COVID-19: Latest guidance

July 2, 2020

Many businesses are currently experiencing widespread disruption and uncertainty as a result of COVID-19. Our advisors are busy keeping up to date with all the detail and practicalities on emergency measures as they are announced by Government.

In times like these, see how we support clients.

Please click the images below for information and insight into how to deal with the economic impact of COVID-19.

COVID-19: Accounting for rent concessions

COVID-19: Accounting for rent concessions
The challenge of meeting property rental payments is a top concern of businesses and charities as a result of coronavirus. Many lessees are discussing a rent concession with landlords. Donald Boyd looks at how these should be accounted for here.

The Corporate Insolvency and Governance Act 2020 – protection for businesses in financial distress

Derek Forsyth shares the impact of this new legislation on the business world here.

Tax Planning for High Net Worth Individuals

Katy Burke shares some tips here.

COVID-19 and anticipated company loss carry backs to claim cash tax
Mark Pryce discusses a potential alternative to changing company year end here.

Mind games
Fraser Campbell discusses the benefit of businesses adopting a ‘start-up attitude’ amidst the roller coaster of Covid-19 headlines here.

HMRC enquiries are likely to increase – are you prepared?

Read more here.

Business Interruption Insurance Claims
All is not lost…but challenges to overcome. Read more here.

Job Retention Scheme – Key Changes

Job Retention Scheme – Key Changes
Here we summarise the impending amendments to the scheme.

 

 

Watch the rear-view mirror
With reports stating that HMRC will have the power to investigate, claw-back and penalise fraudulently claimed coronavirus support payments and grants, Fraser Campbell discusses considerations to take into account now here.

Changes to Restructuring Legislation - The Corporate Insolvency and Governance Bill

Changes to Restructuring Legislation – The Corporate Insolvency and Governance Bill
Major changes to the UK corporate rescue regime imminent. The changes are designed to help companies that require breathing space and a restructuring plan to survive. Read more here.

Charities could benefit from tax reform as cash reserves fall

Charities could benefit from tax reform as cash reserves fall
Scott Craig, National Head of VAT and a specialist in charity taxation, discusses the current tax system in greater detail and suggests some reforms which may help the sector here.

How will the Coronavirus Support Packages affect your SME R&D Tax Claim?

How will the Coronavirus Support Packages affect your SME R&D Tax Claim?
Here Mark Pryce looks at the impact funding could have on your R&D tax relief or tax credit claims – past, present and future.

COVID-19 and the Art World

COVID-19 and the Art World
Scott Craig discusses the impact the pandemic has had on the Art market worldwide here.

Reopening and Rebooting

Fraser Campbell discusses ideas and plans that should be considered for reopening and rebooting the economy in his latest blog.

Details of Changes to the Coronavirus Job Retention Scheme

Details of Changes to the Coronavirus Job Retention Scheme
Here we summarise the key points and provide clarification on the key aspects.

Coronavirus Job Retention Scheme

Further Financial Assistance Available for Employers
The Financial Assistance Scheme for Employers unable to pay statutory redundancy payment. View more information here.

Coronavirus Job Retention Scheme extended until October

Government provides clarification on Job Retention Scheme until 31 October 2020
At the end of last week, the Chancellor announced changes to the Job Retention Scheme. We’ve summarised the key points here.

 

 

Grappling with the people factor
Fraser Campbell discusses the impact COVID-19 has had on workforce and careful considerations for the future.

Stock market turmoil, Property sales and Inheritance Tax. Can you claim back IHT?

Stock market turmoil, Property sales and Inheritance Tax. Can you claim back IHT?
The COVID-19 pandemic has had a major impact on global stock markets, with the value of shares and unit trusts falling significantly. Aileen Scott discusses the opportunity of claiming back or reducing Inheritance Tax (IHT).

Further financial support announced by the Scottish Government

Scottish Government increases funding support
It was announced on 26 May that further measures are being taken by the Scottish Government to support businesses adversely affected by coronavirus.

Claiming back employees’ coronavirus-related Statutory Sick Pay (SSP)

Claiming back employees’ coronavirus-related Statutory Sick Pay (SSP)
The scheme was originally launched in April and the portal opened for applications on Tuesday, 26 May.

 

 

How the COVID-19 crisis has helped bring the public closer to UK farmers – and what must be done to maintain relationship

How the COVID-19 crisis has helped bring the public closer to UK farmers – and what must be done to maintain relationship
Ian Craig discusses how to maintain public engagement long after the crisis.

Predicting and attracting demand in the new economic landscape
Fraser Campbell discusses the need for businesses to plan and prepare for the next phase.

UK Government to provide £1.25bn support package for start-up businesses

Support for start-up/early-stage businesses
Graham Cunning, Partner, looks at the details of this package.

Coronavirus Job Retention Scheme extended until October

Coronavirus Job Retention Scheme extended until October

Read more here.

Planning for and managing “sticky” cashflow

Planning for and managing ‘sticky’ cashflow
Fraser Campbell discusses the practical measures businesses can take to protect cashflow and progress to the recovery stage in ‘new normal’.

Good governance guidance for public sector organisations during COVID-19

Good governance guidance for public sector organisations during COVID-19

Read more here.

New loan fund for SME housebuilders announced by Scottish Government for loans up to £1million

New loan fund for SME housebuilders announced by Scottish Government for loans up to £1million
View further details here.

The Self-Employed and Coronavirus

HMRC Self-Employed Income Support Scheme – how to claim
Aileen Scott, Head of Tax, discusses eligibility and next steps.

Funding Circle added to list of accredited CBILS lenders

Funding Circle added to list of accredited CBILS lenders
View the key features of and criteria for CBILS through Funding Circle.

Counting down the days
In the first of a series of ‘Counting down the days’ blogs by Fraser Campbell, he offers practical tips and steps that the SME business community can take to prepare and manage the transition from ‘Survival to Revival’.

UK Government announces 100% state-backed loans for small and medium sized businesses 

UK Government announces 100% state-backed loans for small and medium sized businesses
View further details, including eligibility criteria.

COVID-19: Government Grants Process in Scotland

Distressed SMEs and newly self-employed given lifeline by Scottish Government
View further details of how the £100 million support package will be broken down.

Furloughing and the Job Retention Scheme
Grant Saunders, Head of Payroll, discusses how we can help and offers guidance.

Further update: Coronavirus Job Retention Scheme

Further update: Job Retention Scheme
The Chancellor has made a Treasury Direction under Section 71 and 76 of the Coronavirus Act 2020.

Further financial support announced by the Scottish Government

Further financial support announced by the Scottish Government
Around £220 million of additional grants are being made available.

Company Car Benefit in Kind during Coronavirus

Company Car Benefit in Kind during Coronavirus
Aileen Scott, Head of Tax, discusses the impact on company car benefit.

Further update: Coronavirus Job Retention Scheme

Further update: Coronavirus Job Retention Scheme
Aileen Scott, Head of Tax, looks at the additional guidance published by HMRC.

Government support

Supporting you and your business
A practical guide to help you navigate through some of the latest Government emergency measures.

Coronavirus Job Retention Scheme

Coronavirus Job Retention Scheme
We look at the details of the Scheme and how it will operate.

The Self-Employed and Coronavirus

The Self-Employed and Coronavirus
We explore the Self-Employed Income Support Scheme.

Claiming back employees’ coronavirus-related Statutory Sick Pay (SSP)

Accessing Coronavirus Business Interruption Loans
As details develop we are sharing what we know, so far, to assist you in accessing the Coronavirus Business Interruption Loan Scheme (‘CBILS’).

COVID-19: Government Grants Process in Scotland

Government Grants Process in Scotland
The Scottish Government has published details as to how some businesses can apply for help with non-domestic rates.

Deferment of VAT payments

Deferment of VAT payments
Veronica Donnelly, Partner, discusses support for businesses through deferring VAT and Income Tax payments.

How to manage your tax payments

How to manage your tax payments
Mark Pryce, Partner, looks at two facilities HMRC already has in place which could help you to manage your tax payments.

We will continue to monitor events and announcements as they occur and should you have any concerns on how your business may be affected, please get in touch.

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The information in this update should not be regarded as financial advice. This is based on our understanding on 02 July 2020. Laws and tax rules may change in the future.

 

COVID-19: Accounting for rent concessions

July 2, 2020

The challenge of meeting property rental payments since lockdown started is one of the top concerns of companies and charities up and down the country. Many lessees and their landlords are discussing payment holidays, or temporary rent reductions or a combination of both. This is particularly prevalent in the retail and hospitality sectors but is increasingly the case across all other office accommodation. Where an agreement is reached between the two parties this would be considered a rent concession. So how should these concessions be accounted for in a company’s management accounts and ultimately their annual accounts?

There has been some debate as to whether these concessions should be accounted for in a similar way to incentives or lease modifications and spread across the lease term or alternatively recognised immediately as a reduction in rents. Helpfully there has been some clarification from standard-setters.

Organisations who apply IFRS accounting, are already grappling with the implementation of the new leasing standard IFRS 16. The International Accounting Standards Board is conscious of this and to try to provide some help, in May this year they issued an amendment to IFRS 16 covering rent concessions under COVID-19. This allowed companies who have agreed a rent holiday or reduction in rent because of COVID-19 to treat this as a variable lease payment which means derecognising the part of the lease liability that has been forgiven or waived. This allows the impact of the concession to be recognised immediately and not spread forward into future reporting periods. This is an optional treatment just allowed for COVID-19 concessions and must be in relation to reductions in lease payments originally due on or before 30 June 2021.

Lease concessions are not considered under UK GAAP, but FRS 102 does allow lease payments to be recognised as an expense on a straight line basis unless “another systematic basis is representative of the time pattern of the user’s benefit”. The FRC are currently considering whether to issue clarification of what this means in relation to rent concessions. It seems likely however that where there is a link between the concession and the lessees benefit from the use of the asset (for example where a property cannot be occupied due to lockdown and a concession is agreed) reducing expenditure in the period the concession is given, rather than spreading forward to future periods, is an acceptable treatment.

Whilst some of this may seem like dancing on the head of a pin, the accounting around this will have significant implications for financial and management reports across major parts of the economy.

If you have any questions, please get in touch.

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The information in this update should not be regarded as financial advice. This is based on our understanding on 02 July 2020. Laws and tax rules may change in the future.

Digital in the Third Sector

July 1, 2020

“There are only two certainties in life…”

Whatever you want to add onto the end of that famous quote, digital would either be one of the two certainties or at least the essential third. There is no escape, not personally, not in the workplace and certainly not in the Third Sector if you or your organisation wishes to stay current and relevant in today’s digitally enhanced world.

Digital needs to be a force for good within your organisation, it should be of benefit to you internally and externally, this means making sure you prioritise the right amount of care and attention, develop a formal strategy and aim to receive the maximum benefit.

But where should a Charity begin? Who should take responsibility? Where do you go for advice? What are your risks? What skills do you need…?

In our first guide which will be part of a series of digital documents we hope to pull together the main considerations for your Charity, the guidance already available to you, and explain some of the more common social media platforms that you can use on your digital journey.

Our first guide covers the following topics:

  • Key Competencies of a Digital Trustee
  • The Charity Digital Code of Practice
  • Digital considerations for Trustees
  • Are you on the world’s third-most visited website?

At the end of the guide we have included a handy checklist to help you evaluate your progress and implement small achievable steps to help you manage your digital journey.

For more information or if you have any queries with what we cover in the guide, please get in touch.

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The information in this update should not be regarded as financial advice. This is based on our understanding on 01 July 2020. Laws and tax rules may change in the future.

The Corporate Insolvency and Governance Act 2020 – protection for businesses in financial distress

June 30, 2020

The Corporate Insolvency and Governance Act 2020 received Royal Assent and came into force from 26 June 2020.

Central to this new legislation is a new moratorium which will give a company in financial distress a 20 business day breathing space from creditor enforcement action which can be extended. This new moratorium gives protection to businesses that may be financially struggling and may result in the rescue of the company as a going concern.

The moratorium is intended to be a “light touch procedure” which is overseen by a monitor who must be a licensed insolvency practitioner.

There’s no doubt that the Insolvency Service and the Government have pulled out all the stops to introduce major new legislation affecting the restructuring landscape for UK companies. This Act creates the largest change to our corporate insolvency regime in more than 20 years.

What impact may the moratorium have on the business world?

  • The new moratorium gives protection to businesses from creditors and may save viable businesses which are struggling financially
  • Saving viable businesses that right now are struggling would achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being subject to a moratorium)

What action can be taken against a company in moratorium?

Legal and enforcements action against a company in moratorium is extremely restricted. Without permission of the Court:

  • A landlord cannot forfeit a lease or re-enter property
  • No steps can be taken by a creditor to enforce security
  • HP Creditors cannot repossess goods
  • Legal processes for debt recovery cannot proceed (except employment claims)
  • Floating Charge holders cannot crystallise their charges

Supplying goods and services to a company in moratorium

When a company enters an insolvency or restructuring procedure, suppliers of goods and services will often either stop or threaten to stop supplying the company. The supply contract often gives them the right to do this, but it can jeopardise attempts to rescue the business. The Bill will mean suppliers will not be able to use contractual terms to jeopardise a rescue in this way.

Any goods or services supplied in the moratorium period should be paid for and will be a priority debt to be paid if the company in moratorium fails.

The Role of the Monitor

A monitor must be a licensed insolvency practitioner and will only consent to take office as monitor if a company can demonstrate that the moratorium will result in the survival of the company as a going concern.

They are required to bring the moratorium to an end as soon as it becomes clear that this purpose cannot be achieved.

Responsibilities of Directors

The Bill introduces key offences in relation to the duties of directors (including shadow directors) of companies that enter into a moratorium.

They must supply information on request to the monitor, to satisfy the test that survival as a going concern can be achieved and the monitor must submit a report on the conduct of the Directors as part of this process.

Directors commit an offence of Fraud in Anticipation of a moratorium if they:

  • Conceal assets with a value over £500
  • Conceal debt due of over £500
  • Fraudulently remove assets to the value of £500 and above
  • Make false representations to the monitor to secure consent for them to act

For more detailed information in relation to the CIGA Act 2020, read here.

If you or a business in your supply chain has entered or is considering entering a moratorium and you would like to discuss your options further and action you can take, please speak to:

Derek Forsyth
Partner and Head of Business Restructuring and Insolvency
0141 886 6644
derek.forsyth@campbelldallas.co.uk


The information in this update should not be regarded as financial advice. This is based on our understanding on 30 June 2020. Laws and tax rules may change in the future.

Tax Planning for High Net Worth Individuals

June 30, 2020

For many, the impact of the Coronavirus has been more financial than physical and being confined to home has provided little by way of distraction from the movement of the global markets. Lock down has for some been a time for contemplation and an opportunity to attend to financial housekeeping that we may otherwise have been putting off.  With this is mind, now might be a useful time to ask yourself a number of questions relating to your tax affairs.

Taking stock of a fall in value

Lower values make it an excellent time to consider lifetime gifts by fixing low values for Inheritance Tax (IHT) purposes and reducing exposure to Capital Gains Tax (CGT).

  • Have you been considering outright gifts or settling assets into trust? Are you a Trustee considering transferring assets to Beneficiaries?  The suppressed values can reduce the potential tax charges.
  • Is now the time to establish a Family Investment Company (FIC)? A FIC ensures future growth and income falls within the corporate structure and potentially outside of one’s personal IHT estate
  • Have you incurred investment losses that you wish to crystallise? In particular, losses in unquoted trading companies, including EIS/SEIS investments, may be able to be offset against your taxable income
  • Could it be the right time to acquire an asset that you have previously thought about acquiring?The current climate could result in a lower acquisition price and associated costs including stamp duty, if applicable.

Falling Income

Investment income is likely to look very different this year with government support making it challenging for companies to sustain dividend levels.

  • Will reduced income have an impact on existing planning? For example, you may be regularly making gifts from surplus income (as part of your IHT planning) – if income levels have fallen, this will need to be reviewed
  • Has the balance of your income as a couple changed? Perhaps consider equalisation in order to optimise tax rates and allowances.

Pensions

 Pension tax relief continues to be a very valuable as a way of reducing your overall tax liability each tax year.

  • Did you remember to make your 2019/20 pension contribution? Consider utilising your brought forward allowance.
  • Do you have a SIPP? Is now a good time to make additional cash contributions into the tax-free wrapper?

Residence and Domicile

Your travel plans may have been affected and as a result this may have had an impact on your UK tax residence status and overall tax position.

  •  Are you closely monitoring your days in the UK and how this may affect your residence position? Is it possible for you to take advantage of the COVID-19 rules on exceptional days?
  • Does your domicile status require consideration?
  • If your UK income has been reduced is there scope to remit funds to the UK at basic/higher rates rather than the additional rate?

Inheritance tax reviews, wills and tidying up paperwork

Now is an excellent opportunity to get your paperwork in order and have an overall IHT review.

  • Is your Will up to date?
  • Does the movement in your investments affect legacies and liquid assets for settling IHT liabilities?
  • Are you administering an estate? Has there been a fall in value? Can you reclaim IHT?

HMRC enquiries

HMRC progress with existing enquiries is slow and applications to the First Tier Tribunal (FTT) have been delayed.

  • If you are mid-enquiry is it advantageous to push for conclusion?
  • If you have recently reached a settlement with HMRC and are making regular payments, have you thought about making a request for deferment or a time to pay arrangement for a forthcoming tax liability?

HMRC have recently been writing to taxpayers about VCTs and other tax efficient investments.

  • Are your VCT/EIS/SEIS records up to date?
  • Do you know if any of your investments still qualify or perhaps have become of negligible value?

If you would like to discuss any of the areas mentioned above, please get in touch with your usual Campbell Dallas contact or one of our tax experts.

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The information in this update should not be regarded as financial advice. This is based on our understanding on 30 June 2020. Laws and tax rules may change in the future.

COVID-19 and anticipated company loss carry backs to claim cash tax – a potential alternative to changing company year end

June 29, 2020

The HMRC company tax manual was amended last week with an important update which allows companies to submit claims to carry back current year losses to the previous period in a way which has previously not been widely available or indeed possible at all.

Under existing tax practice, generally a company will submit a tax loss carry back claim once the current period is over and the accounts have been finalised. This means the tax computation containing the loss claim can only be submitted to HMRC post year end; holding up potential tax refunds until the year is over at the earliest.

Up until now we have been working with clients to consider changing the company’s year end and typically shortening the period to allow the facilitation of earlier loss carry back claims to be submitted to HMRC. Under the new guidance from HMRC, however, it will be possible to obtain these tax refunds in certain exceptional circumstances, including businesses severely affected by the COVID-19 crisis.

Claims based on anticipated losses: exceptional cases

HMRC Officers have now been instructed to consider allowing claims for tax repayments (including those made in the quarterly instalments payments regime) based on anticipated tax losses. For example, in cases where it can be demonstrated that the expected allowable tax losses will be so great that they will wipe out the current period’s taxable income as well as the amount of taxable profits of the previous period. According to HMRC, anticipated loss carry back claims should take into account how much of the accounting period has expired, any possible upturn in revenue and any other factors that may affect the ultimate loss position of the company.

HMRC state that companies will be expected to provide them with full evidence to support such claims. The level of evidence required will depend on the particular pattern of facts for each company so that any claim can be considered on a case-by-case basis. However, where a claim is made before the end of the current period then, in addition to management accounts, HMRC would expect to see forecast management accounts.

For businesses that are suffering drastic falls in revenue due to the coronavirus pandemic and who are anticipating incurring substantial losses; this will count as “exceptional” in terms of the above. We will be able to assist you in pulling together the appropriate accounting information and related forecast tax computations needed to support an anticipated tax loss carry back claim.

For companies who were previously paying significant amounts of corporation tax, we can help you claim cash tax back urgently. Please get in touch with your usual Campbell Dallas contact for more information.


The information in this update should not be regarded as financial advice. This is based on our understanding on 29 June 2020. Laws and tax rules may change in the future.

Mind games

June 25, 2020

Over the last few days there has been a roller coaster of Covid-19 news headlines:

Upwards

“Cinemas and Museums to reopen in England”

“PM to announce on Tuesday if pubs and restaurants can reopen”

“PM set to announce cut in 2 metre social distancing rule”

“Chancellor plans emergency VAT cut in bid to rescue economy”

Downwards

“First Minister to stick to 2 metre social distancing”

“Shopping centre owner (Intu) braces for administration”

“Ex-chancellor warns against return to austerity”

“UK economy likely to suffer worst Covid-19 damage says OECD”

“One in six UK car industry jobs could be lost….”

Information overload and uncertainty is building again. Businesses reopening face a multitude of interdependent decisions and uncertainties.  There is an increasing unsettled feeling when compared to the relative certainty of the shutdown period at the start of lockdown.

Adopt a “start-up” attitude

The economic landscape is fundamentally altered after Covid, not to mention the likelihood of a recession for a significant period of time.  In adopting a ‘start-up attitude’ it should be possible to feel much more positive about the road ahead. What does this mean?

Have a plan

So as a reminder, if you haven’t developed your re-opening business plan yet now is a good time to revisit that task. And it needs to be written down so that you can communicate what the priorities and actions are, hold yourself and your team to account, measure how you are doing, and change tack quickly as needed.

Have fuel in the tank

Start-ups are constantly raising funding. CBILS, BBLS, JRS, grants and tax holidays all allow business to bolster cash reserves as they head into a reopening of the economy.  The funding market will become clogged when those that haven’t secured this funding suddenly realise they need to apply.  Don’t be left at the back of a long queue in a few months’ time – make sure you have surplus cash availability based on your stress tested business plan and forecasts.

Shorten communication lines

Start-ups are “agile”. This means continual refocus on tasks, priorities and outcomes through structured, regular dialogue to solve problems.  Basically, good management and communication. Take your plan, turn it into bite size actions and timelines, communicate to the team, assign responsibilities, and follow up collaboratively very regularly. Communication tools like MS Teams, Zoom, Slack and Trello are great at keeping focussed communication lines open and active.

Finally – take decisions

“….it is not always about making the right choice, it is about making the choice you make right……”. Benny Higgins, Chair of the Scottish Government Working Towards economic recovery Advisory Group.

Inaction and prevarication are blockers to economic recovery and success.  Don’t let perfect be the enemy of done.


The information in this blog should not be regarded as financial advice. This is based on our understanding on 25 June 2020. Laws and tax rules may change in the future.

HMRC enquiries are likely to increase – are you prepared?

June 24, 2020

HMRC have recently announced that they will tackle any abuse of the Coronavirus Job Retention Scheme and the self-employed scheme by bringing in new legislation.  So far, these schemes have cost the UK taxpayer more than £70 billion.

This new tax legislation is being rushed in after a short consultation period ended recently, with the new law expected to be in place in July 2020.  The proposed legislation is expected to introduce a 30-day window for employers to admit and notify HMRC of any errors of deliberate abuse.

“It is clear that HMRC are now putting in place legislation that will allow them to deal swiftly and effectively with fraudulent or incorrect claims for COVID-19 related payments (Praveen Gupta, Partner, National Head of Tax)”

There are various ways that an employer may potentially misuse the scheme, and HMRC is reviewing all of these through their well-established Risk & Intelligence Service and in addition there is an online facility for individuals to notify HMRC of suspected employer abuse of the scheme.

There are a number of concerns that the Government have on how these COVID-19 related schemes are being abused however we also recognise that due to the complexity of the rules, some companies could be making genuine mistakes.

At a time when HMRC will be receiving materially lower tax revenue due to the closure of businesses and the deferral of certain taxes, there will be pressure on HMRC to take action where they suspect either fraud or that mistakes have been made.

In May 2020, just two months since the furlough scheme was introduced, HMRC went on record that they are already conducting over 3,000 investigations into furlough “abuse” relating to their claim of potential misuse of the scheme. It is recommended that employers keep furloughed records for five years as it is likely that retrospective checks may be undertaken if HMRC believe there has been some level of misuse.

If HMRC determine that an employer has fallen foul of the scheme, then at the very least they will expect the overpaid amounts to be returned along with interest. There is also the strong likelihood that a range of financial penalties will be chargeable to that employer, with deliberate misuse attracting higher penalties than those who were careless.  In the worst cases, HMRC are likely to seek to investigate criminally.

HMRC’s approach, when they find misuse, will also likely be that they will also escalate those enquiries by looking into other areas of the employers and business owners tax affairs. HMRC’s view is that if a taxpayer is treating their affairs incorrectly, or misusing the furlough scheme, then there is a strong chance that they are doing it in other areas.

How we can support you

We offer our clients membership of a Tax Investigation Fee Protection Service which for a fixed amount of money you and your business would (subject to the scheme rules and acceptance) be covered for our fees to act for you in the unfortunate event that you are selected for an HMRC enquiry provided you have joined the service before the date of contact by HMRC (subject to terms and conditions).

This service can support you with:

  • Cases where no misuse has taken place, but HMRC believe that it has.
  • Cases where misuse has occurred as a result of carelessness, but HMRC are treating it as deliberate.
  • Cases where HMRC are looking to expand the enquiry into other areas of the employer’s tax affairs.

If you are not already a member of our Tax Investigation Protection Service and would like to join or learn more about it, then please speak to your usual relationship Partner, Director or Manager or contact a member of the Campbell Dallas Tax team.


The information in this update should not be regarded as financial advice. This is based on our understanding on 24 June 2020. Laws and tax rules may change in the future.

Business Interruption Insurance Claims: All is not lost…but challenges to overcome

June 24, 2020

Many businesses around the UK will have taken out Business Interruption Insurance policies (“BII”) in the hope that if they suffer an incident that causes them to lose profits they could claim against their policy.

When the impact of COVID-19 hit and businesses were forced to shut, not trade or trade differently which reduced their profits, they may have turned to their BII policy to see if they were covered.

However, many businesses will have been left disappointed in the knowledge that their BII policy does not appear to cover them based on the standard wording in that no “physical damage” has occurred to  their assets (i.e. from an incident such as flood or fire). However, policy extensions may be present that may enable a claim to be made for example, wording regarding communicable diseases or non-damage denial of access, thereby making a claim possible.

The Financial Conduct Authority’s Test Intervention

However, the “devil really is in the detail” in respect of whether you may or may not be covered. So much so that the UK’s Financial Conduct Authority (the “FCA”) announced that it will run a test case during July to provide guidance in respect of BII claims as a result of COVID-19. The FCA are reviewing a number of insurers’ policy wording to establish whether a valid claim could be made.

The FCA have invited policyholders, insurers and other stakeholders to provide comments and questions which they will seek to address in this hearing in July with their intention to make the decision in respect of which policy wording would warrant a BII claim to be legally binding. Clearly, there will be some deviations from the policy wording that they review, but it will at least set some guideline for whether a BII claim is valid.

Professional opinions

We sought the views of other professionals dealing with BII claims during COVID-19:

Duncan Sutcliffe, Director of Sutcliffe & Co Insurance Brokers, said:

“When the COVID-19 pandemic started impacting businesses many turned to their business interruption insurance but it was soon pointed out that the vast majority of policies purposefully do not provide pandemic cover, in the same way that insurance rarely covers huge unpredictable events like war. However, there are a small handful of polices which may inadvertently be providing some cover due to a badly written policy wording. The only way to know if you are covered is to carefully examine the small print.”

Adam Finch, Dispute Resolution Partner at Harrison Clark Rickerby Solicitors, added:

“It’s not quite as stark as the insurers are suggesting.  The policies are not as clearly defined as they would like.  So do take a very careful look at your policy to determine whether there is an opportunity to make a claim to your insurer.  If in doubt, proceed with a claim.  The FCA’s test case will assist in resolving some of the ambiguity around common terms.  By advancing your claim, the insurer will be aware of your interest and will be expected to formally respond after the test case has been determined.”

Martin Chapman, Forensic Accounting Partner at Baldwins Accountants, said:

“Even when you get over the hurdle of having a valid BII Claim, the next step is quantifying your losses. There may be further restrictions on what is claimable, including considerations of the financial support you may have had from the Government. Making your claim easy to follow, robust and reasonable will be the secret to a successful pay out”.

Clearly, getting a valid BII claim accepted will be challenging but all is not lost and the FCA stepping in shows how serious they are taking it.

We are here to help

We can help you if you think you have a valid claim by reviewing the policy wording, putting you in contact with our vast network of intermediaries if further clarity is needed and then if a claim can be submitted, we have the experience in quantifying your losses.

Furthermore, we encourage you to keep a watch on the FCA’s website that they continue to update in respect of the BII test case. We will also be providing commentary and observations on the results of the FCA case once it has been announced.”

If you have any questions on the above or want to discuss this further, please do not hesitate to contact your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 24 June 2020. Laws and tax rules may change in the future.

EU Exit Transition Period – No further extension for the UK (EU to UK Trade)

June 19, 2020

Important information for importers and exporters

On 12 June 2020, the government announced that it would not request an extension beyond the end of the transition period of 31 December 2020.

The end of the transition period signals an end to the UK’s membership of the EU’s Customs Union. It signals a change in the future trading relationship between the UK and the EU but also the customs obligations and compliance requirements which may be placed on British and Northern Ireland businesses moving forward, subject to any agreement which may be reached in the intervening six month period.

Up until this announcement was made, the UK was going to introduce full border controls on 1 January 2021 for all EU movements. However, in recognition of the impact of COVID-19 it has now announced a revised three stage approach (see summary below).  This staged approach is aimed at helping businesses prepare for the changes and has been announced in conjunction with further support measures including an additional £50 million of funding being ring fenced for customs intermediaries.

UK Government three stage approach

From 1 January 2021

  • Customs declarations will need to be submitted for controlled goods including goods which attract excise duty (e.g alcohol and tobacco).
  • Declarations for all other goods and any associated import duties may be delayed for up to 6 months.
  • Businesses must have a duty deferment account or access to a duty deferment account to allow them to defer any payments of import duties.
  • A new Bulk Declaration Scheme for low value imports will be introduced.
  • Intrastat arrival declarations will still need to be submitted by businesses that exceed the relevant threshold.

From April 2021

  • All products of animal origin and all regulated plant and plant products will require a pre-notification and relevant health documents.

From 1 July 2021

  • Customs declarations will be required for all EU trade movements.
  • Full Safety and Security declarations will also need to be required.

The next few months will be a crucial period and British and Northern Ireland businesses need to consider whether they need to make changes to their supply chains and familiarise themselves with the new customs obligations if they trade within the EU.

For further information, our Customs Duty and VAT specialists can provide advice on the changes and confirm the suitability of existing import/export procedures.

The information in this blog should not be regarded as financial advice. This is based on our understanding on 19 June 2020. Laws and tax rules may change in the future.

Job Retention Scheme – Key Changes

June 17, 2020

Details of the amendments to the current Job Retention Scheme (JRS) were published on 12 June 2020. The rules are effective from 1 July and reflect the desire, and indeed need, for employers to start to re-engage their employees and get back to business. There are two over-riding two key points.

Firstly, the rules provide an opportunity for employees to return to work on a part-time basis whilst allowing the employer to claim for the cost of the employee’s wages for the non-working time the employee remains furloughed. This is a change from the current scheme under which employees are not allowed to work at all. It is intended to provide the necessary flexibility for employers wishing to open their doors without the requirement to bring all employees back at once, something which for many businesses will not be feasible.

The second key point is that from the 1 August the amount an employer is able to claim via furlough under the JRS is progressively reduced:

  • From 1 August the employer will not be able to claim via furlough the cost of employer national insurance and pension contributions.
  • From 1 September the employer claim will reduce to 70% with employer contributing 10% of the furloughed employee’s wages.
  • This employer contribution will increase from 10% to 20% and therefore the claim amount will reduce to 60% from 1 October through to closure of the scheme on 31 October.
  • The employee will still receive 80% of salary through to 31 October and it is therefore a reduction in the relief available to the employer.

