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The government has outlined new plans for Freeports to turbo-charge post-Brexit trade. Details have been released that assert a number of new freeports are being planned across the UK. The first new Freeport is on track to open by the end of 2021.

Responding to the consultation on the proposals the government confirmed that sea, air and rail ports in England will be invited to bid for Freeport status before the end of the year, with the government aiming for the first of the new sites to be open for business in 2021.

It also confirmed the Freeports will benefit from:

• streamlined planning processes to aid brownfield redevelopment

• a package of tax reliefs to help drive jobs, growth and innovation

• simplified customs procedures and duty suspensions on goods

Designed to attract major domestic and international investment, the hubs of enterprise will allow places to carry out business inside a country’s land border but where different customs rules apply. They have been successfully used in countries around the world to drive prosperity and boost trade.

At the centre of the new Freeports policy is an ambitious new customs model, drawing on international best practice. The flexible model will improve upon both the UK’s existing customs arrangements and the Freeports the UK had previously.

The government will also introduce a package of tax reliefs on investment by businesses within Freeport tax sites, new measures to speed up planning processes to accelerate development in and around Freeports and new initiatives to encourage innovators to generate new ideas to create additional economic growth and jobs.

A firm can import goods into a Freeport without paying tariffs, process them into a final form and then either pay a tariff on goods sold into the domestic market, or export the final goods without paying UK tariffs.

The letters borrowers receive from their lenders when they are seriously behind on repayments will be easier to understand and less intimidating as a result of new rules proposed by the Treasury last week.

The aim is to reduce stress and anxiety that borrowers may experience if they are unable to keep up with repayments and have concerns that they will face legal action.

Unbelievably, default notices designed to give people who are falling behind on their debts fair warning before lenders take further action, have not been updated in nearly 40 years.

Research from the Money and Mental Health Policy Institute and debt charities has shown that large amounts of capitalised text and legal terms can make the information contained in the letter hard to understand, which has the unintended consequence of confusing and distressing people. This has a negative impact on people’s mental health as well as their ability to effectively manage their debt.

To counter this apparently contradictory result changes are afoot.

As part of the government’s effort to support people in problem debt, it will legislate to change the language and presentation of information in debt letters. The new rules will make debt letters less threatening by restricting the amount of information that must be made prominent and requiring lenders to use bold or underlined text rather than capital letters. Lenders will also now be able to replace legal terms with more widely understood words and letters will clearly signpost people to the best sources of free debt advice.

These new rules are the latest in a wide package of support put in place to help people struggling with their finances, especially through coronavirus. This includes £38 million of extra funding to debt advice providers this year and working with lenders and financial regulators to give people access to payment holidays on their mortgages and a range of consumer credit including credit cards, personal loans, motor finance and payday loans.

The government has also given the Financial Conduct Authority strong powers to protect consumers who borrow money, including cracking down on payday lenders, capping the cost of rent-to-own, and acting on overdraft fees.

The new rules will be delivered through secondary legislation and are expected to come into force in December 2020. All lenders will then be required to make the changes within six months.

This extended support will be available to businesses across the UK that are required to close their premises due to coronavirus restrictions.

Businesses required to close as a result of specific workplace outbreaks by local public health authorities are not eligible to claim under this extended JSS scheme.

To make a claim, employers must have a UK bank account and be registered with a UK PAYE scheme on or before 23 September 2020.

Employers will only be able to use the scheme for employees who cannot work (paid or unpaid) for that employer.

Any payments received from government will be taxable.

What are the additional benefits offered?

• Government will pay two-thirds of employees’ monthly salaries up to a maximum £2,100 per month, per employee.
• Employers will not be required to contribute to wages and will only have to pay any National Insurance and pension costs.
• This expanded JSS will be available for six months from 1 November 2020.
• The scheme will only apply to businesses required to close due to coronavirus restrictions. It will include premises restricted to delivery or collection only services from their premises.
• To claim, employees must be off work for a minimum seven consecutive days.

When will the additional JSS payment be made?

As with the wider JSS scheme, claims for November will be processed in December via an online portal. Subsequent months’ claims will thus be paid one month in arrears.

HMRC will require to see evidence to check your claims

As with other government grants, HMRC will check claims and demand repayments of any claims made incorrectly or fraudulently. In particular, employers should agree and notify claims in writing with affected employees.

HMRC may ask to see these written agreements.

HMRC have also indicated that they will be publishing the names of employers that have claimed under the scheme.

Cash Grants for business required to close in England

Cash grants to businesses required to close in England are also being increased. These cash grants are to support business owners with fixed costs; those costs payable even if the business is closed.

Grants will be linked to rateable values of business premises and will paid every two weeks. This should provide extra financial support to businesses across the hospitality sector that are required to close due to COVID restrictions.

• Smaller businesses with rateable values at or below £15,000 will be able to claim £1,300 per month.
• Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month, and
• Larger businesses will be able to claim £3,000 per month.

