News & Updates

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

Strategic challenges in the new normal

As we move towards a post-pandemic recovery and the economy begins to stabilise in the next few months, businesses face new challenges and will have to adapt to a new normal.

Supply chain issues
Supply chains were disrupted as producers and manufacturers shut down during the pandemic. Some businesses are now facing difficulties in obtaining the materials or products that they need. In other cases, the price of raw materials has gone up due to scarcity caused by lack of production throughout the past 18 months or so.

Managing supply chain issues is difficult and the best thing that businesses can do is to manage the expectations of their customers. It is important to stress that supply chain challenges tend to be temporary. As the global economy recovers, manufacturing, production and shipping should eventually return to normal.

Staffing
Many businesses are struggling to fill roles. Perhaps potential candidates are unwilling to move during uncertain times, or maybe the booming tech industry has absorbed all the best talent. Either way, many businesses are struggling to hire good people.

Some businesses are adding creative perks or benefits to attract staff. Besides health care or pension contributions, some firms are attracting talent with unlimited holiday, remote working opportunities or career development through staff education programmes and sponsored learning.

Profitability issues
Businesses that have survived the pandemic may have burned up their cash reserves or taken on additional debt to finance themselves throughout the last 18 months.

Businesses should plan for a difficult trading environment for some time yet. Sales could continue to struggle, the cost of materials could be higher for some time yet and labour costs, taxation or regulatory costs could be higher. As such, businesses should try to keep costs down where possible. In addition, they should double down on their marketing efforts in order to drive sales and ultimately, revenue.

Last year, businesses had to adapt to conditions created by the pandemic. In 2021, they must adapt to the aftermath. There will be opportunities to innovate and evolve business models, introduce new products or services, etc. The businesses that adapt and create new opportunities or competitive advantages will be the most successful.

Unlimited holiday

Unlimited paid holiday allowance sounds appealing but it can be difficult to implement.

Unlimited holiday allowance is becoming an increasingly popular benefit. Such policies are particularly popular with American tech businesses such as Netflix, LinkedIn, and the like. In an increasingly competitive market where businesses are battling to attract talented employees, unlimited holiday allowance is seen by many potential employees as an incredibly attractive benefit.

On the face of it, allowing staff the freedom and flexibility to take time off as they please certainly gives your business an edge over rivals who don’t offer such a benefit.

From your team’s perspective, they can work and play as they want, and this can make for a happier and more productive workforce. However, implementing an unlimited holiday allowance policy is harder than it seems. People can be bad at taking holiday and may be reluctant to do handovers and pass responsibility for deadlines over to others. Instead they may choose to just keep working. Some staff may become anxious about being seen to take too much holiday and may end up taking less as a result.

In an environment that has set objectives and performance metrics, it can be hard to get people to take time off. With a fixed holiday allowance, you can encourage them to take say 25 or 30 days holiday each year. If holiday is unlimited and there is no clear expectation, management can struggle to get people to take holiday. If holiday allowance is open and completely flexible, some employees may abuse the system and leave other colleagues to pick up the slack which can lead to tension between colleagues.

If team members regularly take extended holiday, they could end up paying the price when they return to the office. They may have to work day and night to catch up. This could have a negative effect on their home life and lead to stress or burnout. Due to the ongoing pandemic, many businesses are now experimenting with flexible working arrangements in order to find what works best for their team. As such, the limitations of unlimited holiday policies could soon be more widely tested.

Stop networking and focus on connecting

Networking is about knowing more people. Connecting is about knowing people more.

We all know lots of people professionally or personally, but we are only really connected with a small percentage of those people.

When you are at a business, social or charitable event, you will likely run into many people you know. But in many cases, you will know them “socially” or “professionally”, which is a way of saying you know them, who they are, but are not deeply connected with them and have no investment in their successes or failures. A good example of this is LinkedIn. You may have 2,000 people in your LinkedIn network but if you run through that list, you may find that you are only truly connected with 50-100 of those people.

True connections make up your community. They are the people with whom you have built a relationship based on mutual respect and trust. They may send you business referrals or you may be the person they ask for advice before they make a personal decision. True connections often cross the line between business and personal. If you build a great connection with a business contact, you may, for example, end up socialising with their family and yours.

So how do you go about building more connections? Learn how to talk about yourself in a meaningful, engaging and memorable way. If we want to build a mutually beneficial relationship with a person, we have to be clear about who we are, what we’re doing and how we could potentially help one another along the way. Figure out how to help and support the person that you are trying to connect with.

Focus on creating a mutual transfer of knowledge and information. Share success stories and discuss challenges that you both face. This may help you to find some common ground.

Don’t reach out to a contact and ask for a favour straight away. Get to know them first, demonstrate your potential and then do something of value for them. For example, offer to make a helpful introduction to someone in your network. Once you have done that, they will be more open to doing a favour for you at some point in the future. Developing your connections may be a bit more difficult in the current environment so you may have to adapt your approach. For example – rather than meeting a contact for a drink after work, you may have to set up a virtual drink on Zoom or Skype. The key is to adapt your strategy and to give it a go. The more you try to build connections, the better you will get, over time.

