How can you get tax relief on a payment of £500k to a SSAS Reply

Small Self Administered Pensions (SSAS) are common for owner managed businesses.

In general a company can pay up to £40k per year into a SSAS for a employee and if the allowances haven’t been used there is 3 year carry forward option, which could mean up to £120k.

However, where a SSAS has multiple members a company could contribute £500k and get full tax relief. This known as an indirect payment.

Corporation Tax relief on the indirect contribution is available in the year it’s made.  It needs to meet the “wholly and exclusively for the purpose of trade” test. 

If the contribution exceeds £500,000 (up to a maximum of £2 million), the relief must be spread over future years.

Here are the HMRC rules https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm043400

Speak to you SSAS provider for advice and further details

steve@bicknells.net

How do you make a claim for the Job Support Scheme (JSS)? Reply

www.bicknells.net

The Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The company will continue to pay its employee for time worked, but the burden of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.

How can I claim?
• The scheme will be open from 1 November 2020 to the end of April 2021.
Employers will be able to make a claim online through Gov.uk from December 2020. They will be paid on a monthly basis.
• Grants will be payable in arrears meaning that a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return

Examples
• Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40% of her usual hours).
• Her employer pays Beth £140 for the days she works.
• And for the time she is not working (3 days or 60%, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80% of her normal wage.
• The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20% of her normal wages) to Beth’s employer to support them in keeping Beth’s job.

https://www.gov.uk/government/publications/job-support-scheme

steve@bicknells.net

Winter 2020 – Job Support Scheme, SEISS, Tax Deferral and Bounce Back Loans (pay as you grow) Reply

NEW JOB SUPPORT SCHEME ANNOUNCED

 

Today Chancellor Rishi Sunak announced a new job scheme starting 1 November 2020 to replace the current Job retention (“furlough”) scheme which ends 31 October 2020.

 

All small and medium-sized businesses are eligible, larger businesses must show their turnover has fallen during the pandemic. Employers can use the new scheme even if they have not previously used the furlough scheme.

 

The new Government scheme will last for six months to 30 April 2021 and to be eligible employees will need to be working a minimum of 33% of their hours. For the remaining hours not worked the Government and employer will pay one third. of wages each. This means:

Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.

 

Employees who can only go back to work on shorter time will still be paid two thirds of the hours for those hours they can’t work.

 

The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

 

By way of an example an employee working 33% of their hours will receive at least 77% of their pay, 22% paid by the Government and 55% paid by their employer (the “worked” 33% plus 22%).

 

SELF-EMPLOYED INCOME SUPPORT SCHEME

 

The existing self-employed grant (SEISS) will also be extended on the same basis as the job support scheme.

 

An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. This is worth 20% of average monthly profits, up to a total of £1,875.

An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April.

 

 

VAT CUT FOR HOSPITALITY SECTOR CONTINUES

 

The reduction in VAT to 5% for the hospitality and tourism sector will be extended until 31 March 2021.

 

DEFERRAL OF VAT BILLS

 

Up to half a million businesses who deferred their VAT bills will be given more breathing space through the New Payment Scheme, which gives them the option to pay back in smaller instalments. Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

 

SELF-ASSESSMENT TAXPAYERS – TIME TO PAY EXTENSION

 

Approximately 11 million self-assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, meaning payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

 

BOUNCE BACK LOANS – FLEXIBILITY GIVEN TO PAY BACK AMOUNTS BORROWED

 

More than a million businesses who took out a Bounce Back Loan will get more repayment time through a new Pay as You Grow flexible repayment system.

This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.

 

The Government also intends to give Coronavirus Business Interruption Loan Scheme lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.

 

The chancellor also announced an extension in applications for the government’s coronavirus loan schemes until the end of November.

 

Further guidance will be issued in due course.

See: https://www.gov.uk/government/news/chancellor-outlines-winter-economy-plan

steve@bicknells.net

 

How can you get a Tax Refund for Trading Losses? Reply

We are facing the worst recession in 300 hundred years, according to Bank of England

Worse than the Napoleonic wars 1812 to 1821

Worse than the Great Depression of the 1930’s

Worse than the 2 World Wars

Worse than the Financial Crash of 2008

The IMF predicts the UK economy will shrink by 6.5% in 2020, compared with the IMF’s January forecast for 1.4% GDP growth.

The Office for Budget Responsibility (OBR) said unemployment could hit 3.4 million – up from 1.3 million – leaving around one in 10 of the working population without a job, while the economy may shrink by 35% between April and June.

Businesses will make losses this year!

How can those losses into cash refunds?

Carry back the losses! Reclaim tax you have previously paid

You will probably need your accountant to help you, here are the basics

Historically most businesses have simply carried forward losses but you can carry them back

Corporation Tax

 

Instead of carrying a loss forward, you can claim for the loss to be offset against profits for the earlier 12 month period (not accounting period).

You can make a claim to carry back a trading loss when you submit your Company Tax Return for the period when you made the loss.

