leesbookkeeping

[leesbookkeeping]

Salaried Employees and the minimum wage.

As has been widely reported, changes are due to the minimum wage from April 2024. Whilst it is clear when staff are paid by the hour the impact can often be overlooked when considering staff on fixed salaries. So, what is happening.

As of April 1, 2024, the rates for the minimum wage in the UK have been adjusted, and there’s a significant change that employers need to be aware of: the National Living Wage now applies to those aged 21 and over. Previously, this wage rate applied to those aged over 23 & over, but the new threshold means that anyone aged 21 and above is legally entitled to £11.44 per hour

Updated rates:

21 and over: £11.44 (an increase of £1.02)

18-20: £8.60 (an increase of £1.11)

16-17 and apprentices: £6.40 (an increase of £1.12)

For salaried employees, it’s crucial to ensure that they are being paid the correct rate. Let’s calculate the minimum salary for an employee aged 21 and over who works 37 hours per week:

Number of hours worked per week × 52 = annual hours

Annual hours × £11.44 = Minimum annual salary

For example, if an employee works 37 hours per week, their minimum annual salary would be £22,010.56.

As ever if you are unsure of how this change impacts your business you should seek professional advice.

[leesbookkeeping]

Savings, Self-assessment & Stealth Taxes

For many putting money aside for a rainy day is a sensible activity. How the money is stashed away will soon have a greater impact on whether an individual needs to do a tax return or not.

Over recent years savers have bemoaned the pitiful interest rates that banks have offered to their investments whilst central interest rates have remained historically low. Whilst this has been to the benefit of borrowers the length of time the rates have been low has lulled everyone into a false sense of security. Just as the increase in rates is causing problems for borrowers, they also come with an often-overlooked issue for savers.

Standard Taxpayers have a personal savings rate of £1000 (Higher Rate £500). For those in employment or in receipt of a pension, HMRC will be aware of amounts paid from prior years and will adjust tax codes to reflect what they expect will be earned in the current year. If income from savings & investments exceeds £10,000 then you will need to register to do a self-assessment tax return anyway.

For those that have other income such as on a self-employed basis, or property income that will already be in the self-assessment system this will be added to their income calculations and tax paid as a result.

So why a stealth tax… Like many other frozen thresholds, including the main personal allowance, the personal savings allowance has been stuck at £1000 for years. Whilst interest returns were negligible it didn’t matter but now that rates have increased many will be impacted by these frozen limits that didn’t even realize they existed let alone exceeding them or needing to pay tax on them.

So what can you do.

Use your ISA allowances as these are outside of the savings income system.

Be aware of your overall interest income (both yours and any on joint accounts) so you can either include it in your tax return or challenge it if HMRC are adjusting your Tax code. These days most banks have interest certificates readily available on their various online banking offerings.

Whilst many other factors will impact on whether you need to pay tax on savings income the potential to be caught out not making a return is growing. Yet another reason to seek professional guidance if you are unsure.

[leesbookkeeping]

Beware of Side Hustle Tax

Due to the difficult economic climate many people have taken up a side hustle to boost their income outside their main job.  Side Hustles can be anything from a bit of free lance work as a Deliveroo driver to selling those crafting creations you have sold at a car boot or on Etsy.  Some do it to see if their idea for a self-employed business works before they give up PAYE work.  The crucial factor here is that HMRC allows everyone in the UK £1000 income in this way to cover those who just dabble. Anyone who does more than this needs to register as self employed with HMRC and declare their hustle income alongside their PAYE income.

As with any self-employed person you can claim expenses incurred wholly in generating the side hustle income. Keep records of all your sales & all your costs as you will need them so that you can track your income and expenditure.

Remember that the tax you will need to pay could be significant if your main Job and your hustle take you over the £50k level. If your total income is low and still below the personal allowance level, you might not have a tax bill but you still need to report it.

In the new year HMRC will be looking closely at this aspect of potential tax revenue and will have access to the records from side hustle operatives such as AirBNB, Uber, and Deliveroo to Ebay and Etsy under new data sharing rules which will come into force.

As ever speak with an accountant or bookkeeper if you feel you are out of your depth.

[leesbookkeeping]

Tax Payments on Account

It’s nearly that time of year again when the next payment on account is due for many self-employed people. I have been busy completing accounts for my clients who are keen to know the impact of their true tax position compared to the projected position that is carried forward and used by HMRC to calculate the payment on account.

