of business rates will be delayed and will be published in the autumn.

It says that by then there should be greater clarity about the economic situation and the future of the public finances.

The review was announced by Rishi Sunak at his Budget a year ago and a call for evidence was published last July.

A summary of responses to this call for evidence is set to be published in an interim report on 23 March 2021.

Business rates have become a politically charged topic with online retailers generally paying much less in business rates than their high street counterparts do.

Online retailers have been able to continue trading throughout the pandemic while most high street retailers have been forced to close for months or weeks at a time.

To continue to support businesses, the Government announced in the 2021 Budget that it will continue to provide eligible retail, hospitality and leisure properties in England with 100 per cent business rates relief from 1 April 2021 to 30 June 2021.

This will be followed by 66 per cent business rates relief for the period from 1 July 2021 to 31 March 2022, capped at £2 million per business for properties that were required to be closed on 5 January 2021, or £105,000 per business for other eligible properties.

This means that 750,000 retail, hospitality and leisure properties in England will continue to pay no business rates for a further three months from 1 April 2021, with the vast majority of eligible businesses receiving 75 per cent relief across the year.

Link: Business Rates Review Update

Vaccine rollout prompts SME optimism about prospects for 2021

New research has found that SMEs across the UK are feeling increasingly optimistic about their prospects for the rest of 2021, after the success of the vaccine rollout.

The Barclaycard Payments Barometer research found that SMEs expect to grow their revenues by an average of eight per cent.

London SMEs, meanwhile, expect to see revenues grow by an average of 11 per cent in 2021.

Amongst other findings, 42 per cent of SMEs believe that the current lockdown will be the last and 49 per cent expect restrictions to end in June.

Rob Cameron, CEO at Barclaycard Payments, said: “While the world may be returning to some form of normal this year, small businesses have realised the benefits of flexible working and digital skills, with many already looking at what improvements they can take forward into 2021.”

Kate Hardcastle MBE, an independent expert, said: “SMEs have had to show a great deal of resilience and entrepreneurism to survive what has been an unprecedented time, and indeed many have shown great ingenuity and creativity.

“Finding new ways to work, and maximising the opportunity with new technology has enabled some businesses to build greater engagement with customers. There is certainly cautiousness about the months and even years ahead, and there is no trivialising the tenacity that will be required, yet as more organisations find better working practice along the way for stakeholders, customers and local-entrepreneurism – this could also symbolise a significant turning point for many businesses.”

Link: Cautious optimism sees SMEs rally for recovery as Barometer reveals 8.1 per cent expected growth in 2021

The Coronavirus Business Interruption Loan Scheme is closing soon – Apply today!

The Coronavirus Business Interruption Loan Scheme (CBILS) is due to end on 31 March 2021, after which no further applications for the scheme can be made.

CBILS allows businesses to apply for a loan of between £50,001 and £5 million up to 25 per cent of their annual turnover from lenders accredited the British Business Bank.

The CBILS come with a range of benefits, rarely available with commercial lending, such as:

  • No repayments for the first 12 months
  • All fees covered by the Government
  • No interest payable for the first 12 months
  • Unsecured lending, with no personal guarantees, up to £250,000
  • No penalties for early repayment of the loan.

The replacement Recovery Loan scheme, which offers loans of up to £10 million per business, seems to be a riskier and less attractive option for many businesses and so it is important to act now if you require financial support from the CBILS.

To be eligible, businesses must meet the following criteria:

  • Be UK-based in its business activity;
  • Have an annual turnover of no more than £45 million;
  • Have a borrowing proposal which the lender would consider viable, were it not for the current pandemic;
  • Self-certify that the business has been impacted by the Coronavirus (COVID-19) pandemic; and
  • Not be classed as a business or ‘undertaking’ in difficulty.