Whilst these are the headline points there is a significant amount of supporting detail and a number of points to consider:

  • With some very limited exceptions, being able to benefit from the new arrangements is conditional on the employee having been in the current JRS running through to 30 June.
  • 30 June must be viewed as the end date for the existing scheme. This means that where an employee’s furlough claim period starts in June and ends in July the employer is not able to submit a single claim but must instead submit two; one for the period to 30 June and one for the July period through to the end date.
  • It further follows that for such an employee flexible part-time furloughing cannot be considered until the full-time three-week furlough period has finished.
  • There is a deadline for making claims under the current scheme of 31 July. The start date for claims under the new scheme is 1 July.
  • From 1 July employees can return to work with the employer making a furlough claim for hours not worked.
  • To qualify under the new scheme the employee must have been furloughed for a three-week period between 1 March and 30 June 2020. This only needs to have been for a single three-week period but it is now too late to furlough an employee for the first time as we are now within three weeks of 30 June, the end date of the JRS in its current format.
  • The number of employees an employer may claim for will be limited to the highest number it claimed for in a single claim period. Thus, where an employer made furlough claims for 30, 40 and 50 employees in three consecutive months, the maximum number of employees for whom a claim may be made post 30 June is 50, regardless of whether more (different) employees were actually furloughed. It does not however need to be the same 50 employees that are furloughed under the new scheme so the upper limit should be viewed as a cap on the overall number.
  • For employees returning from parental, adoption, paternity or parental bereavement leave the retuning employee may be furloughed if the return is after 10 June and he or she has not previously been furloughed. The only requirement is that the employer has made a furlough claim for an employee in the period 1 March to 30 June.
  • The progressive reduction in the amount the employer may claim means that each month must be looked at in isolation for claims purposes. This means that it is will not be permitted to submit a claim which stretches across a month end. The requirement is therefore that a claim, which must be for a minimum of seven consecutive days , must start and end in the same month.
  • An employee may work and be furloughed in the same pay period. This flexibility will allow, for example, an employee to work five mornings a week and be furloughed for each afternoon. This is because the furlough claim is calculated based on hours worked and not worked.
  • The new scheme will continue to limit furlough claims by reference to a limit set at £2,500. This will need to be pro-rated where the employee is part furloughed and part working.

Whilst the over-riding intention of the new arrangements is to ease employees back into work and reduce the cost burden on government, the mechanism for doing this is quite complex with a significant number of factors to be taken into account. The progressive reduction in amounts employers may claim has led to the design of the new scheme making reference to the old but then being distinct to cater for the month on month changes as we move towards closure. It is perhaps relevant that HMRC have recognised that the claims process is relatively complex and have put in place mechanisms to deal with under and over claims.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 17 June 2020. Laws and tax rules may change in the future.

Watch the rear-view mirror

June 17, 2020

There have been reports that the Chancellor will introduce powers in the upcoming Finance Bill that will allow HMRC to investigate, claw-back and penalise fraudulently claimed Job Retention Scheme (‘JRS’ or ‘Furlough’) payments and grants made under the Self-Employed Income Support Scheme. Articles hint at some large businesses that have abused the scheme, by, allegedly, keeping staff at work while claiming the grants.

The complexity of JRS rules and the haste with which it was introduced means there will be many businesses that have made genuine errors. This will be easy pickings for HMRC investigators. Whether there will be leniency for genuine mistakes versus alleged fraud remains to be seen.

All JRS claimants should review what they have claimed so far against current best practice guidance. If you identify an overclaim, repaying unprompted would be a recommended course of action. I also urge claimants to check whether they have tax investigation fee insurance in place that covers accountants’ fees defending you in case of a future HMRC investigation into your furlough claims.

Hidden tax costs

The general rule is that Grant income received by a business counts in calculating taxable profits. This includes JRS, SEISS, support grants and pivotal grants. In the case of JRS, the income will be largely offset by wages paid to employees meaning a limited tax impact. This is not true of other support, which will be taxable in the accounting period it is received. Grants are not really “free money”.

EU State Aid

EU State Aid is a mine-field of legislation covering most government support for UK businesses. The main impact will be on those businesses claiming R&D tax credits on innovation costs to reduce their tax bill or generate refunds.  Crucially, JRS is NOT state aid, but most other forms of COVID-19 support are. This is covered in detail here by my colleague Mark Pryce. A must read for those intending to claim R&D Tax Credits to help their tax cashflow.

…..and Finally

A loan is a loan. Yes, unbelievably, I have had conversations with a small number of people who seem to believe that the Government backed Bounce-back and CBILS loans do not need to be repaid or “will be written off anyway”. The Government is considering creating a “bad bank” to efficiently manage and collect impaired COVID-19 loans. Given the unprecedented magnitude of taxpayers-funded support, I doubt that the Government or Banks will be going easy on collection of loans any time soon.

 


The information in this blog should not be regarded as financial advice. This is based on our understanding on 17 June 2020. Laws and tax rules may change in the future.

Changes to Restructuring Legislation – The Corporate Insolvency and Governance Bill

June 16, 2020

The Corporate Insolvency and Governance Bill passed through the House of commons on Wednesday 3 June 2020 and proceeded to the House of Lords on Tuesday 9 June 2020. The expectation is that it will reach its third reading in the House of Lords on 23 June 2020.

Major changes to the current UK corporate rescue regime and options available to businesses affected by COVID-19 are imminent.

The Bill will introduce new corporate restructuring tools for insolvency professionals to use to help companies that require a breathing space and restructuring plan to survive.

Key aspects of the bill in relation to restructuring are:

  • A new Moratorium available for companies to protect their business and assets whilst they seek a rescue package.
  • Suppliers will not be able to terminate contracts to supply to companies subject to a Moratorium.
  • There will be a new form of restructuring plan which will have the power to bind specific classes of creditors who do not agree.
  • The threat of personal liability for wrongful trading for directors who choose to work to rescue their Company affected by the COVID-19 crisis will be temporarily removed.
  • The Bill will suspend the rights of creditors to issue statutory demands and winding up petitions in relation to COVID-19 debts.

A more detailed summary of the provision of the Bill and how the new regime will work can be found here.

The Insolvency Law measures in the Bill are “reserved” in relation to Wales, in some respects devolved in Scotland and are fully transferred to Northern Ireland.

If you would like further information, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 16 June 2020. Laws and tax rules may change in the future.

Charities could benefit from tax reform as cash reserves fall

June 15, 2020

During a recent webinar hosted by us and attended by several hundred UK charities, it was noted that nearly 60% of charities advised us that they had suffered a marked fall in their reserves – crucial to the financial health and survival of any charity.

Whilst the government’s commitment to extend over £1 billion of funding support to charities was a welcome move, we are concerned that financial issues could continue to impact the sector, in particular charity reliefs and VAT.

Despite successive governments promising to streamline, simplify and consolidate the tax system, tax reliefs appear to have been the only output. At present over 1100 different reliefs are currently available and the administration associated with tax reliefs can cause more problems than they solve and often overcome the original objective.

Tax reliefs in the Charity sector are a good example of this. Since being implemented some 20 years ago, charity relief rules are now considered to be arcane, bureaucratic, inefficient and expensive to operate. They passed their sell-by date several years ago!  In view of the role of charities in the COVID crisis and the financial position many will face as we all come out of COVID the Government must consider improvements to the tax position of charities as a matter of priority.

The VAT reliefs currently available to charities are too narrow and do not reflect the broad and important role charities have in modern society. They should be widened and made more efficient. Some still involve paper-based administrative processes that often cost more money to manage than they save.

In many areas the VAT rules that apply to charities are confusing and open to interpretational differences. This has led some charities to suffer unbudgeted VAT costs or incur significant internal and external costs to defend a position. In a number of cases VAT rules do not reflect current government policy or the position charities have in society these days. Furthermore the majority of charities are unable to recover all of the VAT they incur. Charities therefore use hard earned funds or may receive Government funding to cover the cost of irrecoverable VAT – and this is promptly collected and repaid to Government. If the rules on the recovery of VAT by charities were changed donations given by the public to charities and Government funding itself could be used for the purpose it was originally intended.

Public sector bodies and some charities have a special VAT status that allows them to recover the VAT they incur on free of charge non-business activities. If this status was extended many charities could be in a much better financial position and would not result in a loss of revenue to the Government. The same value of public sector funding could be given to more charitable bodies and concerns. There are examples of situations where the cost of VAT is stifling charities ability and willingness to innovate, invest, employ staff and develop progressive new services. It is also having an impact on the services received by vulnerable sectors in society. Following Brexit the Government has the power to make changes that would make the tax position of charities simpler and more efficient. It is estimated that there are about 210,000 charities in the UK.

The review of charity taxation undertaken last year by Sir Nicholas Montagu highlighted a series of important changes that would start to bring charity tax reliefs into the digital age. These included:

1. Rates – extend reliefs to trading subsidiaries
2. Gift Aid – redirect higher rate relief to charities and help recover
more than £560m of unclaimed Gift Aid
3. Declarations – establish a universal database needing one
registration
4. Payroll giving – mandatory for larger businesses
5. Trading rules – extend rules to all trading activities e.g cafes
6. Wills – remove VAT charges from wills and testaments
7. VAT – undertake a comprehensive review of charity VAT

The report and recommendations by Sir Nicholas Montagu represented a small step in the right direction but is essentially disappointing in its reach and ambition.

We decided to benchmark the views from the charity sector and undertook our own piece of research to see what the charities would like changed.  It would be helpful if the policy makers did likewise.  The suggestions we received focused on eliminating unnecessary rule, securing full rather than partial VAT recoveries and cutting costs and bureaucracy.  They included:

1. Create a £10m nil rate band for trading subsidiaries

2. Apply the zero rate VAT to all supplies by charities – this would allow all VAT on expenditure to be recovered

3. Confer a ‘Special VAT recovery Status’ on charities that allows them to recover the VAT incurred on expenses in the same way as public sector bodies.

4. Remove VAT on charges between charities

5. Remove the VAT reverse charge procedure on overseas services for registration purposes for all charities. This would remove unnecessary VAT registrations and additional irrecoverable VAT costs.

Tax and VAT. Three short words, three letters – but a major headache for charities that is expensive to administer and manage. The government really needs to restructure charity taxation and in so doing free up charities and
their people to focus on their core businesses – making a difference.

If you have any questions or would like to discuss the impact of Coronavirus on your organisation, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 15 June 2020. Laws and tax rules may change in the future.

How will the Coronavirus Support Packages affect your SME R&D Tax Claim?

June 11, 2020
Coronavirus Support Packages and Research & Development (R&D) Tax Relief

During these uncertain times, you may have taken advantage of the range of supporting financial packages introduced by the UK Government. Whilst these packages are likely to offer extremely important cash injections to your business, it is important to consider the impact that such funding could have on your R&D tax relief or tax credit claims – past, present and future.

Background to grant funding and R&D tax relief/credit claims

There are two R&D tax related schemes:

  • SME scheme – Potential benefit of 24.70p tax relief (excluding the general corporation tax relief) for every £1 of qualifying expenditure.
  • Research and Development Expenditure Credit (“RDEC”) – Potential benefit of 10.53p (excluding the general corporation tax relief) for every £1 of qualifying expenditure.

The receipt of a subsidy  impacts upon any benefit you receive under the SME R&D scheme. The extent of that impact depends on whether the subsidy is classed as Notified State Aid or not. For example, if you receive Notified State Aid for a qualifying R&D project  then you cannot claim SME R&D relief for any of  the qualifying expenditure incurred on that project, even if it is only funding a proportion of the costs. Relief may still be available under the RDEC scheme but, as noted above, the benefit under that scheme is not as generous.

Where the funding you receive is not classed as Notified State Aid, then you may still be able to make an SME R&D claim in respect of the unfunded element of expenditure. An RDEC claim may then be available in respect of the funded element.

Potential Retrospective Effect

As noted above, if you receive Notified State Aid for a project (irrespective of the amount or timing of that receipt), no SME R&D relief can be claimed on any of the costs associated with that  project. Accordingly if you have claimed one of the grants currently available and it is Notified State Aid then you need to make sure that this in turn isn’t going to result in you having to repay SME R&D relief you have already claimed. This is particularly relevant for ongoing projects which you have already claimed R&D SME relief for.

Coronavirus funding and R&D tax relief/credit claims – What impact will the UK Government’s funding packages have?

The most widely taken up Coronavirus funding options are the Coronavirus Job Retention Scheme (CJRS) and Coronavirus Business Interruption Loans (CBILS). Other options available to help with cashflow throughout the Coronavirus pandemic are Bounce back Loans, VAT Deferral and Time to Pay arrangements.

HMRC have indicated that where the funding is received for general business support rather than being project specific, they would not consider the funding to relate to specific R&D activities and therefore the funding would be unlikely to prevent the company from being able to access SME R&D relief.  Each claim however will depend on the individual facts and where the funding can be linked to project expenditure (for example where the costs of a project have been identified within a funding application as costs that require subsidising), we would anticipate that the Notified State Aid funding restriction will apply.

Coronavirus Job Retention Scheme (CJRS)

The support measure allows companies to furlough employees and to claim 80% of the employee’s salary up to a maximum value of £2,500 a month. This will not be classified as Notified State Aid and will therefore not affect the version of the scheme that the company can claim under (SME or RDEC) but if the salary is subsidised then companies can’t claim subsidised R&D. Where those employees that usually carry out R&D activities are furloughed then the period of time for which they are furloughed and the subsidised salary will not be claimable for R&D purposes. However, HMRC have indicated that should the employees salary not be subsidised by the government but they are in fact working a reduced working week as part of a lockdown strategy then this will still be claimable as part of any R&D claim.

Coronavirus Business Interruption Loans (CBILS)

The Interruption loan was introduced to help companies through the worst effects of the coronavirus pandemic. Currently the Government has notified CBILS as a State aid under the European Commission’s new Temporary Framework for COVID-19 and thus this will affect any R&D claim submitted for companies that have received an interruption loan. If the CBILS relates specifically to the company’s R&D expenditure (on a project) rather than being intended more generally to support the company then those projects funded using a CBIL will not qualify under the SME version of the relief and will instead will form part of the less generous RDEC relief.

Where a CBIL is received and utilised for multiple projects (or possibly only one) then those projects funded by a CBIL will fall under the RDEC version of the relief but all other projects may fall under the SME version of the relief. Because of this we would strongly advise that you seek help if your business submits R&D claims and has received a CBIL.

Business Rates Relief

Rates are not a qualifying cost within the R&D legislation and can’t be claimed under either version of the relief. As such applying for the rates relief will have no impact in any future R&D claims.

Bounce back Loan Scheme (BBLS)

The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available for a company is £50,000. BBLS, like CBILS, is classed as Notified State Aid and will therefore affect a company’s R&D claim. However the big difference between CBILS and BBLS is the Bounce Back loan is significantly smaller (max of £50,000) and therefore will likely be classed as “De minimis” state aid. A company can’t claim SME R&D relief for projects funded by de minimis state aid, but where the funding is utilised for any other projects (non R&D) or general day to day business this will have no impact on any future claim.

VAT Deferral and time to pay arrangements

Where companies have taken advantage of the deferral options for tax payments or agreed a time to pay arrangement then this should have no impact on any R&D claim provided that the terms of the agreement are adhered to. Any R&D claims submitted where the claimant has arrears with HMRC, RDEC or payable tax credit will not be set against any of those amounts before the revise due date.

Where tax has been deferred as part of a Time to Pay (TTP) arrangement, HMRC will follow existing policy and set any R&D tax credit off against any TTP liability, not just the amount owing at the point in time the credit is paid. This would include informal deferrals offered in advance of TTP arrangements being put in place. TTP is an agreement by HMRC to delay enforcement proceedings for a given debt to a specified future date. It doesn’t alter the fact that the debt is owed to HMRC or change the due date.

Finally, where companies have missed filing deadlines due to the impact of Coronavirus then HMRC may accept late claims. While HMRC have yet to give clear indication if this is the case, previously where a company was able to provide a legitimate and compelling case for a late filing of a CT Return, HMRC would allow a late R&D claim. At this current time it seems Coronavirus would be seen as such but unless there is clear guidance from HMRC to ensure this is the case we would advise ensuring any claims are still submitted by the regular filing date.

What steps should the company take next?

The funding packages introduced by the UK Government will be vital to many companies however, please take care  to consider whether the above restrictions are likely to have a detrimental effect on your R&D SME claims as, once the funding has been received, it cannot be repaid.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 11 June 2020. Laws and tax rules may change in the future.

COVID-19 and the Art World

June 11, 2020

With art galleries closed, art fairs worldwide cancelled, museums in lockdown, auction houses silent and transactions at a very low level, there is no doubt that the pandemic has had a deep and dramatic effect on the art market worldwide.

There was already surprise in many quarters that TEFAF in Maastricht went ahead in March and less surprise when it closed early after positive tests began to emerge. Frieze New York and TEFAF scheduled for May were swiftly cancelled along with the May auction sales and Art Basel in June quickly followed.

In cities around the world, galleries had to cancel shows while museums also closed their doors with many exhibitions effectively mothballed. With no certainty on when the public will be allowed back, tough decisions have had to be taken about which shows and exhibitions to pull from the calendar. Some of this has been sheer logistics as works intended for show are still in other institutions around the world and cannot be transported while a truncated (and optimistic) calendar for the autumn means there are only so many slots available.

All of this has forced the art world to pause, reflect and consider how things may look when some form of restart button can be pressed. From conversations with artists, dealers, galleries and representatives of institutions, some hopes and fears are coming into focus and in this insight, I will focus on the art fairs then consider other business aspects.

What will the future hold for art fairs?

Looking at art fairs there is no doubt there was a sense of fatigue across the market as galleries travelled from fair to fair, continent to continent in a seemingly endless cycle. That is now broken. ArtBasel is hoping to show in September but, in my view, that has to be open to serious question. The fact that they have extended the deadline for galleries to commit to attend indicates to me that many are still hedging their bets and others are unlikely to attend. There are serious logistical and practical questions to answer; will it be possible to travel to Basel and, if so, what restrictions will be in place? If people do travel, will they face further restrictions when returning home, and the UK Government’s 14-day quarantine regulations are likely to be a further deterrent to travel, if they are retained for any length of time. How will organisers manage the numbers and attendance with safety and, of course, will it be possible to transport all the art works and set up the stands?

I am sure there are many further questions, but these alone will cast a long shadow. The same can be said for Frieze and FIAC in October and TEFAF fall in November where organisers hope that further time will allow a little more “normality” to have returned.

I suspect that many galleries will abandon the idea of physical attendance at fairs in 2020 completely and assess how the situation looks in 2021. There will also be commercial considerations; it is expensive to attend the fairs and many galleries will be licking their wounds after a year in which trading has almost ground to a halt.

In these circumstances, fairs have been offering a digital experience; ArtBasel Hong Kong and Frieze New York fairs have experimented with an online viewing platform; ArcoLisboa launched on 20 May and ArtBasel’s offering is due on 17 June with all those who had originally signed up for the fair invited to take part. It will be interesting to see how many do and, so far, my sense is that there a far fewer galleries showing online as there would normally be on the floor. Galleries were reporting sales from Frieze NYC, but it is hard to judge how this compares to “normal” and what the appetite is of collectors in the current environment. My expectation is that sales activity will be down and while viewing online is interesting and the VR experience will no doubt improve for many, there is no substitute for actually seeing the works, walking around the stands and engaging in the wider social experience at the fairs.

In an email issued in May, the organisers of ArtBasel said that “we plan to start hosting fairs as soon as we feel that can be done safely and successfully, as we equally try to imagine and define how the art fair of the future might differ from that of the past.”

Is there a prediction?

Predictions are a difficult and sometimes dangerous pastime as events reveal how wide of the mark you are; but, for better or for worse, these are mine:

  • There will be almost no live fairs until at least the end of the year and maybe nothing of substance until ArtBasel Miami in December or Frieze L.A. in February 2021.
  • Even these depend on the ability and willingness to travel and the specific positions of Florida and California.
  • Tickets for Frieze London this October are meant to go on sale in the summer. Forget it. If it goes ahead it will be smaller, more UK centric and decisions will be made late on.
  • There will be far fewer fairs in 2021 as some fold completely or merge.
  • For those that do take place the number of exhibitors will be down as the galleries that have survived weigh the costs and ration their attendance.
  • Curators will need to rethink how fairs are designed, how attendees can move around and in what numbers.
  • The online viewing platforms will continue alongside the physical fairs and those platforms will become ever more sophisticated and interactive.

What is certain is that the world of the art fair will never be quite the same and, while I listen for the tears of lament, I am struggling to hear them. As more news comes through on this, I will provide an update (and see how far off I was with my predictions) and next take a look at the impact on the galleries.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 11 June 2020. Laws and tax rules may change in the future.

Reopening and Rebooting

June 10, 2020

The Sunday Times recently reported that, when confronted with the likelihood of 3.5million job losses if the country doesn’t reopen over the summer, Boris Johnson apparently responded “Christ”!  The UK’s COVID narrative is pivoting to the economic toll, and emergency measures to resuscitate the economy back to life.

In a recent and related press article I called on the UK and Scottish Governments to start thinking about specific measures to support the Hospitality, Leisure and Tourism sectors.  This discussion is thankfully now underway and will hopefully see a possible relaxation of distancing from 2m to 1m.

Sector commentators indicate this would increase venue capacity from around 30% to 70% meaning a greater likelihood of businesses remaining viable.  This approach has been adopted by many European countries and is in line with WHO guidance.

Clear safety and operating guidance alone will not be enough.  More generally, the “Summer Six” in the UK cabinet are formulating their plans for reopening and rebooting the economy. Below are some ideas I hope they will consider:

Indirect tax stimulus

Following the 2008 crash UK VAT was reduced to 15% to stimulate consumer demand.  Germany has temporarily cut its VAT rate from 19% to 16%. Belgium just announced a targeted reduction of VAT on hotels and restaurants to 6% from 12%.

The UK has one of the highest rates of VAT in Europe.  Other EU states also apply differential VAT rates to hospitality and leisure sectors to stimulate demand.  VAT stimulus must be a serious contender to help our recovery.

Targeted sector support

Furloughing, tax holidays, CBILS, Bounce Back Loans and rates grants are all non-sector focussed.  This economic crisis is unusual in that the recovery lies in consumer markets behaving normally. However, either through law or new behaviours mandated by the pandemic, consumer markets are struggling to get back to normal.

This is an imperfect market calling out for structured support for those parts most affected.  A runway beyond October for furloughing staff in certain leisure activities perhaps?  Or grants for the hospitality & leisure sector to face into business model changes – similar to the 1980s and 1990s when Regional Development grants targeted post-industrial regeneration.

Redesign and Repopulate City Centres

Office based workers have shown their managers and employers that they can be trusted to work from home.  This is a structural shift that is likely to result in reduced demand for office space.  The retail property sector is also facing a slew of CVAs and rent holiday or reductions.  Some major cities outside London are actively promoting a return of the city centres to residential.

In the face of structural changes to the retail and commercial landscape is it not now time for some radical plans to incentivise (through tax breaks) the repopulation of our regional city & town centres?  This could also help ease the shortage of social housing if appropriate planning incentives were attached.  A similar approach to empty commercial property was taken with the introduction of BPRA following the 2008 crash.  How about the R/CPRA now? (Retail/Commercial Premises Residential Allowance)?

The information in this blog should not be regarded as financial advice. This is based on our understanding on 10 June 2020. Laws and tax rules may change in the future.

Details of Changes to the Coronavirus Job Retention Scheme

June 2, 2020

On 29 May the Chancellor announced a series of changes to the Coronavirus Job Retention Scheme (JRS), tapering down the Government funding for the final few months that it is available, and introducing flexible furloughing. The purpose of this note is to summarise the key points and provide clarification on the key aspects. This initial analysis is based on a fact sheet issued by HMRC; detailed guidance is to be issued on 12 June. The information in this note is therefore subject to amendment and will be revised as appropriate following issue of the detailed guidance.

Flexible furloughing

  • From 1 July 2020, employees will be able to return to work from being on furlough for any amount of time or shift pattern. Any normal hours not worked will continue to be able to be claimed via the JRS.
  • Employers will need to agree the new flexible working arrangements with employees and have this confirmed in writing.
  • When submitting a JRS claim, employers will need to report the hours worked and the usual working hours for each claim period.
  • For the hours worked, the employer will be solely responsible for paying the employee as well as the employer NICs and any employer pension contributions .
  • Further and more detailed guidance on how to calculate flexible furlough claims will be published by HMRC on 12 June 2020.

Closure to newly furloughed employees

  • From 30 June 2020 the JRS will close to employees who have not previously been furloughed.
  • Employees will need to have been on furlough for a full 3 week period by 30 June in order to continue to be furloughed. So in order for employees to be furloughed beyond 30 June, they need to have started their furlough period by 10 June 2020 at the latest.
  • Employers will then have until 31 July to submit JRS claims for any claim periods up to 30 June 2020.
  • From 1 July 2020, claim periods will no longer be able to overlap calendar months. This is to enable the management of the forthcoming changes.

Employer costs

  • For June 2020, employers can continue to claim 80% of an employee’s pay up to £2,500, including the employer class 1 NICs and 3% employer pension contributions.
  • For July 2020, employers can claim 80% of an employee’s pay up to £2,500, including the employer class 1 NICs and 3% employer pension contributions, for any usual hours an employee does not work. For any hours worked, the employer will have to pay all costs directly.
  • For August 2020, employers can claim 80% of an employee’s pay up to a maximum of £2,500 only for any usual hours an employee does not work. The employer will need to pay all employers class 1 NIC’s and pension contributions.
  • For September, employers can claim 70% of an employee’s pay up to a maximum of £2,187.50 for any usual hours an employee does not work. The employer will need to pay all employers class 1 NICs and pension contributions, and 10% of the employee’s pay for any usual hours not worked.
  • For October, employers can claim 60% of an employee’s pay up to £1,875 for any usual hours an employee does not work. The employer will need to pay all employers class 1 NICs and pension contributions, and 20% of the employee’s pay for any usual hours not worked.
  • The caps on the monthly pay to be claimed via JRS are to be pro-rated for hours worked and not worked. The capped amounts included in this note are based on an employee being fully furloughed and not working.
  • Employers will still be able to choose to top-up employees’ pay over and above any amounts they claim via the JRS
  • The JRS will cease on 31 October 2020. The last day to submit a claim has not yet been announced.
  • In summary:
July August September October
JRS claim: 

Employers NICs and pension contributions

Yes No No No
JRS claim:

Employee’s pay

80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875
Employer contribution:

Employee’s pay

10% up to £312.50 20% up to £625

As expected the rules covering this transitional period will be complex and is with the original introduction of the scheme will anticipate a number of questions and points of clarification will be raised between now and 12 June. We will of course continue to provide our updates as the position evolves.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 02 June 2020. Laws and tax rules may change in the future.

Further Financial Assistance Available for Employers

June 1, 2020

The Financial Assistance Scheme for Employers unable to pay statutory redundancy payment

As an employer, if your plan to Survive the Covid Crisis requires workforce reduction, the Government has a scheme in place to help fund the costs of statutory redundancy.

The Financial Assistance Scheme for Employers unable to pay statutory redundancy payment can be accessed via a part of the Government’s Insolvency Service; the Redundancy Payments Service (“RPS”).

If an employer cannot afford to pay their employees’ redundancy pay they can apply to the RPS for financial assistance, if the application is approved the RPS will make payment directly to the redundant employees.

The assistance takes the form of an interest free loan.

To be eligible, an employer must provide evidence that they cannot afford to pay their employees statutory redundancy pay and that the employee has a valid claim.

The application requires disclosure of full financial information, including robust business forecasts demonstrating a repayment plan and evidence that you have taken all reasonable measures to raise the necessary funds.

This scheme may prove to be a very useful tool available to business as part of an overall plan to restructure and to build a healthy business model for the future.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 01 June 2020. Laws and tax rules may change in the future.

Government provides clarification on Job Retention Scheme until 31 October 2020

June 1, 2020

At the end of last week, the Chancellor announced changes to the Job Retention Scheme. Whilst we await the fine detail, the key points announced were as follows:

  • JRS cannot continue indefinitely but will remain open until end of October. Employees will continue to receive the full 80%.
  • A new more flexible furlough scheme will start from 1 July 2020 – one month earlier than announced a few weeks ago.
    • Providing maximum flexibility – employees can come back part-time.
    • The final date on which an employer can furlough an employee for the first time is 10 June 2020.
    • Employers will have until 31 July to make claims in respect of period end 30 June 2020.
  • Final phase of the furlough scheme will ask employers to contribute:
    • From August – employers will only pay the Employers NIC and Employers Pension Contributions.
    • From September – employers will need to contribute 10%.
    • From October – employers will then need to contribute 20%.
    • The scheme will then close on 31 October 2020.

The Chancellor referred to taking careful, but deliberate steps to re-open the economy and a need to adapt to a new environment. He acknowledged that the current scheme could not continue indefinitely but recognised that employers need to be protected. This gradual phasing for employers from 1 August is welcomed and leaves the employee’s position intact. We will of course update when further details are available.

Update: Following publication of this update, a factsheet was issued by HMRC and an analysis of this can be found here.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.


The information in this update should not be regarded as financial advice. This is based on our understanding on 01 June 2020. Laws and tax rules may change in the future.

Grappling with the people factor

May 28, 2020

The journey into the next phases of pandemic management is well underway and the timing of opening of different industries is becoming clearer each week. It is good that the government has extended financial support under the Job Retention Scheme (JRS, or Furlough) and is allowing businesses to bring furloughed workers back to work on a part time basis until 31 October.

The JRS extension is welcome and will let employers ease workforces back to work as, hopefully, economic activity returns to close to pre-lockdown levels over the rest of the year.

Despite this we have seen a raft of significant redundancy announcements from big employers and a spike in unemployment claims. Many of the redundancy announcements are from businesses that haven’t ceased trading or entered administration. Those businesses are implementing business model changes in advance of the economy reopening, sadly with the cost of jobs.

I have previously advised all businesses should be reviewing their business model and strategy, reforecasting demand as best as possible, and modelling and testing the financial impact of this. This allows a judgment of the rate at which employees are brought back from furlough, or redundancies are managed.

This is REALLY hard to do, particularly if you are in a sector that will be affected by major business model changes through prolonged physical distancing, changed consumer attitudes and anti-virus measures.

High uncertainty over future demand, and financial forecasts that indicate losses and poor cashflow, means the decision to trim workforces quickly and deeply might unfortunately be necessary. Should demand pick up better than expected, re-recruitment is an easier problem to manage than running out of cash. Using JRS to manage this process is sensible but is not a long-term solution.

Finally, when looking at a workforce reduction, it is imperative that Employment Law and Human Resources specialist advice is sought. Discharging legal obligations is a must. Skilled HR professionals will also help to build a stronger, resilient, people focused business.

In summary:

  • High uncertainty of demand – you must lower your cost base to buy time
  • Funding losses through employing unproductive people is not sustainable
  • Using JRS as part of a considered plan that re-shapes your business makes sense
  • Using JRS to delay difficult decisions will distract from efforts to adapt and evolve
  • Not all decisions will be right – accept that, learn from mistakes and re-adapt as quickly as you can
  • Inaction and indecision will leave you behind your competitors and put the business and ALL of your employees in jeopardy
  • Seek competent employment law and HR advice early

The information in this blog should not be regarded as financial advice. This is based on our understanding on 28 May 2020. Laws and tax rules may change in the future.

Stock market turmoil, Property sales and Inheritance Tax. Can you claim back IHT?

May 28, 2020

Many Estates are now in the position of paying Inheritance Tax (IHT) at a rate of 40%. For those who died in the last year with portfolios of quoted shares and securities the value of those shares included for IHT purposes may well have reflected buoyant stock market prices.

The COVID-19 pandemic has had a major impact on global stock markets. The value of many shares and unit trusts has fallen significantly. Quoted shares may have been sold to generate cash, diversify portfolios or to cut losses or alternatively executors may be considering just what to do now.

Qualifying Investments – What to look out for

Executors of Estates who have sold ‘qualifying investments’ that were part of the deceased’s Estate within 12 months of the date of the death may find that they can claim back some IHT paid on the Estate. The date of sale is the date of contract rather than settlement date.

For Estates where the person died within the last twelve months and where shares are standing at a loss compared to the value at the date of death it may be worthwhile selling shares to reduce or reclaim IHT at 40%. The executors need to carefully consider and calculate the potential IHT saving against the actual crystallisation of losses on the sale. The Executors need to consider how capital losses realised on the sale of shares can be utilised and generally to compare the tax position of shares sold by the Estate compared to the tax position if such shares were appropriated to the legatees before sale.  In all situations, executors should ensure that they take investment advice from a qualified IFA or other appropriately qualified professional about realisation of shares or other securities before taking any action.

What are Qualifying Investments?
‘Qualifying investments’ are generally shares or securities which at the date of death are listed on a recognised stock exchange, UK government stock and holdings in authorised unit trusts. Private company shares, holdings in companies listed on the Alternative Investment Market (AIM) and loan notes are not covered by the relief.

Claim for relief
A claim for relief needs to include all qualifying investments sold within the twelve-month period following the date of death, not just those sold at a loss. The total proceeds from the sales is substituted for death values. There are also special rules that apply where investments of the same description are repurchased within two months of the last sale which have an effect of reducing the available loss. So, each case needs to be looked at based on its own facts and circumstances.

