December 2020

Welcome to our monthly newsletter. We hope you find it helpful and will contact us if you have any questions or would like to discuss any issues further.

We start the newsletter with the latest updates regarding COVID-19 support in Wales to help hospitality and tourism and a reminder about the Self-Employment Income Support Scheme that is now open and then have included other tax updates and the latest Brexit guidance for businesses.

ERF Restrictions Business Fund

The First Minister has announced a £340m package of support directed primarily at the hospitality, tourism and related supply chain sectors in Wales.

The purpose of the fund is to support businesses into the new year with cash flow support to help them survive the economic consequences of the restrictions put in place.

Hospitality businesses who received the Lockdown Business Grant in October via their Local Authority will begin receiving payments via the ERF Restriction Fund into their back account during December. These businesses will not be required to re-register their details.

For all other eligible businesses to receive any of the ERF Restrictions Fund, businesses will need to register their details, as well as making a short on-line application to their respective local authority for the discretionary elements. These payments will start to reach businesses in January.

The fund consists of two separate grants:

ERF Restrictions Business Fund:

The ERF Restrictions Business Fund will provide the following financial assistance:

Businesses in the hospitality sectors that are in receipt of Small Business rate relief (SBRR) and have a rateable value of £12,000 or less will be eligible for a £3,000 payment. Tourism, leisure, retail and supply chain business qualifying for SBRR will also be eligible for this support if they have greater than 40% reduction in turnover during the restriction period.

Hospitality businesses with a rateable value of between £12,001 and £51,000 being eligible for a £5,000 payment if they are forced to close. Tourism, leisure, retail and supply chain business in the same rateable value bracket will also be eligible for this support if they have greater than 40% reduction in turnover during the restriction period.

Hospitality businesses with a rateable value between £51,001 and £150,000 being eligible for a £5,000 payment if impacted by the restrictions. Tourism and leisure businesses in the same rateable value bracket will also be eligible for this support if they have greater than 40% reduction in turnover during the restriction period.

How to access the ERF Restrictions Fund:

Businesses must be on the non-domestic rates (NDR) rating list for their local authority on 1 September.

Hospitality businesses who received the Lockdown Business Grant in October via their Local Authority will begin receiving payments via the ERF Restriction Fund into their bank account during December. These businesses will not be required to re-register their details.

Business will be able to access the registration and application process to access the funding through the Business Wales and Local Authority websites. Further details on the process will be published soon so please check the Business Wales website for updates.

ERF Restrictions Discretionary Grant

Local authorities will continue delivering the Lockdown Discretionary Grant to businesses that are materially impacted. As was the case for the Firebreak, this will continue to be targeted at businesses that are not on the non-domestic rates (NDR) system and therefore not eligible for the NDR linked grants. The grant level for this strand would be set at eligible costs of up to £2,000 per business.

This will provide support to sub VAT sole traders without a property who are materially impacted (more than 40% reduced turnover) as a result of the restrictions, e.g. cleaners providing services to the hospitality industry.

Application for the grant can be accessed by visiting the relevant local authority website, or via the Business Wales website.

You are not eligible for this grant if:

You are eligible for, or have received a Non-Domestic Rate Grant from your Local Authority

If you have 50 or more employees

If the business generated less than 50% of your income, the business must be your main source of income.

Applications will be dealt with on a first come first served basis. This may lead to applications not being appraised after they have been submitted if the fund is fully committed.

If you are not eligible for the above grants you may be eligible for the ERF Sector Specific Fund, more details are available on the ERF Sector Specific Support page.

ERF Sector Specific Support:

The ERF Sector Specific Support (operating cost) package is targeted at Hospitality, Tourism and Leisure (HTL) businesses or supply chain companies who are materially impacted with a greater than 60% impact of turnover as a result of the restrictions.

Eligible businesses will have to be employing staff via PAYE, and either VAT registered or (exempt from VAT) with turnover above £85,000, or limited companies with turnover above £50,000.

Businesses who have accessed the ERF Restrictions Business Fund could also apply for this fund if they met the eligibility requirements.