You will need to provide certain documents when you apply for a CBILS-backed facility. These requirements vary from lender to lender, but are likely to include:

  • Loan amount, purpose, and term
  • A short paragraph on the business background and how it has been impacted by COVID-19
  • Last two full sets of filed accounts
  • Bank statements covering November 2019 to present
  • Shareholder and directors’ details
  • Up to date management accounts
  • Current debt position of existing loans and borrowing.

There are a variety of products available under the scheme, from various accredited lenders, including:

  • Term loans
  • Asset finance
  • Invoice financing
  • Property finance
  • Debt refinancing
  • Merchant cash advance

If you haven’t benefited from the scheme, but think that this finance could help you either now or in the future, it is worth considering taking out a CBILS loan before the application window closes.

Those who have already obtained one CBILS loan can take out additional finance via the scheme as well, while those who have previously taken out a smaller Bounce Back Loan can also transfer this into the CBILS and borrow more.

You will just need to ensure that you request enough funds to cover the cost of repaying your Bounce Back Loan, in addition to the extra funds you want to request through the CBILS.

To apply for finance via the CBILS, borrowers need to have started an application by the end of the day on 31 March 2021.

If you think you may need the financial support afforded by the CBILS it is important that you start your application soon. To find out how we can help you prepare an application, please contact us.

Repaying COVID-19 Government-Backed Loans

Businesses that have used the Coronavirus Business Interruption and Bounce Back Loan schemes may soon see their 12-month payment-free period end soon.

Businesses that took out a loan when they were first launched last year will have to begin repaying the money lent to them from May, unless they are able enjoy a repayment holiday in the first six months of the repayment period.

It is important that businesses consider how they repay these loans, so to help we have outlined the current repayment and restructuring options available to borrowers.

Repaying a Bounce Back Loan

With large parts of the economy facing restrictions well into June, the Government is offering businesses support to repay the Bounce Back Loan via the Pay as you Grow’ (PAYG) initiative.

Under PAYG, businesses have the option to:

  • Extend the length of the loan from six years to 10 years
  • Make interest-only payments for six months, with the option to use this up to three times during the life of the loan
  • Pause repayments entirely for up to six months.

PAYG is available to all borrowers from their first repayment and offers companies the flexibility to tailor their repayment schedule to meet the needs of their business.

Businesses do not have to use the PAYG initiative and can choose to make loan repayments as they see fit.

In some cases, it may be beneficial to repay the loan sooner to reduce any interest (fixed at 2.5 per cent per annum) on a Bounce Back Loan. Bounce Back Loans are not subject to early repayment fees.

Repaying a Coronavirus Business Interruption Loan (CBIL)

After the initial 12-month interest-free period ends, lenders should provide businesses with an outline of their repayment costs, factoring in interest.

Pricing varies amongst lenders, but interest rates beyond the 12-month interest-free period are likely to take into account the existence of a guarantee from the Government.

With a loan facility, it may be necessary to provide regular capital repayments, but lenders may be able to provide payment holidays subject to discussions with them.

Businesses who borrow under the CBIL scheme are also not subjected to early repayment charges, should they choose to repay their financing before its term ends.

However, businesses remain 100 per cent responsible for paying the facility back, as well as interest and fees charged by the lender once the initial interest-free 12-month period ends.

When a business took out a CBIL, they agreed to be liable for the repayments, in the same way as any other type of credit agreement.

If a business is not able to pay back the loan, the lender will need to recover the debt from any personal guarantee used for the loan, up to 20 per cent of the loan value. The remainder is then covered by the Government’s 80 per cent guarantee.

For loans of less than £250,000, no personal guarantee was required and, in this case, the loss is covered by the Government up to 80 per cent of the loan value at the time.

Businesses can approach lenders to restructure a loan if they have issues meeting the prescribed repayment plan.

Businesses that need to restructure a loan, will need up to date figures, financial forecasts, profit and loss reports and a balance sheet before approaching their lender to demonstrate the difficulties they face.

Repaying the Recovery Loan Scheme

The new Recovery Loan Scheme will be open from 6 April to 31 December 2021. It will offer businesses loans of between £25,000 – £10 million over a six-year loan period and is backed by an 80 per cent Government guarantee.

