Government confirms Job Retention Bonus of £1,000

Government confirms Job Retention Bonus of £1,000

Government confirms Job Retention Bonus of £1,000

During the Summer Economic Update, the Chancellor Rishi Sunak announced his Plan for Jobs, which included a new incentive for users of the Coronavirus Job Retention Scheme (CJRS) to keep furloughed workers employed until January 2021.

The Job Retention Bonus (JRB) will encourage employers to bring back furloughed employees by allowing them to claim a £1,000 payment for every previously furloughed worker that is retained.

To qualify for the JRB, an employer must bring employees back to work in roles that pay above the Lower Earnings Limit of £520 per month on average, between the end of the CJRS and the end of January 2021.

If an employer keeps the employee in employment and meets the criteria of the scheme a JRB payment will be made from February 2021 for each eligible employee.

Further information about the JRB is expected from the Government on 31 July 2020.

Upcoming key dates for the Coronavirus Job Retention Scheme

Upcoming key dates for the Coronavirus Job Retention Scheme

In the next few weeks, employers may need to submit additional information or change the way they manage their Coronavirus Job Retention Scheme (CJRS) claims. To help you prepare, here are some key dates and actions you may need to take:

31 July 2020 – Submit your CJRS claim for periods ending on or before 30 June 2020. This is the last date you can make these claims. You need to have claimed at any point on or before 31 July to be able to claim for future months.

1 August 2020 – The CJRS will no longer pay for employers’ National Insurance (NI) and pensions contributions for furloughed employees. Employers have to make these payments from their own resources after this date.

1 September 2020 – Employers will have to start contributing to the wages of furloughed employees. Grants will be for 70 per cent of usual wages in September, but furloughed employees will continue to be entitled to receive at least 80 per cent of their usual wages and so employers are expected to make up the difference from their own resources.

Employers that are struggling to administer the changes to the CJRS should seek professional support to ensure they are compliant as HM Revenue & Customs is taking a tough, proactive approach to errors and fraudulent claims.

Paying for COVID-19: Government begins exploring tax take back

Paying for COVID-19: Government begins exploring tax take back

The Chancellor, Rishi Sunak, has commissioned the Office of Tax Simplification (OTS) to undertake a review into how Capital Gains Tax (CGT) is paid by small businesses and individuals.

It is estimated that the UK Government has already incurred hundreds of billions of pounds in costs in its economic fight against the Coronavirus and it is clear that it will need to recover this spending in some way.

The decision to commission a review of CGT has left many concerned of a ‘stealth wealth tax’, using CGT as a means of increasing the tax bill of small businesses and those with high-value assets.

The OTS investigation into CGT is said to be wide-ranging and will include a look at all of the allowances, exemptions and reliefs associated with CGT, the treatment of losses within the tax and its interaction with other levies, such as inheritance and income tax. This review will also look at whether current rules alter taxpayer’s behaviour and encourage inappropriate actions to be taken.

Many fear that the extensive free rein given to the OTS may be a precursor for big changes in a Budget later this year.

One suggestion is that the Chancellor may be seeking an equalisation of CGT and income tax rates. At present, the highest rate of CGT for most assets, apart from property, is 20 per cent, whereas the top rate of income tax is 45 per cent.

As an alternative, some have suggested that the Chancellor could seek a flat rate of CGT rather than the five rates that currently exist (0, 10, 18, 20 or 28 per cent).

The review may also look to close loopholes and ambiguities in existing reliefs to ensure that taxpayers do not get an advantage from structuring their estate and disposals around CGT.

Another area of potential reform is the capital gains uplift, which currently applies when a person inherits assets, which allows assets to be acquired at the market value on the date of death, rather than the amount originally paid.

This could tie in with the Government’s previous review of Inheritance Tax (IHT), during which the OTS recommended the uplift be removed in cases where IHT exemptions or reliefs apply.

IHT continues to be an area of contention and one that has been explored numerous times. However, it may also be in the spotlight as the Government seeks to recover the multi-billion-pound cost of COVID-19.