For eligible businesses the package of support will provide the following grant awards:

For single employee business, minimum grant of £2,500

SMEs (up to 249 employees) - £1,500 per employee up to a maximum of 10 employees, representing £15,000 or for those employing more than 10, £1,500 per employee or self-declared operating costs for the restricted period (whichever is the lower amount).

There will be an upper limit of £100,000 for SME businesses with a digital system based application.

Large businesses (250+ employees) - £500 per employee for Welsh headquartered large business applicants to a maximum of £150,000, with a manual case by case application via the sector team.

How to access the ERF Sector Specific Fund:

A triage tool will be available on the Business Wales website by the 11th of December for businesses to check their eligibility for the fund and the fund will open to applications on the week commencing the 11th of January.

Self-Employment Income Support Scheme Grant Extension

The Self-Employment Income Support Scheme Grant Extension provides support to the self-employed in the form of 2 grants, each available for 3 month periods covering November 2020 to January 2021 and February 2021 to April 2021.

Who can claim

To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:

have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)

declare that they intend to continue to trade and either:

are currently actively trading but are impacted by reduced demand due to coronavirus
were previously trading but are temporarily unable to do so due to coronavirus

What the Grant Extension covers

The extension will last for 6 months, from November 2020 to April 2021. Grants will be paid in 2 lump sum instalments each covering a 3 month period.

The third grant will cover a 3 month period from 1 November 2020 until 31 January 2021. The UK Government will provide a taxable grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. This is an increase from the previously announced amount of 55%.

The UK Government are providing the same level of support for the self-employed as is being provided for employees through the Coronavirus Job Retention Scheme which has also been extended until March 2021.

The UK Government has already announced that there will be a fourth grant covering February 2021 to April 2021. The Government will set out further details, including the level, of the fourth grant in due course.

The grants are taxable income and also subject to National Insurance contributions. They are not subject to VAT.

Virtual Christmas parties will qualify for tax exemption

HMRC has confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the tax exemption rules for annual functions.

The rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a seasonal party, without creating a tax liability.

To qualify the party must be an annual event which is open to all staff generally, or all staff at a specific location, if the employer has more than one location. If the employer has more than one annual event in a tax year, for all the events to be tax-free the combined cost per head must be no more than £150.

Gifts to employees can be tax-free

Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
the benefit is not cash or a cash voucher
the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
where the employer is a 'close' company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

No more than £50

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.

Further details on how the exemption works, including family member situations, are contained in the HMRC manual.

However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

Minimum Wage Increases from April 2021

Increased minimum wage rates have been announced to take effect from 1 April 2021.

The government has announced that the National Living Wage (NLW) will increase by 2.2% from £8.72 to £8.91, and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, Commissioners recommended smaller increases in recognition of the risks to youth employment, which the current economic situation poses.

NLW and National Minimum Wage (NMW) rates will also increase as follows:

From April 2020 (£)	From April 2021 (£)	Increase (%)
National Living Wage	8.72	8.91	2.2
21-22 Year Old Rate	8.20*	8.36	2.0
18-20 Year Old Rate	6.45	6.56	1.7
16-17 Year Old Rate	4.55	4.62	1.5
Apprentice Rate	4.15	4.30	3.6

*Rate also applies to those aged 23 and 24

Advisory fuel rates for company cars

New company car advisory fuel rates have been published and took effect from 1 December 2020.

The guidance states: 'You can use the previous rates for up to one month from the date the new rates apply'. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 December 2020 are:

Engine size	Petrol
1400cc or less	10p
1401cc - 2000cc	11p
Over 2000cc	17p

Engine size	LPG
1400cc or less	7p
1401cc - 2000cc	8p
Over 2000cc	12p

Engine size	Diesel
1600cc or less	8p
1601cc - 2000cc	10p
Over 2000cc	12p

HMRC guidance states that the rates only apply when you either:

reimburse employees for business travel in their company cars
require employees to repay the cost of fuel used for private travel

You must not use these rates in any other circumstances.

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes so it can be provided tax free to employees.

If you would like to discuss your car policy, please contact us.

Self assessment taxpayers warned to watch out for scammers posing as HMRC

HMRC is warning self assessment taxpayers to be alert to the danger of scammers posing as HMRC in the lead up to the tax return deadline.