You must make two payments on account every year unless your last Self-Assessment tax bill was less than £1,000. The deadlines for paying your tax bill are usually:

31 January - for any tax you owe for the previous tax year (known as a balancing payment) and your first payment on  account.

31 July for your second payment on account.

Payments on account work on the assumption that your income & costs are stable and therefore the net taxable profit is similar from one year to the next. So, once you have a tax bill over £1000 for year one it is assumed the tax bill for year 2 will be the same and this is what you are expected to pay on account. The first year this happens to a business it means they must pay their current tax bill and the equivalent of the next 6 months tax. Once you are in the cycle of payment you then essentially pay part of your tax every 6 months.

So why are my clients keen to know what their true tax position is?

Well, if you know your tax bill is going to be lower than last year, you can ask HM Revenue and Customs (HMRC) to reduce your payments on account. You can do this either online or by post. With the tough trading conditions that some of my clients have seen, the ability to reduce the payment on account in line with actual tax can help cashflow.  For those who work within the construction industry they have suffered CIS deductions (Tax paid at the time of invoice by a contractor on behalf of the sub-contractor) once their accounts are concluded they are often due a tax rebate which always helps.

Being on top of your figures on a regular basis allows you to plan for these tax payments as the year progresses so that you can minimise any nasty shocks. We all know tax is inevitable but early planning can make sure that you pay the right tax at the right time.

[leesbookkeeping]

Tips for the financial year end for a small business.

 1.       Ensure you have accurate financial records for the entire year to hand for reference as needed. This will include bank statements, credit card statements & loan statements showing the balances at the year end so that reconciliations can be double checked.

2.       Count your cash and your stock at the yearend date and keep a record so that inventory can be adjusted as needed.

3.       Ensure you have receipts for all capital asset purchases as these will need extra scrutiny to ensure proper treatment within your books.

4.       Check your outstanding customer invoices. Are any likely to be bad debts and therefore need addressing?

5.       Check your creditors to make sure they are all paid up to date as required.

6.       Review your tax records to make sure all payments have been made in terms of VAT, PAYE & NI or CIS withheld.

7.       Take the time to compare your activity against prior years and set new goals for yourself.

8.       Remember to consult with a qualified professional if you need help to prepare and file your taxes especially if you are unfamiliar with the process.

[leesbookkeeping]

New Minimum Wage Rates from 1st April

With the cost of living very much on the agenda at the moment a timely increase in the minimum wages for many of the lowest paid will be welcomed. UK Minimum wage for anyone 23 & over goes from £9.50 to £10.42. 21-22 is £10.18 and 18-20 £7.49.The government hasn’t increases annual tax allowances so more people will therefore be paying more tax without necessarily noticing hence this stagnation in allowance is often referred as a stealth tax. Other knock on effects of this increase could potentially mean more people hitting pension thresholds  or at least the cost of pensions to employers will rise as it is calculated as  a percentage of pay. Those that are near to or go over the Employers NI Allowance of £5000 will also hit this limit earlier so potentially see bigger bills. All this when competition for good staff remains high especially in historically lower paid work such as hospitality and retail, Employers need to think creatively to find and retain staff whilst keeping an eye on their own bottom line. So, whilst the increase will be welcomed by staff, I am urging my clients to review their own margins. Upward pressures on all costs are currently the norm, from raw materials to electricity bills all have seen significant moves. Regardless of the source of the profit pressure, margins should be reviewed on a regular basis to make sure things don’t slip beyond tolerable levels. Business Owners still need to make a living themselves or there is little point in being in business. Profit is not a dirty word for the small business it is a necessity for survival. Corporate business have often tainted the word profit as they have a disconnect between the levels required by shareholders and the people they generate the profit from. So here we are, pay increases will have an impact on inflation. The money pendulum swings towards the employee for a while. A good business and often a small business will see this as an essential part of the way things work. Small business work hard as do their staff. They should both be renumerated fairly for their efforts. 

[leesbookkeeping]

MTD for ITSA kicked into the long grass.