The claim for relief needs to be made by the ‘appropriate person’ who will generally be the executor, administrator, personal representative or trustees in held in a settlement. The claim for relief must be lodged with HMRC within four years of the date of death. If a claim is made after any qualifying investments have been distributed from the Estate, relief may not be available.

Relief for Land and buildings
A similar relief is available where land and buildings are sold within four years of the date of death. In this case, both a higher or lower value can be substituted for probate value.  The date of exchange of contracts is usually the date of sale. An election cannot be made if there is no IHT payable and it will not generally be advantageous to make an election if the property was sold for more than probate value as this will increase the IHT payable. Also, the election cannot be made if the property has already been distributed from the Estate. All sales of land and buildings in the four-year period need to be included in the election which must be lodged with HMRC within seven years of the date of death.

What happens next?
Given the difficult financial times that many face with the COVID-19 pandemic, any opportunity to reduce or claim back IHT is welcome. If you have any questions or would like to discuss any of the above points in further detail, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 28 May 2020. Laws and tax rules may change in the future.

Scottish Government increases funding support

May 28, 2020

It was announced on 26 May that further measures are being taken by the Scottish Government to support businesses adversely affected by coronavirus. The enhanced support includes:

  • An extension to the eligibility of the current small business and retail, hospitality and leisure grant for businesses that occupy multiple premises with a cumulative value over £51k
  • As well as an extension to businesses occupying premises such as shared office spaces, business incubators and shared industrial units where the landlord is the ratepayers

The Scottish Government will also be looking at ways to support those who were excluded from the Hardship Funds due to not having a business bank account. We are expecting further details to be announced on this later in the week.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 28 May 2020. Laws and tax rules may change in the future.

Claiming back employees’ coronavirus-related Statutory Sick Pay (SSP)

May 27, 2020

The Coronavirus Statutory Sick Pay Rebate Scheme was launched to allow employers to claim back the SSP paid to current and former employees. The scheme was originally launched in April and the portal opened for applications on Tuesday, 26 May.

Who can claim?

Employers can use the scheme if:

  • they’re claiming for an employee who’s eligible for sick pay due to coronavirus
  • they have a PAYE payroll scheme that was created and started on or before 28 February 2020
  • they had fewer than 250 employees on 28 February 2020 across all their PAYE payroll schemes

What documents are needed for claiming?

Employees are not required to give a doctor’s fit not for a claim to be made. Either of the following can be requested:

  • an isolation note from NHS 111 – if they are self-isolating and cannot work because of coronavirus (COVID-19)
  • the NHS or GP letter telling them to stay at home for at least 12 weeks because they’re at high risk of severe illness from coronavirus

Which contract types are covered?

The scheme covers all types of employment contracts, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts
  • fixed term contracts (until the date their contract ends)

What can be claimed?

The repayment will cover up to 2 weeks SSP starting from the first day of sickness, if an employee is unable to work because they:

  • have coronavirus symptoms
  • cannot work because they are self-isolating due to someone they live with, who has symptoms
  • are shielding and have a letter from the NHS or a GP telling them to stay at home for at least 12 weeks

You can claim for periods of sickness starting on or after:

  • 13 March 2020 – if your employee had coronavirus, symptoms or is self-isolating because someone they live with has symptoms
  • 16 April 2020 – if your employee was shielding because of coronavirus

How to claim

You must have paid your employees’ sick pay before you can claim it back. If you use an agent who is authorised to submit PAYE online for you, they will be able to claim on your behalf. If we process your payroll, please speak to your usual payroll contact if you would like us to do this for you.

To find out details on what employer and employees records you will need to retain and more detailed information on the SSP scheme, please go to the Government website.

If you would like to speak to us about payroll or have any questions about this scheme, please get in touch with your usual Campbell Dallas contact.

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The information in this blog should not be regarded as financial advice. This is based on our understanding on 27 May 2020. Laws and tax rules may change in the future.

How the COVID-19 crisis has brought the public closer to UK farmers – and what must be done to maintain relationship

May 20, 2020

A few weeks before the COVID-19 crisis, a UK Treasury official reportedly said that the food and farming industry was not critically important to the UK’s economy. Quite rightly this was met with a huge amount of anger from the farming industry. Since then, the crisis has helped bring the public closer to UK farmers, and food security is a much easier concept to understand. All of a sudden consumers witnessed empty shelves in supermarkets, and it has become necessary to buy ahead, plan meals, cook more and reduce food waste. Consumers are seeing firsthand in the media how complex supply chains are and inevitably thinking more about where their food is coming from. The sector needs to think about how it will maintain public engagement and continue to drive this message long after the end of the crisis.

The issue in recent weeks has not been about lack of supply, it has been dysfunctional supply chains. Produce normally sold 50% retail and 50% food services was switched overnight to 100% retail.  Whilst these are abnormal circumstances there needs to be contingencies in place, and alternative models to the “just in time” supply chains the food sector has become reliant on. The risks also need to be better shared, so that it is not all pushed down the line to the primary producer, as we are witnessing in the dairy sector.

Many farming businesses have diversified and ironically it is the retail, tourism and leisure parts that are being hardest hit right now. Indeed the business models have been based on home produced food, provenance, short supply chains and trust. Whilst these businesses are feeling pain at the moment, hopefully there will be a bigger pool of consumers who have been educated on food supply on the other side, but perhaps more importantly a government that negotiates a good trade deal for Agriculture with food security in mind. The distraction of the pandemic has resulted in the government losing negotiating time on how the UK will withdraw from the European Single Market. The UK has some of the highest welfare and environmental standards in the world, and I hope, given recent events, these are not sacrificed in pursuit of quick trade deals.

COVID-19 and Brexit are going to be a reset for many businesses, and much will depend on what happens to subsidies and how farmers in the UK are incentivised going forward. I am sure given a choice the majority of farmers would prefer not to be subsidised and instead be suitably rewarded by the market. Whilst the market for farmers may be more valuable selling direct to consumers, ultimately farmers produce commodities and compete in a world market. We therefore need to watch what our competitors around the world are doing as we do not want to be the only country not supporting our agricultural sector. Maybe it is time for some blue sky thinking and switching subsidy towards research and development or connecting with consumers. Engaging with the public has traditionally been thought about in terms of getting people onto farms through the likes of open days, but one thing the last few weeks has taught us is engagement can be achieved using technology too.

With all government decisions around COVID-19 being made based on science, the answers to some of the issues affecting the farming sector right now also rely on science. COVID-19 and Brexit ought to accelerate the focus and investment in technology, as the more spent on R&D the more productive industry becomes.

We hear a lot just now about the R number. I would like to redefine R as a measure of Resilience. Having spent my professional career as a Chartered Accountant dealing with farmers and rural businesses, one thing I have learned is these businesses have R in spades. The longevity of these clients is greater than any other, so whatever is thrown at the rural sector in the coming months and years, I have no doubt the sector will innovate to survive and thrive.

If you have any concerns on how your business may be affected or require more information on support available please get in touch with your usual Campbell Dallas contact.


The information in this blog should not be regarded as financial advice. This is based on our understanding on 20 May 2020. Laws and tax rules may change in the future.

Predicting and attracting demand in the new economic landscape

May 19, 2020

Probably the most challenging task when reopening or increasing activity is predicting the level of customer demand. The ideal would match staff, production and operations to demand to preserve working capital and cash.  This is difficult enough in normal times.

B to B

In theory businesses that sell to other businesses should have an easier task. I know of manufacturers that went into lockdown with backlogs of orders, construction companies running at full capacity and business services companies with a rapidly expanding customer base.

We are undoubtedly in recession and that will reduce demand across all B to B sectors. The key action is to speak to existing and pipeline customers and get as clear a picture as possible of their expected demand. This is good practice anyway.

B to C

The closer you are in the chain to the consumer the more difficult it becomes to predict consumer demand. Close collaboration with the retailer or B to C supplier at the end of the chain will help with insight into predicted consumer demand.

Non-essential high street retail, travel, tourism, hospitality and leisure businesses face an uncertain phased reopening and capacity restrictions through anti-viral transmission measures. Well run e-commerce businesses have enjoyed increased activity and will look to continue to place pressure on physical operators.

Steps that our clients are taking to drive demand include:

  • Investing in e-commerce activity, or create an e-commerce platform if you don’t yet have one
  • Increased customer engagement – use customer databases and social media to sell and promote your brand
  • Customer surveys – what will make customers more likely to buy?
    • Home delivery only?
    • Click & collect?
    • Private or family appointments?
    • Curated/bespoke collections or activities?
    • Zoom consultations?
  • Transparency about safety measures being put in place – particularly important for high risk activities like hairdressers and fitness activities.

Consumer demand will be supressed in those sectors most affected by physical distancing. Those businesses need to use the time now to

  • scenario plan and adjust business plans
  • invest in new customer channels,
  • bolster cash and investment resources, the government backed support – including grants, not just loans
  • lobby industry bodies and government for additional sector support
  • reach out to advisors, and others in your business chain to challenge and learn

The Darwinian nature of this crisis will mean the weakest businesses and those that don’t plan and prepare for the next phase WILL FAIL. So please TAKE ACTION NOW.

The information in this blog should not be regarded as financial advice. This is based on our understanding on 19 May 2020. Laws and tax rules may change in the future.

Support for start-up/early-stage businesses

May 19, 2020

The UK Government has recently announced £1.25bn of support for start-up/early-stage businesses. This consists of a £500m Future Fund, of which the Government will contribute £250m in partnership with the British Business Bank also providing £250m. A further £750m of funding for research and development via loans and grants will be provided by government through Innovate UK and targeted at SMEs.

The UK is a world leader in innovation and technology but because start-up technology businesses do not have historic profits, or developed assets, they are generally unable to access traditional lending structures, including finance through the Coronavirus Business Interruption Loan Scheme (CBILS). Instead, these entities typically rely on early stage investment through private investors including angel investors and venture capital firms.

Innovate UK

£200 million of grant and loan payments for existing Innovate UK customers is to be accelerated, although an opt-in is required, and an extra £550 million will also be made available to increase support for existing customers. £175,000 of support will be offered to around 1,200 companies that do not currently receive Innovate funding.

Future Fund

The Future Fund, with applications open from Wednesday 20 May, provides start-up/early-stage entities with access to convertible loans of between £125,000 and £5,000,000. These loans convert at a subsequent funding round at a discount of 20% on the equity value. Criteria for accessing these loans are:

  • The business is an unlisted UK registered company
  • The company needs to have raised £250,000 from private investors in the previous five years
  • The Government commitment needs to be at least matched by investment raised from private investors
  • The funds are partially ring-fenced so that the Government’s money cannot be used to repay other borrowings, pay bonuses or placement fees.

Fledgling companies that do not have a history of raising money will not qualify for the funding. And for many businesses the challenge of attracting the investment from private investors required for the Government to match their contribution will remain.

The loans will convert at a discount of 20% to the prevailing market price in the event of a qualifying funding round. At the end of three years the loans are redeemable at a premium of 100% to the par value of the loan.

State Aid & R&D Tax credits

Funding from Innovate UK, and COVID-19 related support measures, is deemed as State Aid. Any research and development project for which State Aid is received is treated as subsidised and therefore not eligible for SME tax relief in respect of R&D. Care should be taken that the benefit of money received from this support package is not outweighed by the benefit of future R&D tax credit claims.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 19 May 2020. Laws and tax rules may change in the future.

The New UK Global Tariff – Reducing import costs for UK businesses

May 19, 2020

On 19 May 2020, the Government announced an important change to what levels of tariffs and quotas will be applied to goods imported into the UK, by the publication of a new UK Global Tariff (UKGT) – which has been lodged with the World Trade Organisation (WTO). UKGT will replace the UK’s reliance on the EU’s Common External Tariff and will take effect from 1 January 2021.

The new tariff is aimed at encouraging trade to the UK by assisting UK businesses to make it simpler and cheaper to import goods from overseas. Its aim is to streamline and simplify some of the existing tariff lines and rates which the UK feels are onerous and complex. It will remove tariffs on a number of products, simplify complex duty calculations and abolish additional levies on certain types of goods.

The new UK Global Tariff will:

  • Reduce some duty rates to 0% – for example, pianos (reduced from 4%), dishwashers (reduced from 2.7%), cocoa powder (reduced from 8%) and Christmas trees (reduced from 2.5%).
  • Round down or ‘band’ some duty rates – for example, hairbrushes (reduced from 3.7% to 2%), ballpoint pens (reduced from 3.7% to 2%) and golf clubs (reduced from 2.7% to 2%).
  • Remove duty rates below 2% – for example, circular saws (currently 1.7%) and poultry incubators (currently 1.7%).

The UKGT will apply to all goods imported into the UK unless:

  • An exception applies, such as a relief or tariff suspension.
  • The goods come from countries that are part of the Generalised Scheme of Preferences (GSP).
  • The goods are imported from countries which have a trade agreement with the UK.

Of equal importance is that Common Agricultural Policies (CAP) duties will also be removed on prepared foodstuffs (for example, frozen food and ready meals) which contain lactose, starch and proteins. This will greatly reduce costs to businesses in those sectors.

The new UK Global Tariff represents a significant move forward towards the end of the transition period. We would encourage businesses to reignite their cost and business planning models ahead of 31 December 2020 to ensure they account for an additional savings as a result of the introduction of the UKGT.

If you have any queries or would like further information regarding the above, please contact Lucy Sutcliffe, National Customs Duty Director.


The information in this blog should not be regarded as financial advice. This is based on our understanding on 19 May 2020. Laws and tax rules may change in the future.

Coronavirus Job Retention Scheme extended until October

May 12, 2020

Today, 12 May, the Chancellor announced that the Government’s Coronavirus Job Retention Scheme (CJRS) will remain open until the end of October.

The scheme will continue in its current form until the end of July, with changes to allow for more flexibility from August. The Government will be releasing further details on these changes at the end of May.

We have summarised key points from today’s announcement below:

  • So far, the Coronavirus Job Retention Scheme has enabled 7.5 million roles to be furloughed, which may otherwise have been lost.
  • The scheme is to be extended until the end of October 2020 and in total, will be 8 months of support given by Government to all sectors and regions across the UK.
  • The Chancellor has promised those currently furloughed that they will continue to receive the current 80% of salary, capped at £2,500 per month until the end of October 2020.
  • Although the amount received by employees remains unchanged, it has been announced that from August, employers will not be able to claim the full 80%. The employer will be required to fund an element of the 80% salary payment to their staff with full details on how the cost of salary payments will be shared, to be detailed in May.
  • From August to October employers will be able to bring currently furloughed employees back to work on a part-time basis. The new initiative is intended to help boost the economy, whilst ensuring that there will be no reduction in financial support for those employees who are brought back to work.
  • Employers will be required to fund a percentage of the salary of their furloughed staff who go back to work part-time, and this payment will substitute the contribution the Government is currently funding. Comprehensive guidance will be released to provide clarification on this complex area.

We will publish more information as soon as we have it. In the meantime, if you have any questions about the scheme, please get in touch with your usual Campbell Dallas contact.

Please also refer to our COVID-19 information hub, which is regularly updated with the latest news, insight and details of the economic support and measures as they are announced by Scottish and UK Governments.

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The information in this blog should not be regarded as financial advice. This is based on our understanding on 12 May 2020. Laws and tax rules may change in the future.

Planning for and managing ‘sticky’ cashflow

May 12, 2020

As Scotland gets set for another three weeks of lockdown what practical measures can businesses take to protect cashflow and ensure they can progress to the recovery stage – whenever that comes? Reviewing and putting in place a flexible business plan is an essential first step to ensure the business can tackle the ‘new normal’.  ‘New normal’ will be a diminished version of normal business with extra challenging variables.

Key areas to consider:

  • Customer demand – as distancing measures start to ease – retail and hospitality businesses may see much reduced demand whilst manufacturers may see demand soar. Forecasting demand will be the subject of another blog.
  • Supply chain – speak to your suppliers to work out the operational impacts
  • Staff welfare – how easily can your business adapt to distancing in the workplace?

Forensic “order to cash” cycle

The shortest possible journey from order to cash is good business. Do a forensic review of all the processes that turn an order into cash across your business and make changes to improve efficiency and cash retention.

Maximise your cash buffer

  • Apply to your bank for CBILS funding – Even if you don’t need a loan facility now, having it approved and ready to go will help you through any unforeseen tight spots.
  • Use HMRC – VAT payments until 30 June 2020 have been postponed until next year and HMRC still offers time to pay arrangements for all business taxes.
  • Maximise tax reliefs – including R&D tax credits, refunds and use of losses.
  • Changing your year end– can accelerate Corporation Tax refunds when using loss relief.
  • Claim everything else – rates reductions, postponement and grants.

Practice “supercharged” cashflow hygiene

  • Raise invoices promptly and keep your accounting records real time up to date
  • Monitor cashflow against your plan daily – use automated forecasting software that integrates with your accounting system
  • Credit control is key – again use automated software
  • Speak to your suppliers and customers so you can help smooth each other’s cashflow
  • Tighten controls around non routine and discretionary expenditure

We are learning how to adapt and revive our businesses during a pandemic – new territory for us all.  Don’t hesitate to ask for help from peers, competitors, suppliers, government and advisors.  We all need to keep supporting each other.

If you have any questions or would like to discuss the impact of coronavirus on your business, please get in touch with your usual Campbell Dallas contact.

The information in this blog should not be regarded as financial advice. This is based on our understanding on 12 May 2020. Laws and tax rules may change in the future.

Personal Protective Equipment (PPE) – Relief from import duties

May 12, 2020

If you are a business which currently imports Personal Protective Equipment (PPE) or if you are considering importing these goods, the recent announcements concerning import duties will come as welcome news.

For businesses which import PPE for specific organisations or sectors

HMRC has introduced import duty relief for PPE including medical supplies, equipment and protective garments used to tackle COVID-19.  This relief applies to customs duty and import VAT and can be claimed on goods imported into the UK providing the following conditions are met.

  • The relief applies to imports of PPE set out in the COVID-19 Commodity Code list:
  • The relief applies to imports into the UK between 30 January 2020 and 31 July 2020.
  • The goods must be imported by or on behalf of an organisation based in the UK who are:
  • State organisations, including state bodies, public bodies and other bodies governed by public law.
  • Other charitable or philanthropic organisations approved by the competent authorities.

If you import goods on behalf of one of the approved organisations or sectors, you should obtain prior approval from HMRC to claim this relief.

If you have imported goods from 30 January 2020 onwards and did not claim relief at the time, you may be eligible to recover any import duties retrospectively.

For businesses importing PPE from 1 May 2020

HMRC has advised that a temporary zero rate of import VAT will apply to qualifying PPE imported into the UK between the period 1 May 2020 to 31 July 2020, irrespective of the end user of the goods.   Qualifying PPE has been defined as equipment which is recommended for use by Public Health England in the guidance dated 24 April 2020 – ‘COVID-19 Personal Protective Equipment (PPE)’.

Please note: This is to align with the announcement that the domestic VAT rate for the onward supply of PPE in the UK will also be zero rated between 1 May and 31 July 2020.

If you would like any advice about how to apply these provisions or you would like assistance with a  retrospective claim for relief, please contact Lucy Sutcliffe, National Customs Duty Director.


The information in this blog should not be regarded as financial advice. This is based on our understanding on 12 May 2020. Laws and tax rules may change in the future.

Good governance guidance for public sector organisations during COVID-19

May 11, 2020

Good governance is more important than ever, but this involves adapting to best fit the circumstances (internal, local and national). COVID-19 is the biggest single disruption to our society since World War II.  We are aware of changes across the Scottish public sector of “governance-light”, “interim/emergency governance” and various suspensions of board and committee meetings. There is no definitive answer as to the proper response, but decisions made now will have shorter and longer term consequences.

Most organisations are facing unprecedented challenges, whether through user demand (e.g. first-line responders such as the NHS, councils and police services), through uncertainty of dealing with evolving central government direction and guidance, through impact on funding and ability to keep operations ticking over as sustainably as possible under some level of interruption. From a governance perspective, being clear and having key stakeholders fully focused on what your objectives are is crucial.  It should be from this perspective that any modified governance arrangements are developed.

We have set out below some key questions, to support you in effective yet optimised governance.  These can be used as prompt points for your organisation, to promote thinking, discussion and response.

  • To what extent do you need to revise your strategy and objectives in light of COVID-19?
  • Do your revised governance arrangements support your refined strategy? Broadly, the latter should lead the former (and not the other way about, as can be the case in practice), except in areas such as compliance and organisational probity.
  • Does it optimise between oversight and challenge to keep NEDs reasonably sighted, yet allow the organisation to deal with the direct and immediate implications of the current crisis?
  • Is it clear how the internal and external communication plan is to be deployed, to ensure clarity, consistency and confidence in messaging?
  • To what extent have you considered revising your scheme of delegation, to empower quick and responsive decision making at the appropriate level? This may mean investing more power in a specific taskforce, in executives, and in middle management. This may go against your culture or mean accepting quicker but less well-informed decision making.
  • If delegating more decision making, how is the Board being kept informed of activities?
  • Are you making use of the cumulative expertise across your professional networks (e.g. speaking with similar bodies across your sector, including fellow Chairs, Executives and Board Secretaries)? Does this cover both effective governance processes and help inform your strategic response to the challenge?
  • How are your revised arrangements balanced between immediate challenges and the longer-term implications (including future implications of decisions being taken now)? For example, too long a “suspension” of governance meetings and processes could result in issues for the medium and longer term.
  • How have any revised governance arrangements been developed, consulted upon, and communicated to all internal stakeholders? How has any feedback been demonstrably evaluated?
  • Have external stakeholders been appropriately consulted; Scottish Government/Sponsor Body, auditors, regulators, other key stakeholders?
  • Are you open to and able to flex your interim arrangements, as things develop and either the internal or external context you are operating in changes?
  • If your normal arrangements result in relatively long lead times for board and committee papers (e.g. one or two weeks), how reasonable is this when the timeliness of information is critical for the best scrutiny and decision making?
  • What have you learned about your business continuity and disaster response arrangements? Are you taking steps to deal with immediate implications of this and noting improvement opportunities to pursue later?
  • To what extent do your revised arrangements comply with the basic principles of good governance, and if not can you reasonably explain any deviations?

As the situation continues to develop, the likes of the Good Governance Institute may well be a useful bookmark to add to your browser.

Finally, remember that your Campbell Dallas advisors are always here to offer support to clients and never more so than now.  Please get in touch with your usual engagement lead or manager to discuss any issues you are facing, whether ad-hoc advice is required, a sounding board, or a more formal partnership on any challenges to help inform your evolving arrangements.

We look forward to helping you work through your specific circumstances and tailor any advice to suit your unique context. As in all our work, we want to support effective decision making and best possible delivery of your outcomes.

The information in this blog should not be regarded as financial advice. This is based on our understanding on 11 May 2020. Laws and tax rules may change in the future.

New loan fund for SME housebuilders announced by Scottish Government for loans up to £1million

May 8, 2020

Small and medium-sized housebuilders experiencing cashflow issues as a result of the coronavirus outbreak and the temporary closure of building sites will be able to apply from a new £100m loan fund for short-term loans of between £50,000 to £1 million. Interest rates are set at 2% and it is expected that loans will be repaid within two years.

The targeted emergency loan fund was announced by the Scottish Government on 7 May and aims to:

  • safeguard jobs and protect suppliers
  • support post-COVID-19 economic recovery and the continued supply of homes
  • retain diversity of the housebuilding sector

Eligibility

You can apply for this loan if you meet the following criteria:

  • you are an SME housebuilder operating within Scotland
  • your yearly turnover is £45 million or less
  • you build five or more homes per annum

The fund is complementary to other loans available, but businesses will need to explain why existing support mechanisms open to them are not sufficient to see them through the crisis.

The application process opens at 14:00 on Monday 18 May and will be available here.

You can also check what other support you and your business will be eligible for here.

If you have any questions or would like to discuss the impact of coronavirus on your business, please get in touch with your usual Campbell Dallas contact.

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The information in this blog should not be regarded as financial advice. This is based on our understanding in May 2020. Laws and tax rules may change in the future.

HMRC Self-Employed Income Support Scheme – how to claim

May 6, 2020

HMRC have now issued further guidance on how to access the self-employed grant, which has been introduced as a result of COVID-19.

A reminder of eligibility
You will be eligible to claim the grant if you are self-employed or a member of a partnership and:

  • you carry on a trade which has been adversely affected by coronavirus
  • you traded in the tax year 2018 to 2019 and submitted your Self Assessment tax return on or before 23 April 2020 for that year
  • you traded in the tax year 2019 to 2020
  • you intend to continue to trade in the tax year 2020 to 2021

HMRC will firstly look at the profits shown on the submitted 2018/19 tax return to determine whether an individual is eligible. To be eligible, profits must be under £50,000 and must represent at least half of the individual’s taxable income.

Check if you are eligible
You or your tax adviser can check whether you are eligible for the grant by going to the HMRC online eligibility tool found here.

You will need to enter your unique taxpayer reference (UTR) which is your 10 digit reference used to file your self-assessment tax returns, and your National Insurance number. If you are eligible to claim the grant, you will receive the following message:

You will be able to claim from 8am on [22] May 2020. To get ready, you need to add your contact details. We will use these to tell you when to claim and what you need to do beforehand”.

[Please note that the date of eligibility will vary from claimant to claimant.]

In order to undertake this next step you will need to have a Government Gateway account to allow you to sign in and add your contact details. If you do not already have a Government Gateway account, you can create one very easily. The steps are:

  • Go to https://www.gov.uk/log-in-register-hmrc-online-services
  • Click the Green “Sign In” button
  • Click “Create sign in details”
  • Enter your email address where asked
  • You will now be sent a confirmation code to this email address in order to confirm the email. Once confirmed you can start to enter personal details to establish your Government Gateway account.
  • You will be issued with a user ID for your Government Gateway account which will be used going forward

Your tax agent is not going to be able to make the claim on your behalf, so it is vital that all of the mechanics are in place to enable you to submit the claim as soon as it is open to you. Once you have submitted the claim you will be told straightaway if the grant is approved. HMRC will pay the grant into your bank account within 6 working days. The grant will be 80% of your average monthly trading profits paid out in a single instalment covering three months and capped at £7,500. This sum will be subject to tax and National Insurance in your 2020/21 tax return. You should therefore keep copies of all records pertaining to the grant.

If you are unable to claim online, an alternative method will be available. HMRC has confirmed they will issue details of this alternative claim route in due course.

Scottish Government help for newly self employed
If you are not eligible for the self-employed grant because you have not yet submitted a tax return, but have been self-employed since April 2019 you can still access an additional grant from the Scottish Government, click here to find out more information and check if you are eligible.

If you would like to discuss the support available, or have any other queries, please get in touch with your usual Campbell Dallas contact.

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The information in this blog should not be regarded as financial advice. This is based on our understanding in May 2020. Laws and tax rules may change in the future.

Funding Circle added to list of accredited CBILS lenders

May 5, 2020

Funding Circle, a peer-to-peer lending platform, has announced its addition to the British Business Bank’s list of accredited lenders giving businesses another route to access the Coronavirus Business Interruption Loan Scheme (CBILS).

Funding Circle’s application process is an online, automated process with an ‘instant decision lending platform’.  There are large volumes of applications for the scheme taking time to process through other lenders and this alternative lending option could offer a quicker decision turnaround for some businesses.

The minimum loan offered by Funding Circle is now £50,000, increased from £10,000, due to other government schemes providing helpful support for businesses requiring less than £50,000.

The key features of and criteria for CBILS through Funding Circle are listed below:

  • Available to all UK businesses with a turnover less than £45m per annum
  • 3 years trading history
  • Over 50% of turnover from trading activity (i.e. not from investments)
  • No repayments for first 12 months
  • Businesses pay no fees and no interest for the first 12 months
  • All loans will have an APR   < 9.0%
  • Loans between £50k and £250k over 2 to 5 years
  • No Personal Guarantees
  • Loans primarily for trading in the UK
  • Purpose for working capital and for expansion to fund growth
  • 80% government guarantee but borrower is 100% responsible for the loan
  • No forecasts are required – last 2 years accounts and last 6 months bank statements are required documents
  • User friendly documentation process including Docusign

We have helped many clients with applications for financial support with some funding already received. If you require information on financial support available or need help to apply please contact your usual advisor.

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The information in this blog should not be regarded as financial advice. This is based on our understanding in May 2020. Laws and tax rules may change in the future.

Changes to the reporting of disposals of residential property for UK residents

April 30, 2020

From 6 April 2020 changes to the way UK resident individuals, trustees and personal representatives report the disposal of UK only residential property came into effect. The changes will mainly affect those disposing of a second home, a rental property, or properties that have not been occupied as a main residence throughout the period of ownership.

Previously any UK resident individual, trustee or personal representative disposing of residential property was required to declare the disposal on a Self-Assessment Tax Return within nine months following the end of the year in which the property is disposed of.

Any Capital Gains Tax (CGT) due would also be payable by 31 January following the end of the year in which the disposal took place.

Those not within the Self-Assessment system could report and pay CGT using the ‘Real Time’ CGT service but must have done so by 31 December following the end of the tax year in which the disposal takes place.

The new rule
From 6 April 2020, in a move to bring UK residents in line with non-UK residents (and to collect tax much sooner), the disposal of residential property will need to be reported to HM Revenue and Customs within 30 days of sale. Gains realised on the disposal of property that has been both residential and non-residential are to be apportioned. For the purpose of the start of the 30-day window, the date of sale is the date of completion and not the exchange of contracts, which is usually used for CGT purposes and will remain the date of sale for CGT calculation purposes. The payment of any CGT due will also need to be made within the 30-day window.

When does the rule not always apply?
This new rule does not apply in all cases. Those whose capital gain is fully covered by Principal Private Residence Relief, brought forward losses or those that have been realised prior to this disposal, their annual exemption or where a nil gain/nil loss arises, will not need to file a Return within 30 days and should report the disposal in the normal way via self-assessment where applicable.

Where a sale of a main residence which is only covered by partial relief e.g. the owner has had periods of absences, will need careful consideration to ensure the 30-day deadline is not missed.

Failure to file the Return within the 30 days will result in a late filing penalty of £100 being charged. Where a Return is still outstanding at 6 and 12 months, penalties of £300 or 5% of the tax due, if greater, will also be charged. Any late payment of the CGT due will incur interest charges. A penalty equal to 5% of the tax outstanding will be charged if the liability is not settled within 30 days of 31 January following the end of the tax year of disposal.

Additional 5% penalties will arise if the tax remains outstanding after a further 5 and 11 months respectively.

Losses available and CGT exemption
When calculating the CGT payable (for residential property gains the rate is normally 18% or 28% or a combination of both), losses available at the date of disposal and the annual CGT exemption can be used alongside a ‘reasonable estimate’ of the individual’s income for the tax year concerned. This is due to the fact that a disposal Return may have to be filed before the end of the tax year.

The estimated tax due will be regarded as a ‘payment on account’ until the actual amount can be calculated and reported to HMRC via the Self-Assessment Return. Any tax overpaid can only be reclaimed once a Self-Assessment Return has been submitted.

Therefore, if you are now planning on selling a residential property, careful consideration beforehand may be required to ensure that all relevant information can be gathered, CGT calculations, and the required Return(s) prepared to allow for the submission of the Return(s), and the payment of tax due, within the 30-day window.

Full withdrawal of higher rate interest relief on residential let properties
Landlords have come under (tax) fire in recent years, and the restriction on the deductibility of interest relief for individuals has been phased out over a number of years, with only 25% of allowable costs being fully deductible in 2019/20. From April 2020, the availability of higher rate tax relief on loan interest paid to finance rental properties is fully withdrawn, meaning all individuals will only get 20% tax relief on these sums paid. Similar restrictions do not apply to company landlords.

Those who are currently basic rate taxpayers could be forgiven for thinking this will have no effect on them as the rate of relief will not change. However, the way in which interest costs are now relieved has changed for everyone and could have unforeseen knock-on effects.

Currently, interest relief is given as a credit against calculated tax liability, rather than as a deduction from income. By way of example, using 19/20 tax rates and assuming no gift aid or pension payments, someone with a salary of £37,000 plus rental income of £15,000, and £8,000 allowable interest would previously have had taxable net income of £44,000 (salary plus rental income less interest). Now, the same situation gives taxable income of £52,000 (salary plus rental income), which would push the taxpayer into paying tax at 40%, although there would be a tax credit of £8,000 at 20% deducted from the tax bill. In this example, the taxpayer ends up paying £400 more tax than before. This can have a similar knock-on effect for capital gains tax rates.