 

Self Employed

You may use the loss against your income of 2019 to 2020 or 2018 to 2019 or both years.

You can make this claim for losses made in the first 4 years of trade. Start with 2016 to 2017 income.

If the loss is more than your income use the remaining loss against your income in 2017 to 2018 and then 2018 to 2019.

Do not make this claim if you, your spouse or civil partner first carried on the trade before 6 April 2016.

 

 

Corporation Tax – Carry a trading loss back

Instead of carrying a loss forward, you can claim for the loss to be offset against profits for the earlier 12 month period (not accounting period).

You can only do this if your company or organisation was carrying on the same trade at some point in the accounting period or periods that fall in the earlier 12 month period.

For example, if your company or organisation has a loss of £8,000 in the accounting period 1 January 2016 to 31 December 2016 and profits of £20,000 in the earlier 12 months, you can carry back the £8,000 loss to be set off against the profits for the previous accounting year, this will reduce them from £20,000 to £12,000.

If an accounting period straddles that 12 month period, the profit for that period is apportioned and the loss can only be offset against that portion of the profit that falls within the 12 month period.

For example, your company or organisation has a loss of £8,000 in the accounting period 1 January 2016 to 31 December 2016 and it’s recently changed its accounting date, so that the accounting periods and profits of the earlier periods were:

  • £2,000 for 1 July 2015 to 31 December 2015
  • £10,000 for 1 July 2014 to 31 July 2015

You can carry back £2,000 of the loss to cover the whole of the profit in the period ended 31 December 2015.

The balance of the loss of £6,000 cannot be entirely carried back as only 6 months of the profits of £10,000 fall into the earlier 12 months of the loss making period.

Only a loss of £5,000 (6/12 x £10,000) can be used, and the balance of £1,000 is available to be carried forward to the year ended 31 December 2017.

How to claim for a trading loss to be carried back, or amend a claim

You can make a claim to carry back a trading loss when you submit your Company Tax Return for the period when you made the loss.

You can make your claim in your return or in an amendment to the return, as long as you’re within the time limit to amend it. You can also make your claim in a letter.

If you’re making a claim in your return that reduces your Corporation Tax liability for an earlier period, you must make sure you have put an ‘X’ in the appropriate box on the CT600 form.

A claim should be made within 2 years of the end of the accounting period when you made the loss. Your claim should include:

  • the name of your company or organisation
  • the period when the loss is made
  • the amount of the loss
  • how the loss is to be used

If you send your claim separately, send it to HMRC.

 

https://www.gov.uk/guidance/corporation-tax-calculating-and-claiming-a-loss

Income Tax – Using losses: types of claim

Trade losses may be used in a number of ways against:

  • income or possibly against capital gains of the same year or an earlier year
  • profit of the same trade
  • income from a company to which you transferred your trade.

Not all losses may be claimed in all of these ways and sometimes the amount of loss you claim is restricted or limited.

https://www.gov.uk/government/publications/losses-hs227-self-assessment-helpsheet/hs227-losses-2020

Loss set-off against income or income and capital gains

You may use the loss against your income of 2019 to 2020 or 2018 to 2019 or both years. The loss you claim against income will normally be the whole of the loss. If the loss is more than your income, claim the figure of income. You may be able to use the remaining loss, or part of it, against your chargeable gains.

Loss used against income in 2016 to 2017 to 2018 to 2019: early trade losses relief

You can make this claim for losses made in the first 4 years of trade. Start with 2016 to 2017 income.

If the loss is more than your income use the remaining loss against your income in 2017 to 2018 and then 2018 to 2019.

Do not make this claim if you, your spouse or civil partner first carried on the trade before 6 April 2016.

If you make any of these claims, make sure that you include losses claimed by you other than in your tax return. The section on stand-alone claims gives more on this.

If you use the loss against earlier year’s income or capital gains you must also tell us the:

  • amount of loss used for each year in the ‘Any other information’ box on the return
  • decrease in tax due for earlier years

The amount of loss relief you claim against income or capital gains may be restricted or limited for example if you:

  • worked for less than 10 hours a week on average on commercial activities of the trade
  • are a Limited Partner or a member of a Limited Liability Partnership
  • have a trade which is carried on wholly overseas
  • have claimed certain capital allowances
  • have income from oil extraction activities or oil rights

If you need more information on any of the restrictions on relief, ask us or your tax adviser.

There’s a limit on the total amount of Income Tax reliefs that you may claim for deduction from total income for a tax year. Loss relief is one of the reliefs affected. The limit is the higher of £50,000 and 25% of the adjusted total income of the year. See Helpsheet 204 if you think you may be affected by this.

 

Example

Phil has a total income of £70,000 in 2019 to 2020 and makes a trading loss in that year on one of his businesses of £60,000.

