Member Blog

Wednesday, 01 April 2020

The COVID-19 pandemic has caused great unrest through the global economy and caused radical fluctuations in the value of business and other assets. Many taxpayers will own assets which have fallen in value, such as stocks and shares, and are now wondering how to react, if at all. Although this is primarily a personal financial matter, the tax consequences could be an important factor in this decision.

Do you own failed investments of negligible value?

During the period in which you’ve owned assets that have become worth ‘next to nothing’, you may be able to make a ‘negligible value claim’ to HMRC, which allows you to realise a loss on the assets, which can be offset against other gains made in the year to reduce your capital gains tax liability.

Have you realised capital gains in the 2019/20 tax year?

If you’ve realised gains in this tax year such that you will pay capital gains tax, it may be possible to mitigate this tax charge or eliminate it entirely by making further capital disposals in the tax year (before 6 April 2020) that will make a loss. Although selling assets at a loss is not inherently attractive, there may be some appeal in avoiding a charge to capital gains tax.

Any actions taken in this regard should be taken on a commercial basis, and we encourage anybody making significant decisions about their personal financial situation to take advice from a suitably qualified investment adviser or independent financial adviser.

If you have any queries, or would like to discuss your personal tax situation, please get in touch with your usual MHA Larking Gowen contact in the first instance or at [email protected].

You can find contact details on the Our People section of the MHA Larking Gowen website.

Cindy Chaplin

Wednesday, 25 March 2020

If COVID 19 has affected your company and you need more time to file your accounts at Companies House, you can apply for an extension.

Accounts are usually due for filing nine months after the year end. If you can still meet the deadline, you should.

However, if it becomes apparent that it will not be possible to file on time due to your company being affected by COVID 19 you can make an application to Companies House for an immediate three month extension.   

• The extension is not automatic and must be applied for;
• A three month extension will be granted (but please see below if you have already extended or shortened your year end);
• It must be applied for before the normal filing deadline; and
• The application is made online.

You only need your company number to apply.

Companies House have confirmed that companies that have already extended their filing deadline, or shortened their accounting reference period may be ineligible for an extension.

Further information, including a link to the online application, is available from gov.uk.

If you have any queries, or would like to discuss your requirements for the next step, please get in touch with your usual MHA Larking-Gowen contact in the first instance or at [email protected].

Chris Yeates

Thursday, 26 March 2020

HMRC have issued new guidance on how the coronavirus will impact on the Statutory Residence Test (SRT). 

The number of days an individual stays in the UK, is one of the factors determining whether or not they are UK resident in a tax year. 

There’s been concern that some people might have to spend extra days in the UK due to the virus and as a result, inadvertently become UK tax resident and incur an unexpected tax bill.  

HMRC accepts that the epidemic is affecting people’s ability to move freely to and from the UK and has announced that the following circumstances may be viewed as ‘exceptional’ and will be ignored for the purposes of the various counts of their presence in the UK for the SRT: 

• You are quarantined or advised by a health professional or public health guidance to self-isolate in the UK
• You are officially advised by the Government not to travel from the UK
• You cannot leave the UK as a result of the closure of international borders
• You are asked by your employer to return to the UK temporarily, as a result of the virus 

However, the 60-day annual limit set out in the statutory residence test still applies, and HMRC say they will consider the facts of each individual case before deciding to disregard days spent in the UK due to exceptional circumstances. 

HMRC have reminded taxpayers that this new guidance may change at short notice as situations change, so keep an eye on our website for updates or contact us via [email protected] 

Alex Coghill 

Thursday, 26 March 2020

With the current pandemic impacting on cash flows, this is a timely reminder to all businesses that a tax relief exists that could really help you in these challenging times. It rewards innovation and has the potential to provide a valuable source of revenue to help maintain and shape your business.

Research and Development (R&D) tax credit is a government incentive designed to reward UK companies for investing in innovation. In order to qualify, a company must be subject to UK corporation tax and involved in R&D and incurring costs on these projects.

By way of a of a background, in the last tax year, 21,865 small and medium-sized enterprises (SMEs) made a claim for R&D tax relief, and the average amount of tax relief obtained was over £60,000. To clarify for R&D purposes, an SME is a company which has fewer than 500 staff, less than €100 million turnover and less than €86 million in gross assets. (Larger companies who exceed the above limits can still claim R&D relief but at a reduced rate).

Whilst based on our experience the number of businesses claiming R&D relief is on the up, there’s still work to be done in spreading awareness of this valuable relief; now more so than ever.

The scope for identifying R&D is huge – in fact it exists in every single sector and you should know that, even if your project was last year, a company has two years from the end of its accounting period to submit a claim for qualifying spend identified during that period. Therefore, returns already submitted without an R&D claim can be amended.

