Category Archives: Latest News

Voluntary and compulsory strike-off processes paused in response to national lockdown

Companies House will pause both the voluntary and compulsory strike-off processes for one month from 21 January until 21 February to support businesses affected by COVID-19, it has been announced.

The extended measure comes in response to delays to the system caused by the third national lockdown.

In a notice to customers, Companies House said reduced resources have led to delays in processing correspondence, documents and forms, which could potentially disadvantage companies during this period.

The regulator said it will continue to publish first Gazette notices for voluntary strike-off applications, but to give business owners more time to update their records, the second Gazette notice will not be published and companies will not be removed from the register during the pause.

Both the first and second Gazette notices for compulsory strike-off applications will not be published, however, and companies will not be compulsorily removed during this period.

Commenting on the changes, Companies House said: “Pausing our strike-off processes will provide companies with more time to update their records and help them avoid being struck off the register. It’ll also protect creditors and other interested parties who might have had difficulties in receiving notices or registering an objection, or whose objections have not yet been processed.

“We’ll continue to remind customers about their filing responsibilities during this period. Our digital services are available as normal, and we encourage all customers to file online if you’re able to.”

The Companies House strike-off process was also paused during the first and second national lockdown.

What is the Companies House strike-off process?

Registered businesses are removed from the official register of companies after a period of inactivity.

You can choose to close down your own limited company by getting it “struck off” voluntarily, providing it meets a strict set of requirements.

A company can also be forcibly struck off if company documents are outstanding and the regulator has received no response, or if the company has no registered directors.

Link: Companies House pauses voluntary and compulsory strike off processes

Consultations on future of Companies House could see filing deadlines slashed

A set of consultations on the future of Companies House published in December 2020, include proposals for mandatory digital filing, requirements to tag accountants digitally with IXBRL and shortening filing deadlines to three months for public companies and six months for private companies.

The Department for Business and Industrial Strategy (BEIS) is also seeking feedback on extending the powers of Companies House to allow it to undertake further checks on filings before they are added to the register, with the authority to reject them where necessary.

Finally, BEIS is consulting on banning corporate directors, meaning only individuals could hold the position of a company director. At the moment, companies are only required to have a single individual director.

There is no guarantee that any of the proposals being discussed will be implemented and, if they are, it is likely to take some time.

Lord Callanan, the Minister for Corporate Responsibility, said: “Today’s proposals set out further detail on our far-reaching reforms to ensure the Companies House register is fit for the 21st century – allowing us to crack down on fraud and money laundering while providing businesses with greater confidence in their transactions.”

Link: Companies House reforms could cut filing deadlines

The advantages of electric vehicle salary sacrifice schemes

Businesses looking to reward and retain staff members may wish to consider offering an electric vehicle (EV) salary sacrifice scheme.

Not only are many EVs better for the environment, but they could also offer businesses considerable savings.

Businesses can use employee salary sacrifice – similar to schemes offered for pension contributions, cycle to work schemes and childcare vouchers – to fund the purchase of new EVs in a tax-efficient manner.

In principle, salary sacrifice is simple, the employee ‘sacrifices’ part of their salary and the employer invests this in a benefit – in this case, an EV. Using salary sacrifice saves the employee National Insurance Contributions (NICs) and Income Tax.

However, in recent years HM Revenue & Customs (HMRC) has taken a tougher approach to many salary sacrifice schemes, which has often made them less effective.

Thankfully, a special exemption was put in place for ultra-low emission vehicles to encourage motorists to swap their petrol and diesel cars for electric and hybrid models.

When this was confirmed it was made clear that the provision of an EV via salary sacrifice would be considered a benefit-in-kind.

Initially, the benefit-in-kind, or BiK rate, on a pure electric car was 16 per cent, which in many cases meant that there was little or no benefit.

However, following changes in April last year, all pure electric cars now have a zero BiK rate and salary sacrifice benefits can be felt in full.

The zero per cent rate also applies to hybrid vehicles that are first registered from 6 April 2020 that produce between one and 50g/km of CO2 and are capable of at least 130 miles on battery power alone.

The change in rates coincided with more complex rules regarding emission and economy tests, which determine rates for vehicles including hybrids, which may have an impact on existing hybrids acquired via salary sacrifice.

The Treasury has recognised that the older tests may unfairly disadvantage some company hybrid car users and so to achieve fairness it has reduced the BiK rates used for older car models.

This reduction will fall to one per cent in the 2021/22 financial year and will disappear altogether in the following year. This means that there will be no reduction in its BiK rate for these vehicles from April 2022.

People looking to purchase a new company car in the next year should review the Government’s latest rates, which can be found here. Be aware though that these rates change annually and may differ after April 2021.

