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The fifth SEISS grant will only be paid to taxpayers who can show that their business turnover for 2020/21 has reduced, and to do that the taxpayer must provide two turnover figures as part of the grant application process.

The first figure is the actual turnover of the business in a 12 month period ending between 1 April 2021 and 6 April 2021. HMRC requires the total gross sales, including VAT, for this 12-month period irrespective of the accounting period the business normally uses.

The reference period to compare to is the turnover reported on the 2019/20 tax return. This will be the turnover for the accounting period that ends in 2019/20, not the turnover actually recorded in the tax year 2019/20. HMRC has generously said that if the 2019/20 year was abnormal the taxpayer can instead use the turnover reported on the 2018/19 tax return as the reference year.

The two turnover figures (2020/21 and reference year) will thus come from periods which are not immediately adjacent in time.

Complications are introduced where the reference period is not for 12 months or the taxpayer is trading as a partnership. Where the taxpayer has more than one trade, the turnover for all trades (but not property businesses) should be included.

Taxpayers will be contacted by HMRC later this month and given a date from which they can apply for the SEISS-5. The portal for applications will remain open until 30 September 2021.

As was the case for the earlier SEISS grants we expect that tax agents won’t be able to apply for the grant on behalf of their clients. We will thus have to work out the turnover figures for you and provide that information to you in advance of you attempting to apply for the grant.

Written by the Tax Advice Network

Stamp Duty Land Tax (SDLT) must be paid within 14 days of the completion of the property deal. The amount due is calculated according to the purchase price of the property, so normally a refund of SDLT will not be necessary as the correct amount will have been paid.

However, where one or more of the purchasers will owns an interest in two or more residential properties at the end of the day on which the deal was completed, the SDLT will include the 3% supplement on the entire value. This can happen where the individual has bought a new home before they have sold their old home.

When the purchasers sell their original main home within three years of the purchase of their new main home, they can claim a refund of the 3% SDLT supplement. These SDLT refund claims will now be paid out without prior eligibility checks by HMRC, which should speed up the process.

However, repaying out the SDLT doesn’t mean that HMRC has agreed the refund is correct. HMRC has nine months to carry out compliance checks for amended SDLT returns and refund claims. If HMRC finds that the SDLT refund was not due, the taxpayer will be required to pay it back with interest.

Written by the Tax Advice Network

Since 6 April 2020 gains made on the disposal of UK residential property have to be reported and the CGT paid within 30 days, using the UK Property Reporting Service. This online service doesn’t link into the annual self-assessment reporting system.

However, HMRC had assured the tax and accounting professional bodies that any under or over ‘payments on account’ of CGT would be sorted out in the taxpayer’s annual self-assessment. It appears that is not the case, as we outlined on 20 May 2021.

All taxable gains must be reported on the SA form whether or not they have also been reported through the UK Property Reporting Service. It is only at this stage that taxpayer’s total income for the year is determined and thus how much of the gains fall into the basic and higher rate tax bands. The incidence of capital losses can also reduce the final amount of CGT due compared to what was paid on account.

The SA computation will not automatically off-set any overpaid CGT against income tax and NIC due, or prompt HMRC to refund the excess CGT. In this situation the taxpayer has a choice of how to secure the refund of CGT:

Amend the UK Property Disposals return and claim a tax refund via that service, if an amendment to that particular calculation permitted under FA2019, Sch 2, para 15.

Complete the SA return using the original figures on the UK Property Disposal return, then view and print the tax calculation.

Note, action 1) should not be undertaken once the SA return for the year has been submitted.

If route 2) is taken and the total of income tax, CGT and NIC due is more than the amount of CGT overpaid, the taxpayer can pay the balance of tax by 31 January 2022. However, the taxpayer or his agent must first contact HMRC on 0300 200 3300 and ask for a manual adjustment to set off the amount of CGT overpaid against the other taxes due. An alternative solution is to pay all the income tax, NIC and CGT shown as due on the SA computation and contact HMRC for a repayment of any overpaid CGT.

This manual adjustment by HMRC is a temporary solution which creates more work for taxpayers, their tax advisers and HMRC. It is hoped that an automated solution will be provided in due course.

Note that non-resident taxpayers must report and pay the tax on gains from all UK commercial and residential properties, so the problem is much bigger for non-resident individuals.

Written by the Tax Advice Network

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful. Please contact us if you would like to discuss any matters further.

FURLOUGH GRANT REDUCES TO 70% FOR JULY

For the month of‌‌ July the CJRS Furlough grant support from the government via HMRC reduces to 70% of the employee’s usual pay for hours not worked. This is despite the fact that “Freedom Day” in England has been delayed four weeks to 19 July 2021, and now called “Terminus Day”. The government support to employers will then reduce to 60% in August and September.