Just before the Christmas break HMRC dropped the news that it had kicked its plans to make most sole traders and landlords complete quarterly uploads of their accounts into the long grass. The planned implementation of MTD for ITSA in April 2024 is no more and replaced with a staggered and diluted version from 2026. It was felt in the bookkeeping and accountancy arena that nobody including HMRC was ready for the switch.  Despite efforts by governing bodies, software providers and beta testing customers, just not enough had been achieved and the complexities of the UK tax system raised more questions than answers. With the impact of the changes in 2024 rippling into preparation for 2023 a change of tack was widely welcomed and gives time for things to be done properly.

So what are the revised plans.

From April 2026 all self-employed individuals & landlords with an income of over £50,000 will be required to keep digital records and provide quarterly updates. This shouldn’t be that problematic in terms of numbers as to generate an income of £50,000, the chances are that the business will be VAT registered and therefore already be using software for MTD for VAT which is already live.

From April 2027 the threshold moves to capture those with an income between £50,000 and £30,000. This will need more of a shift in procedures for many self employed individuals as pretty much anyone who is full time self employed in an established business should be there or there abouts.

Beyond this the government has yet to decide if/how/when to expand to the remaining sole traders, landlords and partnerships.

A separate issue that has often been lumped in with the MTD for ITSA preparations is basis period alignment. This was the need to pay tax on profits in line with tax years not accounting periods as has been the case. This has NOT changed and the regulations to make this happen were passed into statute last year so this reform will still be April 2024. So, some change will be needed if not already undertaken for those not on standard April tax years.

So where does all this leave us. In my opinion there has never been a good reason to leave your accounts to the 31st January. With the right system for the right client the added value of knowing how your business is performing on a timely basis has never been more important. The days of the ‘carrier bag’ client remain numbered as there are better ways to do it. For my practice the move to computerization continues, it is just that we have a bit more time to make the changes. I will continue to work with my clients who have not yet embraced cloud accounting and we now have time to get comfortable with it before there is a need to officially submit. Better to iron out the technicalities whilst there is time and before any deadlines.

MTD for ITSA may be in the long grass for now but I know just the man with a lawnmower to make it all tidy.

[leesbookkeeping]

Christmas Wishes and hope for a kind 2023

It’s been a tough year here at bookkeeping central. The thrill of being free from Covid restrictions has been dampened by the tricky trading conditions out there. My clients seem to be working harder than ever and any returns on this effort is hard won. For some it has just been too much and with financial reserves and energy reserves depleted by covid they have had no option but to call time on their business ventures. Whilst this has given me space to help other new clients it isn’t without sadness to end what have been good working relationships.

I have always said that regular and up to date financial information is essential to any business and this is where my role as a bookkeeper excels. Better to be informed on all fronts of how the business is doing, in good times and bad. Having a pragmatic and realistic approach to understanding your business can only help but I do ask that you don’t shoot the messenger just because he gives news you don’t want to hear even if you need to hear it.

The world of accountancy & bookkeeping has changed since I started in practice over 10 years ago and for sure it will continue change in the coming years. Rest assured I will be there to help and support my clients adapt to regulatory change as it occurs.

So, for now I send my Christmas wishes to all my clients past, present and future. Take the break to invest some time with your family and friends and come back ready for whatever 2023 is going to throw at us. Here’s hoping its kind to us all.

[leesbookkeeping]

Goodbye Making Tax Digital for VAT hello again VAT

Today November 1st marks the closure of the old VAT portal for uploading quarterly vat returns. To be fair most businesses will have already shifted across onto compatible software that makes the submission in the new way for months if not over a year so no big deal. Only businesses that file VAT annually may still be able to use this route, but that window is closing too. A handful of exemptions existed in the past for filling online and these have continued in the main and HMRC will consider each situation on a case-by-case basis.

What this closure means is the conclusion of the whole Making Tax Digital for VAT project. Anyone resisting the change can no longer submit manually and has no option other than to comply. Any that are not on board will face the possibility of HMRC penalties in the new year for non-compliance.

Any new VAT registration will automatically be processed under the new digital process. You can usually apply via VAT online which will register you for VAT & create a VAT online account (Government Gateway) which you need to enable linking your compatible software to HMRC.

So now that VAT has been made digital it can now just be refereed to as VAT Again.  Making Tax Digital hasn’t gone away though, it has just moved its focus onto Individual self-assessments which are currently expected to commence Apr 2024.

[leesbookkeeping]

Change, Taxes & Death are the only inevitable things.