Every year HMRC issues thousands of SMS messages and emails as part of its push to remind people to file before the 31 January deadline. HMRC says it is aware that fraudsters use calls, emails and texts to contact taxpayers.

In the last 12 months, HMRC has responded to more than 846,000 referrals of suspicious HMRC contact from the public and reported over 15,500 malicious webpages to internet service providers so that they can be taken down.

Many scams target customers to inform them of a fake tax rebate or tax refund or claim that court action will be taken against the taxpayer if they do not pay their tax bill now to the bank account detailed by the scammer. They use language intended to convince the taxpayer to hand over personal information, including bank details.

If you are contacted, please note it is most likely to be a scam and you should telephone us to see if you are in fact due a refund or have an outstanding tax liability.

£1 million Annual Investment Allowance cap extended

The Treasury has confirmed that the £1 million cap on the Annual Investment Allowance (AIA) is to be extended for an additional year as the government continues to look at ways to stimulate the economy.

The AIA provides a tax write off against profits for expenditure incurred on plant and machinery by businesses and owners of commercial property.

Businesses can now continue to claim up to £1 million in same-year tax relief through the AIA for capital investments in plant and machinery assets until 1 January 2022. The temporary £1 million cap was originally due to revert to £200,000 on 1 January 2021.

Get prepared for the end of the Brexit transitional period

It is time to prepare for the end of the Brexit transitional period.

Whilst the United Kingdom officially left the European Union (EU) on 31 January 2020, this prompted the start of an 11-month transitional period during which time the UK remains part of the Single Market, the EU Customs Union and the VAT Territory. The UK will leave the EU VAT Territory on 31 December 2020. After this date, Great Britain (England, Wales and Scotland) will not be subject to EU VAT legislation. Northern Ireland will remain subject to EU VAT legislation in respect of transactions involving goods, but not for services.

Acquisitions (purchases of goods from EU member states) will be treated as imports. A new system, Postponed Accounting, will be introduced and will apply to imports received from all over the world, with some exceptions such as low-value consignments. The system is intended to mitigate the cash flow disadvantage posed by paying import VAT upfront and waiting to reclaim it in a later VAT return. Under the new system, import VAT can be deferred and declared to HMRC in the VAT return for the period of importation. The VAT can be reclaimed in the same return subject to the normal rules for reclaiming input tax.

Dispatches (zero-rated sales of goods to business customers in EU member states) will be treated as exports. Exports are zero-rated, provided certain conditions are met.

Distance sales (sales of goods to non-business persons in the EU) will also be treated as exports. The EU distance-selling regime and thresholds will no longer apply to UK suppliers.

Customs Changes

When the UK leaves the EU Customs Union on 1 January 2021 the UK will operate a full, external border with the EU. New border controls on imports from the EU to Great Britain will be introduced in stages, with customs declarations for goods which are not controlled being delayed until 30 June 2021.

Customs Duty

From 1 January 2021, there will be new rates of Customs Duty for imports - called the UK Global Tariff. To check the tariffs that will apply to different categories of imported goods, please see https://www.gov.uk/guidance/uk-tariffs-from-1-january-2021.

It is important to be ready for these changes. Some practical actions to take now include:

Obtaining an Economic Operator Registration and Identification (EORI) number, which will be required when trading with the EU post Brexit. It is free to obtain an EORI number and you can do so by visiting https://www.gov.uk/eori.
Deciding whether to use an agent freight forwarder to help with making customs declarations. The following guidance outlines the services they can provide https://www.gov.uk/guidance/appoint-someone-to-deal-with-customs-on-your-behalf
If you buy goods from the EU, checking whether those goods are 'controlled'. Ascertaining which declarations are required and when they will need to be made. For more information please see https://www.gov.uk/guidance/list-of-goods-imported-into-great-britain-from-the-eu-that-are-controlled.
Checking the UK Global tariff to see the rate of Customs Duty that is likely to apply to the goods you import.
Deciding whether to use the Postponed Accounting system (https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return)to defer import VAT and familiarising yourself with the procedure for declaring the deferred import VAT on the VAT return.

If you require more information please contact us to discuss how we can help you move smoothly into 2021.