News

Outcome of the Uber case

The Supreme Court has handed down a landmark judgement in the Uber case. The Supreme Court unanimously upheld the decisions of earlier courts and has found that Uber drivers are ‘workers’ and not self-employed as Uber has tried to argue. 

The decision of the Supreme Court as the final court of appeal in the UK marks the end of the case for Uber. The Uber case had been ongoing since an employment tribunal decision in October 2016 found that two former Uber drivers worked for Uber. At the time of the tribunal hearing in 2016, the number of Uber drivers operating in the UK was estimated to be around 40,000, of whom around 30,000 were operating in the London area. The ruling in this case has important implications, not just for Uber drivers, but for the many people across the country working in the gig economy.

The decision means that Uber drivers are entitled to the minimum wage (including the right to back pay), holiday entitlement and certain other employment rights. The Supreme Court also ruled that Uber drivers are ‘working’ for the entire period that they are logged into the Uber app within the territory in which they were licensed to operate and were ready and willing to accept trips, and not just during the periods that they are driving passengers to their destinations.

The judgment does not give the ‘workers’ full ‘employee’ rights, for example, a worker cannot claim unfair dismissal or a statutory redundancy payment.

Source: Other Wed, 24 Feb 2021 00:00:00 +0100

VAT Agricultural Flat Rate Scheme

Businesses that use the flat rate scheme pay VAT as a fixed percentage of their VAT inclusive turnover. The VAT Agricultural Flat Rate Scheme is a variant of the flat rate scheme specifically designed for farmers and other activities relating to agricultural production (such as horticulture).

Farmers cannot join this scheme if the value of their non-farming activities is above the VAT registration threshold (currently £85,000). The amount of VAT paid on business expenses becomes irrelevant to VAT returns.

The scheme was introduced to help ease the administrative burden on farmers who found that the requirement to maintain full VAT records had become disproportionally burdensome, usually by reason of the relatively small size of their businesses.

It is a condition of joining the scheme that farmers who are registered for VAT must have their registration cancelled. The flat rate scheme is effectively an alternative to VAT registration for farmers. However, although the farmers will no longer be able to reclaim input tax they can charge a flat rate addition (FRA) currently 4%.

The FRA is not VAT and the farmer is allowed to keep it. The addition acts as compensation for the loss of input tax the farmer would have been able to reclaim if registered for VAT.

Source: HM Revenue & Customs Wed, 24 Feb 2021 00:00:00 +0100

Government to publish range of tax consultations

In a recent HM Treasury press release it has been confirmed that the government will publish a number of tax-related consultations and calls for evidence at the end of March. These consultations would usually be published on Budget day but instead will be published on 23 March. This will allow more time for these consultations to be examined.

None of the announcements will require legislation in the next Finance Bill or have an impact on the government’s finances. A number of these consultations relate to the government’s 10-year tax administration strategy, titled ‘Building a trusted, modern tax administration system’.

Financial Secretary to the Treasury Jesse Norman said:

'We are making these announcements separately to the Budget, but still all on a single day, in order to give a range of important but less high profile measures greater visibility among Members of Parliament, tax professionals and other stakeholders, and greater scope for scrutiny by them.'

Announcements which have fiscal implications need to be captured in the OBR’s economic and fiscal outlook, and announcements of measures to be legislated in the Finance Bill, will be made on Budget day in the normal way.

Source: HM Treasury Wed, 24 Feb 2021 00:00:00 +0100

Capital Gains Tax exemptions

As with Income Tax personal allowances, taxpayers have an annual exempt amount for Capital Gains Tax (CGT) which is forfeited if not used. The annual exemption for individuals in 2020-21 is £12,300. A husband and wife each have a separate exemption. This also applies to civil partners who are treated in the same way as married couples for CGT purposes.

Married couples and civil partners should ensure that assets sold at a gain are either jointly owned or that each partner utilises their annual exempt amount wherever possible. Any unused part of the annual exempt amount cannot be carried forward and is forfeited if unused in the current tax year.

CGT is usually charged at a simple flat rate of 20%. If you only pay basic rate tax and make a small capital gain, the gain may be subject to a reduced rate of CGT of 10%. Once the total of taxable income and gains exceed the higher rate threshold, the excess will be subject to 20% CGT. A higher rate of CGT (8% supplement) applies to gains on the disposal of chargeable residential property.

If you have sold or are planning to sell any assets in the current tax year, 2020-21, it is important to ensure that you take full advantage of the annual CGT exemption and arrange your affairs to ensure the optimum CGT position. For example, capital losses are deducted from gains before net gains are calculated. Crystallising a loss that will waste the annual exemption should therefore be avoided.

Source: HM Revenue & Customs Wed, 24 Feb 2021 00:00:00 +0100

Inheritance Tax – tax-free gifts

We wanted to remind our readers of the Inheritance Tax (IHT) implications of making cash gifts during the current tax 2020-21 tax year that ends on 5 April 2021.

You can give away up to £3,000 worth of gifts each tax year. This is known as your annual exemption. Any unused part of the annual exemption can be carried forward, but only for one year. So, if you didn’t make any cash gifts in 2019-20, you could gift up to £6,000 this tax year.