It’s been a while since my last blog. Life has pretty much been getting back to the full swing of things following the post lockdown world.  Many people had change thrust upon them as they found new ways of working during the Covid crisis. As I look back upon how it affected my business, I am pleased to say that it was largely business as usual. I have often looked to technology to help me run my business in the most efficient way and as a relatively early adopter of cloud technology such as Quickbooks, Xero and Dext the benefits of working remotely in the cloud came into their own. That’s not to say since lifting of lockdowns I haven’t been keen to get back into physical contact with my clients as you can’t beat face to face in helping to understand the non-financial aspects of a business that are just as important as the cold hard facts of trade. Sorry ‘zoom’ but you are no long-term alternative, just a useful emergency option. Many of my clients have been considering how they will adapt to life after covid. Some are considering removing or reducing costly offices. Others are just trying to find new ways to keep hybrid staff motivated whether they are in or out of the office. All understand that there wont quite be a complete return to as you were. Changes to the work mentality have happened and there is no going back 100% even if they wanted to. Change has been and is inevitable.

So that brings us on to taxes. HMRC is intent upon its further journey towards digital taxes. MTD for VAT concludes for all next April 2022 and then MTD for individual taxes starts with a vengeance in April 2023. Its all part of HMRCs roadmap to get more real time knowledge on taxes. Most of my clients are at this stage unaware of the impact this fundamental change in the way they do their tax returns will have. I believe that many professionals in my sector have yet to fully grasp the implications of what it will mean.  For me as an early adopter I am already reviewing my key operations and activities to see how I can best take my business forward. The days of the shoebox accounts will finally be dead. Yes, at a push someone could still deliver their records to an accountant once a quarter for production but practically how many accountancy firms will have the ability to process these volumes of work in such a small window of time. The year starting April 2023 will see accountants and bookkeepers doing tax returns for the last time in the old way as well as at the same time commencing in the new way. More than double the work in the same space of time. The practicality of how that is going to happen is the bit that currently escapes me, and I can only see me working for less clients not more as we move through MTD with those prepared to embrace the changes with me remaining and those that resist left wishing for the way things once were.  I can see a few of my older clients using this as a reason to finally retire if not reducing their activity levels to below the 10k threshold. For me my own long-term retirement plans of maybe keeping a few annual clients just to keep my hand in seems less likely. For now, I am trailing a new suite of practice management software from Senta. Early days but so far so good in helping me both understanding my practice demographic and managing all the various deadline dates for, VAT, CIS, Payroll ETC that normally are held in my head which would otherwise explode. Certainly, something is needed to help manage the coming quarterly MTD tax deadlines. The clock is ticking down on the way things were in bookkeeping so time to embrace more change before it’s the death of me.

[leesbookkeeping]

Domestic Reverse Charge VAT starts 1st March 2021

Unless there is an eleventh hour climb down the long-awaited Reverse VAT charge scheme for CIS is set to start 1st March this year.

What does it mean for those in the construction sector?

VAT is a tax paid by the end user. Normally in a supply chain for a transaction at each step the vendor charges VAT on goods and services (output VAT) and each ongoing link in the chain gets to claim this back as input VAT until you get to the very last consumer or end user. HMRC believe that they have been losing out on correct VAT in the building sector with incorrect or fraudulent claims being made. To stop this is has targeted the building sector and in particular those VAT registered businesses already operating under the CIS scheme with Reverse Charge VAT. Simply put it takes the paid VAT element away until you get to the actual end user.

What is covered?

·         If the services fall within the same definition as for CIS payments, then it is generally going to be covered by the new system.

·         Both parties need to be registered for VAT

·         VAT charged at standard or reduced rates included – Zero rate no change as there is no VAT payment changing hands.

The full HMRC tech guide is here.

https://www.gov.uk/guidance/vat-reverse-charge-technical-guide

An Example: How the CIS reverse charge works

Bob the Builder (who is VAT registered) supplies the materials and labour on a new building for Colin the Contractor who (who is also VAT registered) and in turn supplies his construction services to Dave the Developer (also VAT registered). Dave finds and develops land and will bring the build to completion and supply a finished commercial building to the end user, his client.

Under the old VAT system Bob would, invoice Colin £12,000, comprising of his £10,000 bill for materials, labour and works, plus £2,000 in VAT (at 20%).

From March 2021, under the new CIS reverse charge mechanism, he invoices £10,000. His invoice states that 'the CIS reverse charge applies ‘and that the applicable rate of VAT is 20%.