Another area that could be affected is the personal savings allowance; basic rate taxpayers are entitled to receive £1,000 of interest tax free, but those taxable at higher rates are capped at £500 instead. Similarly, where items are means tested, such as child benefit, the taxable income figure is used. In the example above, the taxpayer in receipt of child benefit would now have a High-Income Child Benefit charge that would need including on a Self-Assessment return.

What happens next?
If you would like to discuss any of the above points in further detail, please speak with your usual Campbell Dallas contact or:

Aileen Scott
Head of Tax
0141 886 6644
aileen.scott@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in April 2020. Laws and tax rules may change in the future.

Counting down the days

April 30, 2020

Opinion blog

I just heard an economist say we are emerging into a more indebted, less global and more digital world. What does it mean for private and family businesses as we plan for a reopening of the economy?

Many businesses are focused on getting through the next few weeks, looking after staff, protecting cashflow, accessing Government support and counting down the days to when they can reopen their doors.

In this series of blogs I will offer practical tips and steps that the SME business community can take to prepare and manage the transition from ‘Survival to Revival’. I would encourage you to contribute and offer your own ideas so that we can share the journey and different experiences for the wider benefit of the Scottish business community.

So, to get started, here are a few suggestions:

“Fail to plan, plan to fail”

I am still astonished by the number of skilled and experienced business owners that NEVER WRITE IT DOWN! I get that life moves at 100 miles an hour – but for the next few weeks at least everyone has time to reflect on their business model; plan their lockdown exit; write down the actions needed; put in place measures of success; review success; modify plans; and go again. Before you know it more of us might get into the good habit of recording plans and implementing them.

Preserve and build up cash reserves in your business

Government measures thus far have helped business to maintain their staff on payroll (Job Retention Scheme), defer tax bills, access grant funding and loans for smaller businesses and obtain bank funding through the CBILS scheme.  These measures have been welcome, addressing the standstill period and allowing for most businesses to at least exist by the time this phase of lockdown starts to ease. I would recommend all but the most cash rich of businesses to apply for CBILS funding now. Even if you don’t think you need it immediately, you don’t want to be scrabbling for cash if/when you hit a cash crunch. Banks are very busy just now. Don’t be at the back of a long queue in a month’s time.

Do some deep dive reading

World class insight is out there that only needs you to give up your email address for a “free” subscription. McKinsey; Boston Consulting; TED talks; Harvard; I subscribe to 3 or 4 thought leading institutions for free stuff that helps me think. 80% is irrelevant but the other 20% has some real gold in it, which could be useful if applied in relation to your business model or sector.

UK Government announces 100% state-backed loans for small and medium sized businesses 

April 28, 2020

The Chancellor announced yesterday, Monday 27 April, that a 100% Government backed loan scheme will be available for smaller businesses to access across the UK within a week.

The new Bounce Back Loan scheme will allow eligible businesses to borrow from £2,000 up to £50,000, and will be interest free for the first 12 months with no repayments due within this first 1 year period for a loan term of up to 6 years.

The scheme, which opens for applications on Monday 4 May, is designed to help smaller businesses which are having difficulties accessing others options available, such as the Coronavirus Business Interruption Loan Scheme, and give small businesses a much needed cash injection.

The Government will be working with lenders to ensure loans are delivered as quickly as possible through a network of accredited lenders, with a low standardised level of interest being agreed for the remainder of the loan period after year 1.

Eligibility

You can apply for this loan if your business:

  • is based in the UK
  • has been negatively affected by coronavirus
  • was not an ‘undertaking in difficulty’ on 31 December 2019

Businesses cannot apply if they are already claiming and have received funds under the Coronavirus Business Interruption Loan Scheme (CBILS). But they are able to transfer it into the Bounce Back Loan scheme, if preferred by arrangement with their lender until 4 November 2020.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 28 April 2020. Laws and tax rules may change in the future.

Distressed SMEs and newly self-employed given lifeline by Scottish Government

April 22, 2020

As mentioned in our article last week, the Scottish Government has announced a further £100 million in grants is being made available for newly self-employed, micro and SME businesses in distress, who are ineligible for other Scottish or UK Government schemes.

This lifeline support was confirmed late on Tuesday 21st April along with further details below of how it will be broken down:

  • £34 million Newly Self-Employed Hardship Fund, managed by Local Authorities, will be allocated to the newly self-employed facing hardship through £2,000 grants
  • £20 million Creative, Tourism & Hospitality Enterprises Hardship Fund, managed by the Enterprise Agencies in partnership with Creative Scotland and VisitScotland for creative, tourism and hospitality companies not in receipt of business rates relief
  • £45 million Pivotal Enterprise Resilience Fund, managed by the Enterprise Agencies for vulnerable SME firms who are vital to the local or national economic foundations of Scotland

As well as this, the Scottish Government is providing £1 million to top up Creative Scotland’s Bridging Bursaries in the not-for-profit sector.

The recently self-employed, who are currently excluded from the UK’s scheme, but suffering hardship, will be able to receive £2,000 grants. For creative, tourism and hospitality companies of up to 50 employees not receiving business rates relief, there will be rapid access £3,000 hardship grants or larger grants of up to £25,000 where it can be demonstrated support is needed. The support and larger grants for pivotal SME enterprises will depend on the specific need of the enterprise and will be developed by the relevant enterprise agency with wrap around business advice and support.

The grant funding is expected to be open for applications by the end of April, and recipients will receive funds in early May.

Coronavirus Business Support Finder Tool

With a number of loans, tax reliefs and cash grants now available for business, the UK Government has now created a tool to help enable you to quickly check what support you and your business may be eligible for. We would recommend all business owners do a quick check that they have applied for all loans and grants available. Follow this link to complete the questionnaire.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 22 April 2020. Laws and tax rules may change in the future.

Furloughing and the Job Retention Scheme

April 18, 2020

Furloughing Staff

How can we help?

We will be able to provide you with a tailored Average Earnings report from our payroll software.  This will provide you with the average ‘regular’ pay for staff for the 2019-2020 tax year and the previous year’s pay period to compare the data to. This will aid you in advising the payroll team as to what ongoing payments you wish to pay any furloughed employees.

Your usual dedicated payroll contact will liaise with you to establish the parameters of what is included in your staff’s ‘regular’ pay. This will then allow us to produce the bespoke report for you.

Unfortunately, we are unable to calculate and advise this rate of pay for you as employee remuneration is a business decision and we would advise seeking advice from an Employment Law firm, as this will require contractual changes, even in the short-term.

We can provide a comprehensive list of employment law contacts in your area that can assist you if required.

What if I have not furloughed any staff yet?

ACAS have a comprehensive guide and resources on what to consider when you furlough your staff, including a template letter you can send to your employees.

There is more guidance available here.

Your employees will still pay the taxes they normally pay out of their wages. This includes pension contributions (both employer contributions and automatic contributions from the employee), unless the employee has opted out or stopped saving into their pension.

Both the Apprenticeship Levy and Student Loans should continue to be paid as usual. Grants from the Job Retention Scheme do not cover these.

You will need to inform the payroll department of the payments you wish to process each period and send your payroll data across in your usual method.

Job Retention Scheme

How can we help?

We are offering two levels of service for clients to aid their JRS claims. These are as follows:

Pro Service

The ‘Pro’ service will be an ‘all-in’ package for clients that require us to calculate the claim and process the application through the HMRC portal.

Our service will include:

  • Calculation of JRS reclaims which will be sent to you for approval and sign off
  • Administration of the reclaim process through the HMRC portal (due to be released on Monday 20th April)

Intermediate Service

The ‘Intermediate’ level service will be suitable for our clients who require assistance with their JRS claims but who wish to administer the claim process themselves.

This service will include the production of a bespoke report that will provide you with the data you need to calculate the claim figure.

If you are completing the claim yourself

Ahead of starting this process, HMRC have published a useful step by step guide for employers.

First of all, you will need to check the HMRC guidance to determine if you are eligible to claim employees’ wages through the Coronavirus. Further details can be found here.

As of 17th April, HMRC have published clear guidance on how to work out 80% of your employee’s wages to claim through the JRS and even have a calculator available. The latest guidance can be found here.

The online service you’ll use to make the JRS claim will be available on 20 April 2020. You cannot make a claim prior to this.

If you have furloughed over 100 employees in one claim period, you will be able to upload a file to the JRS online portal, if less than 100 then this will be a manual inputting task as we understand it.

In addition to official HMRC guidance, there is a wealth of resources on the ACAS website including recorded and live webinars for employers, as well as also operating a Q&A on Twitter every Friday at 10.30am.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 18 April 2020. Laws and tax rules may change in the future.

Further update: Job Retention Scheme

April 17, 2020

The Chancellor has made a Treasury Direction under Section 71 and 76 of the Coronavirus Act 2020. Further supporting guidance and detail has been published by HMRC on the Job Retention Scheme (JRS) in accordance with this, and we summarise below the key points, providing clarification on many aspects and the various practicalities of the scheme, and answering some crucial questions employers have raised on the imminent availability of the platform.

Who can claim?
  • Crucially, the Government has announced a change to the reference date of employees who must have been on a payroll to 19 March 2020, the day before JRS was first announced.
  • It has been clarified that a Real Time Information (RTI) submission must have been made to HMRC notifying of a payment to an employee on or before 19 March 2020.
  • This benefits those employees who are on weekly or fortnightly payrolls who were employed after 28 February but before JRS was announced, on the proviso that they would have been notified to HMRC on an RTI submission on or before 19 March 2020.
  • Unfortunately, a monthly paid employee who was employed from, say 2 March 2020, would not qualify for the JRS as they would not have been notified to HMRC on an RTI submission by 19 March 2020.
  • Employees are to be furloughed for a minimum of three weeks, or 21 calendar days. However, rotating of furloughed employees within a business is allowed.
Employees made redundant or left after 28 February 2020
  • We have clarification that employees who were made redundant or who stopped working for an employer after 28 February 2020 but re-hired can still qualify even if reinstated after 19 March 2020. For these employees, the reference date that they must have been on the payroll remains as 28 February 2020.
Employees who are TUPE’d
  • Where a business is transferred to a new owner and the employees are TUPE’d they would still qualify for the JRS even if this transfer occurred after 19 March 2020. This is on the assumption that they would have been on the previous employer’s payroll on 28 February 2020.
How much to claim
  • An employer can claim 80% of an employee’s regular gross PAYE earnings (or reference pay), capped at a maximum of £2,500. In addition, the employer’s Class 1 NIC and the minimum 3% employers automatic enrolment pension contributions on the subsidised furlough pay can be claimed.
  • The reference pay to base the claim on is as per the last pay period prior to 19 March 2020. For monthly paid employees, this will be February 2020.
  • For employees who receive varied amounts, employers are to claim the higher of the following:
    • The same pay period’s earnings from the previous year, or
    • An average of the earnings for the 2019/2020 tax yearWhere such employees have been employed for less than a year, earnings are to be averaged for the period since they started until they were furloughed.
  • Regular earnings are any regular payments an employer is obliged to pay their employees. This includes wages, regular overtime, compulsory commission, etc. Any discretionary payments such as bonuses or tips are to be excluded.
  • Benefits in kind and any elements that are provided via salary sacrifice schemes are to be excluded, and all the furlough pay must be in the form of money. It is recommended that any contractual benefits or salary sacrifice arrangements are reviewed when placing an employee on furlough.
Public sector organisations
  • It is expected that most public sector organisations will not use the scheme as it is expected that they will be continuing to receive public funding. This also applies to other organisations who receive public funding.
  • There may be cases where organisations are not primarily funded by the Government and whose services cannot be used in the response to coronavirus, so the JRS may be appropriate for employees here. We can provide more information on this aspect.
Administrators
  • Administrators are able to use the JRS where they have taken over the management of a business. It is, however, expected that that the employees being furloughed have a reasonable possibility of being re-hired by a new buyer of the business.
The claim and availability of the JRS portal
  • The HMRC portal whereby employers can submit their JRS claims is scheduled to be available on 20 April 2020.
  • There will be a dedicated HMRC helpline for those with questions on using the portal, we are yet to receive a note of this phone number. However, it is intended that the claim process will be structured such that HMRC is not expecting to be inundated with calls.
  • Claims can be made up to 14 days before a payroll is run.
  • HMRC are intending that funds should reach employers’ bank accounts between 4 and 6 working days of the receipt of a claim.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 17 April 2020. Laws and tax rules may change in the future.

Further financial support announced by the Scottish Government

April 15, 2020

To help businesses deal with the ongoing impact of coronavirus, the Scottish Government has announced around £220 million of additional grants are being made available.

The second phase of funding includes £120 million to extend the Small Business Grant scheme. With a 100% grant already available on first properties, small business rate payers will now be eligible to a 75% grant on any additional properties.

A further £100 million is being made available for newly self-employed and micro and SME businesses who are ineligible for other Scottish Government or UK Government schemes. The fund will be channelled through local authorities and enterprise agencies.

Applications for the £100 million fund will be open by the end of the month, and the new arrangements for the Small Business Grant will be in place to receive applications on 5 May.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 15 April 2020. Laws and tax rules may change in the future.

Company Car Benefit in Kind during Coronavirus

April 9, 2020

With many company car drivers now working from home or being furloughed, what happens to their company car benefit?

HMRC had remained silent on the provision of benefits such as company cars. By means of a refresher, current rules provide that:

  • A company car is taxed based on its availability for private use, irrespective of whether it is actually used privately.
  • Any reduction in the benefit in kind (BIK) value for periods of unavailability can only be applied when the period of unavailability is at least 30 consecutive days, preceded and followed by taxable periods.
How do these existing rules apply to the current situation?

We are all living under significant restrictions which limit our ability to travel as we once did. However, a company car is still available for private use even where there are such restrictions in place. The car is still available for a trip to a supermarket, to attend a medical appointment or collect a prescription even if it is not so used. As such a benefit in kind for the provision of a company car still exists.

What can be done to prevent a BIK arising when a car is not being used?

For a company car to be considered unavailable it must be physically be located somewhere not directly associated with the employee and out of reach of the employee to use. With the current restrictions on unnecessary travel and with many workplaces being closed, it may not be possible to physically return the car either to the employer’s premises or a designated storage depot.

In these current extraordinary circumstances HMRC have now confirmed that returning the car keys to the employer will be sufficient to demonstrate the car is unavailable. This is a helpful and sensible easement. Our recommendation is that this be documented in writing; a written declaration signed by both parties confirming that the car has been withdrawn and has therefore become unavailable for private use during this period.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 09 April 2020. Laws and tax rules may change in the future.

Further update: Coronavirus Job Retention Scheme

April 9, 2020

Further to our insight issued on 30 March 2020 on the introduction to the Job Retention Scheme (JRS), HMRC has now published additional guidance covering some further aspects.

Summarised below are the key points, providing clarification on the types of workers the JRS can apply to and some various practicalities, in response to some question’s employers have raised. Further details are emerging daily and we will continue to publish appropriate further updates going forward.

Apprentices and national minimum wage
  • Employers are able to furlough apprentices, and they can continue their training whilst on furlough. Our understanding is that this is a reference to their ongoing formal training programme.
  • The apprenticeship national minimum wage/living wage must still be paid to apprentices for any time they spend training. So, if furloughed and claiming 80% of the apprentice’s wage through the JRS, the employer must top-up their wage to the appropriate minimum wage.
Tips, overtime, benefits, etc.
  • Employers can claim for any regular payments they are obliged to contractually make to their employees such as wages and compulsory commission. This is a helpful addition and will cover employees on a low basic wage where their contract provides they will receive a commission on, for example, a sale.
  • Past overtime is also included, however it is not entirely clear how this will in practice be included in the calculation. This should become clearer when the portal is released.
  • Discretionary bonuses, non-contractual commission, tips and non-cash payments cannot be included.
  • Non-monetary benefits, including taxable benefits in kind, provided to employees, including those via salary sacrifice, cannot be included in the JRS claim. Where an employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
Salary sacrifice arrangements
  • It has now been confirmed that it is salary after any salary sacrifice arrangements which is to be used in the JRS claim and not the pre salary sacrifice reference salary. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should not be included in the reference salary.
  • HMRC have confirmed that Covid-19 may be treated as a ‘life event’ to allow adjustments to contractual arrangements going forward. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a so-called life event.
Cars – a welcome clarification
  • Whilst not part of the JRS, there has been some discussion over when a company car is deemed to be ‘available’ for private use during this coronavirus lockdown period. The car benefits legislation provides that, where a car is kept on an employee’s driveway, even if it is not used, it is still considered available for private use, and that a car benefit is therefore in point. We understand that HMRC have advised that, where the car keys are handed back to the employer, then this will deem the car unavailable to the employee for benefit-in-kind purposes. This is a helpful short-term easement.
Employees made redundant or who resigned after 28 February 2020
  • Employees who were made redundant or resigned after 28 February 2020 can, with agreement from their employer, be reinstated and furloughed if they were on the payroll at 28 February 2020.
Employees furloughed part way through pay period
  • Claims must be pro-rated for employees who are furloughed part way through a pay period.
Statutory parental leave
  • If your employee is on maternity leave, adoption leave, paternity leave or shared parental leave the normal rules for maternity and other forms of parental leave and pay apply.
  • You can claim through the scheme for enhanced (earnings related) contractual pay for employees who qualify for either:
    • Maternity pay
    • Adoption pay
    • Paternity pay
    • Ahared parental pay
Employees with caring responsibilities
  • It is now clear that employees who are not able to work due to having caring responsibilities resulting from the coronavirus situation, are able to be furloughed.
TUPE
  • Where a business changes owners, the Transfer of Undertakings (Protection of Employment) regulations (TUPE) protects its employees.
  • Our current information is indicating that where employees were TUPE’d before 28 February 2020, they are able to be furloughed by the new employer, assuming they are on the new employer’s PAYE scheme as at 28 February 2020.
  • Further, it appears that employees TUPE’d on or after 28 February 2020 will also be eligible to be furloughed on the understanding they were on the prior employer’s PAYE scheme as at that date.
  • We are awaiting specific guidance and confirmation from HMRC on these points and in the meantime extreme caution must be exercised in this area.
Company directors
  • As office holders, company directors are able to be furloughed based only on PAYE earnings. Amounts normally paid as dividends cannot be included.
  • This is with the proviso that during their furlough period, they may only perform such statutory obligations that enable the business to continue running but must not carry out duties that would generate revenue. We would expect that duties such as running the payroll where the payroll manager has been furloughed would not prevent the director from being furloughed.
  • This also applies to salaried individuals who are directors of their own personal service company (PSC).
Salaried members of LLPs
  • Members of Limited Liability Partnerships who are designated as employees for tax purposes (‘salaried members’) are eligible to be furloughed and receive support through this scheme.
  • To furlough a member, the terms of the LLP agreement may need to be varied by a formal decision of the LLP, for example to reflect the fact that the member will perform no work in the LLP for the period of furlough, and the effect of this on their remuneration from the LLP.
  • For an LLP member who is treated as being employed by the LLP the reference salary for JRS purposes will be the member’s profit allocation, excluding any amounts which are determined by the member’s performance, or the overall performance of the LLP.
  • The terms of the LLP agreement will therefore need to be varied to reflect the change in their remuneration and that no duties are to be performed during the furlough period.
Fixed term contracts
  • Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period. However, where a contract is not renewed or extended, you can no longer claim under the JRS for them.
Contingent, Limb (b), agency workers, etc.
  • Workers who receive earnings via PAYE are able to be furloughed, whether they are paid via an agency, umbrella company, etc.
  • Where Limb (b) Workers are paid through PAYE, they can be furloughed and receive support through this scheme. Business must be encouraged take specific advice from an employment lawyer on the precise nature of the workers they engage. As tax specialists and business advisers we are not authorised to provide this advice.
  • Workers who are paid gross may instead be eligible for the Self-Employed Income Support Scheme (SEISS).
Contingent workers in the public sector
  • The Cabinet Office has issued guidance on how payments to suppliers of contingent workers impacted by COVID-19 should be dealt with where the party receiving the contingent worker’s services is a Central Government Department, an Executive Agency of a Central Government Department or a Non-Departmental Public Body. We can provide further support in this area as required.
Direct earnings attachment (DEA)
  • Any overpayment of benefits can be recovered by the Department of Work and Pensions (DWP) by them issuing DEAs to employers for deductions to be made from employees’ salaries.
  • Due to the coronavirus situation, DWP will be issuing letters to employers stating that recoveries via DEAs are to be temporarily stopped. No deductions should be taken from employees’ pay for April, May or June 2020.

If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 09 April 2020. Laws and tax rules may change in the future.

Customs Special Procedures – Potential Changes from 1 January 2021

April 9, 2020

If you are a business which currently use Customs Special Procedures or you are exploring the possibility and benefits of using these procedures, please read on…

The use of customs special procedures currently allows approved businesses to import goods from non-EU countries and suspend, or relieve, some or all of the associated UK import duties. HMRC recently announced an update regarding how potential changes may affect customs special procedure (CSP) authorisations in the UK from 1 January 2021.

The customs special procedures currently most widely used by businesses include:

  • Inward Processing
  • Outward Processing
  • Temporary Admission
  • Authorised Use (also referred to as End Use)
  • Customs Warehousing.

From 1 January 2021, CSP holders will be able to use their existing authorisations for goods imported from EU countries, as well as goods they already import from non-EU countries. This change would extend the scope of the import reliefs available for many UK businesses.

In order to incorporate EU movements, businesses will need to request an amendment to their authorisation if there are any changes to:

  • The range of commodity codes
  • Quantities
  • Values
  • Any details which may impact the specific terms of the authorisation.

For businesses authorised to place goods into a CSP, including moving those goods into the EU, this authorisation will still be valid but in the UK only. Unfortunately, the EU has indicated that a customs procedure such as customs warehousing, issued by the UK, will not be valid in the EU from 1 January 2021. Any businesses named on authorisations issued by an EU customs authority to place goods into a CSP in the UK, will not be able to receive goods in the UK under this authorisation from 1 January 2021. A separate authorisation from HMRC will be required.

A guarantee is currently required by HMRC to support some CSP authorisations. From 1 January 2021, in most cases (there are exceptions) guarantees will not be required as a prerequisite to obtaining an authorisation. HMRC have indicated that they will give 12 months’ notice before reintroducing the requirement for guarantees.

As businesses take steps to prepare for the end of the Brexit transition period, some of the potential CSP changes will assist to ease the adjustment from intra-EU trade to international trade.

Please note: Final arrangements for 1 January 2021 have yet to be confirmed and this update may be subject to change by HMRC.

If you would like more information about customs special procedures including the benefits of using them, please contact Lucy Sutcliffe, National Customs Duty Director.


The information in this blog should not be regarded as financial advice. This is based on our understanding on 9 April 2020. Laws and tax rules may change in the future.

Coronavirus Job Retention Scheme

March 30, 2020

The Government has now published further information about the operation of the Job Retention Scheme (JRS). Whilst further information will no doubt be forthcoming over the following days this helpfully goes some way to providing the detail which was awaited following the Chancellor’s headline announcement last week. It also provides clarity in some of the key areas where there was uncertainty over how the JRS would operate.

The key announcements may be summarised as follows:

  • The scheme will be open to all UK employers for at least three months starting from 1 March 2020. It is intended to be up and running by the end of April to support employers whose operations have been severely impacted by COVID-19.
  • Employers will be able to use a portal to claim for 80% of furloughed employees usual monthly wage costs.
  • We now have confirmation of the calculation basis; up to £2,500 per month, plus the associated employer NIC and minimum automatic enrolment employer pension contributions on that wage. This is a welcome point of clarification.
  • Employers can use this scheme anytime during this three-month period.

Eligibility

  • The scheme is open to any UK employer that had a PAYE scheme operational on 28 February 2020. The employer must operate a UK bank account.
  • Where a business is taken under the management of an administrator, the administrator will be able to access the JRS.

Directors

  • We are aware that the CBI were advised by the Treasury that owner managed businesses are included in the Job Retention Scheme based on their PAYE earnings but not their dividends. They are entitled to continue running their businesses in terms of performing their statutory duties as officeholders but must not be raising any revenue by performing other work, this is also included but, not in detail, in the self-employed guidance.

What is the employer able to claim?

  • The employer will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employer NIC and minimum automatic enrolment employer pensions contribution on the subsidised wage. More information is going to be published on this calculation basis before launch.
  • Fees, commission and bonuses are excluded.

What must the employer pay?

  • The employee must be paid at least the lower of 80% of their regular wage or £2,500 per month.
  • The employer may choose to top up the employee’s wage further but is not obliged to. If the employer does so the additional employer NIC and automatic enrolment contribution will not be funded through the JRS.

Some clarity around the pay reference period

  • For salaried employees the actual salary before tax as at 28 February 2020, excluding fees, commission and bonuses is to be used to calculate the 80%.
  • For employees with variable pay who have worked for the business for a full 12 months the grant claim will be the higher of the same month’s earnings from the previous year or average monthly earnings from the 2019/2020 tax year
  • For a variable pay employee who has worked for less than a year the claim is based on the average of their monthly earnings since commencement.

Which employees may a claim be made for?

  • Furloughed employees must have been on the employer’s payroll on 28 February 2020. Employees hired after 28 February cannot be included in the JRS.
  • They may be on any type of contract, including full and part-time employees, employees on agency contracts, and employees on flexible or zero hours contracts. Inclusion of this last category helpfully clarifies the position for this type of worker.
  • The scheme will also cover employees who have been made redundant since 28 February if they are re-hired. This again is a helpful easement for employers who needed to act before the JRS was introduced by the Chancellor and is welcome.

What about subsidy eligibility?

  • The employee may not work at all for or on behalf of the business when on furlough.
  • An employer does not need to place all of its employees on furlough.
  • The employee’s wages in the furlough period will remain subject to payroll income tax and NIC deductions
  • For employees on agency contracts it will only apply if they are not working. It will not apply if they are working but on reduced hours or you are paying at a reduced rate.

Notifying the employee

  • The employer should write to the furloughed employee to confirm that they have been furloughed and keep a record of the communication notice.
  • The employer will need to consider the employment law aspects of furloughing with an employment law specialist.
  • The guidance does not deal with employees returning from furlough to work and being replaced by a newly furloughed employee. This would seem to imply such use of the scheme is not intended or anticipated. Further clarification on this may be forthcoming as the scheme starts.

Particular categories of employee

  • If an employee is on unpaid leave he cannot be furloughed unless the leave period commenced after 28 February.
  • If an employee is on sick leave or self-isolating, he should get statutory sick pay. Whilst he cannot be furloughed in that period he can be after.
  • Where an employee is shielding in line with public health guidelines he can be furloughed.

Multiple employments

  • Where an individual has more than one job with more than one employer, he can be furloughed for each and the cap applies to each employer separately. The guidance does not specifically exclude this where the separate employments are with, for example, two companies in the same group.

Is there anything a furloughed employee can do?

  • Yes, he may do volunteer work or training with the proviso that he does not provide services to the employer or generate revenue for the business. These services are therefore not able to be provided to or for the employer.
  • There may however be ongoing requirements the furloughed employee must fulfil; an online training requirement for example. Where this is the case, they must be separately paid for the training time and at least at the national minimum/living wage. This is a requirement even if this is more than the 80% of their wage which will be covered by the grant.
  • Employees who are on or plan to take maternity leave may be furloughed.

What is the process for making a claim under JRS?

  • The employer will be required to calculate the amount claimed. HMRC have stated that they will have the right to retrospectively audit claims. We would expect this to be after the scheme has been closed.
  • In terms of the mechanics an employer will need to confirm PAYE reference, bank and contact details, the start and end date of the claim, the number of employees furloughed, and the amount claimed.
  • It appears therefore at this stage that the information required is fairly minimal, presumably in order not to delay the grant payment process. However, this does emphasise the need for an accurate calculation bearing in mind the possibility of a retrospective review.
  • If your employer chooses to place you on furlough, you will need to remain on furlough for a minimum of 3 weeks. However, your employer can place you on furlough more than once, and one period can follow straight after an existing furlough period, while the scheme is open. The scheme will be open for at least 3 months.
  • Once the claim has been approved the employer will be paid by BACS to be included in the employee’s gross pay.

Employees seconded to the UK

  • At present, the position around the potential furloughing of employees seconded to the UK from overseas is unclear. As the individuals will typically remain employees of their home country employer it may be the case that they are not entitled to be furloughed in the UK as their employment contract is not with the UK employer. Instead, they may be able to rely on whatever measures have been put in place in their home country to compensate for loss of earnings during the pandemic.
  • The issue should be clearer for those individuals who undertake an international transfer that includes taking up employment with the UK employer as there is a UK contract of employment in place. Employees in those circumstances should qualify for furloughing.
  • Whilst this should only impact a small number of employers, we would hope to have some clarity from HMRC around this point as and when more information is published.

If you would like to discuss how this Scheme could apply to you or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 30 March 2020. Laws and tax rules may change in the future.

The Self-Employed and Coronavirus

March 26, 2020

Some of the workers most affected by the Coronavirus are the self-employed. Many have seen their workloads disappear overnight and face an uncertain future regarding their income.

It is logistically difficult to apply the Coronavirus Job Retention Scheme to the self-employed given the nature of their work, the relative lack of regular reporting around their income and the structure around a method to pay them.

As a result, the Chancellor has announced the Self-Employed Income Support Scheme, and we explore this below.

Self-Employed Income Support Scheme

The Chancellor has announced that, like the Coronavirus Job Retention Scheme, HMRC will pay self-employed people a taxable grant worth 80% of average monthly profits over last three-years, up to a maximum £2,500 per month.

The Scheme will be open to anyone with averaged annual profits of up to £50,000 and the Chancellor stated this covers 95% of all self-employed.

Only those in self-employment with a filed tax return for 2019 will be eligible for the Scheme. The Chancellor confirmed that HMRC have set a deadline of four-weeks to file the tax return, if you previously failed to do so by the deadline of 31 January 2020, in order to qualify for the Scheme.

In addition, for those who are self-employed and have other income, they can only claim if the majority of their income is from self-employment.

The Scheme will be in place by June 2020 and HMRC will contact the self-employed directly with details of the payment to be made. In the meantime, the self-employed can continue to earn and this will not affect their ability to receive the grant under the Scheme. In June, they will receive three-months’ worth of payments.

The Chancellor stated on announcing the Scheme that the tax regime for the self-employed will be brought into line with the employed in future budgets, strongly hinting that National Insurance Contributions for the self-employed will be increased.

This does not apply to contractors, personal service companies or business owners who take their remuneration through dividends. For owner-managed companies, this will be a significant gap.

Would you like to know more?

If you would like to discuss how this Scheme could apply to you or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Campbell Dallas contact.


The information in this update should not be regarded as financial advice. This is based on our understanding on 26 March 2020. Laws and tax rules may change in the future.

COVID-19: Business Update

March 25, 2020

With the Prime Minister’s and First Minister’s latest announcements, as a business, we have been closely monitoring the situation and considering the health and well being of our colleagues and clients as our number one priority.

We have made the decision to close our offices nationally, to help our teams to look after themselves, their families and local communities, during these unprecedented times.

Whilst our offices remain closed you can be reassured we are here to help you and continue to work remotely. Please continue to use the existing email addresses and telephone numbers to contact your usual client partner or advisory team so that we can continue to provide you with the most appropriate service to help in these challenging times.

COVID-19: Accessing Coronavirus Business Interruption Loans

March 25, 2020

We know from our conversations with many of the businesses and banks we work with there is a strong need for clarity on the detail behind the many support measures that the Government has announced in response to the COVID-19 pandemic. As details develop we are sharing what we know, so far, to assist you in accessing the Coronavirus Business Interruption Loan Scheme (‘CBILS’).

We expect most banks will have their application process refined sufficiently by the time businesses apply. In the meantime, the information below should be taken as general guidance, subject to change and there may be some differentiation between banks.

CBILS is available to businesses with a turnover of less than £45million and who do not have adequate security to raise funding from alternative means.

For businesses with turnover in excess of £45million please contact your usual Campbell Dallas contact.

What information will most banks require to assess your application?

While the specific detail will vary from bank to bank we are seeing common themes from most banks. We therefore encourage those businesses wishing to access CBILS to start collating the following information (in digital form) to prepare for your bank requesting them:

•    6 months personal bank statements
•    3 years business financial statements
•    3 years personal tax returns
•    Last 4 business VAT returns
•    Details of other finance in the business, HP, leases etc.
•    A summary of measures you have already taken to mitigate the financial impact of COVID-19 such as:

  • Reducing staff hours/furloughed staff
  • Suppliers e.g. time to pay arrangements/securing supply chain/stocking up to meet demand
  • Arrangements with other creditors e.g. landlord and utilities
  • Accessing other CV-19 support such as tax time to pay, rates relief and grants, 80% wages grants
  • Injections of funds either through shareholder capital or alternative debt funding

•    Up to date Management Accounts showing the trading period prior to the crisis
•    A ‘Hibernation Cashflow’ – in other words the ‘cash burn’ over at least a 12 week period to 30 June 2020
•    Projections available under best and worst case scenarios for your business over the next 12 to 36 months
•    Details of how the COVID-19 crisis has impacted your business – examples could include reducing staff hours, redundancies, unable to get raw materials / stock, zero sales, footfall etc.