Despite Government backing, applications will be subject to full underwriting and affordability checks and unlike the other Government-backed loans there will be no interest-free period.

The information required by each lender to approve a loan varies but they typically require financial accounts for trading periods of between one and three years.

It is not yet known what repayments will be required from businesses via this loan, but it is suspected that this finance may have a higher rate of interest than other Government-backed loans.

Need help?

If you require help assessing your ability to repay loans or would like assistance with the restructuring of any finance taken out as a result of COVID-19 we can help.

Our experienced team can review your financial health and forecast future performance so that you have a clear picture of your affairs and can provide evidence to lenders.

For more information on the various loan schemes and financial support measures download our latest key dates pdf.

To find out more about our services, please contact us

Newly self-employed asked to complete pre-verification checks before applying for fourth SEISS grant

Newly self-employed taxpayers may be required to undergo pre-verification checks before they can access the fourth self-employment income support (SEISS) grant, it has been revealed.

HM Revenue & Customs (HMRC) wrote to over 100,000 businesses recently informing them about the changes.

The move comes after the Chancellor, Rishi Sunak, extended the SEISS to include those who became self-employed in 2019/20 and who completed a tax return for the same year.

Under the scheme, self-employed workers affected by Covid-19 could get up to 80 per cent of their average trading profits in a three-month period as a one-off lump sum.

However, the regulator has warned that newly self-employed traders will need to confirm their identity and business activity before they can apply for a grant.

According to HMRC, affected workers will receive a telephone call over the next two weeks during business hours (8:00 to 17:30) and will be asked to provide an email address and agree to receive a link to a secure Dropbox – an online platform where electronic documents can be deposited securely online.

To complete the pre-verification check, you will need to provide one form of identity, such as a driver’s licence or passport, and three months’ worth of bank statements to demonstrate business activity.

HMRC warned that failure to provide such information could exclude you from the scheme.

For help and advice with related matters, please get in touch with our expert team today.

Preparing for the upcoming changes to furlough

The Coronavirus Job Retention Scheme (CJRS), more commonly referred to as furlough, will now be extended until the end of September this year following confirmation in the recent Chancellor’s Budget.

First introduced a year ago, the scheme has provided an essential lifeline to employers, helping them shoulder the employment costs for employees who were unable to work or who work reduced hours due to the pandemic and its restrictions.

The level of grant available to employers under the CJRS will be maintained until 30 June 2021, under the latest extension, meaning employers will only be responsible for paying pension and National Insurance contributions.

To prevent an abrupt end to the support available, from 1 July 2021, the level of the grant will be reduced so that employers start making additional contributions to the scheme.

To be eligible for the CJRS, employers must continue to pay furloughed employees 80 per cent of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

But in July the amount of support given by the Government will be limited to 70 per cent (capped at £2,187.50), with the remaining 10 per cent provided by the employer.

Then from 1 August until the end of the scheme on 30 September 2021, employers must contribute 20 per cent, with the Government covering the remaining 60 per cent of a person’s regular wage (capped at £1,875).

In addition to the 10 per cent and 20 per cent contributions made in July, August and September, employers must continue to pay employers National Insurance and pension contributions on the full amount being paid to employees.

For CJRS claims from 1 May 2021, employees on an RTI submission before 2 March 2021 will be eligible for furlough.

Employers can claim before, during or after they process their payroll, as long as a claim is submitted by the relevant claim deadline.

Claims must be submitted by 11.59pm, 14 calendar days after the month being claiming for unless this day falls on the weekend or a bank holiday, then claims should be submitted on the next working day.

Employers must prepare for these upcoming changes and consider the impact that the additional employment costs may have on their business.

In some cases, businesses may need to consider redundancies, which may require a lengthy consultation process, so preparations should be taken now.

If you would like assistance with managing these changes or have any queries about the CJRS, please contact us.