Evernote

Evernote is a note taking app designed for business users.

Evernote is a free app for smartphones and computers that is designed to help you to manage and store everything from notes, to do lists, receipts, boarding passes, articles you want to read, and more.

The app works well across multiple devices and keeps everything in sync between your smartphone, tablet and computer.

It works on various platforms including Windows, Mac, iPhone / iPad and Android. The desktop PC version of Evernote is a powerful and quick tool that allows you to create, sync and update notes and clips from your desktop and then sync them to a cloud account to share your content across all of your devices.

To use Evernote, you need to download it to your chosen device and create a free account. Once you have signed up, you’ll be presented with the main Evernote screen. Here you can access all of the features such as notes, notebooks, tags and your most commonly used notes (favourites).

You can also create collections of notebooks such as your Work stack or Personal stack. Evernote has an excellent search function which allows you to search for text in typed notes, images, text in PDFs and text in attached office files. Evernote also offers a wealth of tools for sorting and finding your notes in other ways such as tags and even geolocation tags.

From a business user’s perspective, a particularly helpful feature is the ability to scan and digitize business cards – which works very well when using Evernote on your mobile device.

Evernote offers three tiers from Basic (which is free) to Premium and Business, which offer additional features for a monthly fee. The Basic option is quite limited with up to 60mb of new uploads per month and synchronization across 2 devices. The Premium option costs $69.99 or just over £50 per year and offers 10GB of new uploads per month, sync across all of your devices and customer support via live chat. If you need more storage you can upgrade to the Business package which offers 20GB of new uploads per month and an additional 2GB per user.

If you would like to try Evernote before committing to it, you can sign up for the Basic (free) account on evernote.com.

Claims for CJRS grants need to be made for furlough periods falling within a calendar month as the rules change nearly every month. The hours the employees work may also vary right up until the end of the month, especially when staff are required to isolate, so it is advisable not to complete the CJRS claim until after the month end.

If you have already started a CJRS claim for July and the employer then tells you that staff worked different hours, you can delete that claim within 72 hours of starting it, and begin again. Otherwise, you will have to correct any errors in the CJRS claim within 28 days (plus weekend) of the end of the month the claim relates to, which will be 31 August for July claims.

If you are claiming for 16 or more employees you can use the HMRC template, which makes the process a bit easier.

It is perfectly acceptable to put staff on furlough if they are unable to work because they are self-isolating. Using the CJRS the staff member should receive at least 80% of their usual wage, which will almost certainly be more than the SSP rate of £96.35 per week.

Remember that CJRS claims relating to furlough periods in July can only include 70% of the employee’s usual wage, although the employer must pay 80% of the usual wage for those furloughed periods capped at £2,500 per month. The employer must therefore carry 10% of the wage cost for furlough time plus all the employer’s NIC and all employer’s pension contributions.

The CJRS claims for July furlough periods must be submitted by Monday 16 August.

For furlough periods in August and September the CJRS claim will only cover 60% of the employee’s usual wages, up to £1,875 per employee for the month. The employer must continue to pay the employee 80% of their usual wage for furlough periods. The CJRS will come to an end on 30 September 2021.

Written by the Tax Advice Network

The fifth SEISS grant is on its way, but the application process has not opened yet. HMRC has not given a definite date on which the claims portal will open other than “late July”.

However, that has not stopped the scammers doing their best to entrap taxpayers who are desperate to apply for this last grant. A number of scam emails are circulating pretending to be from HMRC inviting the recipient to apply by clicking a link in the email. We are warning all clients to check the address the email has come from and do not click on a link in such an email – ever.

HMRC is writing to some self-employed traders who started trading in 2019/20, to check that they are eligible for the fifth SEISS grant. The HMRC letter simply warns the taxpayer to expect a phone call from HMRC on the number that they included on their 2019/20 tax return. Unfortunately, the trader needs to do this verification check themselves, we can’t do it on behalf of our client.

The taxpayer will be asked to confirm an email address to receive a link to a Dropbox account. The taxpayer will then have to upload documents to this account to prove their ID and to provide evidence of trading, such as bank statements. This Dropbox link will remain live for only TWO DAYS, so taxpayers need to act quickly to confirm their ID.

Established traders who have already submitted their 2020/21 tax returns may receive a notice of correction to their self-assessment relating to SEISS grants received in that year, as we explained on 24 June 2021. This notice should be copied to us as the agent, but it may not be.

However, the notice will not say that the taxpayer is permitted to reject the correction to their self-assessment within 30 days of the issue of the notice. This is a serious omission by HMRC, but it doesn’t change the law (TMA 1970 s 9ZB) – the taxpayer can reject HMRC’s figures and we can do so on behalf of our client.

Written by the Tax Advice Network

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