Date Added | June 3, 2021

As part of 2020’s commitment to its members by providing online training for accountants in practice, we have provided a Business News Update for our members.

Covid-19 update

The current guidance from the 17 May is to continue to work from home where you can and when travelling within the UK, you should aim to do so safely and plan your journey in advance.

After some confusion last week, there is also revised government guidance if you live in an area where the new COVID-19 variant is spreading. The government advises that you should try to:

  • meet outside rather than inside where possible
  • keep 2 metres apart from people that you don’t live with (unless you have formed a support bubble with them), this includes friends and family you don’t live with
  • minimise travel in and out of affected areas

The current restrictions that remain in place can be seen here: (COVID-19) Coronavirus restrictions: what you can and cannot do – GOV.UK (www.gov.uk)

This month we await news whether from 21 June all legal limits on social contact will be removed, although the government has warned that outbreaks of the Indian variant could disrupt further easing, and “make it more difficult to move to step four in June”.

The cost of Covid-19

The ONS has published its latest paper on how the relationship between UK public sector monthly income and expenditure leads to changes in deficit and debt for the financial year ending 31 March 2021. The figures are subject to adjustment but show the stark reality of the effect of Covid-19 on the UK economy and the extent of government support:

  • Public sector net borrowing (excluding public sector banks) in the financial year ending (FYE) March 2021 is estimated to have been £303.1 billion, £246.1 billion more than in the year to March 2020 and the highest nominal public sector borrowing in any financial year since records began in 1947.
  • Expressed as a ratio of gross domestic product (GDP), public sector net borrowing (excluding public sector banks) in the FYE March 2021 was 14.5%, the highest such ratio since the end of World War Two, when in FYE March 1946 it was 15.2%.
  • Public sector net borrowing (excluding public sector banks) in the FYE March 2021 is estimated to have been £24.3 billion less than the £327.4 billion expected by the Office for Budget Responsibility in their ‘Economic and Fiscal outlook – March 2021’ on a like for like basis.
  • Central government tax receipts are estimated to have been £523.6 billion in the FYE March 2021 (on a national accounts basis), £34.2 billion lower than in the FYE March 2020, with notable falls in taxes on production such as Value Added Tax (VAT), Business Rates and Fuel Duty.

The full report can be seen here:  Public sector finances, UK – Office for National Statistics (ons.gov.uk)

How will this affect your business?

We saw in the last budget the steps the government is taking to support the recovery with new incentives for business investment and help for businesses to attract the capital, ideas and talent to grow. Once economic recovery is durably underway, the recent budget stated that the public finances must be returned to a sustainable path and sets out the size of the challenge and steps to deliver more sustainable public finances. So in March we saw Chancellor Rishi Sunak freeze income tax thresholds and announce an increase in Corporation tax rates from 2023.

The government has chosen a fine line between raising taxes to start paying down the massive government borrowings but at the same time stimulate economic recovery and save jobs.

Most businesses will be focussing short term on their recovery and in the medium term on being resilient, improving profitability and growing turnover. If taxes do rise to fund government spending, we recommend all businesses should map out a range of scenarios with “what if” analysis to understand their available future strategies for success. For example, here is a smaller business’s “what if” scenario planning results: 

Please talk to us about scenario planning – we have the tools to help you prepare for the future and set realistic and achievable targets.   

Are you trading with the EU? 

If your business moves goods between the UK and countries in the EU, they will need to follow new customs and tax rules.

Their business will be affected by the new rules if they:

  • buy goods from an EU seller and bring them into the UK
  • send goods they’ve sold to a buyer in an EU country
  • have not exchanged money, but need to move equipment they use for their business, between the UK and the EU.

You can now apply for the SME Brexit Support Fund. Smaller businesses can get up to £2,000 to pay for practical support, including training or professional advice to adjust to new customs, rules of origin and VAT rules when trading with the EU. Applications must be received before 3‌‌0th June.

See: Apply for a grant to help small and medium-sized businesses new to importing or exporting – GOV.UK (www.gov.uk)

HMRC Webinars

You can attend HMRC webinars to help you adjust to the new rules. HMRC webinars explain existing ‌‌ guidance and give you the opportunity to ask general questions. You will also be able to see responses to other peoples’ questions and the guidance HMRC signpost to for extra help and support.

Importing – actions you need to take before making your supplementary declaration

To support those who have delayed their customs import declarations, HMRC explain the actions you need to take before you can make a supplementary declaration and how intermediaries can help you do this.  Please register to take part if your clients have imported goods since 1 January 2021 and not yet completed a customs declaration for them.

See: Registration (gotowebinar.com)

Customs Import Declarations: an overview

If you are planning to import and you want to understand the full declarations process, please register for this webinar: Registration (gotowebinar.com)

Exporting: what you need to do to keep your goods moving

A webinar with an overview of the actions to take now when exporting goods from Great Britain to the EU and moving goods between Great Britain and Northern Ireland.

Key processes include – zero-rated VAT, customs declarations, using an intermediary as well as licences, certificates, and authorisations.

See: Registration (gotowebinar.com)

Trader responsibilities when using an intermediary

This webinar explains your responsibilities as a trader if you choose to use an intermediary to complete import or export declarations for their business. These are complex and an intermediary can save them a lot of time.

Please register here:  Registration (gotowebinar.com)

Reimburse private fuel by 6 July to avoid fuel benefit

One consequence of the recent periods of lockdown is that employees may have driven fewer private miles in their company cars, particularly where they have not been driving to the office.

If they are to avoid being taxed on the provision of private fuel, they need to fully reimburse their employer for the cost of private fuel by 6 July 2021 for the 2020/21 tax year. If not, the benefit needs to be reported on the employee’s form P11d for 2020/21.

Note that the CO2 emissions percentage for the car is multiplied by the £24,500 notional list price used to calculate the benefit for 2020/21. For example, a director driving a Mercedes Benz E200 saloon company car (CO2 emissions 169g per km) would be assessed on 37% = £9,065 for 2020/21. If they are a higher rate taxpayer that would mean £3,626 tax. That would be an awful lot of private fuel!

In addition to the tax payable by the director on the provision of private fuel, there would be £1,251 Class 1A national insurance contributions payable by the employer.

Note that the private fuel benefit is an all or nothing benefit. There must be full reimbursement by 6 July 2021 to eliminate the benefit. The simplest method would be to multiply private miles by the HMRC advisory fuel rate for the vehicle which is amended every 3 months.

Advisory fuel rates from 1 June 2021

These are the suggested reimbursement rates for employees’ private mileage using their company car from 1 June 2021. Where there has been a change the previous rate is shown in brackets.

Note that for hybrid cars you must use the petrol or diesel rate. You can continue to use the previous rates for up to 1 month from the date the new rates apply.

For earlier quarterly figures see: Advisory fuel rates – GOV.UK (www.gov.uk)

Recovery of Input VAT on Employee Fuel

These HMRC advisory fuel rates may also be used to calculate input VAT that may be claimed by the employer where an employee uses their own car for business journeys. The tax free reimbursement amount continues to be 45p per mile (plus 5p per passenger) so for a 1800 cc diesel car 11p of the 45p is deemed to be diesel and 20/120 of that amount, 1.83 pence per mile, may be reclaimed by the employer provided there are petrol station receipts to cover the amounts claimed.

Click here for more details about the C19 resources and updates available to 2020 Members.