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November 8, 2023
With much of the UK now beginning to experience the first tentative signs of economic recovery, we wanted to bring you an update on some of the key issues that lie ahead.
Businesses still face many challenges, not least upcoming deadlines and changes to the existing package of financial support offered by the Government.
If you have any queries regarding the topics covered in this bulletin, please contact our experienced team today.
Time is running out to join the VAT Deferral Scheme
Companies now have less than one month left to join the VAT Deferral New Payment Scheme.
The deadline to join the scheme on 21 June has prompted HM Revenue & Customs (HMRC) to issue a fresh warning to businesses that haven’t already joined the scheme, that they face a five per cent penalty if they do not make some form of payment arrangements next month.
Last year, more than half a million businesses deferred VAT payments in response to COVID-19, after the Government announced a three-month deferral for the first tax quarter of 2020.
Companies that deferred VAT payments due between 20 March 2020 and 30 June 2020 were given the choice earlier this year to pay the deferred VAT in full by 31 March, set up a payment plan under the VAT Deferral New Payment Scheme by 21 June or make other suitable arrangements with HMRC by 30 June.
The VAT Deferral Payment Scheme allows taxpayers to schedule payments monthly. The scheme lets business owners pay their deferred VAT in equal instalments, interest-free and choose the number of instalments by direct debit, from two to 11 (depending on when they joined the scheme).
For example, if a business joined by 19 May 2021, they can now pay nine equal instalments, whereas if they join on 21 June 2021, they will make eight instalments, or fewer should they wish to pay the deferred VAT quicker.
To benefit from the scheme, HMRC says businesses must:
The new payment scheme is part of a wider Government package of support, now worth more than £400 billion, which is helping to protect millions of jobs and businesses during the pandemic.
The new payment scheme will continue to help the economy recover by enabling businesses, impacted by the pandemic, to manage their cash flow at this critical time.
Eligible businesses that are unable to use the online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme or make alternative arrangements to pay until 30 June 2021.
Is your business ready for the changes to furlough?
Following the Government’s decision to extend the Coronavirus Job Retention Scheme (CJRS) earlier this year, businesses now have the opportunity to rely on this support until the end of September.
Introduced more than a year ago, the furlough scheme (as it is more commonly known) has helped many businesses to retain talented employees without having to meet their regular employment costs.
Now, as many sectors of the UK economy are re-opening and the recovery gets underway, changes will take place to the furlough scheme that reduce the financial support available to employers.
The 80 per cent furlough grant, up to a maximum of £2,500 per employee each month, will continue until 30 June 2021.
To prevent an abrupt end to this financial lifeline, from 1 July 2021, the amount paid will be gradually reduced – meaning that employers will be expected to start making additional contributions on top of the grant provided by the Government.
This gradual tapering means that, from July, Government support will be limited to 70 per cent (capped at £2,187.50), with the remaining 10 per cent provided by the employer.
Then, from 1 August until the end of the scheme on 30 September 2021, employers will be expected to contribute 20 per cent, with the Government covering the remaining 60 per cent (capped at £1,875).
In addition to the 10 per cent and 20 per cent contributions made in July, August and September, employers must continue to pay employers National Insurance and pension contributions on the full amount being paid to employees.
Beyond just extending the life of the scheme, the Government has also opened the door for employers to claim this grant for employees who have previously been unable to benefit.
As per the latest guidance, new employees who have not previously been eligible for furlough can be furloughed for the first time from 1 May 2021 onwards, if they were included in a Full Payment Submission to HMRC by 2 March 2021.
Although there are already early signs of economic recovery across the UK, many businesses may still need to rely on this scheme for some time and so they must be prepared for these important changes in advance.
To find out how we can help you with the administration of these changes to the furlough scheme, please contact us.
Insolvency Service to be given new powers to tackle directors who misused COVID loan schemes
Directors of dissolved companies who have benefited from the Government-backed Coronavirus loan schemes, who now do not intend to repay them, could find themselves facing tough sanctions.
The Government has announced that the Insolvency Service will be given new powers to investigate directors of companies that have been dissolved to avoid the repayment of loans.
Currently, the Insolvency Service has powers to investigate directors of live companies or those entering a form of insolvency, where they believe wrongdoing or malpractice may have occurred.
Where evidence of either activity is uncovered, directors can face sanctions, including a ban of up to 15 years.
The new legislation will extend these investigatory powers and sanctions so that they can be applied retrospectively, enabling the Insolvency Service to also tackle directors who have inappropriately closed companies that have benefited from Bounce Back Loans.
The new measures will also help to prevent directors of dissolved companies from establishing a new, near-identical business under a slightly different name, which often leaves customers and other creditors, such as suppliers, out of pocket.
The new rules will be included in the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, which will cover England, Scotland, Wales and Northern Ireland.
Similar proposals were announced as far back as 2018 but will be made a reality as part of the Government’s commitment to combat Bounce Back Loan fraud, as announced in this year’s Budget.
Directors of companies who have received Government assistance through Bounce Back Loans, CBILS and CJRS and may be considering dissolution of their company are, therefore, recommended to obtain specialist insolvency advice before proceeding.
Introduced in 2015, compensation orders make directors financially accountable for the consequences of their unfit conduct. This means that they may have to personally repay money owed to creditors.
These can be sought by the Insolvency Service via the courts following insolvency proceedings, if the director is subject to a disqualification order or undertaking and their conduct has caused a quantifiable loss to one or more creditors of an insolvent company.
Although they are rarely employed by the Insolvency Service, there is potential scope for these to be used alongside the new investigatory powers and sanctions within the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill to recover losses from the misuse of the Covid support schemes.
Although neither the Insolvency Service nor the Government has given any inclination to increase its use of these orders, they could potentially be applied to directors of insolvent businesses, who are perceived to have misused the Bounce Back loans and CBILS. For more information on our Recovery team please click here.