Has this sparked your interest? Read on…

What is R&D?

One of the biggest misconceptions is that R&D tax incentives are only for those who carry out scientific research in a laboratory.

HMRC’s definition of R&D doesn’t really help: to quote, ‘Research and development … takes place when a project seeks to achieve an advance in science or technology … through the resolution of scientific or technological uncertainty.’

Understandably, confusion exists because it’s not always easy to relate real projects to the terminology.

What the definition really means is that, if a business isn’t sure whether a project is scientifically or technologically possible, or they don’t know how to achieve it in practice, it could be carrying out R&D. It’s clear that R&D can be found widely in various everyday activities dealing with manufacturing, engineering, software development, as well as the more commonly thought of areas such as the pharmaceutical and scientific sectors.

The definition is deliberately broad so that it can be applied to any industry, not just laboratory-based ones and, as an added bonus, the R&D project doesn’t need to have been successful to qualify for enhanced relief.

Why is the relief so beneficial?

Now for the interesting bit … for every £100 spent on R&D, the deduction from the company’s taxable profit is £230! (Yes, you read this correctly).

And if your company has made a loss for the year, then the full R&D credit of £230 can be surrendered for a repayment at a rate of 14.5%, ie. cash in the bank of £33.35 for every £100 spent.

Furthermore, these rules remained unchanged in the recent Budget!  

What costs qualify for relief?

Broadly, as long as a cost has a link to the R&D project being undertaken, then it will be a qualify for the purposes of the tax relief.

This includes:

• Staffing costs, including wages and salaries, employers’ National Insurance and employer pension contributions
• Consumable materials used up in the R&D process
• Utilities, including water, fuel and power
• Externally provided workers and subcontractor costs (claimable at 65%)
• Software costs

To qualify, a company must not have received any state aid towards the costs of the R&D project, if so this is likely to compromise any R&D claim. If you receive a grant to fund a project, you can still obtain tax relief, just at the reduced large company rate.

Conclusion

As a form of innovation funding R&D tax credits can be transformative. At MHA Larking Gowen we are focused on helping innovative companies realise the full potential of these valuable tax incentives.

Now more than ever there is a need to work together to ensure optimum benefit and our specialist tax team with its experience of both appraising R&D projects and submitting successful claims to HMRC is here to help you.

To find out more, email [email protected]

Sarra Mattin

‘Cash is king!’  

However profitable you are, without access to cash (either physical or in an online account), you won’t be able to pay your bills and your business will be in trouble. 

Luckily the Government is helping businesses to keep hold of their cash by allowing them to defer tax and VAT payments.  

Income Tax  

If you pay the majority of your tax via self-assessment, then usually you make two payments each year to pay off the previous year’s tax bill; one by 31 January (when your tax return is due) and one by 31 July. 

The Chancellor has announced there will be no payment due by July this tax year. This allows more time to pay your tax bill. No application is required, and no penalties or interest will be charged in the deferral period. 

VAT 

All businesses are now able to defer their VAT payments for three months. This deferral will apply to VAT due in the period from now until 30 June and any accumulated deferral won’t need to be paid to HMRC until the end of the 2020/21 tax year. This deferral is automatic and no application is required. 

If your VAT liability is usually paid by direct debit, you’ll need to cancel the direct debit mandate temporarily to make sure no monies are taken once the return is submitted. 

Other taxes or payments not covered above 

Where taxes are due and not covered by the deferments outlined above, it’s still possible to contact HMRC to negotiate a time to pay arrangement. 

Typically, this will involve explaining to HMRC why the business can’t pay the tax due on time and outlining a plan to clear the debt in the shortest possible time, without the need for HMRC to use other means (think bailiffs or High Court petitions). 

HMRC may ask the business to exhaust other means of finance before requesting a time to pay arrangement (such as the loan guarantee schemes outlined by the Government).  However, there is also a desire on HMRC’s part to avoid putting organisations out of business in these difficult times. 

Many more measures have been announced to help businesses survive this troubling period and the MHA Larking Gowen team has published details of these on our dedicated web page link  If you need support with grant applications, accessing loan funding or cash flow modelling, please do get in touch. 

Please speak to your usual MHA Larking Gowen contact or email [email protected] 

Jordan Brown 

Friday, 27 March 2020

The Chancellor has finally unveiled his support package for the country’s 5 million self-employed.   

It will support those whose income comes mainly from self-employed activities and where their profits are up to £50,000.  This will account for 95% of the self-employed population. 

