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Too good to be true?

Right now, any reference to a return to 2019 trading conditions seems to echo the title of this short article, too good to be true.

Common sense tells us that we are unlikely to emerge largely, COVID-free until the end of 2021 and additionally, many traders and consumers are apprehensive of the coming EU exit.

Never-the-less, we would be wise to be on the lookout for signs of optimism.

In a year when the truth has been labelled as fake and fake is pedalled as truth, it is difficult to know who to believe. Even if you rely on your own judgement these judgements have to be based on interpretations of fact.

The end of each calendar year is culturally a time to reflect and consider your options; set new year resolutions. But based on our experience of disruption and anxiety created by COVID – and to a lesser extent Brexit – seeing the wood of what could be when it is made up of the trees of uncertainty and misfortune is to be blunt, difficult.

However, it is a wise person that keeps their eyes open and plans for change.

Maybe we should view the end of 2020 as a time for reflection on how we cope with our immediate problems, business or otherwise, and create plans so as circumstances allow a more positive approach, we are ready to go…

This may well entail giving serious consideration to what may appear to be too good to be true, but that may not always be the case.

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Sharing costs

Independence is a cultivated concern. We all want to be self-sufficient.

In a business environment this might manifest as having a separate Wi-Fi source even though it may be possible to share Wi-Fi with a number of business neighbours and divide the cost between you?

There will always be what-ifs to this type of co-operative effort but if the cost sharing made a joint contribution to cost savings wouldn’t it be worth exploring your options?

Retail outlets in a common location could club together to promote their mall or street.

Could you share a group-branded delivery van?

Practically, it may be necessary to form an umbrella management company to deal with the costs and recharge members for their share of costs. But as long as there are overall cash savings to be had why not at least consider this as an option?

Disruption in 2020 has taught us that flexibility is a key element if you want to stay afloat. For many businesses, the stresses and strains have proved too much and cherished family businesses have been forced to close. But those businesses that have survived are leaner and better able to cope.

It may well be that co-operation of this sort may not be an option for your business, but you have nothing to lose by considering your options to cost share.

Just as we have all at some time in 2020 directed staff to work at home – an unlikely option in normal times – surprise, surprise the strategy has worked. In fact, many staff now prefer working from home.

Sharing costs may be one of a number of strategies that you could consider. If your business has survived thus far we should not only count our blessings but constantly be on the lookout for options to make our continued success more likely.

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Furlough extended to end April 2021

During an announcement to Parliament on 17 December 2020, the Chancellor confirmed the following:

An extension of the furlough scheme until the end of April 2021,
The date for Budget 2021 has been fixed as 3 March 2021, and
Businesses will have until the end of March 2021 to apply for Government backed, Bounce-Back and other loan schemes.
In a following press release it was confirmed:

The furlough scheme has been extended until the end of April 2021, with the Government continuing to contribute 80% towards wages – giving businesses and employees across the UK certainty into the New Year, the Chancellor announced today. The eligibility criteria for the UK-wide scheme will remain unchanged and these changes will continue to apply to all Devolved Administrations. Extending the scheme until the end of April means businesses across the country will have certainty about what support will be available to them.

Businesses will also be given until the end of March to access the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme. These had been due to close at the end of January.

The Government has already announced that more support will be available beyond March, through a successor loan scheme. More details of the scheme will be announced in due course, with the Government providing a further update on wider Covid-19 economic support at the Budget on 3 March 2021.

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Are you ready to make customs declarations?

HMRC has written to VAT registered businesses across the country to remind them to be prepared for new trading rules with the EU from 1 January 2021 after the Brexit transition period comes to an end. Time is running short and without having all of the correct procedures and agreements in place it will be almost impossible to trade with the EU from 1 January 2021, technically from 11pm GMT on 31 December 2020.

One of the most important areas is that businesses must consider how to make customs declarations. Customs declarations can be difficult and time consuming to complete.

Most businesses use a specialist such as a customs broker, freight forwarder or fast parcel operator to deal with this on their behalf. HMRC’s data suggests that one in three businesses already have a specialist in place, but many more will need to use one.