Not all of these items will be required, and the list is not exhaustive. Your bank may also require additional information, but we would recommend these items as a guide.

We have robust remote working from home facilities and can arrange video calls with you to discuss how we can support you. We also have secure facilities for you to share information with us confidentially and digitally.

Please get in touch with your usual Campbell Dallas contact to discuss your preparedness to obtain CBILS bank funding. We are on hand and ready to help you secure the funding you need to help you through this crisis.


The information in this update should not be regarded as financial advice. This is based on our understanding on 25 March 2020. Laws and tax rules may change in the future.

COVID-19: Government Grants Process in Scotland

March 24, 2020

The Scottish Government and all 32 local authorities in Scotland have published details as to how businesses can apply for help with non-domestic rates in Scotland to deal with the economic impact of COVID-19.

The Scottish Government has introduced extra rates relief and one-off grants for some businesses and these reliefs will be available to non-domestic properties from 1 April 2020 to 31 March 2021.

To apply, you’ll need to complete an application form via your local authority website with Councils aiming to make payment within 10 working days of receiving a grant application form.

Further details can be found here on the Scottish Government website, which will also provide a quick link to the appropriate page on the relevant local authority website for your business.

Additional reliefs to help with COVID-19
All non-domestic properties in Scotland will also receive a 1.6% rates relief. This relief effectively reverses the change in poundage for 2020-21.

Retail, hospitality and leisure businesses
Retail, hospitality and leisure businesses will get 100% rates relief. To get this relief, a property has to be occupied but all properties that have closed temporarily due to the Government’s COVID-19 advice will be treated as occupied.

We will continue to monitor events and announcements as they occur and should you have any concerns on how your business may be affected, please get in touch with your usual Campbell Dallas contact.

The information in this update should not be regarded as financial advice. This is based on our understanding on 24 March 2020. Laws and tax rules may change in the future.

Deferment of VAT payments

March 24, 2020

Following the Chancellor’s announcement on 19 March and the further updates the UK Government have released since, please read the important points below, regarding the support for businesses through deferring VAT and Income Tax payments:

• All VAT payments falling due from 20 March to 30 June 2020 will be deferred to the end of the 2020/21 tax year which, for these purposes, we understand HMRC consider to be 31 March 2021.
• All UK-established VAT registered entities are eligible; Non-Established Taxable Persons must still pay as normal.
• Approval is automatic with no applications or notifications required; in fact, businesses are encouraged not to call HMRC for confirmation.
• This measure also applies to any VAT Payments on Account falling due between 20 March and 31 May 2020.
• The provisions do not currently include VAT liabilities arising from previous periods although time to pay arrangements may be available through discussion with the HMRC Debt Management Team.
• VAT returns must continue to be filed by the relevant deadlines; anyone who cannot file in time should call HMRC.
• HMRC advise that direct debits should be cancelled by 31 March 2020 and reinstated later using the online form.
• VAT refunds and reclaims will be repaid by HMRC as normal. As usual, repayment returns should be filed ASAP.
• We continue to await full details and publication of the necessary enabling legislation imminently.

In practice we understand that this is available to anyone that is VAT registered, individuals, not for profit bodies and businesses.  This is an automatic offer with no applications required. It means that no VAT payment needs to be made during this period.

Taxpayers have until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. HMRC stated that VAT refunds and reclaims will be paid by the government as normal.

Anyone that is having difficulty paying an earlier VAT liability should contact HMRC and agree an additional Time To Pay arrangement with HMRC.

This is some positive advice in a challenging time for all businesses.

If you have any questions, please contact your usual Campbell Dallas advisor or a member of our VAT team.

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The information in this blog should not be regarded as financial advice. This is based on our understanding on 24 March 2020. Laws and tax rules may change in the future.

How to stay safe when working from home

March 23, 2020

As many organisations begin to work remotely following government advice to stay home, it’s important to ensure that both you and your business stay secure. Magda de Jager, Cyber Security Manager, has pulled together some tips and resources to help you and your employees work from home safely and securely:

Have the right equipment and systems in place
It is essential that you analyse the needs of your workforce and provide them with the right equipment and systems to continue their work. This might be different depending on the job function and department. You might have a VPN set up for remote working, but can it support all of your workforce? Do you need more capacity or licenses?

Communication channels
• Clear communication is imperative where most of your workforce is out of the office. Do you have a way to communicate with them outside of work emails?

• Staff should also know how to reach the IT support desk so they can ask for help and report incidents.

• Staff should know how to report incidents, and must receive guidance on what incidents should be reported and the importance of reporting promptly.

• Continue to update your staff on potential threats such as phishing emails exploiting the COVID-19 situation.

• If your helpdesk does password resets for staff – what is your identity verification procedure?

Should you want to implement new communication tools, the National Cyber Security Centre (NCSC) has issued a security review for popular products based on their Software as a Service (SaaS) security principles: https://www.ncsc.gov.uk/collection/saas-security

Clear instructions and guidelines
It is important to remind all staff that the same process for authorisation and security still applies, even though staff might not be in the office. This is a time to remain extra vigilant.

Kids and guests
Staff should remind everyone in their household that work issued equipment must not be used for any other purpose and should only be used by the employee.

You can also view specific home working guidance from the NCSC here:
https://www.ncsc.gov.uk/guidance/home-working

Our Business Technology Consulting team have advised many businesses on how to stay safe when working from home. If you would like to discuss how to set your business up to work remotely whilst staying safe at this time please contact:

Magda de Jager
Cyber Security Manager
magda.dejager@scott-moncrieff.com
0131 473 3500

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The information in this update should not be regarded as financial advice. This is based on our understanding on 23 March 2020. Laws and tax rules may change in the future.

Customs Insight

March 23, 2020

The UK and EU customs and trade landscapes are evolving at pace with changes expected as a result of the UK’s withdrawal from the EU. These changes will place additional obligations on businesses to consider how they flex their customs operations to respond positively to the changes.

Our Customs Insight is a quarterly update which will cover some key topics, pose relevant questions and timely responses to assist businesses to move forward and build future resilience.

Click here to view our first edition.

To discuss any of the topics raised, or if you would like assistance to consider your wider customs and trade planning, please contact Lucy Sutcliffe, National Customs Duty Director.

How to manage your tax payments

March 22, 2020

As HMRC’s approach to COVID-19 continues to evolve as the crisis unfolds, we take a look at two facilities it already has in place –  ‘Time to Pay Arrangements’ and ‘Quarterly Instalment Payments’ which could help you to manage your tax payments.

Time to Pay Arrangements

A Time to Pay Arrangement is a debt repayment plan to HMRC for your outstanding taxes.  If you are considering this arrangement, we advise having the following information to hand to help HMRC make a decision:

  • Your HMRC reference number (for example, your 10-digit Unique Taxpayer Reference or VAT registration number).
  • The tax liability that you are finding difficult to pay and the reasons why.
  • What you have done to try to obtain the funds to settle the liability.
  • Your thoughts on how much you can pay immediately and how long you may need to pay the rest. Clearly, the longer the payment period, the more chance that HMRC will challenge the application.
  • HMRC may ask for evidence, such as cash flow forecasts, monthly management accounts or copies of bank statements, showing that you will be able to pay future instalments.
  • HMRC is likely to want to understand your financial position, such as your income and expenditure and your assets and liabilities.

If you have entered into a Time to Pay Arrangement with HMRC before, then it is likely that they may ask more in-depth questions. In more complex cases, they may ask for additional evidence before they make a decision.

Quarterly Instalment Payments

Companies that pay Corporation Tax by Quarterly Instalment Payments (QIPs) often base the calculation of tax payable on annual budgets or other forward-looking projections. These may have been prepared before the potential financial implications of Coronavirus were apparent. Such companies can reduce their QIPs, based upon updated expectations of profitability, without prior approval from HMRC though they should keep a brief summary of their reasons for doing so.

If ultimately Corporation Tax is underpaid, interest will be charged by HMRC at 1.75% per annum (to be reduced following the reduction in the Bank of England’s base rate) on amounts underpaid.

In such uncertain times we consider that there is little or no risk that companies will be charged a penalty if tax is underpaid. When QIPs were introduced, HMRC were clear that penalties would only apply if companies were being reckless or ignoring QIPs completely.

If companies consider they have overpaid QIPs, they can request a repayment from HMRC. This is generally paid without query within 2-3 weeks, unless there is an open enquiry. If the amount is over £150,000 additional security measures need to be complied with by HMRC before payment can be released.

Available assistance

A dedicated helpline has been set-up by HMRC to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities. Through this, businesses like yours may be able to agree a bespoke ‘Time to Pay’ arrangement.

If you are concerned about being able to pay your tax due to Coronavirus, call HMRC’s dedicated helpline on 0800 0159 559.

Please also get in touch with your usual Campbell Dallas contact if you need assistance in preparing an application to HMRC for a Time to Pay arrangement, if you think you may have overpaid corporation tax via QIPs or if you wish to discuss reducing your quarterly payments.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Direct tax ideas to help with your cash flow

March 18, 2020

In the current financial climate, cash flow is more important than ever and our tax team have identified the following ideas that could help you generate a tax refund or defer tax payments which will assist with your cashflow.

1. Research & Development – this is a valuable tax relief that can generate significant cash repayments from HMRC, if a company meets certain qualifying conditions. Companies are able to go back and refile last year’s previously submitted tax returns. If your year-end has recently finished, then you should consider accelerating the filing of your tax return to generate a potential repayment.

2. Carry Back Losses – If your company has made a corporation tax payment in the previous year, and you are now forecast to make a loss in the current period based on latest management accounts. It may be possible for the company to carry back these forecast losses to generate a tax repayment.

3. Capital Allowances – If your company has acquired a property or indeed incurred significant capital expenditure in recent years and not received advice from a specialist capital allowance adviser, it may be possible for your company to claim additional capital allowances. If this is possible, the additional allowances will be claimed in the tax computation, which could generate a corporation tax repayment.

4. Patent Box – This is a valuable relief that is available if your company owns Patents and these are incorporated in a product that you sell. The rules are complex, however, if the conditions are met the corporation tax rate applicable on the qualifying income will be 10%. In certain circumstances, this could result in a cash repayment.

5. Payment on Account reductions – both companies and individuals who are making payments on account of their current year tax liabilities should review these to consider whether they can be reduced and refunds obtains for payments already made.

6. Sheltering Capital Gains – if you have made capital gains in the current year to 5 April 2020 and have a share portfolio sitting at a loss, you may wish to realise some of the portfolio to generate a tax loss in order to shelter the tax which would otherwise be payable. Clearly, independent financial advice should be taken from you financial advisor before considering such a step. In addition complex rules surround the re-acquisition of shares by you or an associate and these need to be considered.

7. Deferring tax payments – HMRC have a dedicated helpline (0800 015 9559) for those who need to request further time to pay their upcoming tax bills. Our experience to date shows HMRC taking a positive and supportive approach.

8. Consider a change in Accounting Period – for both individuals and companies, there may be tax savings by changing your accounting period in order to take into account any losses that your business may incur over the next few months.

9. Averaging Profits – special rules apply for Farmers and those in creative works to allow profits to be averaged over a period of up to five years. If you are in these industries, you should review the application of averaging along with your tax adviser.

10. VAT –  click here to view VAT and Duty procedures that can improve cash flow

If you want to discuss your cash flow position or find out more about any of the above, please contact your usual Campbell Dallas advisor.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

VAT and Duty procedures that improve cash flow

March 18, 2020

VAT and Customs Duties affect the cash flow of most businesses. In the current financial climate, cash flow is more important than ever. We have found the following 10 VAT and Duty procedures can improve cash flow:

1. Time to Pay agreements – Subject to certain conditions you could agree an informal payment promise (or formal payment plan) with HMRC for both Indirect and Employment Taxes. HMRC has introduced a specific helpline to assist with this and we have been able to secure favourable payment arrangements for our clients.

2. Accelerate or decrease VAT repayments – VAT return periods can be changed or moved from quarterly to monthly cycles to speed up VAT repayments or delay VAT payments. It may also be time for previously un-registered businesses to voluntarily register and recover the VAT they incur on expenditure.

3. VAT accounting schemes – A number of VAT accounting schemes can be used by smaller businesses to pay less VAT or pay it later. These include the Cash Accounting, Annual Accounting and the Flat Rate Schemes.

4. VAT recovery accruals –  Where book-keeping or invoice processing results in VAT being recovered in a later VAT period accruals can be agreed to accelerate the recovery of VAT. This can apply to VAT incurred on most expenses including rent, imports and late supplier invoices. Self-billing arrangements could also be introduced to accelerate the recovery of VAT on regular costs.

5. The timing of sales invoices – While sales invoices must be issued at specific times, cash flow can be improved by issuing payment requests or demands or by raising sales invoices at the beginning of a VAT return period.  This can be a complex area and requires bespoke advice.

6. Bad Debt Relief – The VAT declared on sales invoices can be claimed back from HMRC where the invoices remain unpaid after six months. However, the opposite is also true, VAT recovered on unpaid purchase invoices should be repaid to HMRC after six months.

7. Staff expenses – Most businesses routinely under-recover the VAT they incur on staff expenses. HMRC has discretion to allow retrospective VAT reclaims, for as much as four years.

8. Import VAT and Duty – Duty Deferment and Simplified Import VAT Accounting (SIVA) procedures are two examples of measures that allow the payment of import tax to be deferred. There are a number of HMRC procedures (some as part of the BREXIT process) that can be used to defer the payment of tax and create process efficiencies/savings.

9. Sector specific VAT reclaims – Changes in VAT rules have resulted in “sector specific” opportunities for retrospective refunds (of up to four years) for overpaid VAT. This includes Hotels (cancellation charges/room hire charges), Property renovations and conversations (reduced rate VAT), Financial Services (fund management charges) and Retailers (vouchers, discounts and delivery charges).

10. Recover overseas VAT – Globally nearly 170 countries have a VAT system. Some countries have reciprocal arrangements with the EU and UK and in certain circumstances VAT incurred on overseas travel, subsistence and other costs can be recovered.

Over the years we have helped clients to maximise their cashflow and obtain favourable outcomes from Indirect Taxes. In these uncertain times we are here to support and share our knowledge, so please contact our VAT team if you want to discuss your cash flow position or find out more about any of the above procedures.

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Business continuity at Campbell Dallas

March 17, 2020

As the situation surrounding COVID-19 continues to develop daily, at Campbell Dallas we are doing everything we can to ensure that we keep our people safe while continuing to deliver the high quality, personal service you are used to.

Following the latest advice from the UK Government, we have put in place measures to ensure that our business can continue to operate efficiently, should we need to close our offices in the future.

• We are ensuring that our people have the equipment, technology and systems in place to allow them to work remotely.
• Our people will be able to securely access all necessary documentation remotely whilst following our usual processes and controls.
• We receive most of our communications electronically and recommend that you continue to use email to communicate with us and that you scan in any documentation you need to share with us and attach electronically to the email. If you believe you have sent something to us in the post and we have not responded to it, please speak to your usual Campbell Dallas contact.
• As well as communications over email and the telephone, we are also able to offer meetings via video conferencing / Skype.
• If resourcing levels in any part of our business are compromised due to illness or inability to work, we will refocus our teams as necessary to deliver to deadlines. This would mean prioritisation of workloads and we would keep those affected updated, whilst making every effort to mitigate the impact should this situation arise.
• We understand some of our services (such as payroll) are vital to our clients’ businesses and we will be issuing separate guidance to clients of these services.

We also understand that the evolving COVID-19 situation will present challenges to our clients and we want to reassure you that we are with you, we are in this together and we are here to help you.

Please call or email your usual Campbell Dallas contact with any queries.

Entrepreneurs’ Relief: Budget 2020

March 12, 2020

In the Budget yesterday, Rishi Sunak, announced the lifetime limit for Entrepreneurs’ Relief (ER) would be reduced from £10m to £1m.

Although reducing the lifetime limit to £1m will affect some bigger entrepreneurs dramatically, the review was remarkably narrow in its focus, with no other qualifying criteria subject to any change. That said, the relief has already been amended in recent years with an extended 2-year holding period and additional capital entitlement conditions already in operation.

The change to ER took effect from 11 March, so if you had not completed your deal by yesterday morning it was too late. Certain clever wheezes, but not all, by which ER was crystallised before today have also been hindered by anti-avoidance measures included in the draft legislation. No changes to the newer Investors’ Relief have been announced.

Has the Chancellor achieved his aim?
The Government was compelled to make changes as ER was “expensive, ineffective and unfair” but also necessary to encourage “genuine entrepreneurs who do rely on the relief”, stimulating “risk-taking and creativity.”

Despite the Office for Budget Responsibility’s comprehensive report on the subject, Inheritance Tax (IHT) was not mentioned at all in this Budget, and there had been some discussion over whether the criteria for trading businesses to qualify for Business Relief for IHT ought to be aligned with those for ER and Capital Gains Tax (CGT). In fact, Business Relief was left unchanged, such that an ER qualifying business will likely also qualify for IHT relief at up to 100%.

If you would like to discuss these changes and how they may impact you and your business, please contact your usual Campbell Dallas advisor or:

Aileen Scott
Partner and Head of Tax
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Taxation of pension excesses for doctors

March 12, 2020

Following the Budget announcement, statements on spending pledges to fight the impact of coronavirus, freezing of duties on fuel and alcohol and business rates relief for small businesses have grabbed the headlines. However, there was some very welcome news for doctors on pension excesses and how the tax is calculated.

Currently, the maximum annual allowance limit for each individual in a tax year is £40,000 and this is tapered down to a minimum of £10,000 if income thresholds are exceeded.

The Chancellor announced that HM Treasury has reviewed the tapered annual allowance and its impact on the NHS, as well as on public service delivery more widely. He further stated that to support the delivery of public services, particularly in the NHS, the two tapered annual allowance thresholds will each be raised by £90,000. This means that from 2020-21 the ‘threshold income’ will be £200,000, so individuals with income below this level will not be affected by the tapered annual allowance, and the annual allowance will only begin to taper down for individuals who also have an ‘adjusted income’ above £240,000.

This will remove the vast majority of GPs from the potential for a tapered annual allowance limit, therefore helping to reduce potential excess charges in years of high pension input growth.

Many GPs had cut their sessional commitment in order ensure their threshold income fell below the £110,000 level to protect their full annual allowance. It will be interesting to see how many GPs that took this action revert to their previous higher levels of sessions in 2020/21 and beyond.

For those on the very highest incomes, the minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with a total income (including pension accrual) over £300,000.

There was a minor, and expected, announcement on lifetime allowance for pensions. The lifetime allowance, the maximum amount someone can accrue in a registered pension scheme in a tax-efficient manner over their lifetime, will increase in line with CPI for 2020-21, rising to £1,073,100.

If you have any queries, please contact your usual Campbell Dallas advisor or:

Neil Morrison
Partner and Head of Medical
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Budget 2020: The highlights

March 12, 2020

Download our 2019/2020 Personal Tax Year End Planning Guide here.

As Rishi Sunak got up to present his first Budget, many were watching to see how he would juggle the forces of Brexit, Coronavirus, austerity and public services, in the first Budget for a brand-new Chancellor in a brand-new Government.

Coronavirus is at the forefront of most people’s minds, and Mr. Sunak prioritised measures supporting both the NHS and UK business to ensure we would get through it together. As well as committing a £5 billion emergency response fund for the NHS, with as much as 20% of the country’s workforce predicted to be off work at any one time, measures supporting small business and those unable to work were top of the Chancellor’s list.

The Chancellor also focused on infrastructure spending, education, encouraging business development and innovation, housing and the environment.

The Budget included significant spending on public services, matched with significant additional borrowings. The key points from the Budget are below. You can also view our Spring Budget guide here.

Personal Tax
• Lifetime limit for Entrepreneurs’ Relief reduced from £10m down to £1m.
• No changes to inheritance tax.

The headline change was to decimate the amount of Entrepreneurs’ Relief available to individuals selling a business, with the lifetime limit cut from £10m to £1m. There are no corresponding changes to the more recently introduced Investor’s Relief. Coupled with the lack of changes to Inheritance Tax, this could mean more entrepreneurs end up retaining their business until death, rather than stimulating growth through a business sale.

Income limits for tapering of pension contributions increased by £90k, giving an income threshold of £200k.

The increase in income limits for tapering of pension contributions is a direct response to the concerns of doctors who were being penalised for taking on additional hours and responsibilities, limits that had been described by the IFS in April 2019 as “incoherent” and as having a “damaging effect on work incentive”. The minimum level to which the annual allowance can taper down will reduce from £10,000 to £4,000 from April 2020. This reduction will only affect individuals with total income (including pension accrual) over £300,000.

• Personal tax rates and allowances generally frozen at 2019/20 rates.
• ISA contribution limit also frozen at £20,000.
• Capital Gains Tax allowance increased to £12,300 per annum (£6,150 for trustees).

Other than a small increase in the lower limits for National Insurance contributions, most personal tax rates and allowances have been frozen at the 2019/20 rates, so fiscal drag will mean the overall effect is akin to a tax increase. The ISA contribution limit has also been frozen at £20,000 for another year.

Corporate Tax
Corporation tax frozen at 19 per cent

Whilst the 17% rate was attractive, this move is not at all unexpected.

• Investment in Research & Development (R&D) to increase to £22bn a year
• The rate of Research & Development Expenditure Credit (RDEC) will increase from 12% to 13%

With the aim of continuing to keep the UK at the forefront of research and innovation this is a further move to attract businesses to invest in R&D. This welcome change will mean that large companies (more than 500 employees), and some SMEs will be able to claim an increased additional deduction in respect of qualifying R&D expenditure. This will go some way to mitigating the withdrawal of the proposed 2% reduction in the main rate of corporation tax.

• R&D PAYE Cap extended for 1 year to 1 April 2021

It had previously been announced that there would be a cap on the repayable tax credits for loss making companies of three times the company’s payroll taxes. This was going to have a negative impact to start up and smaller companies. The deferral for 12 months is a benefit to such companies.

• Capital Allowances: Structures and Buildings allowance to increase to 3%
• Digital Services Tax – payments due on an annual rather than quarterly basis
• Corporate Capital loss restriction: the 50% restriction on capital losses for companies in insolvent liquidation to be removed

VAT
• Abolishing VAT on e-publications

The abolishment of VAT on e-publications will be welcomed by the publishing industry, but the extent of zero-rating still requires clarification.

• A zero rate of VAT to be charged on women’s sanitary products

The plans to remove VAT from women’s sanitary products are a result of Brexit and the UK Government’s newfound ability to make its own tax laws.

• HMRC investing in anti-tax avoidance measures

The Government will provide additional funding for HMRC to invest in tax anti-avoidance measures in an effort to prevent tax leaking out of the system and into the hands of criminals.

• Government is legislating to clarify when fund management services are exempt from VAT

The VAT on fund management introduces into UK legislation matters which were previously established in ECJ case law [ATP and Fiscale Eenheid].

• An industry working group to review how financial services are treated for VAT purposes is being set up

This review of VAT on financial services has long been mooted and its formation is welcome news.

• From 1 January 2021 postponed accounting for VAT will apply to all imports of goods, including from the EU

Postponed accounting for VAT will give a cash flow benefit to VAT registered importers and is a welcome move. Non-VAT registered businesses and individuals will still have to pay the VAT at the time of import.

• Simplified rules for the VAT treatment of intra-EU movements of call-off stock, allowing businesses to delay accounting for VAT until the goods are called-off

The simplification will bring a welcome cash flow saving to ‘just in time’ businesses who hold stock until their customers needs it.

• Special VAT status will be granted to the welsh-based language channel S4C.

Special VAT status allows the specified body to recover any VAT it incurs on expenditure.

Employment Tax
• Employment Allowance increased by £1,000 to £4,000 from April 2020.

The increase in Employment Allowance for eligible businesses and charities will enable them to claim an increased reduction in their secondary Class 1 NIC liability.

• Van and van fuel benefits increased to £3,490 and £666 respectively from April 2020.
• New cars provided to employees and available for private use that are first registered after 6 April 2020 will be taxed according to CO2 emissions figures measured under Worldwide Harmonised Light Vehicle Test Procedure System (WLTP).

For cars measured under WLTP the appropriate percentage is reduced by 2% in 2020/2021 compared to the current percentages for cars under the current emissions basis to support the introduction of WLTP.

• Tax guidance for the self-employed.

The intention is to make it easier for self-employed people to navigate the tax system. Government will this summer launch new interactive online guidance for taxpayers with non PAYE income.

• Apprenticeship Levy.

The Government will look at how to improve the working of the levy to support large and small employers in meeting the long term skills needs of the economy.

• £500m to be provided over the next 5 years to develop the electric vehicle charging infrastructure.

This will include rapid charging fund to help businesses with the cost of connecting high powered charge points to the grid where the cost would otherwise prevent private sector investment.

• Lower NIC threshold from which NICs payable up to £9,500 from April 2020.

This measure will take £1.1 m out of Class 1 and Class 4 NIC entirely. This is seen as the first step in meeting government ambition to increase the threshold to £12,500.

• Maximum Homeworking rate income tax deduction up from £4 to £6 per week from April 2020.
• The proposed IR35 changes for introduction into the private sector are operative from April 2020.

This confirms the position and that the new rules for review and appropriate deduction of income tax and NICs will apply for payments made for services provided post April 2020.

• An NIC holiday will be available from April 2021 for employers of veterans in their first year of civilian life.

This measure confirms employment income is exempt from NICs up to the upper earnings limit on the veteran’s salary.

• Reduction in company car and van rates.

Rates are reduced by 2% in 2020/21 for cars first registered after 6 April 2020. Rate will increase in 1% increments for two following tax years and then be frozen until 2024/25. Vans will attract a nil benefit in kind if they are zero emission vans.

• Tax avoidance in the Construction Industry Scheme. Further action is intended to raise an additional £4.7bn.

The Government is intending to legislate to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled.

Infrastructure and Environmental Measures
• Levy on gas to rise, but be frozen on electricity.
• £500m for rollout of new electric car charging points.
• Red diesel subsidies will be scrapped for most sectors, excluding agriculture, fish farming, rail and home heating.
• New plastic packaging tax on materials with less than 30% recycled content from April next year.
• Money for flood defences doubled over the next six years to £5.2bn.
• Road building and upgrading plans equal to “£27bn of tarmac”.
• Investment in broadband worth £5bn to help expand rural connectivity.
• New carbon capture “clusters” to be built by 2030, at a cost of £800m.
• Affordable housing programme expanded with extra £12bn of funding.

Coronavirus
• Fiscal stimulus package worth £30bn.
• £5bn coronavirus emergency response fund for the NHS.
• £500m hardship fund to support those who are most vulnerable.
• Statutory Sick Pay will be made available from day one, including those who self-isolate.

While the changes to statutory sick pay for those self-isolating from Coronavirus is welcome news for some employees, the impact on smaller businesses is as yet unknown. An employee receiving statutory sick pay, currently set at £94.24 per week, will now receive an extra £40.

• Government to backstop sick pay for small business for up to 14 days.

Businesses used to be able to recover statutory sick pay costs from the Government, but this was abolished from 6th April 2014. However, considering the current situation there have been calls from business unions for the Government to look to reverse this measure. These measures have also prompted workers’ unions to ask the Government to consider extending the eligibility of sick pay to zero hour and self-employed workers, as they deem the current system unfair to these groups of workers.

• Temporary removal of minimum floor for universal credit.
• Temporary loan scheme to support small and medium sized businesses, with Government guarantees of 80 per cent of losses with no fees.

Other points to note…
• Measures to clampdown on tax avoidance aimed at helping HMRC recoup £4.4bn of unpaid taxes.
• Increased lending for exporters worth £5bn.
• New safety fund worth £1bn to deal with unsafe cladding on buildings over 18m.
• Funding worth £650m to help rough sleepers.
• Stamp duty surcharge of 2 per cent on non-resident buyers. The equivalent tax in Scotland is LBTT and we need to wait and see if this measure is mirrored by the Scottish Government.
• £130m to extend start-up loans.
• Plan to move 22,000 civil servants outside central London.

What should you do next?
If you would like to find out more about how the Budget will affect you, please contact your usual Campbell Dallas advisor or:

Aileen Scott
Partner and Head of Tax, Scotland
aileen.scott@campbelldallas.co.uk
0141 886 6644

Budget Update 2020 Webinar
Our colleagues are holding a Budget Update Webinar today at 1.00pm-2.30pm to provide insight and analysis on the outcomes of the Budget and how they may impact you and your business.

If you would like to join, please register here.

IR35 and the tax compliance changes

March 6, 2020

The proposed IR35 reform due to be implemented from 6 April 2020 has been delayed for one year to 6 April 2021 in response to the COVID-19 outbreak. Details below have been updated to reflect the new date of implementation.

From 6 April 2021, there will be a radical shift and a renewed focus by HMRC towards situations where workers provide their services through Personal Service Companies (PSCs) for the private sector, aimed at medium and large employers – the end users. This follows similar rules previously introduced for public sector organisations. Coming into the spotlight will be the status of workers as either employed or self-employed. Where HMRC successfully challenge the status, these new rules set out who bears responsibility for underpaid tax in the labour supply chain.

Who will be impacted?
End users of workers’ services, intermediaries and agencies will face an increased tax compliance burden. End users will need to decide if the person providing the services through a PSC is effectively doing so as an employee. HMRC will be auditing medium and large employers from 6 April 2021 to ensure they have performed appropriate checks to determine the status of their off-payroll workforce and their compliance with the new rules.

We have already seen a knock on impact in the contracting industry following the recent public sector rules coming into effect. Given the uncertainty and complexity of the regime, many organisations have chosen not to engage contractors anymore, instead bringing workers on to the payroll or ‘playing safe’ by deducing PAYE and NIC from their invoices. This has major implications for all concerned across the related labour supply chain.

For the private sector, HMRC have just announced that penalties for inaccuracies will apply only in cases of deliberate non compliance in year one of the new regime. Although this ‘light touch’ is welcome, many businesses will face unexpected tax liabilities if they are not adequately prepared to implement the changes from the outset.

Key indicators of employed and self-employed
In determining the status of a worker, the whole picture needs to be reviewed through various factors and status indicators; and weighed up in relation to the contract. Key indicators are listed below:
• Financial risks and profit opportunities
• The time period of the engagement and contract termination
• Control or supervision and the number of engagements
• Right or ability to substitute the worker
• Equipment for the job
• Intention of the parties and mutuality of obligation

HMRC has advised that worker status can be checked using their online Check Employment Status tool (CEST); provided the contract mirrors the service carried out in practice by the worker. In our experience, CEST appears very sensitive to the data input and the outcome can be different with even a small change to the answers provided. In particular, the tool tends to point towards self-employment status where control is indicated to be minimal by the end client, without necessarily considering all the factors. This can lead to uncertainty in some situations.

How should end users and PSCs prepare for the new regime?
The end user will be legally obliged to produce a ‘status determination statement’ for each contractor based on individual decisions in line with the above. A contractor can query this decision and is able to challenge the determination in writing if they believe it is wrong. The end user then has 45 days to explain their reasoning.

Where ’employed’ worker status is determined, continuing to engage through a PSC rather than as an individual is likely to have fewer tax advantages than before and will result in significant complexities from a tax compliance perspective, therefore many existing PSCs may cease to trade.

We advise end users and PSCs to prepare for the changes now by taking measures to check the impact of the new IR35 regime.

Next steps
If you think you may be affected by the new IR35 regime either as an end-user organisation, intermediary, agency or contractor, or if you are simply concerned about your self-employed status please contact your usual Campbell Dallas contact or:

Mark Pryce
Tax Partner
0141 886 6644
mark.pryce@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Significant tax changes for rural businesses

March 5, 2020

There are some significant tax changes which have been introduced recently or are on the horizon that could impact farming and other rural businesses. Partner, Alan Taylor, explores the changes below.