As with other recent announcements, the finer details will follow and initially there will be questions that remain unanswered.   

Here’s what we know 

• [email protected] 

  Mark Curtis 

It’s difficult to avoid conversations about coronavirus right now. Whether you’re talking to clients, colleagues, friends or family, it’s the subject on everyone’s lips. However, in recent weeks, we’ve spoken to several businesses that are unsure about what to say to their clients. To help, we’ve pulled together a guide to communicating in a crisis.

Client Communications

First up, we want to tackle client communications during a crisis.

Now, at some point in the past few weeks, you’re bound to have received emails from brands explaining the impact of Covid-19 on their businesses – some good, some bad.

If you want to get it right, here are some points to consider.

What are you trying to communicate?

Every business is handling this situation in a different way.

Some are continuing to function with minimal disruption. Others are working remotely. Some businesses have to close. Others are having to work harder than usual.

Supermarkets, logistics companies and healthcare providers, for instance, are struggling to continue to deliver to their clients and customers.

Which is it for you? What do you need to tell your clients and customers as a result of the situation?

Address the challenges

It’s okay to be honest about the challenges that your business currently faces.

Be sure to explain the current situation in a way that your clients will understand.

Highlight the solutions

While it’s okay to mention the challenges you face, you should also make your solutions clear.

The old aphorism ‘don’t bring me problems; bring me solutions’ has never been more true.

If your clients are going to be affected by what’s happening, be sure to explain how you’re going to resolve the issue – now or in the future. It gives them a clear understanding of what to expect in a time of uncertainty. These days, a little reassurance goes a long way.

And make sure they know who to contact if they have questions or queries. Knowing there’s someone at the end of the phone can help people to cope in these difficult times.

Moderate your tone

Striking the right tone for your communications can feel hard right now. You may feel that the gravity of the situation calls for a sombre, serious tone. But if that’s not what you’re known for, consider lightening up.

While you want to share the facts, you need to maintain your own tone of voice. And if that means injecting some light humour to make your audience smile, then that’s okay.

Hell, we’ve even seen a few emails that are downright slushy about how much certain brands care about their customers. But if that strikes the right tone with your audience, go for it.

Remember that quality is critical. If your message is riddled with mistakes, it may make you look like your team is rushing or panicking. It looks unprofessional and may damage your reputation. Don’t skimp on quality control, even in a crisis.

CTAs

Even at this time, it’s okay to put a call to action in your communications. It might just be a little different to usual.

Maybe you could ask your customers to share selfies with a custom hashtag. Maybe you could ask them to Like your Facebook or LinkedIn pages to stay up-to-date with the latest company news. Or maybe you could ask your clients to stay at home?

Be sure to pick something that resonates with your audience and the challenges they face

Distribution lists

It’s likely that you have recently been contacted by businesses you’ve had no interaction with for years. They want to explain their working practices to you. And you’re unlikely to care.

Rather than running the risk of having the receiver shake their head and delete the message, take time to segment your audiences. That way, your customers only receive messages that are relevant. If a customer hasn’t worked with you in the past year-18 months, consider removing them from your coronavirus mailing list.

Pick a platform

You may choose to distribute different messages across different platforms.

For instance, you may ask your employees to send a personalised (but templated) email to their clients, so there’s a sense of continuity. If you have a large customer base to reach, a generic mailshot may be more suitable.

You could choose to share a slimmed-down version of the message on your social media channels too. Encourage your employees to share the message with their connections too, so any leads and prospects are in the loop.

And, remember, to pick up the phone. It never hurts to speak directly to your clients and explain the situation in person.

Consider frequency

As with any campaign, give some thought to the frequency of your crisis communications.

You may want to send a single email explaining that you’re closed until further notice. Or you might want to say that your business is reassessing the situation every day. In that case, you may contact your clients daily, weekly or monthly.

Just don’t overdo it. If you’re bombarding clients, you run the risk of being an annoyance, especially when there are so many other Covid-19 messages flying around.

Consider what your clients need to hear and communicate accordingly.

This article originally appeared MethodMarketing.org

In our increasingly technological world, there are more and more businesses that are choosing to make the move from high street to online. For many businesses that already have the essential groundwork done, this move proves successful. Overheads can be significantly lowered, and customer reach can also be expanded with the right knowledge. Here are some of those businesses that have proven that moving your company online can be incredibly fruitful.

There’s no older past-time than gaming, whether it’s using a roulette wheel, playing a game of cards or throwing the dice. The first casino ever built, in fact, was the Casino di Venezia, which first opened its doors to Venetians back in 1638. Although at its inception it was simply a wing of a theatre which allowed people to game in the intervals, it became so popular that just a century later there were more than 120 casinos in Venice. That means that for each year that passed, more than one brand new casino opened.