As part of the OTS investigation, Rishi Sunak has also tasked the OTS with looking at how CGT is paid by small businesses. This will include “the position of unincorporated businesses and standalone owner-managed trading or investment companies”.

It is important that all taxpayers continue to monitor the Government’s plans for taxation and seek advice if any future changes affect their financial affairs or the passing of wealth to future generations.

Government confirms the next steps for the digitisation of taxation

Government confirms the next steps for the digitisation of taxation

The Treasury has released new details on the next steps it intends to take as part of its long-term tax digitisation plan.

Its timeline for a modernised digital tax system will see HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) programme gradually extended over the next few years to cover most businesses.

Under the current MTD rules, businesses above the VAT threshold of £85,000 are required to keep digital records and provide VAT returns through MTD-compliant software.

However, under the new plan, the programme will be extended to all VAT-registered businesses with turnovers below the VAT threshold (£85,000) from April 2022.

It will then be extended further from April 2023 to all taxpayers who file income tax self-assessment tax returns for business or property income above £10,000 annually.

The Treasury said that the extension of MTD will only affect the way that tax is reported and not the amount that is collected.

Financial Secretary to the Treasury, Jesse Norman, said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century.

“Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”

In a Written Ministerial Statement to Parliament on MTD the Treasury also said that “the Government remains committed to extending Making Tax Digital to other taxes”.

It is hoped that the long deadline to comply with the extension of MTD will give businesses, landlords and agents time to prepare and allow for the development of new products, including free software for businesses with the simplest tax affairs.

Top tips for contractors to avoid late payments

Late payments have always been a big issue for freelancers and contractors, which can cripple the cash flow of a business.

Numerous studies have shown that small and micro-businesses are the least likely to be paid on time and for small contractors, the same is also true.

During this difficult period, it is important that you are paid on time for the work that you do, especially due to the lack of Covid-19 financial support available to many freelancers.

To help, we have put together some tips to help contractors avoid late payments.

Keep invoices updated and accurate

Make sure that invoices are sent out on time and that they are accurate. Ensuring your invoicing procedures are effective can make a massive difference. It is recommended that you:

  • Send invoices as soon as possible
  • Email or send invoices electronically rather than sending by post
  • Ensure that the invoice is addressed to the right person
  • Make sure that there are no mistakes in the invoices
  • Confirm that the invoice has been received.

It isn’t just the responsibility of your clients to ensure payments aren’t late.

Strengthen your credit control

Contractors should have a clear and coordinated procedure for credit control, which is followed for every job.

This should establish a realistic timetable for payments and outline credit terms that should be based on the needs of the business.

Where a client delays payment do not be afraid to chase them. Effective credit control is often about finding a balance in your relationship, so always be firm, fair and professional.

Make payments easier 

There has never been more choice when it comes to payment methods, so contractors should make sure that they can offer as many as possible. This may include:

  • BACS
  • Credit/debit card
  • Cash
  • Online payments, such as Stripe and PayPal

Just make sure all payments are correctly accounted for so that they can be reported to HM Revenue & Customs.

Research new clients

A small amount of due-diligence beforehand can help to identify problem payers. Undertaking a simple credit report on a new customer can help to reveal if they have had any issues making payments previously.

Undertaking these checks allows you to make informed decisions about the terms and conditions associated with each contract.

Offer incentives to late payers

Freelancers struggling with late payments could look to add incentives to the payment process if they are struggling.

This could be something as simple as offering early settlement discounts to clients when they pay on time.

These incentives can be incorporated into your pricing structure so that profit is unaffected. 

Late payment charges 

When the carrot doesn’t work sometimes it is necessary to use the stick a little. Freelancers are allowed, by law, to charge late payment fees and interest on commercial debts.

If a client continually refuses to pay on time or is withholding funds then it may become necessary to start adding a fee to your existing costs. This can affect working relationships, but in extreme cases, it may be necessary to ensure you are paid.

How we can help

First and foremost, we regularly review your invoices to ensure they have been paid as per your contract payment terms and will of course advise you if any invoices are outstanding so that the payment can be chased.