Capital Gains Tax (CGT) and Residential Property
Where a residential property is sold from 6 April 2020 the seller will be required to file a new standalone online tax return and pay any CGT due within 30 days of completion of the transaction. Currently, if a surplus farm cottage is sold, the seller has between 10 and 22 months to pay any tax and the gain is included as normal in the self assessment tax return. From a practical point of view, it will be important to obtain all the information required to calculate the gain early in the selling process. It will be necessary to have accurate records of original cost, any capital improvements and in some cases valuations. Furthermore, to calculate whether the gain is chargeable to tax at 18% or 28%, it will be necessary to make a best estimate of income for the tax year and factor in any other capital gains/losses made earlier in the same tax year and any capital losses brought forward. Penalties will apply for non-compliance. HMRC will be able to monitor disposals from Land and Buildings Transaction Tax (LBTT) returns. There will also still be a requirement to include the gain in the year end self assessment return and any further tax due or repayable will be included. There is no requirement to file a return where the property has been a principal private residence throughout the period of ownership, there is a capital loss arising or the gain is covered by the annual CGT exemption (£12,300 from 6 April 2020). If any sales transaction is underway there are advantages in completing before 5 April 2020.

Capital Gains Tax and Entrepreneurs’ Relief
Prior to the Budget announcement if you stopped farming and subsequently sold your farm, provided you met all the qualifying conditions, Entrepreneurs’ Relief was available to reduce the rate of CGT to 10% on lifetime gains up to £10m. The lifetime limit has now been reduced to £1m meaning any qualifying gain will be charged at 10% on £1m and 20% on the balance. If a farm was sold and makes a gain of £2m the tax would be approximately £200k under the old rules but £300k now.

Structures and Building Allowance
If from 6 April 2020 (1 April 2020 for companies) capital expenditure is incurred on a new non residential building the rate of allowance is increased from 2% to 3% per annum.

Capital Allowances on Cars
If you buy a new business car from 6 April 2020 (1 April 2020 for companies) 100% allowances are available for electric vehicles with CO2 emissions of 0g/km. Cars with less than 50g/km will qualify for 18% writing down allowance annually and all other cars over 50g/km will attract 6% writing down allowance.

Employment Allowance
Many businesses will benefit from the increase in the Employment Allowance from £3,000 to £4,000. This allowance is given as a deduction from the Employers National Insurance contributions a business pays.

VAT Agricultural Flat Rate Scheme
The limits for this scheme are changing from 1 January 2021 to allow farmers with farming turnover below £150k to join the scheme. When farming turnover exceeds £230k there will be a requirement to register for VAT. The scheme allows farmers to dispense with filing VAT returns, charge 4% flat rate to VAT registered customers which the farmer keeps, but not recover any VAT on expenses etc.

Red Diesel
The Chancellor announced in his Budget announcement that the fuel subsidy for red diesel for most industries was to be abolished. Fortunately, the farming industry is to continue to benefit from the subsidy saving 46.6p per litre when compared to industries such as construction.

If you would like to discuss these changes and how they may impact you and your business or the advantages of these changes, please contact your usual Campbell Dallas advisor or:

Alan Taylor
Partner
alan.taylor@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Budget must stimulate overseas trade

March 3, 2020

The new Chancellor, Rishi Sunak is dealing with an unprecedented number of issues that are threatening the economy. A budget that helps stimulate global trade must therefore be a priority. The following ‘Super Six’ policy changes would help businesses widen their trading horizons and ambitions:

Relaxing EIS (Enterprise Incentive Scheme)
The EIS offers attractive tax relief but it is currently highly complex and technical. Relating the regulations for SMEs looking to establish trading links overseas would help attract investment to these businesses and help their growth ambitions.

‘R&D credits’ overseas
R&D credits also offer generous tax reliefs, to encourage development. It would be good to see a similar system extended to cover expenditure by businesses looking to break into overseas markets.

Clarity over AIA
The problem with AIA (annual investment allowance) is that there is a lack of clarity over qualifying spend and a constantly shifting ‘use-by date’, currently set at 31.12.20. The budget presents an opportunity to extend the ‘use-by date’ for additional allowances by at least five years and provide an incentive to encourage capital investment in assets that would stimulate overseas trade. Businesses need clarity and stability – and AIA needs amended to provide that certainty.

Entrepreneurs’ Relief (ER)
ER currently rewards entrepreneurs with a tax rate of just 10% up to £10m from the sale of a business and is one of the most successful policies for encouraging and rewarding growing businesses. If the relief is withdrawn or amended the government could encourage overseas ventures by allowing entrepreneurs to retain the £10m relief where there is reinvestment of the sale proceeds in businesses expanding overseas.

Better export incentives
Current State Aid rules arguably restrict the creation of grants and incentives tailored to export activities. These rules currently expire on 31.12.20, and it could be an opportune moment at which to launch a new range of grants and incentives that support entrepreneurs in trading overseas. Supporting the recruitment of specialist staff and encouraging investment in new assets that drive export activity would be well-received by businesses wanting to trade overseas.

Goodwill
Finally, tax relief for the goodwill acquired when a UK business makes an overseas acquisition would encourage overseas trade and expansion. A new tax relief for acquisition goodwill could be the key to encourage more businesses to pursue overseas growth strategies.

If you have any questions or queries regarding global trade and the policies noted above, please contact your usual Campbell Dallas advisor or:

Craig Coyle
0141 886 6644
craig.coyle@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in March 2020. Laws and tax rules may change in the future.

Electric vehicles – the tax considerations

February 20, 2020

Now looks like a good time to invest in electric vehicles for both employers and employees to benefit from tax breaks and grants.

There is no denying that electric vehicles have and will continue to become more commonplace on our roads. Technological advancements have made them a more viable and affordable proposition than in prior years. Drivers are now able to benefit not only from cleaner and more efficient transport, but also from increased range and even improved performance when compared with conventional petrol or diesel alternatives. In an effort to be environmentally friendly, employers are now acquiring electric vehicles as part of a fleet or as company cars. An added benefit is also the reduced running costs.

From a tax perspective, now is arguably the ideal time for businesses to consider ‘going electric’. For employees, reducing Benefit in Kind (BIK) rates down to 0% in the 2020 tax year for pure electric cars has strong appeal given the trend for increasing BIK percentages for petrol, diesel and even most hybrid cars. For employers, generous Capital Allowances are available, not only for the purchase of electric vehicles but also for the installation of charging points.

It is clear that the UK Government is currently keen to incentivise the public and businesses to consider zero-emissions vehicles. Should electric vehicles become the default choice, the need for the Government to incentivise adoption will cease, and potentially so will the reliefs available that we see today.

We have outlined below the tax considerations and provisions in relation to using an electric vehicle(s) for your business.

Employee Benefit in Kind

Plans have now been announced to drop the BIK rate for electric vehicles from 16% currently to 0% effective from 6 April 2020 with a commitment to only increase to 1% in 2021 and 2% in 2022 an annual average of only 1%. This applies not only to pure electric vehicles but also to vehicles with CO2 emissions of up to 50g/km and at least 130 miles of electric-only range. On a £30,000 car, when compared with typical BIK rates (circa 25%) for non-electric vehicles, this would result in an annual tax saving for higher rate taxpayers of c. £3,000.

The position favours electric vehicles even further when we consider the provision of personal fuel. As with BIK percentages, the standard amount against which a personal fuel benefit is assessed has increased from £21,100 in 2013/14 to £24,100 in 2019/20. For electric vehicles provided as company cars, there is no taxing provision for private charging as “fuel” does not extend to electricity. Similarly, workplace charging (for private and company cars) will not give rise to a benefit in kind.

Taking this a step further, s149(4) ITEPA 2003 extends the exclusion from the company car fuel charge to any ‘facility or means for supplying electrical energy’. This means that an employer can, for example, pay for the following without a taxable benefit arising:

• A vehicle charging point to be installed at the employee’s home
• A charge card to allow individuals access to commercial or local authority charging points

It should be noted that these particular provisions only apply to company cars (which would otherwise have been subject to the fuel charge) and not in respect of electric cars owned privately and used for business.

The Optional Remuneration legislation introduced in April 2018 in relation to salary sacrifice arrangements does not apply to ‘ultra-low emissions vehicles’ (ULEVs) for which electric vehicles fall within. This provides flexibility to employers wishing to utilise a salary sacrifice company car scheme.

Reimbursements for business mileage

One factor discouraging adoption of electric cars for company car drivers may have been the lack of a provision for the reimbursement of electricity costs incurred personally by an employee in carrying out business travel. From September 2018 however, HMRC introduced advisory fuel rates (AFRs) for electric vehicles allowing employers to reimburse electricity costs at a rate of up to 4p per mile. Where it can be demonstrated that a higher cost has been incurred, an increased rate may be able to be paid on agreement with HMRC.

It is also worth remembering that Approved Mileage Allowance Payments (AMAPs) apply to electric cars in the same way as for petrol or diesel cars. For individuals using a private electric car for business purposes, reimbursement can still be provided tax-free at a rate of 45p per mile for the first 10,000 miles and 25p per mile thereafter. Furthermore, where the employee is reimbursed at an amount lower than this, they can claim tax relief on the difference from HMRC.

Capital Allowances

Aside from the employee/employer considerations, there are also benefits to adopting electric vehicles from a business tax perspective, specifically the availability of enhanced capital allowances (ECAs).

New electric vehicles (and some hybrids) are eligible for first year allowances (FYAs) of 100%, comparing favourably with other cars ordinarily subject to writing down allowances of 18%/8%. Where we are considering fleets of vehicles, this could provide significant relief.

These ECAs are also available to expenditure incurred upon the purchase and installation of new and unused equipment for an electric vehicle charging point solely for charging electric vehicles. The ECAs for expenditure on charging points was due to be withdrawn on 31 March 2019 (for corporation tax) and 5 April 2019 (for income tax), however availability was extended for four years and will now expire on 31 March/5 April 2023.

If you have any questions or queries regarding electric vehicles for your business, please contact your usual Campbell Dallas advisor or:

Scott Hutchison
0141 886 6644
scott.hutchison@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2020. Laws and tax rules may change in the future.

VAT reclaims for operators of childcare holiday camps

February 10, 2020

A recent First Tier Tribunal has ruled that a provider of childcare holiday camps, RSR Sports Ltd, had overdeclared £229k of VAT on their holiday camp services. Any business with similar arrangements could be entitled to VAT refunds too.

RSR believed that its services were exempt as they are welfare and childcare services. HMRC disagreed and believed the activities were standard rated as a result of being sporting activities. RSR successfully argued at the First Tier Tribunal that childcare was the predominant service and the associated sporting activities should not affect their VAT exemption.

This is an interesting and welcome decision for those operating in the sector. The Tribunal commented on the similarities with a previous case; however, there were differences that distinguished them. An important point in RSR’s case was that the sports activities at their holiday camps were not undertaken by qualified coaches, they were provided as part of a childcare service.

We understand that HMRC are considering the decision and may well appeal against it; however, this case shows that there is a fine line between an activity being closely connected with welfare services or not.

RSR received a refund of the VAT incorrectly declared and paid to HMRC over the last 4 years. Others could be entitled to similar refunds. Equally those who already record similar activities as being exempt need to ensure that contracts and all advertising material are worded correctly to minimise any challenge from HMRC.

We would be happy to share our experience with anyone operating in this sector who is unsure of their position. If you would like to discuss this decision and how it may affect you, please get in touch with us as soon as you can.

Martin Keenan
Indirect Tax Senior Manager
0141 886 6644
martin.keenan@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in February 2020. Laws and tax rules may change in the future.

Entrepreneurs’ Relief – considerations to make pre-Budget if you’re mid-deal

January 29, 2020

Recent speculation has gathered momentum in the media that the forthcoming UK Budget may bring potential changes to Entrepreneurs’ Relief (ER), with an expectation that the Chancellor will likely review the impact of the Relief in relation to its key objectives and the cost to Government.

ER was introduced in 2008 as a comfort to entrepreneurs who had just watched business asset taper relief disappear. Originally ER was based on the old retirement relief provisions, reduced gains by 4/9ths and was limited to £1m. Today’s version is far simpler, allowing a flat rate of 10% on gains up to a lifetime limit of £10m (subject to meeting the qualifying conditions). The aim of the relief, back in 2008, was “to encourage entrepreneurship in this country” with the then Chancellor, Alistair Darling adding that he would ensure “only genuine investors benefit from the reformed Capital Gains Tax (CGT) regime”.

Many tweaks since its introduction have ensured that it is only available on genuine withdrawals from a business, and only to trading businesses.

If you are in the process of exiting a business, we would advise focusing on a pre-11 March transaction date if completion dates are in sight and possible before that date. If that is not possible, there are some actions you can take now, which may mitigate any reduction in relief post 11 March should that happen. We have outlined some options and considerations below.

Options and considerations

Changes to ER are highly unlikely to be retrospective, so any qualifying transaction that takes place before any change is announced should still benefit from the relief as it applies today.

Taxpayers would need to make an actual disposal of a business, business asset or company shares in order to claim ER.

While these cannot be transferred to a spouse, they could be a gift to a child, where the transaction would be deemed to take place at market value regardless of any actual value transferred. Similarly, other ways of either gifting shares or developing a new company structure could work in terms of generating an ER-qualifying gain in advance of a Budget-day deadline. Note, however, the anti-phoenixing provisions that seek to charge income tax instead of CGT where a company is liquidated and another similar business is set up within two years of the demise of the first.

However, care must be taken when undertaking such options as above. If not making a third party sale for cash, a tax bill at 10% (instead of 20%) sounds like a good deal, but you still have to fund the tax payment. It may be harder to sell assets in future, or values may drop, especially in times of economic turmoil or uncertainty. Inheritance tax and stamp taxes also need to be considered.

CGT is calculated on a disposal date when contracts are unconditional, rather than on completion, so if terms could be agreed (and signed in binding terms) in full before 11 March, even if the actual transaction does not finalise for some months, ER will still be available.

If you are mid-deal, and would like to learn more about your options, please contact:

Aileen Scott
Head of Tax, Scotland
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in January 2020. Laws and tax rules may change in the future.

Brexit: Our Insight

January 27, 2020

“Get Brexit Done” was the simple message that led to a Conservative majority in December’s general election. This has meant Boris Johnson’s ‘Brexit bill’ passed easily through the House of Commons. Indeed, the bill has now received Royal Assent so the EU (Withdrawal Agreement) Act 2020 is now in place.

The UK is, therefore, set to leave the EU on 31 January 2020 and enter a 12-month transition period during which a trade deal will be negotiated and businesses will need to get ready for leaving the EU.

As things stand, the transition period will end, with or without a deal, on 31st December 2020.

During the transition period, the UK will remain part of the customs union and the single market, and all EU VAT legislation still applies. However, beyond this, many questions about the rules which will apply following UK’s departure are still unanswered. Undoubtedly, the most complicated tasks lie ahead. The UK is in an unprecedented position – no other Member State has left the EU before.

The transition period leaves the two sides with just a third of the time taken to negotiate the Withdrawal Agreement – but with much more to do.

Every EU member state will have a vote and veto over the deal – which will make negotiations more complicated for the UK. The Government may have to choose between making major concessions to the EU or walking away without a deal as the Prime Minister has so far ruled out any extensions to negotiations.

Businesses, therefore, need to prepare to say “farewell” to Brussels and the trade rules as we know them, and rise to the challenge of getting ready for Brexit.

As the amount of uncertainty shows no sign of abating in the short term, many businesses are understandably concerned about the impact of such doubt.

However, there are a number of practical steps we would strongly recommend businesses consider in the lead up to 31 December 2020. These are outlined in our ‘Planning for Brexit: Indirect Tax’ publication.

In the event that the UK’s negotiation with the EU sees the end of the UK’s participation in the ‘VAT Union’, several simplifications currently enjoyed by UK VAT registered businesses will be lost. Those businesses would need to consider their future options. Essentially, these simplifications are designed to facilitate intra-EU trade. Read more about the areas likely to be affected here.

As the Brexit process continues, we will keep you up-to-date with the latest developments that may affect your business.

In the meantime, if you would like to get advice as well as clarity on your indirect tax position to help your business get ready for Brexit, please contact:

Veronica Donnelly
VAT Partner
veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The world wants to do business with Scotland

January 14, 2020

International trade event highlights opportunities and risks

International business opportunities have never been more exciting or potentially more rewarding for Scottish businesses and the business community should explore the huge potential on offer, delegates to an international business event recently hosted by Campbell Dallas were told.

The event in partnership with experts from affiliate firms in the Allinial Global network based in the USA, China, India and Ireland explored how Scottish businesses could begin trading with the four countries.

Expert speakers outlined the different economic and political profiles of each country, how their international business and tax systems are structured, and highlighted some of the key challenges and risks to consider.

Three consistent themes emerged during the presentations:

Firstly, it was clear that many countries are open for business and would like to do business with Scottish companies. This is particularly important given that we are now heading towards some form of conclusion to Brexit.

Secondly, whilst their tax and trade rules are different, there is a consistent desire to see international business dealings taking the form of inward investment, preferably involving a physical presence. Attractive incentives are increasingly being offered to encourage, retain and reward sustainable inward investment.

Thirdly and most importantly, whilst the rewards of international business can be significant, the cost of getting it wrong can be punitive. All the speakers said it was critical to obtain advice, even just a phone call or email, before committing to any form of business structure or enterprise.

Cormac Doyle, Head of Tax with EisnerAmper in Dublin, said that Ireland is proving a popular inward investment location as UK companies seek a more direct springboard into the EU market. Clearly many companies want to ensure they can continue to access both the Irish market and the much larger EU market as seamlessly as possible. There are attractive incentives to invest in intellectual property and knowhow and the Corporation Tax rate is also very competitive. An Irish business presence could offer Scottish businesses a key competitive advantage.

Gerard O’Beirne, a tax partner with EisnerAmper in New York also pointed to a range of incentives designed to encourage businesses to invest in the USA. He explained: “The government wants international businesses to be part of the economy from within, not just trade with the USA. To facilitate this shift, the Trump administration introduced the FDII legislation – foreign derived intangible income. FDII is designed to encourage investment in IP and the knowledge economy, with qualifying international ventures eligible for corporate tax rates as low as 13.25%.”

Amit Maheshwari, a tax partner with Ashok Maheshwari & Associates in New Delhi pointed out that the Indian government had made investment in manufacturing a major strategic target: “India has attractive incentives for businesses wanting to establish and grow a manufacturing presence in India. The incentives have been made more attractive and include lower corporation tax rates and a benign approach to the extraction of profits and dividends. The most popular business structure we now create for clients is the LLP (limited liability partnership) as it is frequently the most suitable model for the international trade tax regime.”

Alex Xie, a Tax Director with SBA Stone Forrester in Hong Kong said that China is also reaching out to attract inward investment with its own range of attractive tax and regulatory incentives: “China wants to undertake more international trade but realises that it has to help overseas businesses commit to engaging with the world’s largest economy. Key to encouraging international trade is a wider range of tax and trade incentives, plus corporation tax as low as 15% as long as it is a qualifying business activity within the high technology sector.”

The last few years have been challenging for all of us in business but our event was a welcome reminder that there is a world of business available to ambitious Scottish companies, and we should do our utmost to help them capitalise on the opportunities. The timing is good given that many tax systems have become more flexible and accommodating, with governments having a better understanding of how businesses operate. As such, the current range of incentives for international business are as good as any for a long time. However, it is always crucial to remember to seek advice before embarking on any significant investment. It is easier to prevent problems than it is to fix them.

Campbell Dallas has a range of materials exploring the legislative, political, economic and tax systems operating in each country. Businesses considering international trade can also benefit from a free initial exploratory discussion.

Fraser Campbell Accountant

 

 

 

 

 

Fraser Campbell, Head of Family Business and International Advisory Partner

For further information on expanding your business overseas contact me at:

fraser.campbell@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in January 2020. Laws and tax rules may change in the future.

New Year brings new, welcome changes to loan charges from HMRC

December 30, 2019

The controversial loan charge was due to be levied by HMRC on loan balances from relevant planning outstanding as at 31 March 2019, resulting in a flurry of activity as taxpayers settled their affairs under the terms offered by HMRC or prepared to deal with the imposition of the charge.

However, following the recent review of the loan charge, it will no longer apply as widely as was previously proposed.

It should be noted that the fact that the loan charge is being dropped does not mean that HMRC will not continue to pursue companies for tax due under the original planning, but in some instances there will be repayments due from HMRC in due course where settlement has taken place.

The first category of change is where the loan was entered into prior to 9 December 2010. For loans entered before this date (when anti-avoidance legislation was enacted), the loan charge will no longer apply.

For loans entered between 9 December 2010 and 5 April 2016, the loan charge will not apply where the planning was fully disclosed to HMRC, and HMRC did not take any action. This will cover cases where HMRC did not open an enquiry, and presumably cases where HMRC did open an enquiry but closed the enquiry without proposing any adjustment.

Those who are still subject to the loan charge can spread the amount over 3 tax years evenly to potentially reduce the amount of the charge which will be due at higher rates of income tax. There are also certain relaxations in terms of Time to Pay arrangements.

Taxpayers who are due refunds from HMRC from settlements entered should begin contact HMRC once the amending legislation has been passed (which is forecast to be in summer 2020). Those considering what to include on their 18/19 tax return can delay filing their return until 30 September 2020 without suffering any penalties.

Each taxpayer who has been involved in relevant planning will need to take professional advice based on their individual tax pattern, and our team would be delighted to assist in this.

If you have any queries, please speak to your usual Campbell Dallas advisor.

craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Quartet of new partners appointed

December 16, 2019

The success of our pioneering apprentice and graduate trainee development programme has resulted in four long-serving staff being promoted to the partnership in the New Year. The promotions are effective 1st January 2020.

All four new partners – Kirsty Murray, James McBride, Jennifer Alexander and Alan Brown – joined as graduate trainees and have been with the business for an average of 16 years.

After joining as a trainee in 2004, Kirsty Murray has been appointed as a new Tax partner based in Edinburgh. She has extensive knowledge of corporate and business tax and is acknowledged as a specialist in the technology, R&D and performing arts sectors. The appointment reflects her high standing with clients, and her key role in driving growth across the tax practice.

James McBride, who joined the business as a trainee in 2003, has been appointed as a new Audit partner based in the Glasgow city centre office. He specialises in providing external audit and business advisory services to a wide range of clients in the property, construction, housing association, charity and education sectors.

Jennifer Alexander has been appointed as an Audit partner after joining the business in 2001 as a CA trainee. Also based in Glasgow, she has developed an expertise in the charity and housing association sectors and provides business advice to food and drink, construction and property businesses.

After initially joining Campbell Dallas in 2003 as a CA trainee, Alan Brown has been promoted to Audit partner. He qualified in 2006 and has been progressively promoted during his 16 years with the firm, becoming a director in 2013. He has played a key role running the Glasgow and Scotland-wide audit team and is highly regarded for his extensive technical knowledge, acting for many of the firm’s largest clients in the food and drink and manufacturing sectors.

Commenting on the new partner appointments, managing partner for Scotland, Chris Horne said: “We would like to congratulate the new partners on their promotions and wish them every success as they continue to develop their careers within the business It is particularly rewarding to see young talent progress all the way to the partnership and in the last two years we have promoted 9 of our people, who started out their CA careers with us to the top level in the business.

“We are focused on developing our own people and on creating outstanding career opportunities for our people looking to develop a career in the accountancy profession. Since 2015 we have recruited 235 apprentices, graduate trainees and school leavers into this successful trainee development programme.”

Scott Moncrieff joined Campbell Dallas in May 2019, creating one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 550 staff.

The rise of overseas buyers and private equity continues to drive Scottish deal market

December 16, 2019

The last 5 years has seen a significant shift in the M&A market towards overseas trade buyers and private equity purchasers in both Scotland and across the UK. It is a significant shift in who does the deals, and how they are financed.

“The rise of the overseas buyer is partly down to the attractive pricing of UK corporates as a result of the continued weakness in Sterling. That’s not to say that UK buyers aren’t still around, but the political and economic uncertainty of the last few years has made them a bit more cautious. Strategic buyers – wherever they’re based – remain confident in the medium to long term prospects for the UK economy, and are continuing to make acquisitions. There also remains a lot of private equity funding looking for investment opportunities and PE house. Those based here in Scotland and further afield are actively seeking out and engaging with business owners to help them realise their ambitions and strategies.

The future of Entrepreneurs’ Relief remains a concern for a lot of business owners and those concerns, coupled with legislative changes, growing compliance regulations and perceptions of higher risk are still driving a substantial number of entrepreneurs to sell their businesses.

Notwithstanding these issues, we should celebrate the recovery in the Oil and Gas sector where there are clear signs of deals being done and confidence returning, which is great news for Scotland’s economy.

And we should be alert to the threats facing traditional retail, which has now become a turnaround sector as businesses try to remodel in the face of the online threat and adapt to a major structural change that is clearly now underway. Several well-known Scottish retail businesses have sadly closed, and it is important that any retailers facing problems should seek early help with their strategy and financial position.

Deal watchers will be aware that deals are taking a good 2 to 3 months longer than 5 years ago, which is an interesting and probably permanent, change. The extended deal process is due to buyers and sellers wanting to spend more time on due diligence to ensure the deal is ‘right’. It is better to take longer to get the right deal, than get a quick deal that is the wrong deal. Risk and compliance have risen to the top of the agenda, with the banking crisis, data breaches, fraud and cyber security driving many businesses to invest far more on risk and compliance.”

Looking ahead, Scotland’s corporate finance scene is suffering from a shortage of experienced younger corporate finance professionals and the uncertainty caused by the ‘B’ word has acted as a brake on business confidence and frustrated investment and M&A activity.

However, we anticipate busy sectors being environmental, specialist healthcare, fintech and cyber security. There are also a lot of dynamic, more “traditional” businesses, in specialist engineering, and manufacturing, that provide design, maintenance and support as well as a product to their customers, where there is encouraging potential for an active corporate finance market.

It has been a challenging year, but the environment for deal making is in healthy shape, with plenty of opportunities, willing sources of finance and key drivers, such as Entrepreneurs’ Relief, encouraging business owners to exit.

It will be a busy 2020 – and we are up for it!

Graham Cunning
graham.cunning@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Business Property Relief

December 11, 2019

Business Property Relief (BPR) is a very valuable Inheritance Tax (IHT) relief for privately owned businesses and was subject to a recent review by the Office for Tax Simplification (OTS). This Insight highlights some key points to qualify for the relief.

Background to BPR

The IHT legislation contains a very valuable relief known as BPR. This relief mitigates the charge to IHT on any transfer of ‘relevant business property’ during lifetime or on death. Where an asset qualifies for this relief, BPR reduces the value chargeable to IHT by either 100% or 50%. BPR is currently an unlimited relief, unlike many other tax reliefs which have a monetary cap, and there is no clawback of the relief if the recipient immediately sells an inherited asset which qualified for BPR in the transferor’s death estate (although there can be a clawback for lifetime gifts).

Given that the current IHT rate on death is 40%, over and above the IHT threshold of £325,000, it is important that owners of privately-owned businesses undertake regular IHT/BPR reviews and that actions are not taken which result in full relief being lost.

Relevant Business Property

‘Relevant business property’ is defined as:

  • A business or an interest in a business, including a partnership (100% relief).
  • Shares in an unlisted company (100% relief).
  • Shares listed on the Alternative Investment Market (100% relief).
  • Quoted shares or securities where the owner has a controlling interest (50% relief).
  • Land, buildings or machinery owned personally and used in the individual’s partnership or a company which they control (50%).

BPR generally only applies where the ‘relevant business property’ has been held for at least two years. However, on a transfer of business interests to a surviving spouse/civil partner on death the spouse inheriting can include the deceased’s ownership period. Also, incorporation of a business does not generally affect the two-year ownership.

For BPR to apply, the business must not consist ‘wholly or mainly’ of holding investments. The legislation does not define ‘wholly or mainly’ but case law has established this as a 50% or more test. A hybrid company with trading and investment activities may qualify for BPR providing that the investment activities are not the main part. The business is looked at in the round along with such factors as:

  • The turnover and level of profitability relating to each part of the business.
  • Capital employed in each part of the business.
  • Management and employee time spent in each part of the business.

Having established that there is ‘relevant business property’, BPR is restricted by the value of any ‘excepted’ assets which are defined as assets not used wholly or mainly for business purposes in the two years immediately before the IHT event or not required for future use in the business. These will include assets such as surplus cash, yachts and houses which are used personally by the shareholders.

Qualifying for BPR and Not Qualifying

For certain types of businesses, there is a fine line between qualifying for BPR and not qualifying due to wholly or mainly holding investments. Recent tribunal cases have looked at the level of activity which is necessary for a livery and a holiday letting business to qualify. As a general rule, BPR is unlikely to be available for these and similar businesses unless substantial additional services are provided.

For example, in the case of HMRC v Personal Representatives of the Estate of M Vigne [2018], it was found that additional activities supplied by a livery, such as providing the horses with hay feed during the winter months, removing horse manure from the fields, checking the general health of each horse on a daily basis and providing on-site security, were sufficient to show that the business was not mainly one of holding investments, such that BPR was available.

By contrast, it was concluded in the case of HMRC v Mrs NV Pawson’s Personal Representatives [2013] that there was nothing to differentiate the business from any other furnished holiday letting business and BPR was not available on the basis that the business was mainly one of holding an investment.

Each case is decided on its own facts and it is particularly important for a full BPR review to be carried out in borderline cases as there may be actions which can be taken to help strengthen the position.

The Office of Tax Simplification (OTS) – Inheritance Tax Review 2nd Report July 2019

The OTS in their July 2019 IHT review have proposed a number of changes. BPR is covered in this report and they have commented that the ‘wholly or mainly’ test (50% test) differs from the test used for CGT for gifts holdover and entrepreneurs’ relief where the business has to be ‘substantially trading’. The latter generally involves an 80:20 split of trading vs investment, again with several indicators to look at including assets, income, expenses, time spent by employees and the history of the business.

The OTS comment that the differences between the CGT and IHT rules can distort behaviour and conclude ‘government should consider why the level of trading activity for BPR is set so much lower than the comparable reliefs for CGT. Aligning the BPR trading test with the tests for gift holdover and entrepreneurs’ relief would be a simplification. Having one test would be easier for taxpayers to understand and would reduce distortions to decision making’. Given these comments it may be that, at some point in the future, the rules to qualify for BPR will be tightened up such that it will become more difficult for hybrid companies to meet the rules resulting in a potential loss of BPR.

In light of these potential changes, it is all the more important for businesses with a mix of trading and investment activities to keep their operations under review to ensure that BPR is not inadvertently lost.

Planning for BPR in Privately Owned Businesses – examples

The following examples illustrate pitfalls to avoid in relation to BPR.

1. All or nothing relief
Windermere Ltd, an unquoted company, has 60% investment and 40% trading activities. The company’s shares would not be eligible for BPR as the business consists ‘mainly or wholly’ of holding investments.

Restructuring the company such that it is not ‘wholly or mainly’ an investment company should be considered to meet the BPR rules. This could be achieved with appropriate specialist tax advice by reorganising matters such that a new company, with identical shareholders, held all the investments leaving the existing company just with the trade.

2. Director’s loan account
Dwayne is a director/shareholder in Grasmere Ltd, a trading company. He has owned 50% of the issued share capital for the past ten years. The company owes Dwayne £100,000 which is held in his director’s loan account. Dwayne’s shares qualify for BPR on either a lifetime or death transfer. However, his director’s loan does not qualify for BPR.

In this situation converting the debt into share capital may enable BPR to be secured. If this is done by an ordinary share subscription, then Dwayne would need to hold the shares for a two-year period before they would qualify for BPR.

The alternative approach of a rights issue with the loan account being used to take up the rights issue is generally the preferred route. This is because the shares acquired under a rights issue are identified with the existing shareholding such that the two-year time period for ownership is met straight away. Care needs to be taken that all the legal formalities concerning a rights issue are met.

An alternative is for Dwayne to have his loan account repaid by Grasmere Ltd and for him to personally invest into assets which will qualify for BPR after a two-year period. This might be a portfolio of AIM shares or shares in another unquoted trading company.

3. Excepted assets
Derwentwater Ltd is an unquoted trading company. Kim, a widow, dies having owned 100% of the ordinary share capital of the company for over 20 years.

Under Kim’s will all her assets pass in equal shares to her two children. The probate value of the shares in Derwentwater Ltd is £1m which includes surplus cash not required in the business of £150,000. The executors, of Kim’s will, are satisfied that Derwentwater Ltd is not wholly or mainly an investment company and that BPR is due as follows:

Portion of value Rate
Probate value of shares in Derwentwater Ltd – £1,000,000
Less: value of excepted assets – (£150,000)
Value of shares qualifying for BPR – £850,000

The excepted assets valued at £150,000 are subject to IHT.

In this scenario a regular review of assets held in Derwentwater Ltd would have identified the excepted assets and action could have been taken to change matters to potentially secure more BPR.