Casinos

If we fast forward several centuries to 1996 then we can see that the love of casinos remains. It was in this year that we witnessed the birth of the first online casino, InterCasino. In its first year it accepted the first ever online real money wager and since has paid out more than $3billion to online gamers. This is undoubtedly a huge sum, though still the physical casino industry has a larger market share than online. With that said though, the tides could be about to change. Whilst bricks and mortar casinos generate a staggering $130bn worldwide each year, online poker sites and casinos are catching up with a healthy $46bn for the year 2019. The growth in revenue has been marked in the past few surveys, so it could be that online casinos will overtake physical ones in the not too distant future.

Auction Houses

Auction houses were, funnily enough, one of the first types of business to recognise the potential of trading online. It used to be that an item would come up for auction and, if you weren’t present at the auction house on that day, then you wouldn’t be able to buy it. With the invention of the telephone this changed for the better, with auction lots being able to reach a bigger customer base.

Fast forward a couple of centuries and the birth of the internet again changed auction houses for the better (or the worse if you were hoping to snap up a bargain!) Now physical auction houses allowed bids from the internet, which meant that specialist objects which would perhaps only have an audience of one or two collectors, could now reach enthusiasts from around the world. This enabled lots to reach higher prices and made the auction house a nice commission.

So great was the change that the internet made to this business that now perhaps the biggest auction house in the world is entirely online. Pierre Morad Omidyar is the founder of eBay, an online auction site which was launched in 1998 and almost instantaneously made him a billionaire. Whilst the day of the brick and mortar auction house is far from over, it seems that online auctions are here to stay.

The UK Government has announced new measures to mitigate the cases of coronavirus and its fatalities. These include avoiding public workplaces when possible, which has resulted in more people than ever working from home. Working from home may have been a long-term dream for some, but that doesn’t make it easy. It can be challenging to be productive and get in the swing of things, although working from hoe can help you grow a business with more limited funds (more information here). With these top remote working tips, you can make it work!

Make Sure You Take Breaks

Surprisingly, that extra break we long for when at the office can go unnoticed when working from home. With no boss to escape and no burning need for a gossip with a nearby colleague, it is easier to go through the working day without taking lots of breaks. But that doesn’t mean you shouldn’t. When working from home, make sure you make a schedule that allocates frequent breaks. During these breaks, do something you enjoy. Such as go for a walk, run or cycle as allowed by the government, or call a friend. You could also have a quick session on a video game or play some casino games to take your mind off work. If you are stuck for ideas of where to play, check out the excellent options listed at CompareCasino.

Get Dressed – Always!

Working from home shouldn’t mean working from your bed, in your dressing gown or god forbid, in your birthday suit. Getting dressed just like you would if you were heading into the office is a way to maintain your schedule and some normality. It is also proven to help you get into work faster and remain productive throughout the day. This doesn’t mean put on your best suit or dress, although you may prefer it especially if you have video meetings, at least put on some jeans and a shirt – slippers allowed.

Dedicate a Working Space

Making a workspace that is only used for your professional work is also a good idea. This helps you draw a boundary between your working life and personal life while at home, which is not always easy with barking dogs and demanding children nearby. Use a desk and set it up just like your office desk, hopefully with less mess. If you don’t have a desk at home, then consider staking a claim to the dining table for the next few weeks. You should also look into getting some noise-cancelling headphones to help you concentrate.

For Remote Working Parents

If you are parents of a child who is no longer at school and both working from home, you may need to make some compromises. Children may need home-schooling, and they may need entertaining or want to go outside too. As a couple, it is beneficial to make a schedule where you both get the quiet time to work while the other tends to the kids. If you plan it well around both of your meetings, you can mitigate disruptions when working with children around. We might be in a self-isolation lockdown and struggling to adjust to the new working life, but make it known that millions of freelancers do this every week and live productive lives outside of the office. You can do it too!

