The answers provided to the questions below cannot be relied upon without checking with your accountant and/or tax advisor first. The information is correct for the specific question asked, but may change over time as a result of legislation and may not apply in your particular case. We cannot take any responsibility for action taken as a result of relying on these Q&A scenarios.
What is the Government doing to help employers ?
The Govt. have introduced a series of measures intended to help businesses survive during this period of enforced closures. They have been well documented on the Govt. website, www.Gov.UK and in aritcles in our Relevant News section on this website.
The main areas are:
- For small businesses in retail, leisure and entertainment with rateable value below £50,000pa, a full year’s rates holiday and a £25,000 grant
- For all businesses, the ability to ‘furlough’ staff under the Cornoavirus Job Retention Scheme
- Postponement until 2021 of VAT payments due between 20 March and 30 June 2020
- Access to Govt. backed, Business Interruption Loan Scheme
I am an employee earning £30,000pa, but my company does not need me until this is over. What can I do?
Your company has the option to furlough your employment, which means they change your employment status such that you cannot work for them during this period, but remain on the payroll as an employee and HMRC will pay your employer a grant of 80% of your gross salary up to £2,500 per month, so they can pay you.
Your employer may decide to top up the missing 20% if they so wish.
As an employee, you do nothing, this is done for you.
I am self employed and last year my profit was £25,000. What help can I get? My wife is self employed too, but she earned £60,000 last year. Can she get help too?
- There is good news and bad news.
- Any Self employed person (or partner in a business) who earned less than £50,001 last year will be contacted by HMRC and given 80% of their profit in equal monthly instalments, up to a max. of £2,500 per month.
Your wife, who earned over £50,001 is disqualified from this scheme and gets nothing.
- HMRC will contact you and there is nothing for you to do.
Can I be furloughed in my main job, whilst having another job in which I am still working?
The answer is yes, as long as your main employer agrees. As far as HMRC are concerned, it is not a problem
What is the Government’s Corona Business Interruption Loan Scheme ?
The Government will support small and medium businesses by standing behind finance provided by the banks and other lenders to businesses that need help to weather the Corona Virus pandemic
ON new loans, the Govt. will guarantee up to 80% of the loan, pay all interest and loan fees in the first year and are insisting that lenders do not take any Personal Guarantee for loans up to £250,000.
However, the bank still need to be persuaded that the loan is viable and for this they need to see a business plan and projections.
What is a bounce back loan ?
It is the latest Government initiative to help small businesses.
It is a 100% Government guaranteed loan up to £50,000 but limited to 25% of Turnover, for max. period of 6 years, with no capital payments or interest charged in year 1.
It will be available from 4 May 2020, by a simple online application.
Can I bring a key ‘furloughed’ employee back to work for just one week ?
Yes, but not whilst they remain on furlough. You will need to take them off furlough, re-employ on full pay for the week, then re-furlough for a minimum of three weeks.
When will the furlough scheme be stopped ? Are there any changes to this help?
The Chancellor has extended the scheme until the end of October 2020 and has promised there will be no change to the current 80% furlough payment until the end of July 2020, aftet which the scheme will become more flexible and probably be slowly reduced.
Has the scheme to help self employed workers been extended beyond June ?
No. It only provided for a payment of 3 months from Mar-May at a maximum of £2,500 per month and there has been no extension to the time period
If we want to bring staff back from furlough but they refuse to return because of fear of contracting the virus, then what should be done?
The prime consideration for the employer is that they have implemented adequate safety precautions, in line with Govt. guidance on working safely during the Corona Virus (see www.Gov.uk/guidance). The 5 key steps are:
1. Carry out a Covid-19 risk assessment
2. Develop cleaning, handwashing and hygiene procedures
3. Help people to work from home
4. Maintain 2M social distancing
5. Manage transmission risk
If this is implemented and the employee is still refusing to return, it may be grounds to take disciplinary action, but see the ACAS guidelines and consult an HR expert.
I bought a property in my name some years ago to provide me with additional income both now and in my retirement. I understand the HMRC have changed several things that affect the tax I pay on this rental income, but I am not sure what they are. Can you help?
Thank you for your question. This is something which affects many taxpayers and there is a lot of ignorance surrounding these important changes.