Chasing clients for unpaid invoices can be time-consuming  and the FreeAgent accounting software has automatic reminder emails that you can set up which lets your invoices chase themselves.

As part of the process of joining our firm, we will make sure that the necessary systems are in place so that your pay is unaffected – making the switching process much easier.

We also employ the latest accounting software through FreeAgent to help with the creation of invoices and debtor control, while those choosing our Total Access service will get direct support in chasing outstanding payments from the experienced Cogent team.

To find out how we can help, please contact us by calling 020 8952 2234 or emailing info@cogentaccountants.co.uk

From the Desk of the MD…

This month…

To misquote Dr McCoy from Star Trek… “It’s back to the office Jim, but not as we know it.”

Our office has been closed since lockdown in March and I’m grateful that we passed the remote working from home test with flying colours. Thanks go to all my colleagues for their professionalism and dedication to continue to give all of our clients the best service.

I’m no spring chicken and have been working in an office environment for about 40 years. There have been the odd days here and there where I worked from home when I needed solitude to work on a particularly knotty project. So, I was quite surprised on returning to the office last week with a few colleagues to put our collective toes in the water, to find that I felt like a schoolboy arriving in senior school for the first day. This seemed like an unfamiliar place and not at all like the home office that has been my place of work these last few months.

It seems that many large organisations are not intending to return to the office with the majority of workers until 2021. Smaller organisations such as ourselves are tentatively trying to bring back some workers, perhaps on shift systems to keep safe distancing.

Governments worldwide appear unsure on how to guide us and deliver workable solutions to balance physical and economic health needs. With expectations of the threat of Covid or some other virus being with us for some time, perhaps years, it seems likely that the return to the office will not be an all or nothing. It may be starts and stops depending on lockdown guidance. A bit like the doing the Hokey Cokey… “You put left foot it, your left foot out…”.

As always in life, every threat has an opportunity lurking. For contractors, working freelance, working from home a number of days a week could be powerful. It could protect the freelance nature of what they do, provide fewer travelling hours, which can be used for more chargeable hours or personal time, fewer stay away from home days leading to a better work-life balance. Organisations who previously would not allow working from home due to cyber security have found the solutions now to allow it.

We, as your accountants, like you should be looking for methods to turn this inevitable change to working practices to our advantage, to provide better services, better work-life balance and enjoyable and profitable work going forward.

Best regards,

Victor Korman
Managing Director
Cogent Accountants

Reminder: Deferring payments on account as a result of Coronavirus

All self-assessment taxpayers can defer the 31 July second tax payment on account for income tax to 31 January 2021 as a result of the COVID-19 pandemic.

Taxpayers have the option to defer their second payment on account if they are:

  • registered in the UK for self-assessment; and
  • find it difficult to make the second payment on account by 31 July 2020 due to the impact of Coronavirus.

Taxpayers do not need to tell HMRC that they are deferring their payment on account and it will not prevent an individual from being entitled to other Coronavirus support that HMRC is providing.

Those who defer must make their second payment on account on or before 31 January 2021. However, please be aware that other payments you may have to make by this date include:

  • balancing payments due for the 2019 to 2020 tax year; and
  • the first payment on account due for the 2020 to 2021 tax year.

It is, therefore, highly advised that you keep the funds required to one side to ensure they are available at the start of next year.

HMRC will not charge interest or penalties on any amount of the deferred payment on account, provided it is paid on or before 31 January 2021.

Those who do not wish to defer can still make the second payment on account by 31 July 2020 as normal.

Government offers Job Retention Bonus

The Chancellor has laid out his plans to protect, support and create jobs. Although many of the new measures he outlined were not aimed at directly assisting contractors, one measure stood out – the Job Retention Bonus.

Rishi Sunak has confirmed that the existing Coronavirus Job Retention Scheme (CJRS) would still end in October, he said that it was important that people who have been furloughed are supported back to work.

To help encourage employers to retain staff, the Job Retention Bonus will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed through to the end of January 2021.

To benefit from this payment, employees must be on the payroll continuously and earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Businesses that retain previously furloughed employees will receive payments in February 2021.