There are several other tax incentives for both company car users and the businesses that offer this benefit, especially where it is used for business purposes, including:

  • Corporation Tax relief
  • Reclaiming VAT on a vehicle purchase
  • Lower vehicle excise duty
  • Plug-in grants
  • Tax-efficient electric car charging points

It is not surprising, as technology advances, that more businesses are considering EV salary sacrifice or the purchasing of a fully electric or hybrid fleet.

Beyond the immediate tax benefits for a company, the employer should also look at the advantages that offering a company car can have on retaining staff.

Offering EV salary sacrifice is an excellent way of rewarding employees in a tax-efficient manner that doesn’t incur significant costs for the business or the employee.

Looking further ahead, the Government is now committed to a ban on the sale of new purely petrol and diesel vehicles by 2030, which is now less than a decade away.

Link: Electric Car Tax Benefits

Business insurance rates are on the rise

The impact of the pandemic has been felt in many different ways. Some of the effects have been quite immediate, but now many businesses are starting to see how the events of the last year are affecting their annual business insurance rates as well.

Before COVID-19 struck, there were already a number of factors adversely impacting the insurance industry and the market has steadily deteriorated during the last year. Beyond the pandemic, the industry has also been affected by:

  • Changes in legislation
  • A sharp rise in UK property rates
  • Flood and storm damage claims
  • Rising reinsurance rates and reducing capacity
  • Lower interest rates

The combined effect of these issues and COVID-19 has meant that many insurers are now looking to increase business insurance premiums in the year to come.

With many businesses already struggling with cost and cash flow management issues, a sudden increase in insurance rates could damage their ability to recover later in the year.

To combat some of the issues listed above, the insurance industry is reacting. One such area is specialist insurance for those in high flood risk areas, which uses a very practical approach.

If a business has previously been flooded, is at risk of flooding or has flood insurance in place, a new product has been created that is essentially a drain pipe attached to the outside of the premises.

When water levels reach a pre-agreed height on the drainpipe, the insurance policy pays out a pre-agreed sum of money immediately.

This new type of policy is not based on damage costs, like a traditional policy, and can be used as flood insurance or as cover for the excess on existing flood insurance.

This is one of several new insurance products on the market designed to reduce premiums, which is why businesses need to assess their current level of cover and the costs involved.

Link: Property insurance costs to keep rising in 2021

HM Revenue & Customs increases the threshold for Self-Assessment online payment plan service to £30,000

HM Revenue & Customs (HMRC) has increased the threshold for Self-Assessment taxpayers to use its online self-service Time to Pay payment plan service from £10,000 in tax liabilities to £30,000.

The move means that more taxpayers will be able to spread the cost of their tax bills by paying in monthly instalments, without having to call HMRC.

The Chancellor announced in his Winter Economy Plan that taxpayers will be able to arrange a payment plan of up to 12 monthly instalments to cover tax payments deferred from July 2020.

HMRC now says that this also covers outstanding tax owed for 2019-20 and the first payment on account for the current tax year.

Taxpayers must set up a payment plan no later than 60 days after the due date of the tax debt to qualify for the payment plan, which, for tax payments due on 31 January 2021 is 1 April 2021.

However, setting up a payment plan more than 30 days after the due date of the tax debt will lead to late payment penalties. This means payment plans in respect of tax due on 31 January 2021 would need to be set up by 2 March 2021.

Unlike the previous Self-Assessment deferral of the second payment on account that was due on 31 July 2020, the new payment plans will be subject to interest from 1 February 2021.

To qualify for a payment plan using the online self-service Time-to-Pay system, taxpayers must:

  • Have no outstanding tax returns;
  • Have no other tax debts;
  • Have no other HMRC payment plans set up; and
  • Have a debt of between £32 and £30,000.

HMRC has also warned taxpayers against scammers claiming to be from HMRC and offering to set up payment plans. Currently, payment plans can only be set up by individual taxpayers.

HMRC says that taxpayers may have the option of using the online self-serve Time to Pay facility on GOV.UK once they have completed their 2019-20 Self-Assessment tax return.

Those with Self-Assessment debts of more than £30,000 or who need more than 12 months to pay the tax they owe may be able to set up a Time to Pay arrangement via the Self-Assessment Payment Helpline on 0300 200 3822.

Link: If you cannot pay your tax bill on time

Independent commission argues against annual wealth tax but advocates a one-off charge

An independent commission established last spring by the London School of Economics, the University of Warwick and the Economic and Social Research Council to analyse proposals for a wealth tax has rejected an annual tax but has advocated a one-off charge.

The commission comprises senior academics from the universities involved as well as tax barrister, Emma Chamberlain.

While Chancellor, Rishi Sunak, has previously rejected the idea of a wealth tax, the commission’s independence means that the idea may gain traction in the coming years.