From 1 April 2016, HMRC withdrew the right to deduct 10% from the rental income on furnished lettings that previously allowed for general wear and tear. The immediately increased the profits subject to tax.
Furthermore, HMRC withdrew the ability to deduct loan interest from the rent, to calculate taxable profit. Instead, they tax the rent at the top rate but only allow tax relief on the interest at 20%, which significantly increases the tax liability for 40% taxpayers where interest was a large part of the cost.
Somebody told me that when I sell a property, I have to pay tax straightaway. Is that right?
If you are selling your own home, then as long as it is within 9 months of moving out, then there is no tax to pay, as any gain is exempt, After 9 months, any future gains may be subject to Capital Gains Tax.
If you are selling an investment property, then the gain arising between the time you bought it and the selling price less direct expenses, is subject to capital gains tax at up to 28%.
As from 6 April 2020, this must be paid within 30 days of the sale, whereas prior to that date it was the 31 January following the year of the sale, so a very significant difference.
The important thing to be aware of, is not just the tax, but having the information from when you purchased the house and any major improvements, so as to be able to calculate the gain.
Can I gift my property to my children, as I don’t need the income and maybe it will help reduce any Inheritance Tax when I’m gone? I presume there is no tax on making the gift?
Thank you for this question, which seems simple, but is anything but.
The simple answer is ‘yes,’ you can gift anything as there is no Inheritance Tax on lifetime gifts, BUT if you die within 7 years of making the gift, it will be included in your Estate for Inheritance Tax.
But the second part of your question is not so obvious. Making a gift of property will trigger Capital Gains Tax, even though no money changes hands. The gain is the difference between the purchase price (or value at 5 April 1982 if later) and the sales price and the Capital Gains Tax @28% of this figure is payable 30 days later.
If the donor dies within 3 years of making a gift of a property, then it the worst of all worlds; both the Capital Gains Tax @ 28% at the time of the gift and the Inheritance Tax on the property at value at date of death at 40%.
I am the director of a UK limited company and we are growing very quickly. Last year our company’s Turnover was £7 million with total assets of £6 million and over 100 employees. I am not sure if I need an audit, as my turnover is below the £10 million audit limit.
The short answer is you do need an audit. The reason is there are 3 statutory limits, and an audit is required if any 2 of them are breached. You company’s turnover is below the £10.2M limit but breaks both the other limits of £5.2M assets and 50 employees.
My company does not need an audit, but I am worried that something is not right. Is the audit a ‘sort of’ guarantee?
The audit process is what you think; it is not a guarantee of anything, but rather our objective as auditors is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The word ‘material’ is defined as anything that could reasonably be expected to influence a reader of the accounts to form a different conclusion. It is true that as part of the audit, we highlight in the audit report whether: The accounting records are accurate The financial statements agree to those records All required disclosures have been made We received all the information and explanations we requested and if we are not satisfied, we qualify our audit and explain the problems we encountered.
I have offered my top manager a company car, but he is nervous about being taxed on it. Is there a cost for him and is there a cost to me, his employer?
MAYBE and MAYBE This seems a strange answer, but it’s true. It depends on what car you provide The car is a benefit to the employee, provided by the employer and this benefit is calculated by a fixed percentage of the list price of the car when new and not the cost paid by the company. From 6.4.20 for one yea only, the % for electric cars is Zero! Hence the benefit is zero and the tax for both employee and employer is zero. For tax year 2021/22 this increases to 1% and for 2022/23 to 2%, so it is extremely tax efficient to receive an electric company car. Hybrids, petrol and diesel cars have higher and higher %s, which can be checked online, applied to the list price and hence the benefit is higher.
How much can I earn tax free?
This depends on the type of income and gain.
The basic rules are as follows:
|Income Tax||£12,500 tax free allowance on any income|
|Savings allowance||£5,000 tax free if majority of income is from savings|
|£1,000 tax free if minority of income from savings|
|Dividend allowance||£2,000 tax free|
|Capital Gains Tax||£12,000 tax free|
|Rent a room||£7,500 tax free|
In a possible scenario, a tax payer could have:
|Rent a room in their home||£7,500|
|And pay no tax|