Colin pays Bob £10,000. He then accounts for both output and input VAT of £2,000 on the supply on his own VAT return.

Bob does not account for output VAT in his accounting system as he has invoiced only £10,000.

Because of the reverse charge procedure, Bob charges and receives £2,000 less than under the old system (where he would charge £10,000 + VAT). He does not have to account to HMRC for any output tax on the transaction.

When he is paid, he includes the value of the sale in box 6 of his VAT Return. He does not add VAT to box 1 as he receives no output VAT.

The change may impact Bob’s cash flow, as under the old rules he could use the £2,000 in VAT to pay for supplies which he would later offset against his own output liability.

On the other hand, Colin has a cash flow advantage, as he does not have to pay Bob £2,000. At the end of his VAT quarter, he cannot reclaim £2,000 as he is accounting for the reverse charge and the output VAT offsets the input VAT.

As Colin is supplying CIS services, he must also consider the reverse charge. Will his client (Dave) be involved in the onward supply of CIS services or is he the end user. This may be difficult to determine but it is Dave's responsibility to notify down the supply chain. 

[leesbookkeeping]

Happy Covid Christmas and good riddance 2020.

Well, what a year that was. It has been a tough year for many, but I am blessed that regardless of the challenges I am here to fight on into 2021 where sadly some families and some businesses can’t say the same.

I believe that regardless of however tough things have become I have been there as bookkeeper, business adviser and friend to my clients. Adapting and learning as the frequent and frustrating government rules grew, in attempts support all, as they faced both the physical and financial strain of Covid 19. Furlough, SEISS, CBils, Bounce Back Loans, Grants, Vat changes and even Eat Out to Help out all new to me and to my clients. I have been extremely grateful for the support the being an ICB Member has given me although I have lost track of the number of webinars and the like that I have witnessed. I am not just a bookkeeper I am an ICB bookkeeper and of that I am proud.

I did lose a few clients who called it a day due to the difficulties of trading in Covid. But I also replaced with a few new clients who took the situation as an opportunity.  Mental health has certainly left its mark on many but wherever possible maintaining positivity and being honest with my clients has I am sure helped them continue.

We are not out of the woods yet in terms of Covid and I am worried for what the early months of 2021 will bring especially to my beloved pub and hospitality sector. As I write Brexit deals still hang in the balance with the changes that will inevitably bring for my clients that trade overseas. My tradesmen are looking busy but have an eye on the Domestic Reverse Charge VAT changes coming in March. Others are just considering how they will adjust to repayment of the deferred tax bills and starting Bounce Bank Loan repayments in a climate of reduced consumer appetite. So yes good riddance 2020 but 2021 is only getting a cautious welcome from me. I am totally knackered so the break is most welcome.

Please stay safe, enjoy Christmas as best you can with your families and see you next year.

[leesbookkeeping]

Handouts to help out.

I am in the midst of the latest round of furlough calculations as my clients make use of the CJRS for their staff. All would much rather be open and trying to trade but needs must as we endure lockdown 2. The latest package of measures will see us through the darkest parts of winter and the hope of spring and vaccine distribution.

So, whilst we wait to find out the crucial tier levels to see if we can trade or not - a refresher of support available.

·         Furlough for staff at 80% until 31st January at least. Part time flexible furlough is allowed for those that have some but not all work they would expect. There are some finer details re  calculations & limitations so ensure you consult your payroll provider.

·         Self-Employment Income Support Scheme (SEISS) will open from 30th November covering income support for the period 1st November2020 to 29th January 2021. As before I cannot claim on behalf of my clients, they need to do this themselves. That said most have managed this well in previous rounds and HMRC application process is easy enough. Clients must meet several conditions and make an honest assessment about whether the virus will significantly reduce their trading profits.

·         Small Business Grant Funding for retail, hospitality, and leisure are available. Again, we have been here before and the local council opened for applications last week. First time around SSDC were quick off the mark and funds were received by client promptly. Again, value of payment will be linked to rateable value (before any rate relief) and are payable for each period of forced closure. £1334 to £3000 for each 28-day period.

·         Councils will also have discretionary funds for businesses with premises without rates bills but the key word here is discretionary.