In rejecting the idea of an annual wealth tax, the commission argues that such a levy would “have higher administrative costs relative to revenue than a one-off tax, which means that it is currently not feasible” considering the lower tax thresholds.

It goes on to note that “at very high levels of wealth, the extent of these responses remains uncertain. Some responses could be mitigated by careful design, but others would be more difficult to resolve.”

Instead, the commission argues for substantial reforms of existing taxes on wealth instead of “minor tinkering”. They suggest this approach would be more efficient economically and less costly to administer.

In contrast, the commission advocated a one-off charge to help repair the public finances following the pandemic, arguing:

A well-designed one-off wealth tax would raise a total of £260 billion at a rate of five per cent over £500,000 per individual or £80 billion at a rate of five per cent of £2 million per individual, payable at one per cent per year over five years.

The report goes on to say that such a measure should not be pre-announced in order to prevent forestalling but that deferrals should be permitted where taxpayers are constrained in their liquidity.

The commission says that such a charge would be preferable to increasing taxes on work or spending.

Link: The Wealth Tax Commission

Could the Government be about to launch a new permanent state-backed small business loan scheme?

According to reports in the Financial Times, the Government is considering launching a new loan scheme, where businesses could borrow anything up to £10 million through an 80 per cent state-guaranteed bank loan.

The new scheme, which could be a successor to the existing Coronavirus Business Interruption Loan Scheme (CBILS), would provide a permanent state-backed small business loan to eligible companies.

Under the plans, the Government would guarantee loans to small businesses ranging from a few thousand pounds up to £10 million over a six-year lending period.

This would effectively extend the CBILS, but with a lower threshold once applications for the existing loan scheme ends on 31 March this year.

The Financial Times reports that participating banks could set their own interest rate for their loans, capped at around 15 per cent. Research by GrowthBusiness found that lenders are charging anything between three per cent and 15 per cent for current CBILS loans.

As yet, no official announcement has been made on such a scheme, but it is understood that the Chancellor is looking to announce a range of options to support jobs and businesses in his upcoming Budget on 3 March 2021.

Douglas Grant, Director of CBILS lender Conister, said: “We fully support the UK Government’s plans to launch a permanent replacement for the £65 billion Covid loans programme to support SMEs.

“This more permanent financial support from the Government will be welcome news to those resilient SMEs that have already shown extraordinary levels of adaptability and strength in the face of changing consumer behaviour.”

Link: Government plans permanent state-backed small business loan scheme

HMRC issues new warning over lockdown fraudsters

Within hours of the Prime Minister announcing a new national lockdown in England, HM Revenue & Customs (HMRC) has issued new warnings after it received reports that fraudsters were attempting to dupe taxpayers by pretending to be the tax authority.

Throughout the last year, criminals attempted to scam businesses and individuals out of money by sending fake HMRC correspondences related to COVID-19.

According to the latest reports, a number of scam text messages are now being sent out, informing people they are entitled to receive a grant from the Government as a result of the latest national lockdown.

One such scam message reads: “HMRC: The third lockdown has been announced. Our records show you have been issued a grant of £240 to help during this period.”

Taxpayers who receive the text are then redirected to a website designed to mimic GOV.UK, which asks them to enter the personal and financial details to receive a grant.

As part of the scam, individuals are asked to provide their card details, information it states is necessary “to confirm and deposit the calculated amount”.

Although the Government has announced £4.6 billion of grant funding for businesses during the latest lockdown, this funding is not applied for online in this way.

In response to the latest reports, HMRC has said it will never send any texts to people regarding a tax refund, rebate or grant. People can, therefore, safely assume such correspondence is a scam.

Instead, those who think they may be eligible for grant funding or other COVID-19 financial support should seek professional advice so that they can make the necessary applications.

Link: Avoid and report internet scams and phishing

FSB proposes move to turn Covid emergency debt into shared ownership schemes

The Federation of Small Businesses (FSB) is calling on the Government to introduce new measures to help companies struggling with COVID-related debt, including employee shared ownership.

The FSB has said that businesses are facing “unmanageable” levels of Coronavirus debt – with four out of 10 small businesses describing their indebtedness in this way.

Already nearly half of those surveyed in the FSB’s latest study had used personal finance products, such as personal credit cards, overdrafts and loans, to keep their businesses going.

Instead, the small business organisation is suggesting that a system of shared ownership is introduced under which emergency debt could be assigned to an employee ownership trust in return for the trust getting preference shares in the business of the same value, plus an option to acquire 10 per cent of the business when there is a future change of control.

Preference shares, also referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued.

This move would take the debt off the company’s balance sheet, according to the FSB and help businesses manage their debts.