From 1 January 2021, customs agents will be able to make simplified declarations for you using their own authorisation, so you don’t need to be authorised. They can only do this if:

– your business is established in the United Kingdom
– your business imports goods into Great Britain (England, Scotland and Wales)
– the customs agent has the appropriate authorisation
HMRC’s guidance is clear that if your goods do not have the right paperwork, or if information is incorrect or missing, your goods may be seized and you will face delays and may have to pay extra charges.

If you are moving goods between Great Britain and Northern Ireland, the free Trader Support Service can help guide you through new processes. Under the Northern Ireland Protocol, all Northern Ireland businesses will continue to have unfettered access to the whole UK market.

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Double entry demystified

Most business owners will know the difference between a profit statement and a balance sheet.

Both are created from a process known as double-entry bookkeeping.

If asked to consider two aspects of a £50 purchase from a stationery store, most would say that their cash reserves have dropped by £50 and the store’s cash reserves had increased by the same amount. This is true, but double entry bookkeeping looks at the two-fold aspect of any transaction from one point of view.

In the above example, the purchaser has incurred a cost for stationery and reduce their bank balance by £50. In bookkeeping parlance, stationery costs are debited with £50 and their bank account is credited with the same amount.

Debits are plus amounts and credits are minus amounts. Roll out this process to all transactions in a year and they will sum to zero. This zero result proves that your accounts balance.

In a profit statement, debits for costs are shown as expenses and credits for sales and other income sources are shown as sales or income. If debits (costs) are more the credits (income) you have made a loss, and visa versa, more credits than debits you have made a profit.

Your balance sheet, made up to the same date, will show all assets (debits) less all liabilities (credits). The difference between these two amounts will demonstrate if you have more assets than liabilities – you are solvent – or more liabilities than assets – insolvent. Most balance sheets label this figure as Net Assets/(Liabilities).

The bottom end of the balance sheet shows how the net assets/liabilities have been acquired or financed. Usually, this is your capital stake in the business (credits) plus any retained profits (credits).

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New Christmas grant for pubs

The Prime Minister, Boris Johnson, has announced an additional one-off £1,000 Christmas grant for wet-led pubs in tiers 2 and 3 who will miss out on much needed business during the busy Christmas period.

A wet-led pub is a bar which doesn’t serve food and relies almost entirely on the sale of drinks for its business. This means that most wet-led pubs will be closed for the festive period. The £1,000 payment will be a one-off for December and will be paid on top of the existing £3,000 monthly cash grants for businesses.

Under the current rules only pubs that serve substantial meals are allowed to operate under Tier 2 restrictions with premises in Tier 3 only allowed to offer a takeaway service.

Prime Minister Boris Johnson said:

‘Pubs are at the heart of communities across the country and they have been among the businesses which have suffered the most during the pandemic.

While we can’t make up for all the trade they will lose over Christmas, I hope this new £1,000 grant – on top of the furlough, VAT and business rates relief and existing grants, goes some way to help them weather the economic storm.’

Eligible wet-led pubs across tiers 2 and 3 are invited to apply for the Christmas grant through their local authority.

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Pay January tax by instalments

The deadline for submitting your 2019-20 Self-Assessment tax returns online is 31 January 2021. You should also be aware that payment of any tax due should also be made by this date. This includes the payment of any balance of Self-Assessment liability for the 2019-20 plus the first payment on account due for the current 2020-21 tax year. You may also need to pay the second payment on account for 2019-20 that was due on 31 July 2020 but was provided with an option to defer payment until 31 January 2021 as part of the government support measures during the coronavirus outbreak.

There are also other options to defer payments due on 31 January 2021 and pay by instalments over 12 months. This includes a self-serve Time to Pay facility online for debts up to £30,000 or by arrangement with HMRC.

Taxpayers that want to use the online option must meet the following requirements:

– Have no outstanding tax returns ;
– No other tax debts ;
– No other HMRC payment plans set up.
The debt needs to be between £32 and £30,000, and the payment plan needs to be set up no later than 60 days after the due date of a debt. Taxpayers can choose how much to pay straight away and how much they want to pay each month.

Taxpayers with Self-Assessment tax payments of over £30,000, or who need longer than 12 months to pay in full, can still set up a time to pay arrangement by calling the Self-Assessment payment helpline or the dedicated COVID-19 helpline.

Taxpayers using either option will be required to pay interest on any outstanding balance from 1 February 2021.