It is understood that this scheme will also be available to contractors who operate as an employee via their own Personal Service Company, who have been furloughed during the CJRS, as well as any other individuals that they employ and who have been furloughed.

PLEASE NOTE THAT THIS NEW GRANT ONLY APPLIES WHERE A DIRECTOR OR EMPLOYEE WAS FURLOUGHED AT SOME POINT BEFORE 30 JUNE 2020.

The furlough scheme continues to be one of the few financial support measures available to contractors.

Cogent will continue to help our clients at this difficult time and will provide the service of applying for this final Job Retention grant for client companies.

Details of ‘Eat Out to Help Out’ scheme confirmed

The Government has now confirmed details of the ‘Eat Out to Help Out’ scheme, announced by the Chancellor at his Summer Economic Update on Wednesday 8 July.

The scheme covers the cost to restaurants, cafes and pubs that sell food of providing a 50 per cent discount, capped at £10 per head, on food and non-alcoholic drinks purchased for consumption on the premises from Mondays to Wednesdays in August.

The scheme is open to businesses that were registered with their local authority as food businesses on or before 7 July 2020, provides or shares a dining area for eat-in meals and sells food for consumption on the premises.

HM Revenue & Customs says this could include:

  • restaurants
  • cafés
  • public houses that serve food
  • hotel restaurants
  • restaurants and cafes within tourist attractions, holiday sites and leisure facilities
  • dining rooms within members’ clubs
  • workplace and school canteens

Participating businesses are expected to provide the offer throughout their opening hours on the days that the scheme is in operation.

The scheme applies to food or non-alcoholic drinks, meaning that a coffee purchased without food to drink in a café’s seating area would be eligible for the discount.

The guidance also gives details of how businesses should apply the discount to customers’ orders. Service charges are not covered, while the £10 a head cap is based on the number of people at the table, including children. This means that the discount available to a table of six would be capped at £60, even if the discount for one or more individuals exceeds the £10 cap, assuming the table is covered by a single bill.

The scheme does not apply to takeaway food and drink, or catering services for private functions. It also does not apply to mobile vans or takeaways that provide tables and chairs on the pavement.

However, the guidance does confirm that the scheme can still be used where a customer orders food for dining in but then takes away the remainder of their meal.

The scheme also cannot be put towards:

  • alcoholic drinks
  • tobacco products
  • food or drink that is to be consumed off-premises
  • food or drink that is sold as part of a private party, event or function taking place within an eligible establishment

The discount can be provided alongside existing offers and comes in addition to a cut in VAT from 20 to five per cent for food and non-alcoholic drinks, as well as for accommodation and admission to attractions, which will apply from Wednesday 15 July until 12 January 2021.

The new normal

A lot has changed as a result of COVID-19 and lockdown, with many aspects of our day-to-day life turned around by the restrictions that have been put in place.

It is unlikely, considering the upheaval we have faced, that we will ever return to life as it once was. This has led many to describe the post-lockdown era as ‘the new normal’.

For some people, this new era may mean working more from home and commuting less, for others it could be a change in attitude to their leisure time, but for many, it could also mean changes to their spending habits.

Many studies have been published in recent weeks that look at how life has changed and here is what they have found:

  • 86 per cent of people would like to work from home at least one day a week, says a study by HubbleHQ.
  • 63 per cent of employees are more productive working from home, according to Lenovo’s Technology and the Evolving World of Work study.
  • Research commissioned by Ciena shows that two-thirds of British adults currently working from home fully expect to carry on doing so.
  • 60 per cent of shoppers say they will avoid the high street over the next month and 67 per cent now prefer shopping online, research by ChannelAdvisor found.
  • British bike sales are up 60 per cent due to people cycling more, according to the Bicycle Association.
  • Eight in ten millennials are concerned they do not have enough saved in the event of another pandemic, prompting many to reassess spending habits, according to UBS.
  • British staycations are up 150 per cent as people shun overseas trips, research from Pitchup.com has found.

Like many other businesses, we are having to adjust to changes to daily life and we want to reassure you that we are here to support you as you adapt to ‘the new normal’ as well.

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