4. Business premises owned personally and used by the family company
Emma owns a warehouse used by Ullswater Ltd, a trading company selling chocolates. Emma has a 65% shareholding in Ullswater Ltd and Charlotte has a 35% shareholding (not a family member). Emma gifts 20% of company shares to her son, David, who works in the business as part of the family’s long term IHT and income tax planning.

The gift of the shares does not give rise to CGT due to the availability of hold over relief and future dividends received by David will be taxed at a lower rate than in Emma’s hands. BPR applies so there is no IHT charge if Emma does not survive seven years from the date of gift (provided David still holds the shares at the date of death and assuming that the shares are not subject to a binding contract for sale and still qualify for BPR at the time).

However, in this scenario Emma loses control of Ullswater Ltd as her shareholding reduces to 45%. BPR is available on her shareholding but, having lost control of Ullswater Ltd, the warehouse no longer qualifies for BPR. This pitfall would have been avoided if Emma had gifted fewer shares (14%) and retained control of Ullswater Ltd.

Conclusion

BPR is an extremely valuable IHT relief in relation to both lifetime gifts and on death. It should not be taken for granted that BPR is simply available for shares in privately owned businesses as there are strict conditions for relief.

Full BPR can be lost because of a technicality. Regular reviews of the business profile should be undertaken so that BPR can be preserved or enhanced based on changing circumstances.

Planning early and taking specialist tax advice in advance will give the best results and ensure that hard earned wealth is protected from IHT.

For further advice on maximising BPR, please contact your usual Campbell Dallas advisor or:

Campbell Dallas staff portraits. Katy Burke.

Katy Burke
Tax Associate Director
0141 886 6644
katy.burke@campbelldallas.co.uk

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

The tax considerations when leasing rural properties

December 6, 2019

As leasing of residential properties is becoming ever more popular within rural businesses, it is important that landlords are aware of their property tax obligations. A landlord must register with the council for the area in which the property is situated and ensure they advise HMRC of the income received, either via a tax return or a letter.

Landlord Registration
All local councils have a landlord registration department and, before you rent out any residential property, you should register with the appropriate council. Details can be found on the council’s website. There are additional requirements for HMOs (House in Multiple Occupancy).

Taxation
Property rental income must be declared to HMRC and resultant tax paid. The amount of tax depends on the level of the profit and your personal circumstances.

Profit is calculated as income less allowable expenses and you need to declare this to HMRC via a Self Assessment tax return if you have income of:

  • £2,500 or more after allowable expenses, or
  • £10,000 or more before expenses

If your income is under these limits then you must still advise HMRC by writing to them.

Generally, property income should be declared by the person whose name is on the title deeds. If title is held jointly by married couples or civil partners living together, the income will automatically be split 50:50 unless a formal election is submitted to HMRC. If title is held jointly by any other people, the income is split in the same proportions as the ownership.

Expenses you can deduct include:

  • General maintenance and repairs – but not improvements
  • Mortgage interest – but changes are in place
  • Council Tax, gas, electricity, insurance
  • Maintenance contracts for heating systems etc.
  • Letting agent’s fees and management fees, tenancy renewal fees
  • Landlord registration fees
  • Telephone calls – the proportion relating to the letting activity
  • Motor expenses – the proportion relating to the letting activity
  • Replacement of domestic items
  • Accountancy fees

For further advice on the tax aspects of renting out properties, please contact your usual Campbell Dallas advisor or:

Karen Morrison, Tax Director, Campbell Dallas

Karen Morrison
Tax Director
01563 536 319
karen.morrison@campbelldallas.co.uk

 

 

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Is your SME supply chain ripe for cyber crime?

December 4, 2019

The Office of National Statistics estimates that 4.5 million cyber crimes were committed in the UK in the 12 months up to March 2018. You are statistically more likely to fall victim to a cyber crime in the UK than you are to any other type of crime.

As the cyber security systems become more adept at preventing and pursuing consumer fraud, the cyber criminals have been targeting the public sector and larger organisations for their new revenue streams.

Amongst larger organisations, numerous cyber security breaches have occurred, impacting banks, police forces and even defence firms. Wipro, a major IT services business, recently reported a major attack on its IT systems, after it was targeted by a phishing campaign.

The problems being faced by large organisations should be a warning for SMEs, owner managed businesses, social enterprises and charities, many of whom are at high risk of becoming unsuspecting cyber victims. And it is their supply chains that offer some of the best opportunities for cyber theft. Why?

Smaller enterprises just do not have the scale, resources or systems to protect, prevent and counter cyber fraud. Furthermore, they tend to work with a much wider network of suppliers and intermediaries. A recent survey of IT risks amongst SMEs undertaken by Scott-Moncrieff (our sister firm in Scotland) highlighted the very low level of investment in cyber security, poor understanding of the processes involved, and their high levels of vulnerability to attack.

Any point in the supply chain that creates a break in the flow of relationships, information, products, logistics and services, creates a potential for weakness in systems, and a window of opportunity for the cyber crooks. Like a house purchase, the more links in the chain of suppliers, the bigger the risk, and the greater the costs, including:

  • Finding an alternative supplier
  • Business interruption or shut down
  • Scrutiny and fines from regulators
  • Loss of productivity
  • Reputational cost, loss of trust and subsequent loss of clients

Prevention of cyber crime is far more cost-effective rather than having to deal with the bureaucracy, cost and reputational damage of a security failure. Key cyber security strategies and solutions that should be considered include:

  • Adopting relevant industry guidelines and frameworks, we recommend the National Cyber Security Centre’s Small Business Guide as an excellent starting point
  • Invest in and keep investing in the latest technologies and systems, and ensure that your systems are regularly patched
  • Risk assess your suppliers and business relationships, if they are protecting your assets – do you know what their cyber security arrangements are? Have your suppliers invested in meeting cyber security standards? We recommend only working with suppliers who have complied with the UK Government’s Cyber Essentials standard, and if you are out-sourcing key processes only working with suppliers who can demonstrate compliance with ISO27001, an internationally recognised security standard.
  • Employ or engage specialists that really understand the issues, and know how to implement and manage the very best cyber security systems and solutions
  • Consider cyber insurance

Cyber risk is now a permanent feature of our lives, and increasingly so for businesses.  You need to understand and manage not just the risk to your own business but also satisfy yourself that the businesses you depend on are also taking the risks seriously.

Magda de Jager is a cyber security expert within the firm’s Business Technology Consulting team.

If you have any queries in relation to cyber security for your business and how you can best protect against cyber crimes contact:

Magda de Jager
Cyber Security Manager
0131 473 3500
Magda.deJager@scott-moncrieff.com

 

 
Scott-Moncrieff joined Campbell Dallas in May 2019 to become part of the CogitalGroup.

The information in this blog should not be regarded as financial advice. This is based on our understanding in December 2019. Laws and tax rules may change in the future.

Latest IR35 changes will trigger soaring employment costs for businesses

November 26, 2019

New IR35 ‘off-payroll working rules’ due to come into force next year could cause a major increase in employee costs and trigger major cash flow problems for larger companies that routinely use contractors.

Craig Coyle, Tax Partner, says; “From April next year companies who engage workers ‘off-payroll’ and have a turnover of more than £10.2m will have to determine the employment status of that worker and, where required, withhold UK tax and National Insurance from their pay. The IR35 rules are aimed at those individuals working through personal service companies (PSCs) who would otherwise be considered as employees.”

The new rules will apply to companies defined as meeting at least two of the following:

• Turnover in excess of £10.2 million
• £5.1 million or more on the Balance Sheet
• More than 50 employees

Smaller companies operating below these thresholds will not be affected by the increased costs and bureaucracy of administering the new rules.

The new rules will have a significant impact on companies that routinely engage large numbers of contractors. Sectors that commonly engage contracting staff include banking, property and construction, media, entertainment and IT.

In addition to an increased compliance burden, companies will face increased labour costs from Class 1 Secondary National Insurance Contributions. They are also likely to have to face demands from workers for larger payments to protect their take-home pay. Craig Coyle estimates that a contractor previously earning £30,000 a year from a business in a self-employed capacity could cost the business as much as £10,000 in extra charges for income tax, NIC and pension contributions.

The soaring costs to businesses arising from the new rules could encourage behavioural change by businesses to avoid breaching the new thresholds, and hence limit additional income to HMRC and act as a cap on growth.

Craig Coyle says: “There will be a considerable financial incentive to downsize or create new businesses that fall beneath the thresholds and avoid the significant financial bureaucracy and costs of the new rules. We are also unlikely to see a reduction in PSCs as contractors align themselves with SMEs that avoid the new rules. Businesses that grow, or take on substantial contracts, could adapt by creating new corporate entities or separate trading subsidiaries.”

Those companies affected by the new rules will be required to determine the employment status of the worker, however HMRC will decide whether they agree with the assessment made. There are several complex indicators that will guide the decision, including whether the company or the employee provides the tools for the job, how the worker will be paid for their services and their exposure if the company experiences financial problems.

Craig Coyle urges companies to start planning as soon as possible: “These new rules will have a significant impact on the already hard-pressed construction industry, and we would encourage all property and construction businesses to familiarise themselves with the new rules as soon as possible. Those businesses that already fall into the new thresholds should review their contracting arrangements, budget for increased costs and consider alternative methods of engaging with contractors. Failure to comply with the new rules could be costly, or worse.”

It is recommended that you check HMRC’s new online ‘Check Employment Status for Tax’ (CEST) tool, which will allow businesses to determine worker status:

https://www.gov.uk/guidance/check-employment-status-for-tax

If you have any queries, please contact your usual Campbell Dallas advisor.

Craig Coyle - qualified Chartered Tax Advisor and a Chartered Accountant

 
 
 

 

 

Craig Coyle

craig.coyle@campbelldallas.co.uk

0141 886 6644

Brexit and the direct tax implications

November 6, 2019

The UK now has an extended deadline of 31 January 2020 to achieve Brexit as the country enters a 6 week period of campaigning in the run up to a General Election on 12 December 2019. Business should review how Brexit will impact them and in this update we consider the direct tax implications for companies.

The three areas we will consider are EU Directives, EU State Aid and UK Companies in International Structures.

EU Directives

Three main directives issued by the EU have a bearing upon UK direct taxes. These are the Parent & Subsidiary Directive; and the Interest & Royalties Directive; and Mergers Directive.

The Parent & Subsidiary Directive operates so as to prevent withholding taxes on dividends between EU companies where there is significant participation. Upon leaving the EU this could mean that UK companies find withholding taxes being applied on dividends received. Of course, we do still have tax treaties with each country which could limit this effect. Due to the uncertain landscape, groups should urgently consider whether there is a case for accelerating dividends from their EU subsidiaries.

The Interest & Royalties Directive similarly prevents withholding taxes on payments between EU companies. As with dividends we would therefore need to revert back to tax treaty rates with the individual countries and groups should urgently consider whether there is a case for accelerating royalties and/or interest payments.

The Mergers Directive essentially works so as to ensure cross border mergers within the EU are offered the same tax breaks as wholly UK mergers. This of course seems perfectly sensible in the context of the EU model and therefore the UK did legislate to comply with the directive However with the UK ceasing to be a member state of the EU, the domestic legislation would not provide protection for UK companies. Therefore, any group presently undergoing restructuring or merger transactions and expecting to benefit from this Directive should urgently review their position.

State Aid

Whilst the loss of application of EU Directives could mean a potential tax increase for UK companies, there could be some better news from the UK no longer being bound by EU rules on State Aid limitation. In particular, the UK government could potentially make the following tax reliefs more generous:

• Research & Development Tax Credits (R&D)
• Enterprise Investment Scheme (EIS) relief
• Enterprise Management Incentive (EMI) share options
• Venture Capital Trust (VCT) relief.

UK Companies in International Structures

Notwithstanding Brexit, the UK remains a very tax effective holding company regime, with key exemptions for certain gains realised and dividends received.

Coupled with a main rate reducing to 17%, exemptions for overseas branch profits, and no withholding tax on dividends paid, the UK continues to be competitive in attracting international groups.

In the meantime, if you would like to discuss the potential implications for your own business, please get in touch with your usual Campbell Dallas contact.

Mark Pryce
mark.pryce@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in November 2019. Laws and tax rules may change in the future.

Tax relief for farmers and landowners

October 21, 2019

Farmers and landowners have enjoyed a tax system that has allowed succession to take place with little or no tax liability. Generous reliefs from Inheritance Tax (IHT) and Capital Gains Tax (CGT) are available, and even on death the family farm usually passes to the beneficiaries with little or no tax due.

The Office for Tax Simplification (OTS) recently reported to the Chancellor outlining eleven recommendations for the reform of IHT, therefore some changes to these tax reliefs may be ahead.

What might these changes look like?

The OTS reported findings that show IHT is little understood, and when you consider that fewer than 25,000 estates are liable to IHT each year, this is perhaps not surprising. This figure represents less than 5% of deaths, however more than 10 times as many estates are required to complete and submit forms.

The recommendations cover three primary areas – lifetime gifts, the interaction between IHT and CGT, and businesses and farms. Many people are aware of the 7-year clock that starts when one individual makes a gift to another. Many people are also aware of the annual IHT exemption of £3,000, a figure which hasn’t changed since the 1980s. The OTS has recommended replacing the annual exemption and the marriage gifts exemption with an overall personal gifts allowance, and recommended that the level of this exemption and the small gifts exemption are reviewed. There is also a recommendation to reform the normal expenditure out of income exemption or replace it with a higher personal gift allowance.

A further key recommendation is a reduction in the 7 year period to 5 years, along with the abolition of the taper relief provisions that apply if tax becomes payable on a gift that has failed the 7 year test. The taper relief provisions are complex and not easily understood.

The second area considered by the OTS relates to the interaction between IHT and CGT. The OTS has concluded that the complexity of this interaction can distort decision making. Currently there is generally no CGT on death. Instead, assets form part of the estate subject to IHT and the value of the assets passed to the beneficiaries is rebased to the market value at the date of death. This means, for example, assets that are inherited by a spouse are free of IHT and can be sold shortly after with little or no gain over the date of death value. There is therefore no CGT due either.

The OTS has therefore recommended that the CGT rules be amended rather than the IHT ones, so that assets covered by any sort of IHT exemption will not be rebased to market value on death but will be inherited at the deceased’s original base cost. This would mean if they were sold by the recipient there would be a far larger gain, most likely giving rise to a capital gains tax liability.

If any of these recommendations are followed through by the Government, there are likely to be winners and losers. Whilst the reduction in the 7 year period following a gift would certainly be welcome, the change to the rebasing provisions would almost certainly see the tax liability of beneficiaries rise substantially, perhaps resulting in fewer disposals of inherited assets.

Based on current political uncertainty, a new Government could take a more radical approach. A “wealth tax” is a realistic option and probably a vote winner. Several European countries have adopted a wealth tax, where individuals pay an annual tax based on their total wealth or property owned.

Our advice to farmers who have succession options available is to make use of the generous tax reliefs available as they may not be available if legislation changes.

If you have any queries please contact your usual Campbell Dallas advisor.

Andy Ritchie
andrew.ritchie@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in October 2019. Laws and tax rules may change in the future.

Perth accountancy firm achieves 60% growth

October 14, 2019

A pioneering apprentice and graduate trainee recruitment programme and a strategy of developing internal talent has helped drive expansion of the Perth office of fast-growing accountancy firm Campbell Dallas.

The Perth office currently generates fee income of more than £4m, an increase of 60% since 2017 when Campbell Dallas opened a new £1m office in Perth city centre.  Total staffing has risen to 5 partners and 61 staff, and a new recruitment drive is planned for additional professional staff at all levels.

The Perth office currently has 19 trainees working towards accountancy qualifications, and overall 25% of the staff currently are completing a professional qualification.

Andy Ritchie, Head of Campbell Dallas’ Perth office said:

“The last two years have seen rapid expansion of our business in Perthshire, and the decision to focus on developing our own talent and supporting an extensive trainee programme has been key to our growth.  Looking ahead, there are encouraging prospects for the Perth office and we have expanded our range of services and specialists in order to help our clients capitalise on the opportunities ahead.”

He continued: “The Perthshire and Tayside economies are highly diversified and several key sectors, such as tourism and services are performing strongly.  Several major infrastructure projects, such as the A9 upgrade, could help drive further economic activity, and complement the success of the Dundee Waterfront development.  The Perth office has the capacity to support further expansion and we plan to recruit additional staff during the next 6 months.”

John Todd, who recently qualified as an accountant in the Perth office, said: “The level of support and motivation I received from my team and the whole Perth office was crucial in helping me pass my professional exams.  The wider student network across the firm is also very helpful as it allows us to discuss exam tips and strategies and to benefit from the mentoring and advice that is on offer.”

In the last 5 years Campbell Dallas has recruited 119 apprentices and graduate trainees across Scotland.

Campbell Dallas and Scott Moncrieff recently merged, creating one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 600 staff working from 10 offices.

Andy Ritchie

Andy Ritchie

andrew.ritchie@campbelldallas.co.uk

01738 441 888

 

Tribunal rules that locum GP was entitled to sick pay and holiday

October 10, 2019

A judge has ruled that a locum GP who was working for an out-of-hours provider should have been treated as a worker who was eligible for sick pay and holidays following an appeal from the provider.

Under the current system of employment law, individuals are either employed, self-employed, or have ‘worker’ legal status. This determines whether they have access to employment rights such as sick leave, paid annual leave, protection from discrimination and national minimum wage.

In this case, Dr Narayan, regularly worked the same shifts, had no obligation to accept work and could take holiday when she wished to, while Community Based Care Health was not obliged to provide any work.

Community Based Care Health argued that Dr Narayan was self-employed and therefore not entitled to receive paid holiday. However, the judge reviewed 13 different factors – including equipment, indemnity, who supplied medication and the ability to work for other organisations – and concluded that she should have been classed as a ‘worker’.

It should be noted that there is a difference between employment tribunals and tax law. Worker status is not recognised in tax law and the doctor concerned in this case would have remained self-employed, with no consequent IR35 liability.

The Government has promised to introduce new tools to help individuals understand how to determine their status in light of upcoming changes to the off-payroll working rules by April 2020.

Practices need to be aware in light of this decision of the potential for locums that have a long-standing relationship with the Practice, to claim holiday pay over a number of years. It is therefore essential to have documentation in place in such instances that correctly set out each respective sides’ responsibilities.

If you have any queries please contact your usual Campbell Dallas advisor.

Neil Morrison
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in October 2019. Laws and tax rules may change in the future.

IR35 Off Payroll in the Private Sector Rules Published

September 27, 2019

The draft reforms for the off-payroll legislation, commonly known as IR35 have now been published by the Government and are contained in the Finance Bill 2019-20. These provide that private sector firms who enter into contracts or make payments to workers engaged through a Personal Service Company (PSC) on or after 6 April 2020 will need to check the individual’s “deemed” employment tax status.

Reforms in the public sector were introduced in April 2017 with the prospect of this extension into the private sector introduced in the 2018 Budget. The legislation will come into force from 6 April 2020.

Where the individual’s role does look akin to an employment type one the engager, agency or third party paying the worker’s company will need to deduct income tax and national insurance contributions (NICs) and pay Employer NICs.

The responsibility for determining whether the off-payrolling rules apply will move to the organisation receiving the individual’s services.

The proposed reforms
A company that qualifies as a “small” business will not be required to apply the new rules. In these circumstances there is no change and the PSC will assess their own IR35 position, as they are required to currently, and be liable for income tax and NIC deductions, as appropriate.

A company will be regarded as small for this purpose if it has two (or more) of the following:

• Turnover – not exceeding £10.2 million.
• £5.1 million or less on the Balance Sheet.
• Number of employees not exceeding 50.

Any business so identified as small using the above guidance will still be required to apply the new rules if it is a subsidiary of a large or medium sized parent.

Further, anti-avoidance provisions are intended to ensure a business will not be able to contrive a situation which artificially creates a small business exemption.

The impact

Where an individual works for a medium or large sized engager outside of the public sector, through their own PSC and falls within these rules:

• The party paying the worker’s PSC (the fee-payer) will be treated as an employer for the purposes of income tax and Class 1 NICs.
• The amount paid to the worker’s intermediary for the worker’s services is deemed to be a payment of employment income.
• The party paying the worker’s intermediary (the fee-payer) will be liable for secondary Class 1 NICs and must deduct tax and NICs from the payments they make to the worker’s intermediary in respect of the services of the worker.
• The person deemed to be the employer for tax purposes must remit payments to HMRC and to send HMRC information about the payments using real time information (RTI).

Client-led disagreement process

A status determination statement outlining the end-client’s IR35 status decision must be provided to both the contractor and any party directly engaging the contractor (typically an agent). Until this is provided the end user will remain responsible for collecting income tax and national insurance. If the contractor does not agree with the IR35 status decision, there is a new client-led disagreement process. This requires the end-client to review a decision and provide a reasoned response within 45 days. If this deadline is not met the end-client will assume the IR35 liability.

The responsibility to deduct the payments for tax and NIC are therefore effectively transferred from the fee-payer to the end-client if the end-client defaults. This is a crucial aspect; the end-client could quite easily find themselves in a situation where they are technically in breach of the rules through an administration mistake.

Guidance

HMRC will be publishing detailed guidance for organisations and both general and targeted education packages, including webinars, workshops and one-to-one sessions with businesses in particular sectors.

Improvements are also expected to HMRC’s Check Employment Status for Tax (CEST) tool and, following testing by legal and operational experts and stakeholders, are expected to be available later in 2019.

Good News

On a positive note the Government has confirmed that the reform is not retrospective and that HMRC will not carry out targeted campaigns for earlier years where a PSC falls within the new IR35 rules from April 2020.
Instead HMRC are indicating that they will be ensuring businesses comply with the reform for new engagements. As such, an organisation’s decisions about whether workers are within the rules should not automatically trigger an enquiry into earlier years.

Next Steps for Businesses

Businesses that are caught by the new rules must act now by carrying out employment status assessments of their contractor workforce and establishing suitable administration systems and protocols.

Whilst these reforms might seem somewhat draconian, there is no doubt that businesses will still be able to engage legitimate contractors who will fall outside of the new rules.

We can support a business through the entire process and are specialists in complex IR35 and employment status reviews.

If you have any queries, please contact your usual Campbell Dallas advisor or:

aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Proposed Inheritance Tax changes for Excluded Property Trusts

September 18, 2019

Draft legislation in Finance Bill 2019-20 includes changes which could result in higher inheritance tax charges for some excluded property trusts from the date of Royal Assent onwards.

The current position

Under current legislation, non-UK assets within a trust qualify as ‘excluded property’, meaning that they are outside the scope of UK IHT, where the settlor was neither UK domiciled nor deemed domiciled (by virtue of being a long-term UK resident) at the time the settlement was made.

Where non-UK assets are transferred between trusts, these will only be treated as excluded property in the second trust if the settlor of the second trust was neither UK domiciled nor deemed domiciled (as a long-term UK resident) when the settlement was made.

The 2017 Court of Appeal decision in Barclays Wealth Trustees (Jersey) Limited & Michael Dreelan v HMRC confirmed in relation to transfers between trusts that the ‘time the settlement was made’ refers to the initial creation of the settlement, not the date of the transfer. Therefore, excluded assets transferred between trusts created while the settlor was non-UK domiciled should retain their excluded property status.

A logical extension of this principle might suggest that when determining the excluded property status of later additions to an existing excluded property trust, only the domicile status of the settlor at the time the trust was created is relevant. However, the court did not specifically rule on this point.

What is proposed?

Draft Finance Bill 2019-20 clarifies that non-UK assets cannot be excluded property where the settlor was actually UK domiciled or deemed domiciled (as a long-term UK resident) at the time the assets were added to the trust (this is opposed to considering the domicile of the settlor at the time the settlement was first created).

In addition, it is proposed that non-UK assets transferred between trusts will not be treated as excluded property where the settlor was UK domiciled or deemed domiciled (as a long-term UK resident) when the transfer occurs.

The draft legislation was published on 11 July 2019 and was open for consultation until 5 September 2019. It was proposed that the legislation would apply to all chargeable events, being IHT ten year charges and exit charges, from the date of Royal Assent onwards. It is intended that this will be the case regardless of whether trust additions were made before or after the date of Royal Assent. The proposals for transfers between trusts are only intended to apply to transfers which take place on or after the date of Royal Assent, so do not have a retrospective effect.

Example

Ravi settled two offshore trusts, the first in 1995 and the second in 1998, when he was neither resident nor domiciled in the UK. He moved to the UK in 2001 and became deemed UK domiciled from 6 April 2017 as he had been UK resident in at least 15 of the previous 20 tax years. In 2021, the 1998 trust received a transfer of non-UK assets from the 1995 trust.

The next ten year anniversary of the 1998 trust will occur in 2028. Under the proposed new legislation, the funds added in 2021 will not be excluded property at this date as the transfer was made when Ravi was deemed UK domiciled. These funds will therefore be subject to a ten yearly IHT charge at a maximum rate of 6%. In addition, if any of the transferred funds leave the trust, they may be subject to an IHT exit charge. Relief would be available to reflect the fact that the property added in 2021 has not been held in the trust for the full 10 years.

The transfer of assets from another trust with the same settlor will also have ‘tainted’ the trust from an income tax and capital gains tax perspective, which could result in higher income tax and capital gains tax charges in the UK.

Had Ravi left the excluded property in the original trust, it could have continued to benefit from IHT protection as it was settled before he became deemed UK domiciled as a long-term resident. The trust would also have retained its protection for income tax and capital gains tax purposes, provided it had not been tainted in any other way.

Action points

Individuals considering settling non-UK assets into trust and offshore trustees should take advice to ensure that they preserve the excluded property status of assets currently held in trust and do not inadvertently fall foul of the new rules.

Offshore trustees should also notify affected clients of the changes.

Campbell Dallas has substantial experience in working with non-domiciled individuals and offshore trustees and can assist with matters such as the following:

• Maximising IHT protection where possible by advising upon the segregation of trust assets where transfers in and/or additions have previously been made.

• UK tax planning for additions to settlements. Where an individual has become UK domiciled or deemed domiciled as a long-term resident, particular care is needed when adding funds or value to trusts. In addition to the potential IHT consequences, settling new assets or adding value into an existing trust can ‘taint’ that trust such that it loses its protected status, with adverse income tax and capital gains tax implications. There may be alternative options which are more efficient from a UK tax perspective.

• UK tax planning for trust restructures, particularly in the light of the proposed changes which could result in assets transferred between trusts losing their excluded property status.

• Reviewing existing and proposed trust structures from a UK tax perspective.

If you have any queries please contact your usual Campbell Dallas advisor or:

aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

VAT update: HMRC policy U-turn on certain no-show deposits for tour operators

September 12, 2019

The VAT treatment of payments for unfulfilled supplies has been a topical area in VAT for many years. In the latest policy paper from HMRC dated 6 September 2019, HMRC has admitted to making an error when updating its policy affecting the Tour Operators Margin Scheme (TOMS).

Background

Prior to 1 March 2019, HMRC accepted that certain retained deposits for unfulfilled supplies were deemed to be compensation payments and outside the scope of VAT. This treatment was widely seen within the travel and hotel sectors.

Following the EU Court ruling involving Air-France-KLM, HMRC changed its policy advising that from 1 March 2019, output VAT would be due on all retained payments for unused services and uncollected goods. The policy change would be wide-reaching and HMRC changed many of its VAT Notices accordingly, including the TOMS VAT Notice 709/5 – where HMRC advised that cancellation fees and forfeited deposits should be included within the selling price under TOMS, which subsequently increased the VAT liability.

HMRC’s recent policy paper (Revenue and Customs Brief 9 2019), advises that HMRC made an error when changing the policy for TOMS supplies. The paper explains that the tax point rules under TOMS are different to other types of supplies, and certain deposits should still be excluded from the TOMS calculation.

Under TOMS, there are two methods of determining the tax point of supplies – Method 1 and Method 2. We have replicated these from the policy paper below:

•    “method 1 and account for VAT when the traveller departs or the accommodation is occupied”
•    “method 2 and account for VAT when taking payment if it exceeds 20% of the sale price – if they receive a deposit of 20% or less then the treatment in method 1 applies”

Opportunity

If you use TOMS Method 1, no tax point is created until the traveller departs or the accommodation is occupied, therefore you must not include deposits within the TOMS calculation for supplies which customers fail to take up. In addition, if you use Method 2, deposits representing 20% or less of the price of the supply should be excluded from the TOMS calculation.

If you have accounted for VAT on such deposits, then you should be entitled to a refund from HMRC.

If you think you could be affected by this policy change, or if you have any wider VAT questions, please contact:

martin.keenan@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

HMRC delays implementation of VAT reverse charge for construction businesses

September 10, 2019

HMRC has announced a one year delay on the implementation of VAT reverse charge to 1 October 2020. Whilst this is good news for construction businesses who were not yet prepared, it may cause additional work for those businesses who were ready to go.

HMRC has said they recognise that some businesses will have changed their invoices already to meet the needs of the reverse charge and cannot change them back in time. Therefore they will take the change in implementation date into account where genuine errors have occurred. This does not mean that businesses can continue to issue such invoices, and steps should be taken to revert to pre-implementation invoicing.

Also, where businesses have already opted for monthly VAT returns, they should reverse this as soon as possible.

Those businesses not yet ready for the original implementation date should now take advantage of the extra time available and consider the software changes required, and extra funding requirements – if applicable.

Veronica Donnelly - Chartered Tax Adviser and Associate of the Institute of Indirect Taxation

Veronica Donnelly

veronica.donnelly@campbelldallas.co.uk

0141 886 6644

 

 

The information in this article should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Will VAT now be added to Botox procedures?

September 3, 2019

A recent VAT tribunal decision has led to headlines such as “Botox is not a medical procedure so VAT will have to be added”.  However, this is not necessarily the correct interpretation and caution should be exercised.

Skin Rich lost at a VAT tribunal in June 2019 because some of its treatments were not diagnosed by a medical professional and for those that were, the court was not satisfied that the evidence produced was sufficient to prove a medical purpose for the treatments.

The test for medical exemption in relation to VAT remains the same; the supply must be made by a person on a medical register, or someone supervised by that person, and the treatment must be one of medical care. The appropriate records must be kept to evidence these treatments and their purpose, and it is on this evidence that HMRC will rely.

The Court agreed that a treatment may have a cosmetic benefit but this does not preclude it also having the principal purpose of protecting, maintaining or restoring health. This should have resulted in an agreement to VAT exemption except that the Court went on to say “on the facts we do not find that this principal purpose has been established”. The issue was ultimately one of record keeping and evidence.

On a more positive light, the case clarified that it is not necessary for medical practitioners to have detailed specialisms on their medical registrations in order to demonstrate the required expertise. They do, however, have to provide other evidence to demonstrate their qualifications, experience and training.

Also, the discussion around the provision of care in any hospital or state regulated institution provided some useful insights. In this circumstance, where injectables “were administered by trained practitioners to improve a client’s appearance and make them feel better about themselves,…such treatment is of a medical nature and can comprise ‘care’”.  This is useful for Care Quality Commission (CQC) or Healthcare Improvement Scotland (HIS) registered clinics.

Our advice continues to be for businesses to look very carefully at their record keeping and evidence of medical purpose. There are no shortcuts. Where you can clearly evidence a medical purpose then VAT is exempt.

If you have any queries, please speak to your usual Campbell Dallas advisor.

veronica.donnelly@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2019. Laws and tax rules may change in the future.

Getting a net bang for your buck?

August 30, 2019

Current exchange rates make investment in UK commercial property cheaper for overseas investors, but the tax environment is less friendly than it previously was.

The current exchange rate for US dollar investors in UK commercial property would seem to make investment in the sector from overseas an attractive proposition. At the time of writing, the exchange rate is £:$1.23. This compares to a rate of £:$1.66 just five years ago. To put this into context, a commercial building valued at £2.3m would now cost $1m less than it would have 5 years ago.

The investor still has to consider rental yields, capital growth and the risk of sterling devaluating further, but on paper the investment seems considerably (just over 25%) more attractive than it was back in 2014 – all other things being equal.

One thing which is not equal, however, is the tax treatment of the investment in UK commercial property.

April 2019 changes

Since 6 April 2019, gains made on the disposal of UK commercial property will be taxed on non-resident individuals at 20% and (since 1 April 2019) on non-resident entities at corporation tax rates (currently 19%). The rules can also apply where the shares in a UK company which is “property rich” are disposed of.

Properties held prior to this date are rebased to their market value on the date on which the new regime was introduced, such that only increases in value from April 2019 will be taxed. It is therefore worth obtaining a valuation for any property held at that date as this will be helpful on eventual disposal.