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Confirmation of Minimum Wage increases 2021

The Chancellor used the recent Spending Review to confirm that increased National Minimum Wage and National Living Wage rates will come into effect on 1 April 2021.

From 1 April 2021, the National Living Wage will increase by 19p to £8.91. This represents an increase of 2.2%. The National Living Wage currently applies to those aged 25 and over but from next April will be extended to 23 and 24 year olds for the first time. The threshold will further reduce to 21 by 2024.

The hourly rate of the National Minimum Wage (NMW) for 21-22 year olds will increase to £8.36 (a rise of 16p). The rates for 18-20 year olds will increase to £6.56 (a rise of 11p) and the rate for workers above the school leaving age but under 18 will increase to £4.62 (a rise of 7p). The NMW rate for apprentices increases by 15p to £4.30.

The new rates mirror the recommendations made by the Low Pay Commission (LPC) which have been accepted in full by the Government. The LPC recommended smaller minimum wage increases for those aged under 23 in recognition of the risks to youth employment which the current economic situation poses.

The independent Low Pay Commission (LPC) was established following the National Minimum Wage Act 1998 to advise the government on the NMW. It is made up of representatives from all sides of industry. The increases will come into effect from 1 April 2021, subject to Parliamentary approval.

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EU exit – did you read this letter?

The Secretary of State for Business, Energy and Industrial Strategy, Alok Sharma has written a letter to businesses in the professional services sector. The letter (available in English and Welsh) provides tailored advice on what key actions businesses must take after the transition period ends on 31 December 2020.

The UK government confirmed earlier this year that it would neither accept nor seek any extension to the transition period and the EU has formally accepted this position. This means that the transition period will end on 31 December 2020. At the time of writing, no trade deal has been agreed with the EU although negotiations to reach an agreement with the EU appear to be continuing into the 11th hour.

We have summarised the main headings in the letter below:

1. Get your professional qualifications recognised by EU regulators to be able to practise or service clients in the EU.

Starting the process to get your professional qualifications recognised by EU regulators by 31 December 2020 may help you to practise your profession (e.g. accountancy, engineering) in the EU.

2. Check if a visa or work permit is required to travel to the EU for work purposes and apply if necessary.

You may face delays or refusal at the border when travelling for business if you do not comply with the immigration requirements of the EU27 if travelling from 1 January 2021.

3. Be prepared on data protection and data transfers.

Your business may not be able to legally receive personal data from the European Economic Area (EEA) from 1 January 2021 if you have not put alternative safeguards in place to cover EU to UK personal data flows.

4. If you are planning to recruit from overseas from 1 January 2021, you will need to register as a licensed visa sponsor.

You may not be able to legally hire people from outside the UK if you do not have a licence. New employees from outside the UK will also need to meet new job, salary and language requirements. Irish citizens and those eligible under the EU Settlement Scheme are not affected.

The letter also reminds readers that webinars providing a range of support are available at: gov.uk/ transition-webinars.

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Deadlines for paying deferred VAT

The coronavirus VAT payment holiday gave businesses the chance to defer the payment of any VAT liabilities between 20 March 2020 and 30 June 2020. The option for businesses to defer their VAT payments ended on 30 June 2020.

There are two options available for repaying this VAT.

The first option is to pay the deferred VAT in full on or before 31 March 2021. No interest or penalties will accrue on deferred payments that are paid by the new due date and there is no requirement to contact HMRC.

The second option, added by the Chancellor when delivering his Winter Economy Plan, is to further defer the amount of VAT due. The new VAT deferral payment scheme will allow businesses the option to pay the deferred VAT in smaller payments over a longer period. Instead of having to repay the full amount by 31 March 2021, businesses will now be able to make smaller interest-free payments during the 2021-22 financial year and pay the VAT due by 31 March 2022.

Businesses will need to opt-in to the new payment scheme. HMRC has published updated guidance confirming that the opt in process will be available in early 2021. Businesses will also need to opt in themselves and will not be able to use an agent to do this for you.

The new payment scheme will allow businesses to pay their deferred VAT in instalments without adding interest and select the number of instalments from 2 to 11 equal monthly payments. Businesses must meet certain conditions to use the scheme including being up to date with their VAT returns.

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