As well as suggesting the new system of ownership, the FSB has also called for the Government to turn Coronavirus emergency loan repayments into tax owing – effectively nationalising a portion of small business debt.

Another proposal is to extend the existing Bounce Back Loan Scheme Pay As You Grow model – which allows borrowers to extend the length of the loans, make interest-only payments and request repayment holidays – to all commercial small business lending.

Martin McTeague, National Vice-Chair of the FSB, said: “Implementing a model whereby firms start repaying debt when they’re making a profit again could mark a positive way forward, as could getting employees more involved in the ownership and running of firms.

“Hundreds of thousands of viable small businesses have taken on sizeable debts to see them through to the other side of the COVID crisis. With emergency loan repayments fast approaching, and festive trade hugely disrupted, we need the Government to intervene swiftly to avoid a small business credit crunch in the spring.”

Link: Turn Covid emergency debt into shared ownership, urges small business

VAT – Post-Brexit arrangements

The latest guidance on VAT on imports and services to and from the EU is complex and businesses need to account for this in their trading.

To help we have provided a brief summary below, but we highly recommend you seek additional advice.

Import VAT 

Goods that move into the UK from the EU from 1 January 2021 onwards will be considered imports, meaning import VAT will be payable and customs declarations will need to be made.

Businesses must account for VAT on all goods imported using a postponed accounting system. This means that import VAT is accounted for and paid via the usual VAT return, which will lead to an improved cash flow position for many businesses.

This applies to all goods imported by VAT registered importers to the UK, including those from the EU. In most cases, import VAT should be recoverable by businesses.

Accounting for import VAT on your VAT return

Businesses have to account for import VAT via their VAT return under the postponed accounting system if the goods they import are for use in their business.

A business must include its EORI number starting with ‘GB’ on its customs declaration and its VAT registration number if it is needed.

It can then account for import VAT on its VAT return when it submits a declaration that releases those goods into free circulation from one of the following special customs procedures:

  • customs warehousing
  • inward processing
  • temporary admission
  • end use
  • outward processing
  • duty suspension.

A business can only account for import VAT on their VAT return once they release excise goods for use in the UK – also known as ‘released for home consumption’.

If the business imports goods that are not controlled into Great Britain from the EU, between 1 January and 30 June 2021, they must also account for import VAT on their VAT return, even if they delay the customs declaration or use a simplified customs declaration to make a declaration in their records.

Deferring VAT

New rules for VAT deferment apply in Great Britain, which allow businesses that import goods regularly, to apply for a deferment account to delay paying most customs charges, including import VAT.

Through this account, a business can make a single payment each month via direct debit instead of paying for each consignment separately.

The scheme is open to importers or customs agents and freight handlers that work for importers and have an approved deferment guarantee or waiver in place.

Regardless of the method of accounting for VAT on imported goods, checks to ensure that the data on the customs declarations is accurate will continue to be highly important for VAT purposes, for all imports.

Consignments of value below £135 

Imported goods in a consignment not exceeding a value of £135 (€150), excluding specific excise goods and gifts, will not be subject to import VAT at the border and will be subject to sales (supply) VAT instead.

This will end the £15 VAT exemption thresholds previously known as low-value consignment relief and VAT will now be charged on the goods as if they were supplied in the UK and accounted to HM Revenue & Customs on the UK VAT return.

This means that businesses selling goods to be imported into the UK with a value not exceeding £135 will be required to charge and collect any VAT due at the time of sale.

For UK VAT registered businesses importing goods in a consignment not exceeding £135 in value that has not been charged VAT at the time of purchase they can account for this VAT on their VAT return under the usual reverse charge method.

Place of supply

Businesses must determine the country where a supply takes place for VAT purposes so that they know where VAT due is payable.

Businesses should be aware that they may continue to create VAT liabilities in other EU Member States. This may mean that businesses in the UK require multiple EU VAT registrations within each member state that they trade within.

Reclaiming VAT in the EU

Currently, UK firms incurring VAT in EU countries can claim VAT back (subject to national rules) via HM Revenue & Custom’s dedicated refund portal.

That arrangement will remain in place until 31 March 2021, after which time, there is currently no provision in place to claim for VAT incurred in 2020, under the terms of the Withdrawal Agreement.

Impact on services

Post-Brexit there should be minimal impact on the supply of services. Business to business services are treated as though they are supplied where the customer belongs and that customer must account for the local VAT.

This will mean that for UK service suppliers they will continue to not charge UK VAT. For business to consumer supplies, UK VAT generally applies and this will also remain the same.

When receiving services, UK businesses may still have to apply a reverse charge to the receipt of services from non-UK suppliers. This ensures that there is no competitive advantage from sourcing services via non-UK suppliers.