The devolved administrations in Scotland, Wales and Northern Ireland will be receiving additional financial support to offer similar measures in the devolved areas, should they choose to do so.

Readers who may have inadvertently over-claimed grants, the furlough scheme for example, should remedy the situation before HMRC start pro-actively investigating claims.

The Finance Act 2020, contains an amnesty for notifying HMRC of any errors or overclaims within 90 days of the later of:

• any tax charge being payable due to the overclaim and
• the date of Royal Assent of the Act.

As such, the earliest date this amnesty will expire will be 20 October 2020.

Businesses that have made claims – predominantly the furlough scheme – should check claims made and correct any errors within the time limits of this amnesty For example, issues that may have created over-claims are:

• not being aware that remote staff are working, e.g. work-related emails being generated or line managers asking furloughed staff to carry out some work,
• technical or computational issues – innocent errors such as where there is misunderstanding of the methods of certain calculations will not be targeted,
• delays in making payment to staff for the wages due from the furlough grants,
• deliberate fraudulent behaviour.

This amnesty will be the only chance employers have to remedy their position without any penalties being charged.

Penalties for those who fail to notify HMRC within the ‘amnesty’ period but knowingly received the CJRS grant or overclaimed the grant even though they were not entitled to claim it due to any changes in their circumstances will be based on ‘deliberate and concealed’ behaviour. This could potentially make the client liable to a penalty of 100%.

HMRC will also expect to see documentary evidence of furlough arrangements made with staff and other justifications for making claims. These would include an outline of why businesses consider their firm was or continues to be adversely affected by the coronavirus disruption.

New proposals have been outlined by government to ensure small businesses in the UK are paid on time. Currently £23.4 billion worth of late invoices are owed to small firms across Britain, impacting on businesses’ cash flow and ultimate survival.

The proposals, as part of a new consultation launched 1 October 2020, look to give new powers to the Small Business Commissioner including:

• the power to order companies to pay their partners, either as a lump sum or agreed payment plan, when a complaint against them for late payment has been investigated and upheld. Companies which do not do so could face further penalties, including fines. This will give a clear incentive for companies to pay their partners on time.
• the power to compel companies to share information during an investigation by the SBC. This will ensure cooperation with SBC investigations and provide more information about company payment practices.
• the power to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business.
• expanding the scope for complaints to the SBC, to allow the Commissioner to investigate complaints about other businesses relating to payment matters in connection with the supply of goods and services.
• to review and report on wider business practices outside of payment matters, on instruction of the BEIS Secretary of State. This could be a practice unrelated to payment matters specifically impacting small businesses such as supply problems, or broader issues like barriers to the adoption of payment technology.
• the power to claim investigation costs from an investigated company when there are adverse findings against them.

The consultation opens 1 October 2020 and will run until 24 December 2020. Businesses are invited to share their views.

Trying to double guess the social distancing rules is rather like placing bets on a throw of the dice. The current exhortation from the Prime Minister – to observe the rule of six – is yet a further change in the endless attempts at controlling coronavirus by manipulating social distancing regulation.

But we all need respite; we need to be able to look forward to a cheery Christmas. Unfortunately, based on current progress to control COVID-19, this is looking an increasingly remote possibility.

However, if an annual Christmas bash is on the cards we have outlined below the rules to observe from a tax point of view to ensure that the cost of your annual staff party will not create unintended tax issues for you or your staff.

1. The event must be open to all employees at a specific location.
2. An annual Christmas party or other annual event offered to staff generally is not taxable on those attending provided that the average cost per head of the functions does not exceed £150 p.a. (including VAT). The guests of staff attending are included in the head count when computing the cost per head attending.
3. All costs must be considered, including the costs of transport to and from the event, accommodation provided, and VAT. The total cost of the event is divided by the number attending to find the average cost. If the limit is exceeded then individual members of staff will be taxable on their average cost, plus the cost for any guests they were permitted to bring.
4. VAT input tax can be recovered on staff entertaining expenditure. If the guests of staff are also invited to the event the input tax should be apportioned, as the VAT applicable to non-staff is not recoverable. However, if non-staff attendees pay a reasonable contribution to the event, all the VAT can be reclaimed and of course output tax should be accounted for on the amount of the contribution.

Perhaps you could book a local restaurant and break up your party into tables of six?

Last month the Treasury announced further support for businesses adversely affected by lockdown in local areas to control local outbreaks.

Local Authorities will be funded to pay the grants now offered.

Businesses in England required to close

Businesses in England required to close due to local lockdowns or targeted restrictions will now be able to receive grants worth up to £1,500 every three weeks, To be eligible for the grant, a business must have been required to close due to local COVID-19 restrictions. Grants will be paid out every three weeks businesses are required to close. During each three week period:

• Largest businesses will receive £1,500
• Smaller businesses will receive £1,000.