Action Fraud reported that between 1st February 2020 and 18th March 2020, Coronavirus-related frauds increased by 400%.  These frauds include phishing emails and online shopping scams. Throughout this situation we may all at times become vulnerable to these attacks. In times of desperation when trying to purchase supplies for staff or personal use, and when trying to keep up to date with current events, it’s easy to become a victim.  Here are some of the common COVID-19 scams that are being used: Online Shopping Fake websites are being set up to sell in-demand items such as protective face masks, hand sanitisers and other cleaning products. These items never arrive. If you can find these products for sale online, question how they are available given the current shortages. Have you used or heard of this site before? Is the connection on your browser showing as a trusted site? Make sure you do some research and try to find reviews or comments from others who may have purchased from the website. If you feel confident in the site, use a credit card to make payment. Most major credit card providers will insure your online purchase. Phishing Emails There are four common phishing emails currently being reported to Norfolk Police. These false emails will try to steal private information from you including passwords and bank details. The four trends reported recently include emails for fake cures, Coronavirus tax refunds, World Health Organisation (WHO) impersonations and Bitcoin payments asking for donations towards a cure. These emails often look like they come from trusted sources such as HMRC, WHO, or various Government departments. If you are not expecting the email, do not click on any links or download attachments. Inspect the email carefully as fake emails can be hidden behind the ‘From’ section of the email. Look out for spelling mistakes, threatening language and requests for personal information. Don’t be afraid to get in touch with the sender impersonated to check if the email you received is legitimate. Taking action may allow these organisations to make others aware of the scam. Smishing ‘SMS phishing’ is similar to email phishing, but uses text messages. Posts are currently circulating of a smishing scam posing as the UK Government offering payment. The text message includes a link to a fake Gov.UK website where you can apply for funds. Once again, be on the look out for spelling errors, suspicious links or offers such as funding schemes that you have not heard about on the news.  Be aware that there will be other types of scams out there that we haven’t listed above. For more information on spotting these attacks, view our guide to spotting phishing attacks. Download our guide to phishing attacks here.

Trading Standards has received details of Coronavirus (COVID19) related community scams.  We will continue to issue alerts through our email service and social media channels of any scams or information we receive so this can be shared within communities.

To see our recent alerts and subscribe to our emails visit www.norfolk.gov.uk/scams

To find us on Facebook visit www.facebook.com/norfolktradingstandards

To like us on Twitter visit www.twitter.com/NorfolkCCTS

You can report scams you receive to us, via our partners, the Citizens Advice consumer helpline on freephone 0808 223 1133 or through their online reporting form.

We are also recommending that everyone completes the quick and simple Friends Against Scams online training. This allows everyone to better understand and spot scams, and recognise when people are being scammed in our communities.

You can find out more and access the training at www.norfolk.gov.uk/friendsagainstscams and become more scam aware.

The Government’s series of measures to support businesses in response to the COVID-19 pandemic is unprecedented. There is recognition that urgent help is needed, and only time will tell whether the initiatives will prove enough, or perhaps even too much, to enable businesses, employment and the economy generally to survive and prosper.

One of the new funding initiatives which really catches the eye is the Coronavirus Business Interruption Loan Scheme, now shortened to CBILS. This scheme involves the Government acting as guarantor for 80% of the value of each loan of up to £5 million being issued by commercial banking institutions.

From 23 March, CBILS is available to any trading business with a turnover of less than £45 million as long as the borrowing proposal, were it not for the COVID-19 pandemic, is considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty. So how will the lenders determine this?

Although lenders will want to make quick decisions, I think it highly likely that, for at least borderline proposals, they will require financial forecasts to be prepared, just as they would for any pre-COVID-19 lending application. And even if the lenders do not require forecasts, why wouldn’t you want to forecast the future to make sure you’re borrowing enough to see you through this period (or even not borrowing more than you need)?

So, if you are preparing forecasts, here are three quick useful tips for you to bear in mind:

1. Turnover is vanity, profit is sanity, cash flow is reality

Remember that profit is not the same as cash flow, and it is cash flow which lenders will be interested in as this shows whether you can afford the loan repayments. Lenders won’t want to be relying on the government guarantee to recoup their money, particularly as this still leaves them exposed to the balancing 20% gap in security. Therefore, you really should be presenting integrated profit & loss accounts, cash flow statements and balance sheets broken down on a month-by-month basis (or in some cases, a week-by-week basis).

1. Explain yourself

The financial forecasts are meaningless without supporting written assumptions. Break it down line by line, explaining the rationale for the numbers being used. It’s time consuming, and at times, quite tedious work, but it is absolutely essential.

1. Crystal ball anyone?!

In the current climate, it’s difficult to predict the next 24 hours let alone the next few weeks and months, so how do you model this sensibly? My suggestion would be to run multiple scenarios. So, build a baseline financial forecast, and then run different scenarios by adjusting key metrics like sales, wages, debtor days, creditor days, etc. This will give you a range of results in order to make your borrowing decisions.

Our Corporate Finance team at MHA Larking Gowen regularly produces forecasts for clients to submit lending applications, and if you need any assistance with this, we would be delighted to help. In the first instance, please reach out to me: [email protected].

For further details of the CBILS scheme, please refer to the British Business Bank website and speak with your bank.

James Lay