 As before I advise my clients that just because they can claim does not always mean they should and that any claim should be in the spirit in which it is intended. Yes its tough out there and not likely to get any better in the short term. Once Covid is ‘parked’ the pain of payback will start. Defered VAT, Self Assessment Tax, Virus Loans repayments commencing and the threat of higher taxes down the line all on the back of reduced trading patterns. Be nimble and adapt where possible. Support local businesses where you can and stay safe.

[leesbookkeeping]

Lockdown & Furlough 2

Just when you thought it was safe to put a plan in next months diary big bad Bojo comes along and slams all the country into lockdown. Regardless of your political persuasion at least he is finally managing to unite the country in their distrust of politicians. The battle of life verses living will continue and whilst the life side (Lockdowners) have their day for now the living side (Covidiots) will get their turn in the long run and nobody will come out of this well.  But have no fear Rich Sunak is here to throw some more money at the situation to at least paper over some of the cracks in our fragmented society.

I am not saying I am smarter than your average bear but with the rate of change so fast I refused to get sucked into the Job Support Scheme planning until it was here. Believe me the time it takes to manage and calculate payroll during the past 6 months has increased so much, not to mention constantly being updated and upskilled to ensure to the best of my ability I am up to date. In truth I just did not have time to get onboard with JSS whilst the CJRS (Furlough) was still in full swing. Boom Lockdown part 2 comes with Furlough part 2 and its something else to upskill on. It should not be too tricky to reset as its pretty much August again (wish the sun were here). 80% paid for furloughed hours by HMRC up to £2500 for the new four-week lockdown period. Part time furlough is allowed so where less hours are worked than normal due to suppressed demand in businesses still able to open, this will also help. NI & PAYE all paid by employer. Whilst I have yet to see HMRC small print anyone on a submitted RTI return dated 30th October so that picks up a few of those who have fallen through cracks previously. Sadly, I know this has already come too late for some employees who had already been let go because of the scheme’s previous expiration. For those businesses again forced to close support grants will be available linked to rateable values. Again I hope pay outs are as efficient as they were locally (well done SSDC)  last time around as the key difference to most businesses is that the reduced demand that followed lockdown 1 was not enough to rebuild depleted reserves. As they say in Game of Thrones ‘Winter is coming’ but winter is here, and happy endings seem as likely as a robust track and trace system.

Like it or loath it, lockdown will kick the Covid can down the road a bit further. But the world will still be wonky for a lot longer yet. No cure, no vaccine and not even the new normal as Covid has not gone away. So, I will kick the JSS training down the road too in the hopes of saving my sanity for Christmas.

[leesbookkeeping]

Support Local. Reduced rate of VAT for the Hospitality sector.

Following the governments latest announcement to reduced VAT for sector specific businesses to 5% I am currently working with my Pub, Restaurant & Café clients in making sure they are ready to implement the changes on the 15th July.

On a practical level it may just be a matter of checking till software is updated to reflect the reduction. For some it’s an amendment to their bookkeeping package. For others that still collate daily sales via spreadsheets then a revamp to correctly collect the data. This will then all need to be undone from 12th January when the temporary reduction ends.

VAT rules on food, hot, cold, takeaway, prepared or otherwise can be complex. Seeking the guidance of a professional when unsure is always recommended.

Whilst for some this won’t be the most significant level of support the government has offered every little will help. The decision on whether to pass on the VAT reduction to customers to stimulate sales or to hold onto the additional profit to make up for the reduced foot flow will lie with each individual business. For me personally I would rather continue to pay reasonable prices for quality local produce and service, than keep and extra few pence in my pocket.

I have yet to get involved with the ‘eat out to help out’ scheme the government has also launched. As a bookkeeper I fear the reconciliation process that this may bring but I do understand the need to motivate people away from their lockdown mentality.

I understand COVID has not gone away but it isn’t likely to be resolved for some time either. We need to support our local businesses as best we can by returning to use them. They are embracing and adapting to the frequent changes required of them to keep trading as safely as possible. We as consumers need to adapt to the new normal otherwise, we will wonder why there is nothing left but big multinationals after this whole covid mess is done.

Stay Safe and eat out.

[leesbookkeeping]

Furlough & Self-Employed Support Version 2.0

As we move forward into a more relaxed but still strange Covid world the government continues to support business albeit in a way that eventually tapers off. Two key areas are the 2nd phases of its Furlough scheme and the SEISS.