CORRECTING ERRORS IN EARLIER FURLOUGH CLAIMS

The numerous changes in the method of calculating CJRS furlough grants will no doubt have resulted in errors by some employers.

Remember that you are required to tell HMRC about overclaimed CJRS grants as part of your next claim. You will be asked when making your claim whether you need to adjust the amount down to take account of a previous overclaim. Your new claim amount will be reduced to reflect this. You should keep a record of this adjustment for 6 years.

You should also be aware that HMRC may levy a penalty even if the error is careless or due to a misinterpretation of the rules.

You might therefore like us to check any previous claims that you have made.

If you have made an error that has resulted in an underclaimed amount, you should contact HMRC to amend your claim. As you are increasing the amount of your claim HMRC will need to conduct additional checks.

FIFTH SELF-EMPLOYED INCOME SUPPORT GRANT TO BE PAID IN JULY

The fifth (and final) SEISS grant will be available for the self-employed to claim towards the end of July.

The eligibility criteria remain broadly the same as the fourth grant. Self-employed profits in 2019/20 must not exceed £50,000 and must be more than 50% of your total income. If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the four fiscal years to 2019/20.

Self-employed traders need not have claimed grants under the previous scheme to qualify for the July payment and will be required to confirm that their business continues to be adversely affected by Covid-19. The amount that traders will be able to claim will depend on how much their turnover has reduced by. If the reduction is more than 30% the grant will be 80% of average profits capped at £7,500 but if less than 30% only 30% of average profits, capped at £2,850.

We are still waiting for more details from HMRC on the basis for the turnover comparison.

PLEASE LET US HAVE DETAILS OF YOUR SEISS GRANTS FOR YOUR 2020/21 TAX RETURN

As you are probably aware tax agents were not able to claim SEISS grants on their client’s behalf, and we do not currently have access to the amounts you have claimed.

If you are self-employed and have received any SEISS grants in 2020/21 can you please let us have details of the amounts received so that we can include the correct amounts in your return. The amounts received are taxable but should not be included in your turnover as that would mean double counting.

TAX FREE CHILDCARE ACCOUNT SUBSIDISES SUMMER CAMP COSTS

If you have children under 12 who attend a nursery, after school club, playscheme, childminder or you are considering sending them to a summer camp you should think about setting up a tax-free childcare account. The government adds 25% to the amounts that you save in the account up to £2,000 for each child so £8,000 is topped up to £10,000 (a higher amount applies for disabled children). The account is then used to pay Ofsted registered childcare providers.

Note that it doesn’t need to be the child’s parents paying into the account, uncles, aunts, grandparents and others can also make payments.

Note also that you are not eligible if you or your partner have adjusted net income in excess of £100,000 for the current tax year.

This scheme will gradually replace childcare vouchers which many employers continue to provide to employees. These are free from tax and national insurance (there are limits) and can be used to pay for childcare until the child is 16. Childcare voucher schemes can no longer be set up but employees already eligible can continue to benefit.

PENSION CONTRIBUTION IS TAX EFFICIENT FOR BOTH EMPLOYEE AND EMPLOYER

Pension contributions to approved pension funds on behalf of employees and directors continue to be a tax-free benefit provided the annual input limit is not breached. The contributions are also deductible for the employer provided incurred wholly and exclusively for the purposes of the trade and paid before the end of the accounting period of the business.

For most taxpayers the annual input limit is £40,000 and this overall limit applies to contributions by the employee plus contributions made by the employer on the employee’s behalf. It is also possible to take advantage of unused relief from the previous three fiscal years.

Payments into the pension fund by the employing business will be deductible against business profits. Currently this will only save 19% corporation tax but from 1 April 2023 will save 25% where profits exceed £250,000 and 26.5% where profits are between £50,000 and £250,000.

Note that these limits are divided by the number of associated companies, i.e. under common control.

Although the contribution on behalf of the employee or director may be tax-free they are generally not able to access the fund until age 55.

There have been a number of “schemes” devised over the years to exploit the pension rules.

HMRC WARNING NOT TO USE UNFUNDED PENSION ARRANGEMENTS

HMRC are currently attacking a marketed tax avoidance scheme using unfunded pension arrangements to avoid Corporation Tax, Income Tax and National Insurance contributions.

HMRC strongly believes these arrangements do not work and will seek to challenge anyone promoting or using these arrangements and make sure the correct tax is paid.

Users of these arrangements may pay considerable fees to use them yet may still have to repay the tax claimed to be avoided, as well as interest and a penalty. Contact us if you are approached to use such a scheme.