H M Treasury also released the following notes:

• any businesses still closed at a national level (e.g. nightclubs), will not be eligible

• if a business occupies premises with a rateable value less than £51,000 or occupies a property or part of a property subject to an annual rent or mortgage payment of less than £51,000, it will receive £1000
• if a business occupies premises with a rateable value of exactly £51,000 or above or occupies a property or part of a property subject to an annual rent or mortgage payment of exactly £51,000 or above, it will receive £1500
• Local authorities will also receive an additional 5% top up amount of business support funding to enable them to help other businesses affected by closures which may not be on the business rates list. Payments made to businesses from this discretionary fund can be any amount up to £1500 and may be less than £1000 in some cases.
• Local authorities will be responsible for distributing the grants to businesses in circumstances where they are closed due to local interventions
• further eligibility criteria may be determined by Local authorities
• as with other COVID-19 business grants, local grants to closed businesses will be treated as taxable income

Making a claim

Contact your Local authority to see if you are eligible. And please note, the eligibility of businesses not on the business rates list will likely be discretionary so an early call to clarify your position may be beneficial.

In a press release issued 10 September 2020, the Department for Health and Social Care has reminded affected businesses that they have a legal obligation to record the contact details of their customers, visitors and staff.

Affected concerns in England should note:

• businesses and other public settings where people meet socially including hospitality, close contact and leisure venues must record contact details of customers, visitors and staff on their premises to tackle the spread of coronavirus
• details must be stored for 21 days and shared with NHS Test and Trace, if requested
• fixed penalties will apply to organisations that do not comply

Premises and venues across England like pubs, restaurants, hairdressers and cinemas must have a system in place by law to record contact details of their customers, visitors and staff in the latest move to break the chains of transmission of coronavirus.

These businesses and organisations had been advised to collect and share data, with many effectively doing so, but following the recent move to ban social gatherings of more than 6 people, the data collection programme is now formally mandated and has applied since 18 September.

Please note regional variations in these regulations may apply.

One of the government’s schemes to assist VAT registered businesses with their cashflow during the current COVID disruption was the deferral of VAT payments.

The VAT payments that could be deferred cover payments due between 20 March 2020 and 30 June 2020.

VAT traders that have taken advantage of this support will have likely deferred just one VAT payment.

The following terms and conditions of this deferral option are set out below:

• You have a choice; you can pay the VAT that comes due or defer the payment.
• HMRC have said that they will not charge interest or penalties on any VAT you do defer.
• The deferral does not include payments for VAT MOSS or import VAT.
• HMRC will continue to process repayments as usual.
• You will need to plan to pay any VAT deferred in this way by 31 March 2021.

In all circumstances you must file all returns by the due date even if you defer payment

However, deferral does not mean cancellation and as we have reminded readers above any VAT deferred will need to be paid by 31 March 2021.

This means that you would have nine or more months to save for the VAT deferred.

Readers are advised to make sure that they plan accordingly, otherwise the apparent relief in being able to skip a VAT payment will return to haunt you next year.

This is not an ongoing offer. The deferral option ceases for any VAT payments due after 30 June 2020.

Readers who suffer significant set-backs during the current disruption have one further option. There is a formal “Time to Pay” arrangement that you may be able to use when the VAT becomes due and cash funds are restricted.

Director/shareholders of small companies may be considering reducing their salaries and/or dividends during this uncertain period. Even if firms are managing to maintain profits or breakeven, prudence would suggest that until things improve we should do what ever we can to preserve cash reserves.

Many directors have taken the sensible option to minimise their salaries and take any balance as dividends. In this way, NIC costs can be kept to a minimum.

For those who are under the State Retirement Age there may also be a need to maintain salaries above the threshold that provides NIC credits towards a state retirement pension.

All directors that receive dividends from their company should probably aim to take a minimum dividend of £2,000 a year as this is tax-free.

If you are thinking of moving to a new house you may need to sustain your income (salary and dividends) at a realistic rate to qualify for a mortgage.

Does this mean you have no choice? That you will need to continue taking salary and dividends at pre-COVID levels even if all the cash is not required for private purposes?

Fortunately, there is a solution

HMRC will generally accept that payrolled salaries and dividends voted will be considered as taken by director/shareholders if credited to their loan accounts with the company.

These loans can then be repaid at a future date – when cashflow has eased – with no additional tax complications.

What about tax liabilities?

Director’s salaries will be subject to PAYE and therefore any income tax due should be deducted and paid by the company. The net salary is the figure that will be credited to your loan account.

Dividends are a different matter. Dividends form part of your annual self-assessment and any dividend taxes due will be payable personally by the director whether or not they actually draw the dividends from the company. Accordingly, advice should be taken to work out the amount of dividend taxes payable. The tax amount should then be withdrawn and saved to meet these future liabilities and the after tax amount transferred to the directors’ loan account with the company.

We can help

If you would like to consider your options regarding the withdrawal of salaries and or dividends from your company, please call.