The maximum amount of relief Phil can set against his total income for 2019 to 2020 is £50,000 as this is the greater of £50,000 and 25% of his income. The remaining £10,000 loss can be carried forward.

https://www.gov.uk/government/publications/limit-on-income-tax-reliefs-hs204-self-assessment-helpsheet/hs204-limit-on-income-tax-reliefs-2020

 

Follow our Blog https://stevejbicknell.com/

Check out our website https://www.bicknells.net

Follow us on Facebook https://www.facebook.com/bicknellbusiness/

Follow me of Facebook https://www.facebook.com/stevejbicknell

Connect on Linked In https://www.linkedin.com/in/stevebicknell1/

Follow us on Twitter https://twitter.com/stevejbicknell

Follow us on Twitter https://twitter.com/Bicknelladviser

 

We use Movavi https://www.movavi.com/ to create our Videos and Story Blocks for footage (Model Released and Property Released) https://www.storyblocks.com/

 

What is the Self Employed Income Support Scheme? 2

The scheme will allow you to claim a taxable grant of 80% of your average monthly trading profits, paid out in a single instalment covering 3 months, and capped at £7,500 altogether. This is a temporary scheme, but it may be extended.

If you receive the grant you can continue to work, start a new trade or take on other employment including voluntary work, or duties as an armed forces reservist.

The grant will be subject to Income Tax and self-employed National Insurance.

There is other support available if you’re not eligible for the grant.

HMRC will work out if you’re eligible and how much grant you may get.

Last week HMRC contacted all tax agents (accountants), here is what they said….

As an agent you won’t be able to make a claim on behalf of your clients.

Designing a scheme that enabled agents to apply on behalf of clients would have taken substantially longer to deliver, at a time when speed is the priority.

Instead, we have designed the scheme to be as simple as possible for customers to use, and we will calculate the amount a customer is entitled to based on the information we already hold.

How to use the checker

To use the online checker, your client or you, on their behalf, will need their Unique Taxpayer Reference Number and their National Insurance Number.

If your client is eligible, they will be given a date, between 13 and 18‌‌ May, from which they can apply. This date is assigned randomly to help HMRC manage demand on the service, making sure that everyone who needs to make a claim can do so.

Your client will also be asked to provide their Government Gateway credentials (user ID and password) and check that their bank and contact details are up to date. This is important so that we can we can remind them by email or text message when it’s their turn to make a claim.

If your client doesn’t have Government Gateway credentials, they can set those up simply if they follow our guidance and use the SEISS eligibility checker. There will be no requirement for customers to wait for pins or codes through the post.

So it vitally important that you get a Gateway account with HMRC if you are self employed.

steve@bicknells.net

A Masterclass in Making Tax Digital Reply

Yesterday I presented a 2 hour Masterclass in Making Tax Digital at Scottish Public Sector Taxation Conference, we covered

  • What is MTD and Why is it being introduced
  • What will it cost
  • When are Digital Links needed
  • What are Digital Links
  • How is MTD going so far
  • Problem areas
  • Why has GIANT been delayed
  • What are the 2 main types of Bridging Software
  • Scenarios

160 delegates from the Scottish Government, Scottish Council, Scottish NHS and HMRC attended.

What is happening to the employment allowance in 2020? Reply

In April 2020, the government are planning to make changes to the employment allowance. Since 2014 many businesses have been able to claim £3,000  per year as a deduction against Class 1 NI, but from April things are changing!

Here is a quick summary

  1. Employers won’t automatically qualify for the EA (Employment Allowance) and must claim it each year. This will mean submitting a declaration confirming that you’ve checked and qualify by meeting the eligibility conditions.
  2. Employer with more than £100k of Class 1 NI won’t qualify
  3. Connected employers won’t qualify – sharing staff, premises or other resources
  4. EA will be counted as State Aid and the maximum state aid allowed is 200,000 euros

So even if items 2 to 4 don’t apply, item 1 will apply to every business wanting to make a claim.

steve@bicknells.net

A bit more Goodwill Tax Relief Reply

What has changed

You can now get relief on purchases made on or after 1 April 2019 if the:

  • goodwill and relevant assets are purchased when you buy a business with qualifying intellectual property (IP)
  • business is liable to Corporation Tax
  • relevant assets (including goodwill) are included in the company accounts

Find a full definition of goodwill and relevant assets on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44060.

Relief you can get

Relief is a fixed rate of 6.5% a year on the lower of the cost of the relevant asset or 6 times the cost of any qualifying IP assets in the business purchased.

Relief is given yearly until the limit is reached. More information about how to work out the relief can be found on GOV.UK in the Corporate Intangibles Research and Development Manual CIRD44093.

How to claim

You must complete a Company Tax Return and include the relief. This will reduce both:

  • your company or organisation’s taxable profit
  • the amount of Corporation Tax you have to pay

https://www.gov.uk/guidance/corporation-tax-relief-on-goodwill-and-relevant-assets

steve@bicknells.net

Factsheet – Construction Industry VAT – Reverse Charge Reply

 

Reverse Charge for the Construction Industry starts in October 2019, its complicated and will be confusing!

Read our 2 page fact sheet to understand how you need to account for VAT.

The new rules will affect Subcontractors and Contractors.

Click here to get the factsheet

steve@bicknells.net