The benefits of holding UK property through offshore structures have therefore been removed, and it is worth considering moving structures onshore to reduce the costs of maintaining offshore structures.
Those with such structures should seek advice to consider what the best way forward is before there is time for significant gains to accrue.

If you have any queries, please speak to your usual Campbell Dallas advisor.

craig.coyle@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

VAT on cottages for farms, estates and holiday lets

August 26, 2019

The VAT rules on rented houses on Farms and Estates can be complex. If a house is occupied rent free by an employee who is engaged in taxable activities of the business then VAT on repairs and improvements can be recovered on your VAT return in the usual way. If the house is let to the employee or to a third party, the rental income is exempt and therefore partial exemption rules should be followed.

Partial exemption can be complicated but, in simple terms, if the VAT inclusive spend on cottage repairs and improvements along with any other ‘exempt’ expenditure exceeds £45,000 in one VAT year, then all the VAT on the costs will be dis-allowed. This ruling is often misunderstood because spending £45,000 on a rental property is not a regular occurrence.

Normally Farms and Estates spend modest amounts on cottage repairs and therefore fall under de-minimis rules and receive full VAT recovery without having to apply the rules. If there are regular projects to renovate and upgrade rental properties then it can make sense to have a rolling program doing one house per partial exemption year to take advantage of the £45,000 upper limit under partial exemption. If the house has been empty for over two years or you are converting a non-residential property into a residential one, then the VAT could be charged at 5% instead of 20% giving an immediate saving.

Holiday lets

As the rural tourism market has grown, there has been an increasing trend to develop holiday letting businesses on Farms and Estates. The supply of holiday lets is a service and a standard rated supply for VAT purposes, unlike the letting of a surplus cottage to a third party. For that reason it is not unusual to separate the holiday letting business from the VAT registered Farm or Estate business for VAT purposes, but any planning needs to take into account the initial capital expenditure incurred to create the holiday lets.

This type of VAT planning applies to Farms and Estates with perhaps two to three holiday lets. However, for those businesses looking to develop the luxury caravanning and camping sector, the likelihood is the turnover associated with that will exceed the VAT registration threshold and the VAT rules will apply. There is specific VAT legislation dealing with caravan pitch fees and any rural business involved in this sector would be well advised to ensure they are applying the rules correctly.

We recommend you seek advice from a VAT specialist when carrying out work to any property. Our VAT team at Campbell Dallas would be happy to discuss your project with you and advise on how to minimise your costs. Please contact your usual Campbell Dallas advisor or:

ian.craig@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

Is the new ‘Sustainability’ model for GP premises unsustainable?

August 23, 2019

Younger GPs seem to be turning their backs on the proposed ‘sustainability’ financial model for GP premises. Neil Morrison, Head of Medical with Campbell Dallas, explores the issues, the pros and the cons.

Aside from pensions, the other hot financial topic across Scotland’s medical profession is the proposed “National Code of Practice for GP Premises”.

The code was first issued in Scotland in November 2017 and is part of the new GP contract introduced in April 2018.

The document outlines the Scottish Government’s strategy to create a sustainable environment and market for the ownership and use of GP premises. The ownership and transfer of ownership of medical ‘bricks and mortar’ has become an increasingly onerous issue. Traditionally, when they retired, GPs would sell their equity in a medical practice building to a younger partner.

Owning and managing premises is time-consuming, costly and bureaucratic. GPs want to focus on patient care rather than on thorny and draining issues such as valuations, dilapidations, surveys and roof repairs. The premises problem is proving an issue for younger GPs and disrupting the traditional transfer of premises ownership model. Essentially, too many younger GPs do not want to know.

The new premises strategy aims to mitigate the premises problem by gradually moving towards a model where GPs do not own (or lease) their premises.

The financial mechanism is the new ‘GP Sustainability Loans’. From 2018 to 2023 each property-owning practice will be eligible for an interest free loan of up to 20% of the value (assessed on an existing use basis). Further loans of up to 20% of the premises value will be available every 5 years thereafter.

As capital repayment is not required and the loans are interest free it seems an attractive proposition. Furthermore, the GP practice retains the full entitlement to notional rent, providing for very positive cash flow.

However, problems began to surface when property-owning practices started to receive initial valuation letters based on the Sustainability Loans. The valuations tended to be considerably higher than those provided by independent surveyors who were using the same ‘Existing basis’ methodologies. The long-term funding implications for the Scottish Government were shaping up to be unsustainable!

If it is too Good to Be True
The subsequent lack of detail and the commitments required from GP led to a growing concern, particularly amongst younger GPs. More and more were mulling over the viability of the new model. If it looks too good to be true, then it probably is!

Whilst virtually all property-owning practices registered an interest in the Sustainability Loan Finance, a large number have chosen not to progress an application.

The younger GPs are most concerned about the potential problems and issues. The feedback we are receiving from our wide medical client base indicates widespread anxiety about the risk, which is in turn acting as a blockage to the GP premises market. If younger GPs are unwilling to adopt the proposals, it will impact significantly on the sustainability of GP practices, GP recruitment and career progression, and in turn on medical care.

The Scottish Government clearly has a major problem on its hands.

In the meantime, the good news for younger GPs is that the traditional providers of finance for GP practices, namely banks, remain very keen to lend. The terms offered compare favourably with virtually every other business sector with finance available up to 100% of property values, a lower rate of interest and capital repayment profiles over many years.

As a result, more and more GP Practices, including many of our clients, are deciding to renew their loan facilities with their banks rather than entertain the Sustainability Loan finance product.

Arguably, more considered consultation could have helped prevented the ‘Sustainability Loan’ proposals from looking increasingly unsustainable.

The Medical Practice team at Campbell Dallas has extensive experience researching, negotiating and managing the finance and loan requirements of GP practices.

For further information, please contact Neil Morrison.

Neil Morrison
neil.morrison@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

The Office of Tax Simplification’s (OTS) review of Inheritance Tax

August 22, 2019

The Office of Tax Simplification (“OTS”) has recently published their second report following the review of Inheritance Tax (“IHT”) which included 11 recommendations. These recommendations can broadly be categorised into three areas, namely, lifetime gifts; interaction with Capital Gains Tax (“CGT”); and IHT reliefs associated with businesses and farms. Some of the key recommendations have been summarised below.

Lifetime Gifts – time limits and taper

When an individual makes a gift to another individual for IHT purposes this gift is only a Potentially Exempt Transfer (“PET”) because it is necessary for the donor to survive seven years from the date of the gift to be completely free of IHT. If the donor does not survive the gift by seven years the IHT that may be chargeable is reduced on a sliding scale (known as taper relief) depending on how long they survived.

At the time of death, obtaining information relating to gifts made seven years ago can be difficult as it is difficult for executors to obtain bank statements and other financial records more than six years old.

Furthermore, the application of taper relief is complicated and not understood properly – it is a reduction in the tax payable not a reduction in the value of the PET.

OTS therefore recommends that taper relief should be abolished and shorten the survivorship period from seven to five years.

Lifetime Gifts – normal gifts out of income

Another significant reform that was included in the report relates to exemption for normal expenditure out of income. Where an individual has excess income, they can gift that excess income free of IHT if a pattern can be established.

OTS recommends either this relief is reformed to reduce the administrative burden in calculating the excess income. One of their suggestion is to limit the amount of income to a fixed percentage based on the most recent tax return.

The alternative recommendation is that the relief is abolished altogether and replaced with a higher personal gift allowance. OTS has not suggested a limit but a £25,000 personal gift allowance apparently covers the value of 55% of all normal expenditure out of income claims.

Interaction with CGT

Currently, when an individual inherits assets on death, these assets benefit from a market value uplift for CGT purposes so that the inherent gain is wiped out. The reason for this uplift is to mitigate double taxation on the basis that the asset would be subject to IHT on death. Therefore, the individual inheriting the asset does not pay CGT in relation to the growth in value associated with the asset whilst it was previously owned by the deceased.

The capital gains uplift applies to all assets and therefore it also applies to assets that would not otherwise be subject to IHT by virtue of certain exemptions. These exemptions could include spouse exemption, or other IHT reliefs such as Business Property Relief (“BPR”) and Agricultural Property Relief (“APR”). Where assets qualify for IHT reliefs, the recipient of the inheritance would inherit the asset free of IHT and is potentially able to sell the asset with no CGT. This circumstance gives rise to zero taxation.

The OTS mentions in their report that the CGT uplift on death distorts decision making when it comes to giving assets away. This is because, if an asset qualifies for IHT relief, it is usually more beneficial for the individual to pass these assets on death to benefit from both the IHT exemption and the CGT uplift.

The OTS therefore recommends removing the CGT uplift for assets that benefit from IHT exemption so that the recipient acquires the asset with the original acquisition cost of the deceased.

IHT reliefs

Many business owners and farmers have relied on a form of IHT relief called Business Property Relief (BPR) and Agricultural Property Relief (APR) when planning to pass their business to the next generation. One of the main conditions for BPR to apply is that the business must be wholly or mainly trading. This test considers a trading business to be one where its trading activities is greater than 50%.

For CGT purposes, when an individual gives away or sells their business to a third party, they may qualify for CGT reliefs such as gift relief or Entrepreneurs’ Relief. To qualify for such reliefs, the business must also qualify as a trading business. However, unlike BPR, to qualify for CGT reliefs the bar for assessing the trading activities is higher as it is necessary for the business to be substantially trading which HMRC suggests is greater than 80%.

OTS recommends that the Government should consider whether it is appropriate for the business test to be different for IHT and CGT.

Summary

It is still early days whether these recommendations may be introduced as law but they are certainly suggestions the Government will consider in an attempt to simplify the IHT regime. This can only mean that changes are afoot and it will be necessary to consider the impact on an individual’s estate and review one’s Will. Please get in touch with your usual contact for further details regarding the above or information relating to the other recommendations contained in the report.

If you have any queries on IHT, please speak to your usual Campbell Dallas advisor.

Aileen Scott
aileen.scott@campbelldallas.co.uk
0141 886 6644

The information in this article should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

‘No quick fix’ for Scots’ doctors in UK review of medics pensions

August 8, 2019

Doctors and GPs in Scotland are likely to have to wait for some time before they see any positive changes to their taxation as a result of a commitment by the UK government to review how doctor’s pensions are taxed, a leading accountant specialising in the medical sector has warned.

Neil Morrison, Head of Medical with Campbell Dallas said:

“It is good news that Government ministers are proposing to change pension rules so that doctors can work additional shifts and treat more patients without suffering financially. A new consultation will be undertaken by the Department of Health and Social Care on the new proposals which will give senior doctors flexibility over the amount their personal and employer pension contributions.

“It should allow senior clinicians to do additional work without breaching their annual allowance and incur higher taxes. The Treasury will also review the highly unpopular tapered annual allowance, which has also led to much higher taxes for doctors. However, this whole process is going to take a considerable amount of time to finalise and for new pension rules to be adopted. As such, there are no quick fixes for Scottish doctors,” said Neil Morrison.

He added: “Doctors and GPs in Scotland will have to continue managing their income, pension contributions, finances and tax within the existing tax framework. We have many clients working in the medical sector that have suffered significantly higher tax bills in the last couple of years, and it is likely that these challenges will remain for the time being. It is essential that doctors ensure they arrange their income and pension in the most tax efficient manner.

“The situation is also slightly different in Scotland, and it will be up to the Scottish Government to decide how best to adopt the proposed revisions to pension rules. Unfortunately, this will also add further time to the process, however, we should welcome the fact that the current unpopular pension regime is being overhauled.”

Neil Morrison - a Partner in our Perth office

 

Neil Morrison

neil.morrison@campbelldallas.co.uk

01738 441 888

 

The information in this article should not be regarded as financial advice. This is based on our understanding in August 2019. Laws and tax rules may change in the future.

Major changes to the ability to reclaim import VAT

July 30, 2019

HMRC has issued Revenue & Customs Brief 02/19 which seeks to clarify its policy regarding who can act as the importer of record and recover the associated import VAT.

The brief advises that HMRC has become aware of situations where agents and non-owners of goods are acting as the importer of record and reclaiming import VAT. HMRC has confirmed that the correct procedure is for the owner of the goods to act as the importer of record and to seek VAT recovery in accordance with section 24 of the VAT Act 1994.

HMRC accepts that its previous guidance was unclear on the correct procedure, therefore it will not take retrospective action provided the parties involved acted in good faith and there is no risk of duplicated VAT claims.

HMRC’s new policy will be adopted from 15 July 2019. Claims for import VAT recovery will only be permitted where the legal owner of the goods acts as the importer of record and is entitled to reclaim the import VAT.

The clarification represents a significant change for organisations involved in the importation of goods.

How could you be affected? 
• If you purchase goods from outside the EU where ownership of the goods passes to you following importation into the UK (for example on incoterms DDP delivered duty paid), the supplier of the goods will be responsible for importing the goods into the UK, and the customer can no longer act as the importer of record for VAT purposes. The supplier may also have a requirement to register for UK VAT.

• If you purchase call-off stock where title to the goods remains with the supplier until you call-off following importation into the UK, the supplier would be responsible for importing the goods and the customer can no longer act as the importer of record for VAT purposes. This could result in wider commercial and contractual issues between the parties. There are customs procedures such as ‘customs warehousing’ which can help to mitigate the exposures.

• If you are involved in work on goods where the goods are temporarily imported into the UK and then exported back to the owner, you should consider the use of VAT Duty relief schemes such as Inward Processing Relief.

Organisations should consider the impact of these changes and make arrangements to ensure contractual terms are constant with the VAT policy and any costs and disruptions are minimised.

We are pleased that HMRC are unlikely to take retrospective action prior to 15 July 2019. If you have received assessments from HMRC within the last 4 years in relation to import VAT recovery, our team are on hand to help with any queries you may have. There may be scope to query assessments where import VAT was reclaimed in circumstances similar to those described in the brief.

This represents a significant change which could adversely affect suppliers and customers in the supply chain both practically and financially. If the UK leaves the EU without a deal, the impact of this change may well be greater.

For more information, please speak to either Martin Keenan within our Indirect Tax team or your usual Campbell Dallas contact.

martin.keenan@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in July 2019. Laws and tax rules may change in the future.

Aberdeen-based Williamson and Dunn to join Campbell Dallas

July 26, 2019

Long-established Aberdeen accountancy firm, Williamson and Dunn, is to join one of the UK’s leading business advisory groups Baldwins to become part of the fast-growing CogitalGroup on 2 August. Based on West Craibstone Street, the firm was founded in 1880, employs 5 partners and 36 staff and has a fee income of more than £3m.

In October 2017, Campbell Dallas and Springfords became the first Scottish firms to join Baldwins followed by Sinclair Scott in May 2018 and Scott-Moncrieff in April 2019.

Baldwins, a Cogital Group company, now has 88 offices throughout the UK as part of its national strategic expansion plan, employing 2,700 staff with an annual turnover of approximately £200m.

This latest deal underlines Baldwins’ further investment in Scotland as all staff and partners will transfer to Campbell Dallas, joining one of Scotland’s most innovative and fastest growing accountancy practices with 47 partners, nearly 550 staff and a combined fee income of circa £40m. The enlarged business will trade as Campbell Dallas from the West Craibstone Street offices whilst the Campbell Dallas office on Carden Place, which employs 2 partners and 10 staff, will continue business as usual.

After Baldwins’ deal with Campbell Dallas, plans were announced to drive growth in Scotland through a combination of acquisitions and organic expansion.

Williamson and Dunn provides accountancy, advisory, tax, audit, financial planning and compliance services to more than 1,000 owner managed businesses, entrepreneurs, and private individuals. The firm is known for its expertise in the family business, farming, fishing, property, healthcare, construction, estates and charity sectors.

George Flett, senior partner of Williamson and Dunn said: “Joining Baldwins and the CogitalGroup will enable us to provide our clients with access to a full range of accountancy services and specialists across Scotland, the UK and internationally. We will also gain access to industry-leading financial technology that will allow us to provide outstanding customer service. Our staff will also gain access to challenging and rewarding career opportunities at all levels across the wider group. The accountancy market is changing rapidly, and we hope our clients will quickly see the benefits of the deal.”

Chris Horne, managing partner of Campbell Dallas said the deal was a good move for both firms: “Williamson and Dunn is a highly respected Aberdeen firm with a long history of advising businesses and private clients, and we are delighted to welcome them to Campbell Dallas. The deal provides Campbell Dallas with further scale to expand our client base in Aberdeen and throughout the North East and provides staff with the chance to develop their careers across a larger business. Working together, we will offer the best technology driven services to our clients.”

Scott-Moncrieff joined Campbell Dallas in April this year, adding 16 partners and 220 staff. Campbell Dallas is now one of the largest full-service accountancy firms in Scotland outside of the ‘Big 4’.

Shaun Knight, Board Director at Baldwins, added: “Expanding in the North East is a significant move and underlines our commitment to further growth in Scotland. We welcome our new colleagues and look forward to working together as we continue to build a progressive and disruptive business in the fast-changing accountancy market.”

Entries open for young entrepreneur awards

July 18, 2019

Scotland’s next generation of entrepreneurs are being urged to enter a competition that offers substantial cash and mentoring support to kick start their business.

The KickStart awards, which are open to 18 to 25-year-old entrepreneurs, offers the winner a grant of £10,000 along with £10,000 worth of mentoring and accountancy advice. Two runners-up will each receive £5,000 worth of mentoring and advice.

Chris Horne, Managing Partner, said: “KickStart offers a generous package of cash and advice to young Scots’ entrepreneurs with an exciting business or innovative idea.

“Scotland is famed for its young entrepreneurial talent but with so much economic uncertainty at present it is essential that we support the next generation of entrepreneurs as they build their businesses. We hope as many new Scots’ entrepreneurs will take up the challenge and showcase their talent, and their ideas, on a national stage.”

Ten entrepreneurs will be interviewed about their ideas, with a final three being invited to present to more than 400 people at Edgbaston Cricket Ground in Birmingham on Thursday, November 14.

Last year’s Scottish winner, Michael Harkins from Livingston, landed the £20,000 investment for his shell-shaped swimming aid, known as Turtle Pack, that sits on a child’s back and allows them to swim freely without the need for armbands and handheld floats.

Michael said: “This money is going to go a long way and allow me to scale up the manufacturing of the product so I can fulfil large scale orders.”

David Baldwin, Director at Baldwins, added: “The KickStart programme has developed an enviable reputation for developing talented home-grown entrepreneurs, and the growing standard of entries that we receive year-on-year shows us that there is still more to come.

“Our 2018 winner Michael Harkins was a classic example – he spotted an issue with existing swimming apparatus while going about his daily routine as a swimming instructor, and with the right help and advice, he has turned a concept into a product that is now on the market.”

The deadline to apply for the Awards is Saturday, August 31. To enter, click here.

New talent programme success drives 25% expansion of Campbell Dallas Glasgow office

July 12, 2019

The success of Campbell Dallas’ pioneering apprentices and graduate trainee recruitment programme has resulted in the firm announcing a 25% expansion of the Glasgow office at Braehead by 4000 sq. ft with the capacity for up to 80 staff.

The internal transfer of 30 staff from the existing ground floor offices together with 15 new apprentices and graduate trainees being recruited in 2019 under the Campbell Dallas’ ‘Earn and Learn’ next generation development programme will account for around half of the additional space.

Since 2013 Campbell Dallas has recruited 119 apprentices and graduate trainees, including a record intake of 13 school leavers joining in 2018.

In addition, a recruitment drive for additional professional staff at all levels is expected to see the extra space fully occupied by the year end, taking staff working from the Glasgow office to more than 200. The firm is investing over £250,000 on the installation of utilities, cabling, technology, work-stations and office equipment.

Peter Gallanagh, partner in charge of the expansion, said: “The extra space will be a huge asset to the Glasgow office, which has seen double digit organic growth over the last five years. The additional capacity will allow us to continue our strategy of investing in our people, the latest technology, office systems and mobile working facilities.”

Top 100 Global listing for Campbell Dallas high flyers

July 10, 2019

David Booth, a newly appointed partner with Campbell Dallas, and Shahbaz Mirza, Campbell Dallas’ Digital Transformation Leader, have been named as rising stars in the ICAS Top 100 Young global CAs, a prestigious list of emerging talent identified by ICAS as the next leaders in the accountancy profession.

Peers across the industry were asked to nominate CAs under 35 that they believed to be excelling and showing leadership in their careers, thereby representing the best of ICAS across business, industry and public life.
Aberdeen-based David Booth, who was appointed a partner on 1st July, specialises in advising SMEs, owner managers and private equity backed businesses across a range of sectors including farming, oil and gas, retail, construction and property.

Glasgow-based Shahbaz Mirza is driving Campbell Dallas’ digital and cloud accounting offering. He has delivered digital innovation strategies for many government bodies and has extensive experience advising FinTech businesses in the UK and Middle East. This is the second year he has been named in the top 100 global CA’s list.

Chris Horne, Managing Partner at Campbell Dallas said, “We are delighted that David and Shahbaz have been recognised by ICAS as being amongst the best emerging talent within the accountancy profession. At Campbell Dallas we have a proven track record in developing emerging talent across the business and the achievements of David and Shahbaz reflect the quality of our people and the firm’s commitment to supporting our staff as they build their careers”.

Debbie Brodie promoted to Director in personal insolvency team

July 9, 2019

Campbell Dallas has promoted Debbie Brodie to the new post of Director within the firm’s Glasgow-based personal insolvency team. In the new role she will be responsible for directing the personal insolvency team and developing the range and scope of services provided by the firm in the personal insolvency market.

Debbie has more than 16 years experience of providing specialist advice and management of personal debt issues for a wide range of clients in Scotland. She has also played a key role managing the growing personal insolvency team, which consists of specialist debt advisers and insolvency experts. She has experience in all forms of statutory personal insolvency, the Debt Arrangement Scheme and post-appointment trading cases.

Commenting on her promotion, Debbie Brodie said: “I am delighted to have been promoted to the position of Director. Personal Insolvency is a highly complex area in which we are dealing with frequent changes in legislation whilst working with a wide range of clients who are often facing difficult issues. The team at Campbell Dallas adopts a very sensitive, client-focused approach, and I look forward to continuing to grow the department and extend our range of services.”

Commenting on her appointment, Derek Forsyth, Head of Campbell Dallas Restructuring and Insolvency department said: “Debbie is a major asset to the firm and in particular to our personal insolvency clients and to the team of specialist staff that she has carefully developed over the years. She has also made a significant contribution to the expansion of our personal insolvency department and to Campbell Dallas’s standing as a major player in the personal insolvency market. As such her promotion to Director is very well-deserved.”

Campbell Dallas announces new Partner appointments to support Aberdeen and Stirling growth

July 1, 2019

Campbell Dallas has appointed David Booth and John Gold as partners effective 1st July as the firm ramps up plans to expand the Aberdeen and Stirling offices. The new partner appointments are the first to be announced by the firm following the merger with Scott-Moncrieff in late April.

Based in the Aberdeen office, David Booth is a qualified CA specialising in advising owner managers and private equity backed businesses across a range of sectors including farming, oil and gas, retail, construction and property. He joined Campbell Dallas in 2018 from a Big 4 firm since when he has worked closely with Aberdeen senior partner Ian Williams to expand the client base and develop the firm’s services. David Booth comes from a well-known local farming family and has extensive knowledge of the business issues facing the rural sector.

John Gold is both a qualified CA and a Chartered Tax adviser. He is based in the firm’s Stirling office where he specialises in advising SME’s and owner managers on tax and financial strategies including succession planning, IHT and wealth planning. He qualified as a CA with Campbell Dallas in 1999 and has played a key role driving the growth of the Stirling office.

Commenting on the promotions, Scotland Managing Partner Chris Horne said: “David and John have made a major contribution to the growth of the Aberdeen and Stirling offices and played a key role in delivering excellent client service. Campbell Dallas, as part of the CogitalGroup, is leading the change in the profession as compliance becomes more automated and valued accountancy services becomes more advisory focused. Great technology still needs great people and I am delighted that John and David will be joining the partner group at Campbell Dallas to help deliver further growth.”

Following the new appointments there are now 47 partners across the business. The recent merger between Campbell Dallas and Scott-Moncrieff created one of Scotland’s largest business advisory firms with a combined fee income of around £40m and employing over 500 staff working from 10 offices.

Construction SMEs face mounting pressures

June 28, 2019

The Construction industry is an important part of the Scottish economy, employing around 175,000 people with an annual output value of around £14bn.

Despite this, some recent high profile insolvencies and reports highlight an increasing number of small and medium sized construction companies are showing signs of critical distress, once again drawing some negative headlines for the sector.

Concerns about the UK economy and whether it can withstand a no-deal Brexit, coupled with longer running issues such as high import costs and skilled worker deficits, have been cutting through and impacting key investment decisions. A recent report by the Federation of Master Builders highlighted that the first three months of 2019 saw the first fall in workloads for SME construction firms in six years.

In addition to the ongoing political uncertainty and its impact on workload, there are many other challenges facing SME businesses in the sector. Labour shortages and rising material costs are eating into margins, and intense competition for the little work that is being put out to tender is forcing contractors to bid exceptionally low.

With increased pressure on wages, an expected increase in material prices and still the widespread issue of poor payment performance, it is an industry with real cause for concern.

Changes to the way in which construction businesses will account for VAT, which come into effect from 1 October 2019, will add to these existing pressures for a large number of sub-contractors in the supply chain. Many firms will no longer be able to charge, collect and declare VAT which may reduce cash flow in their business by up to 20%. The impact will be significant for many. A recent article by Greg McNally, VAT Partner, goes into these changes in more detail.

While these issues are worrying, there are ways to manage the impact. Our Business Improvement Services team is vastly experienced in working with businesses in the construction sector and can assist in areas such as profit improvement, cash flow management and external funding. Our team can explore various ways in which you can improve the performance of your business, increase agility and the options available to help you. Analysis techniques can help you understand where gaps are and help inform a range of solutions.

For more information, please contact Blair Milne, Business Recovery Partner, or a member of our Property & Construction team.

blair.milne@campbelldallas.co.uk
0141 886 6644

The information in this blog should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.

MTD for VAT: Registration action required and your how to guide

June 21, 2019

Many businesses will be aware of the MTD requirements for VAT which came into force on 1 April 2019 and may already be using compatible software or be in the process of setting this up. It is likely that you have already discussed what you need to do with your usual contact at Campbell Dallas, however please read the following to make sure you are fully compliant.

Please note, if Campbell Dallas prepare and submit your VAT returns, everything will be done on your behalf and you do not need to worry about the steps detailed below.

As a reminder, VAT registered businesses with a taxable turnover above the VAT threshold (currently £85,000) are now required to use the MTD service to keep records digitally and use software to submit their VAT returns.

If you are already submitting VAT returns through software such as Xero, Farmplan, Farmdata, Sage or Quickbooks, or are about to use bridging software, such as our CoZone client portal solution, you may think you are already MTD compliant. However, there are a few things you need to do before this is the case.

Firstly, consider when you need to register for MTD. This is determined by your VAT return periods and if you have a direct debit set up for paying HMRC or not. Please see the table below:

First MTD VAT return period MTD VAT return due date Time frame to register for MTD (direct debit payers) Time frame to register for MTD (non-direct debit payers)
Quarterly (1 April 2019 – 30 June 2019) 07-Aug-19 15 May 2019 – 30 July 2019 8 May 2019 – 04 August 2019
Quarterly (1 May 2019 – 31 July 2019) 07-Sep-19 17 June 2019 – 29 August 2019 8 June 2019 – 04 September 2019
Quarterly (1 June 2019 – 31 August 2019) 07-Oct-19 15 July 2019 – 27 September 2019 8 July 2019 – 04 October 2019

You can register earlier than the dates above, however, we strongly recommend you make sure you have given yourself plenty of time to complete the whole process before the next VAT return is due, in case you encounter any technical difficulties. Allow at least 24 hours after submitting the last non-MTD VAT return before registering. As the system is new and due to the significant volume of sign ups, we have in some cases seen delays of up to 10 days to complete the registration process.

You may have received a letter through the post from HMRC with details of how to register. If not, please use this link: https://www.gov.uk/guidance/sign-up-for-making-tax-digital-for-vat

When registering, you will need your HMRC login details, VAT number, UTR number for the business and company number (if applicable). Once this has been done, you should receive an email from HMRC within 72 hours confirming you have registered for MTD. Please do not try the next steps or attempt to submit an MTD VAT return until you receive this email. Check your junk mail if it has not appeared in your inbox.

Once you have received this email, ensure your accounting software is set up for MTD. This may be as simple as clicking a button to enable MTD, however additional steps may be required depending on the software used.

If you have a direct debit set up for paying your VAT to HMRC, update your details on the new HMRC portal once you have received the confirmation email. Again, leave plenty of time to update the system as some of our clients have experienced delays and technical difficulties when submitting these changes. Once all of the above is done, you should be ready to submit your first MTD VAT return.

If you are concerned about any of the above and have not already spoken to your usual contact at Campbell Dallas regarding the next steps, please get in touch now to discuss what may be required.

If you wish to discuss our CoZone MTD bridging solution, please let us know.

Amy Weatherup
amy.weatherup@campbelldallas.co.uk
01738 441 888

The information in this blog should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.

‘It’s our own Uber moment’

June 14, 2019

Our Digital Transformation Leader, Shahbaz Mirza believes accountancy is fast approaching its own “Uber moment” as the profession faces up to significant disruption as result of technology. The challenge is how a traditionally “bricks and mortar” business can go digital.

Shahbaz says “My role is constantly evolving and changing over time, because technology is constantly evolving and changing how business operates. It is my responsibility to drive change initiatives that are going to improve the business model, the technology model, and the people model for the firm as a whole.

This means that “digital transformation” is about more than apps – it’s about the people too. Shahbaz says: “If you look at some traditional accountants, they can be very siloed… we’re trying to ensure that our people can learn collaboratively, through teamwork and problem solving.”

On being #ProudtobeaCA, Shahbaz says: “Just because you’re a CA doesn’t mean that you have to fit into a stereotype… when you go to ICAS events you appreciate how many different types of CAs there are, and what they do, and what they’ve achieved, and that’s really inspiring.”

For anyone thinking about becoming a CA, visit our careers section.

Buying a Dental Practice?

June 6, 2019

Buying a dental practice can be exciting, profitable and rewarding. It can also be fraught with risk and become a costly mistake. Roy Hogg, Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL, offers some key buying tips.

If you’re at the stage of considering purchasing your first Dental Practice, or even looking to expand by opening in another location, there are some crucial points to consider. It is undeniably an exciting step forward, but it is incredibly important to think about and plan for the potential risks that may be involved.

If the purchase involves a practice which is already trading, this can easily make the transaction more expensive. This type of purchase will also require more financial and legal due diligence.

Another option may be to open a ‘squat’ practice. This option allows you to effectively start with a blank canvas and create a practice that matches your vision. While this way may seem tempting, there is also the added pressure of having no previous foundations to support you. Everything down to the last detail needs to be planned and thought out – people, training, equipment, hours, marketing and even uniforms.

Building a team that can support you from the initial steps of acquiring a brand to it becoming a reality, is a very significant step. As in the example of a ‘squat’ practice, every little detail needs considered, and having specialist support behind you that has extensive Dental sector experience will undoubtedly make this easier.

This support team will include the likes of:

• Dental Accountant (must be NASDAL member)
• Dental Solicitor (must be NASDAL member)
• Dental Bank
• Dental Valuer / Agent

As the transaction progresses, every GDP (General Dental Practitioner) should invest time to ensure they fully understand the process and the management of each step of the transaction.

Checking whether there is a sales prospectus for the practice helps give an early indication of how professional the seller is, or not. Ensuring that who you’re buying from is reliable and organised will certainly help. At the very minimum, you should ask to view the last 3 years trading accounts. It’s important that these are finalised and have been signed by a qualified accountant.

I would actively encourage preparing a financial projection, and in many circumstances these will be a mandatory request by the bank. Documenting the financial viability of the project is hugely important. It’s expected that the acquisition will cost a significant sum, so every possible assurance that the business can run successfully is highly advisable.

Ultimately, it’s important to emphasise the need to get the process right. I’d highly recommend avoiding taking any shortcuts – no matter how tempting – as this will only increase the potential future risks.

If you are considering buying a dental practice and would like to discuss what to look out for and your options, contact:

Roy Hogg
Partner, Head of Dental and Scottish Chairman and National Committee Member of NASDAL
roy.hogg@campbelldallas.co.uk
01786 460 030

The information in this article should not be regarded as financial advice. This is based on our understanding in June 2019. Laws and tax rules may change in the future.