DIARY OF MAIN TAX EVENTS JULY/AUGUST 2021

Date	What’s Due
01/07	Corporation tax for year to 30/9/20 (unless pay quarterly)
05/07	Last date for agreeing PAYE settlement agreements for 2020/21 employee benefits
05/07	Deadline for agents and tenants to submit returns of rent paid to non-resident landlords and tax deducted for 2020/21
06/07	Deadline for forms P11D and P11D(b) for 2020/21 tax year. Also deadline for notifying HMRC of shares and options awarded to employees.
19/07	PAYE & NIC deductions, and CIS return and tax, for month to 5/7/21 (due 22/07 if you pay electronically)
31/07	50% payment on account of 2021/22 tax liability due.
01/08	Corporation tax for year to 31/10/20 (unless pay quarterly)
19/08	PAYE & NIC deductions, and CIS return and tax, for month to 5/8/21 (due 22/08 if you pay electronically)

Welcome to our monthly newswire. We hope you enjoy reading this newsletter and find it useful.

Developing the next generation of business leaders

Businesses need to invest in nurturing the next generation of talent.

Regardless of the industry that you work in, how you and your management team nurture the next generation of talent in the first decade of their careers can have a huge impact on their prospects for the future.

Given that the world of business is constantly evolving, it can be quite difficult to pin down exactly what career progression looks like for your people. However, one thing is certain, if we don’t develop the next generation, we will not have any future leaders.

So what can today’s business leaders do in order to support the development of tomorrow’s talent?

Fostering a culture of knowledge sharing across the business, between different levels of staff, can give your juniors the opportunity to learn new skills and develop their capabilities.

Businesses also need to recognise the value of soft skills and actively teach them. Good communication skills, critical thinking, conflict resolution and good decision making skills are some of the most important soft skills that future business leaders need to learn as they come up through the ranks.

When developing your team, it’s important to avoid a very narrow focus. Professional development and training should be as broad as possible in order to expose your future leaders to different challenges and ways of thinking.

A proactive stance on diversity is critical at the more junior level in all organisations. If businesses can be more diverse and inclusive at this point in people’s careers, then future management teams will consist of a much broader spectrum of people from different backgrounds.

Protecting your business against fraud

Instances of fraud have increased during the pandemic – what can you do to help mitigate the risks?

Throughout the Covid-19 pandemic, businesses have experienced an increase in the level of fraudulent activity. Many firms have moved their business activities online and with more employees now working from home, there are increased opportunities for fraudsters to target them.

Invoice fraud is on the rise and while not a particularly new scam, it can be catastrophic for businesses who fall victim to it. Invoice fraud occurs when a fake email address is used to contact a business, pretending to be one of the firm’s suppliers The emails tend to mimic those that the firm usually receives from suppliers, including logos and signoffs.

The email will tend to instruct the firm to direct future invoice payments to a different bank account. When the firm receives the next legitimate invoice, they will unwittingly make the payment to the fraudsters bank account. Even if the funds are recalled through your bank, there is no guarantee that the funds can be recovered.

The best way to protect your business against fraud is to educate your staff. Your firm should deliver regular training sessions to all staff on common security threats (online and offline) as well as prevention measures that they can implement. Training should include case studies which show how to spot a fake email address and all staff should be trained to question any request from suppliers regarding changes to payment details and so forth.

Next, you should focus on defending your firm’s systems and data effectively. These days, most financial transactions take place online, so put appropriate systems and processes in place to prevent fraud.

Your firm should also invest in an up to date cyber security software package including a firewall, data encryption, automatic back-up of all data and password management. Finally, all staff should change their password on a regular basis.

Crowdfunding

What is crowdfunding and how does it actually work?

Crowdfunding is a way of raising money for a business venture, personal endeavor, or charitable cause, where a large number of people invest in or donate money to the cause.

Crowdfunding is becoming more popular with startup and early-stage businesses which can often struggle to secure funding from traditional lenders such as banks or financial institutions.

As the name suggests, crowdfunding is about engaging a crowd of people to co-fund a particular project. Funding for say, a startup business, can be provided by hundreds or even thousands of individual investors. They all come together to provide money to get a project off the ground and all share in the risk or reward of that project.

Crowdfunding works well in today’s social media driven environment as it’s all about telling a story and inspiring people to invest in your particular venture. There are different types of crowdfunding including donation based crowdfunding, equity crowdfunding and debt crowdfunding.

Donation based crowdfunding is where people simply give some money to a new venture. Those who donate often get something tangible in return, such as being one of the first customers to receive the new product or service.