There are also generous exemptions for normal gifts made out of your income, but you must be able to maintain your standard of living after making the gift. There are also reliefs available for wedding or civil ceremony gifts. You can gift up to £1,000 per person with higher limits of £2,500 for a grandchild or great-grandchild, £5,000 for a child.

You can also give as many small gifts of up to £250 per person as you want during the tax year but only if you haven’t used another exemption on the same person.

There is no IHT to pay on lifetime gifts between you and your spouse or civil partner as long as you both live together, permanently in the UK.

Other gifts, outside these limits, count towards the value of your estate and should be carefully considered.

Source: HM Revenue & Customs Wed, 24 Feb 2021 00:00:00 +0100

Claiming Self-Employed Income Support Scheme grants

Under the third Self-Employed Income Support Scheme (SEISS) grant, claimants received up to 80% of average trading profits for November and December 2020, and January 2021. This meant that a maximum grant for the three months of £7,500 was made available to those who met the eligibility requirements. The claim window for this grant has now closed.

The government has confirmed that a fourth SEISS grant will be made available from 1 February 2021 to 30 April 2021. The level of this grant and application criteria for this fourth grant will announced at Budget day on 3 March 2021.

It is likely that the same qualification rules will apply as was the case for the third grant. This means that you must be currently trading but impacted by reduced demand due to coronavirus or have been trading but temporarily unable to do so due to coronavirus disruptions.

HMRC’s guidance states that the concept of reduced demand can apply if your business has been impacted by reduced activity, capacity or demand due to coronavirus.

For example, you:

  • have fewer customers or clients than you’d normally expect, resulting in reduced activity due to social distancing or government restrictions
  • have one or more contracts that have been cancelled and not replaced
  • carried out less work due to supply chain disruptions

You cannot claim if the only impact on your business is increased costs. The SEISS grant is treated as taxable income and is also subject to National Insurance contributions.

Source: HM Revenue & Customs Wed, 24 Feb 2021 00:00:00 +0100

What is overtrading?

A reminder that traders who buy and sell goods – wholesalers or retailers – need to be wary of the financial consequences if, as expected, pent up consumer activity leads to a surge in demand for your products from July 2021 or earlier if you can trade before 21st June 2021.

What is overtrading?

Let’s assume that the past year’s disruption has meant you have run-through your cash reserves and you basically have little in the way of liquid (cash) resources.

If you suddenly start selling at volume, with no stocks to supply orders, you may have to buy-in product or raw materials to fulfil your customers’ demands.

Wages and other costs will have to paid and your suppliers may insist on tight payment terms.

If you are offering credit terms in excess of those allowed by suppliers, the demands on your cash flow may exhaust your reserves, as cash in from customers will not – initially – cover your outgoings.

Retailers who are paid at point of sale should avoid over-trading. Those businesses most at risk are buying and selling goods, have significant fixed costs to meet and offer credit terms to customers in excess of those agreed with suppliers.

Eventually, overtrading will fix itself as the profit your increased activity generates find its way into your bank account. But you need to work out if your cash flow needs support from you or your bank until this much needed profit reaches your bank account.

We can help. Producing realistic business forecasts will identify periods when overtrading may rear its head. Please call so we can discuss your options.

Source: Other Tue, 23 Feb 2021 00:00:00 +0100

Emerging from lockdown

The Prime Minister has set out the government’s objectives for easing lockdown restrictions.

If the planned opening of schools, social interactions and businesses is achieved without significant increases in infection, after 21st June 2021, there will be no legal limits on social contact. Which means, all businesses including hospitality and entertainment concerns will have the opportunity to reopen.

Initially, the focus is to get children back to school (from 8 March 2021). There will also be gradual relaxation in rules for mixing outdoors including outdoor sporting amenities (from 29 March 2021). From 12 April 2021, indoor leisure, increased outdoor mixing, zoos, theme parks, hairdressers and other family events will be eased.

Businesses that can take advantage of these changes will need to consider their options. Many will have had their finances stretched by the seesaw lockdowns and closures.

Now is the time to plan for recovery. Please call if you would like to discuss your options. 

Source: Other Tue, 23 Feb 2021 00:00:00 +0100

Buying equipment for your job

Employees who need to buy substantial equipment to use as part of their employment may be able to claim tax relief. In most cases they can claim relief based on the full cost as it usually qualifies for a type of capital allowance called the Annual Investment Allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item.

The way to claim tax relief depends on the amount you are claiming for. HMRC provides the following information on making a claim:

Claims up to £2,500

You should make your claim:

  • using a Self-Assessment tax return if you already fill one in
  • online or by printing and posting form P87 if you don’t already fill in a tax return
  • by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions)

Claims over £2,500

  • You can only claim using a Self-Assessment tax return. You need to register if you don’t already complete a return.

There are different rules for employees claiming for their own uniforms, work clothing and tools for work.

Source: HM Revenue & Customs Wed, 17 Feb 2021 00:00:00 +0100

Tax breaks working from home

Employees who are working from home may be able to claim tax relief for any additional costs due to home working. No tax relief will be due if employers reimburse employees for the additional household expenses incurred.

The tax relief covers expenses such as business telephone calls or heating and lighting costs. