Welcome to the November 2020 newsletter from Chamberlains
Autumn already, and we’ve been working more normally in recent times, as safe as we can be in the office, with extra screens between desks, wipes, etc.. Over the summer we had quite a few meetings out on the lawn over a cup of coffee from the on-site café – quite pleasant. In more recent times we’ve been tending to see people in the office, with suitable distancing. We’ve got quite a bit of room, so it’s felt perfectly possible.
But, with the new lockdown we’ve had need to think again and, in accordance with the rules, we’ll be stopping even these visits for the moment. Perhaps we can manage a brief exchange of documents on the doorstep, but not much more. We’ll mostly be working from home, although there’ll be someone in the office in the mornings and intermittently at other times if we need to pick up or collect files, We’ll be contactable as normal by telephone (if there’s no-one in the office calls divert to my mobile number) and email, and we’re becoming more used to Zoom.
In the meantime, we’ve had some staff changes. Firstly, one of our excellent managers, Vikki decided to leave. At times like this people get restless perhaps… However, we’ve already recovered with two other very experienced accountants –Graeme Weeden and Richard Ullah. They’re both full-time so we’ll be able to deal with more work. So there’s a silver lining to the cloud.
Secondly, over the summer I was approached by another accountant to see if I was interested in taking over his clients when he retired. I’d known Malcolm Kimber for more than 20 years, as being part of a network of local chartered accountants. Our group met regularly, mainly to arrange technical updates and to pick each other’s brains, so I was confident that he’d have the sort of clients we like and who would fit in with Chamberlains. And, thanks to our new full-time chaps, we can deal with the extra work without detriment to existing clients. We’ll be getting to know them over the next while – it’s just a pity that we can’t have a party for everyone at the moment! (You may remember that we normally have a summer / early autumn party for clients and contacts. You might even have met Malcolm at one of them before.)
COVID-19: WHAT NEXT?
The biggest helps earlier in the year – the furlough scheme (“job retention scheme – “JRS”) and the business grants – have now run out and the less generous Job Support Scheme was due to replace it in November. However, no sooner do I draft what that’s about, than the government announces another lockdown and the rules change again – a version of the JRS is returning! Maybe I’ll be able to use the JSS material in my next newsletter.
So the renewed JRS runs for the next month and employees can receive 80% of their current salary for hours not worked, up to a maximum of £2,500, with employers paying the National Insurance and pension contributions. This is a slight improvement on the October version. We await further details.
The other measures available at the time of writing (things change so fast!) are the following.
Business grants – there will be fresh grants for businesses required to close, with the amount based on the rateable value of their properties: £1,334 per month for smaller properties, £2,000 with rateable value between £15k and £51k, and £3,000 beyond that. Useful, but much smaller than the grants at the start of the first lockdown.
There’s £1,000 at the end of January for each furloughed employee then working for the employer – but many employers will by then have decided that they can’t afford to keep on all their staff, even with this incentive.
There’s still a reduced rate of VAT for hospitality businesses until 12 January , 5% rather than 20%. Some businesses have passed this on to customers, while others have taken it as a subsidy to compensate for their reduced business.
VAT deferral – VAT that was due for payment between 20 March and 30 June 2020 can be delayed until 31 March 2021, and this has been further delayed: it can now be paid in instalments between then and March 2022, interest-free. Businesses will need to opt-in to this further deferral.
Bounce Back Loans of between £2,000 and £50,000 with no interest, fees or repayments for the first 12 months. B The government guarantees 100% of the loans and they’re apparently easy to get, provided you can self-certify that you were a viable business on 31 December 2019. The loan can last for up to 6 years. There are rumours that these “easy loans” have been abused or taken out fraudulently…
Business Interruption Loans – these are still available for larger amounts than the Bounce Back Loans, but you need to create “a borrowing proposal which would be considered viable by the lender, if not for the current pandemic.” In other words, you need to do a bit more work to get the loan, and the government only guarantees 80%, so lenders will look more closely. These loans also last for up to 6 years. Your friendly accountant is very happy to help with this sort of Business plan!
Kickstart Scheme – funding for employers to create job placements for 16 to 24 year olds on Universal Credit, launched last September and gone quiet. The take-up seems to have been low, although it occasionally gets mentioned to show that the government’s trying to help young folk. But there aren’t many employers looking to take on new staff at the moment..
Time to Pay for taxes in businesses – HMRC are apparently listening sympathetically, but businesses still need to contact them to make arrangements.
Self Assessment tax bills – anyone was allowed to delay their July “payment on account” until 31 January 2021. (These POAs don’t apply to everyone – they’re mainly for people who have significant income other than through an employment.) This may make for an unpleasant tax bill on 31 January, combined with anything extra due of the last tax year and a first POA for the next year. People with problems may be able to set up a “Time to Pay Arrangement” with HMRC.
Stamp Duty Land Tax on residential property – a successful scheme for the housing market. Estate agents and solicitors are busy – but they fear a cliff edge when the scheme ends next 31 March. No stamp duty is payable up to £500,000 except for the extra 3% for “additional properties”. This saves purchasers up to £15,000 because rates have been 2% from £125,000 to £250,000 and 5% from 250,000 to £500,000.
Mortgage holidays of up to six months will now continue. These were due to finish on 31 October.
The rules and allowances keep changing, but we hope to be able to rely on most of these things….
LOOKING LONGER TERM
We’re all so caught up in the Covid-19 issues that it’s hard to think beyond a few months. However, it seems likely that the government will in due course want to replenish their coffers by raising taxes. They promised not to raise Income Tax, VAT or Corporation Tax in the current parliament, so there can probably only be tweaks at the edges of the bigger tax sources – unless they say that their hand has been forced by changed circumstances. The Press would give them a hard time, but the public might accept this.
Other possibilities are to increase Capital Gains Tax or pension allowances. Entrepreneurs’ Relief may also be reduced – this is the one that allows you to sell or close down your business and pay only 10% tax on up to £1m, if you can meet all the conditions. Inheritance Tax could also change, but it raises little funds for the government, so they may not want to antagonise their supporters.
What can we do to pre-empt this?
Some people might bring forward gifts of assets to their children, for example. If you’re lucky enough to have a spare property, you could give it to your children. This will probably trigger a CGT bill (mostly at 28% of the increase in value from its acquisition) but will escape IHT so long as you live for another seven years. The position may be less favourable in the future.
Another thing to consider is continued or increased contributions into pension schemes. These have traditionally been traditionally been good for tax and a good way of saving for the future. As a minimum, your contribution of £800 was topped up to £1,000 by the taxman, and higher rate taxpayers did even better. This too could all change.
What does the future hold?
These all feed into the income that you can expect in the future. IFAs have various tools to help you look at this, and I had a look at one recently so that I could tell you about it. I was wondering whether it might be a useful tool for Chamberlains to use with our clients, but perhaps we’d better stick to what we do best for the moment…
The version with which I had a play was quite sophisticated but not hard to use. There were a number of forms to complete online to show your current living expenses of all sorts, helpfully split out into all the normal types but with space for extras. You could estimate how these would change when you were retired. You also put in your income, assets and liabilities, and the programme automatically knows about state pensions.
A good IFA will help you to review everything to help you check whether your figures seem reasonable and whether there are any areas that you might have forgotten or which might need some more attention. They can also help with the assumptions that need to be made. These can be changed to see the effect of, for example, inflation of 2% rather than 3%, investment returns of 3% rather than 5%, expected inheritance receipts, planned-for gifts to children, downsizing home, etc.
The net of income minus expenditure adds to or depletes your net assets over time, and it’s shown visually. The different layers of assets – savings, personal pension funds, etc. – change over the years and you hope that there’s still something left for when you’re 100!
Some people may realise that they need to save more or to put more into their pensions; a lucky few may see that they can retire early. Evidently, it takes the IFA time to work with you and to produce their report, and you’ll need to agree charges with them
If this sort of approach is of interest, speak to your IFA or ask me to put you in touch with someone who might be able to help.