Equity crowdfunding is popular with business start-ups as it allows the new business to offer some shares in exchange for incoming capital.

Debt crowdfunding allows individuals to act as private lenders. Those lenders can spread risk by pooling their funds to lend to a wide variety of businesses.

The debt must be repaid and the repayments usually happen on a monthly basis.

Popular crowdfunding platforms in the UK include Crowdfunder, JustGiving, Crowdcube and Funding Circle. Different platforms suit different needs so it is worth doing plenty of research before deciding on using a particular crowdfunding platform.

Closing the deal

Closing a deal is arguably the most important part of the sales cycle.

Your firm might have a database full of potential leads, your products and services could be the best in your market sector but if you can’t close a sales deal, then your business development and marketing efforts will be wasted.

The key to making a sale is to focus on the customer and putting their needs first.

Do your research

No matter what industry you are in, knowing the decision maker is key to closing a sale. In many cases, the decision maker will send someone else to go out and verify all the options that are available. You will have to do your research in order to understand who will ultimately be making the purchase decision and try to understand their needs, the solutions that they are looking for and so on.

Focus on solutions

Don’t try to sell your products or services. Instead, take the time to understand what the problems are that your customer is facing. Try to connect the dots and illustrate how your product or service offers a solution to their particular set of problems. This will help your prospect to understand how your product or service fits with their particular needs.

Objections

Be prepared to handle some objections. Potential clients will have some concerns – maybe they think that your offering is a bit more expensive than your competitors, for example. Rather than resort to discounting, take the time to explain how your product or service offers greater value.

Ask for the sale

If you have answered your prospect’s questions and provided them with an understanding of the solutions that you can provide, then ask for the sale. Illustrate that you understand their particular requirements, be confident but not arrogant.

A polite but confident way to ask for the sale could be to offer to produce a proposal document which includes the details of the products or services and the pricing proposal for the client to consider. You can then follow up in a day or two, to ask the client if they would like to progress with the proposal. This helps to create a sense of urgency which can encourage your prospect to move forward and close the deal with you. If they are teetering on the edge, this is the time to offer any potential discounts. For example, “if you sign today, I can reduce the price by 5%.”

Next steps

Follow up promptly with any paperwork in order to finalise the sale. Ensure that you provide your new client with any information that they need and if necessary, arrange any training that will be required, to get them started with using your products or services.

Whether you make the sale or not, you should always follow up. If you did not succeed this time, ask the client why they chose to go elsewhere and what you could do differently next time. You can use this feedback to refine your sales approach, which will help you to become more effective in the future.

The National Insurance Contributions Bill 2021, which is working its way through Parliament, introduces a new zero rate of employer’s (secondary) National Insurance contributions for employers of armed forces veterans in their first civilian employment after leaving the armed forces. Clients who take on an armed forces veteran will not have to pay an employer’s National Insurance on the earnings of the armed forces veteran for the first year of the veteran’s first civilian employment since leaving the armed forces, unless the veteran’s earnings exceed a new upper secondary threshold. The upper secondary threshold will be aligned with those applying for employees under the age of 21 and apprentices under the age of 25. For 2021/22, the thresholds are set at £967 per week, £4,189 per month and £50,270 per year. Secondary contributions are payable at the usual rate of 13.8% to the extent that the earnings of the veteran exceed these limits.

For the purposes of the relief, an armed forces veteran is someone who has served at least one day in the regular armed forces. This includes someone who has undertaken at least one day of basic training.

The new zero rate is available from 6 April 2021, applying for the 2021/22, 2022/23 and 2023/24 tax years. However, for 2021/22, the relief will be given retrospectively from 6 April 2022; when paying the veteran in 2021/22, the client will need to account for secondary contributions as normal to the extent that the earnings of the veteran exceed the secondary threshold (set at £170 per week; £737 per month; £8,840 per year for 2021/22).

For 2022/23 and 2023/24, the zero rate on earnings up to the new upper secondary threshold for armed forces veterans will be applied through the payroll in real time.

Where the veteran’s first civilian employment after leaving the armed forces started after 6 April 2020 but before 6 April 2021, the zero rate will apply from 6 April 2021 to the first anniversary of the start date of the employment.

Subsequent and concurrent employers are also able to benefit from the relief during the relief period.

The relief only applies to employer’s contributions. The armed forces veteran will pay primary contributions as normal to the extent that his or her earnings exceed the primary threshold (set at £184 per week; £797 per month; £9,568 per year for 2021/22).

Once the relief period comes to an end, the client must pay secondary contributions as normal to the extent that earnings exceed the secondary threshold.

Written by the Tax Advice Network