CJRS  (Furlough)

Furlough version 2 starts from the 1st July. Importantly claims for periods on or before 30th June need to be made by the 31st July. Claims can no longer be made that span months due to the evolving nature of the scheme. The key change is that Employees can return to work on a part time basis and be paid pro rata which was outside of the remit of the scheme in its first phase. The claim cap per person also moves in line with the percentage of time worked (eg if you work 50% of your normal hours on full pay the furlough cap of the claimed 50% cannot exceed £1250 in July/August, £1093.75 September and £937.50 October). Throughout this employee pay can still be topped up to 100% if the employer wishes but all must still get 80% as a minimum regardless of the level of claim.

·         July – No change to grant levels

·         August – The ability to claim for the furlough element of ENI & pension contributions is removed.

·         September – The furlough claim level drops to 70% but employees will still need to receive the minimum 80%. Claim capped at £2187.50 per employee

·         October – The furlough claim level drops to 60% but employees will still need to receive the minimum 80%. Claim capped at £1875 per employee.

·         31st October Scheme ends.

The calculations are clearly going to be more complex with staff potentially on & off furlough during the month. It is therefore essential that robust records are maintained off hours worked, hours furlough and indeed holiday taken so that correct and compliant calculations can be made. HMRC will be monitoring to ensure claims are valid.

Self Employed Income Support Scheme.

If your self-employed income has been adversely impacted by Covid you can still claim for the first grant of 80% of your average last 3 years income (up to £7500) up until the 13th July. The claim scheme is very simple providing you have your own government ID log in and the experience of the first wave of claimants was very positive.

SEISS Part 2 launches in August. This time relief is tapered down to 70% (up to £6570) mirroring the levels of furlough assistance. You can claim for the second grant even if you didn’t claim the first. On application you will need to confirm you have been affected on or after 14th July and the government have been more specific about what this means this time around and have given examples. As with all claims consider if yours is in the spirit of the scheme as there will undoubtedly be further scrutiny down the line. All grant assistance is taxable.

https://www.gov.uk/guidance/how-different-circumstances-affect-the-self-employment-income-support-scheme#adversely-affected-examples

As always be sensible and stay safe.

[leesbookkeeping]

Cashflow & Covid

As the government starts to relax lockdown rules many of my businesses are beginning to contemplate a return to work. They are under no illusions that this will be a return to how things were, and it is over these next months that we will see the true financial battle against the cost of covid and I fear there will be casualties.

The government acted swiftly with its support packages and whilst they will have not been all things to all people, they have certainly been a sticking plaster to the wound on our economy inflicted by the virus. The support measures have been at unprecedented levels but cannot continue indefinitely and many already have a weather eye on potential future tax burdens to pay for the costs. Mix this in with a huge does of uncertainty and you have the problem faced by business owners.

The grants have been given and are being utilised to stem the cash haemorrhage. Where business feel they can, loans have been drawn down and taxes have been side-lined to build a war chest to help with future cashflow.

And it is cashflow where attention should now be turned. With my larger clients all using online software and frequent support, their historic books are virtually up to date, so they have a clear idea of where they have been. What they do not have is a good idea of where they are going and this is where a cashflow forecast comes in. There are plenty of online add on cashflow apps such as Concur or Fluidly and indeed Quickbooks is currently Beta testing its own interlinked cashflow system. There is nothing wrong with an excel spreadsheet, but I would urge against the ‘back of a fag packet’ as handwritten plan can’t be flexible. The most important thing to do is HAVE a cashflow plan.

A good cashflow forecast should be a living document used to run what if scenarios and the current common what ifs are -

·         What if footflow is down by X percent due to fears of virus returning?

·         Will customers return from newly acquired online habits?

·         What if capacity is reduced to maintain social distancing?

·         How many staff do I need to run at new levels?

·         What if trading never returns to sufficient levels?

·         Do I still need an office if staff can work from home?

·         What if I diversify, change the way I work to my advantage?

Each of these questions and more will have an impact on the business. The only thing we can be sure of is that to survive a business will need to adapt the way it operates on a frequent basis in tune with what is happening on the street. Winding down of the furlough scheme, delays in further lockdown relaxation or even the need for local lockdowns are all considerations. All businesses currently considering how to reopen will be balancing ethical choices with financial outcomes. I cannot help with the moral choices but now is the time to engage with your bookkeeper or accountant to plan at least in the short-term. Hope is not a plan, but a plan can give you hope. Early intervention, change and adapting could be the key to survival.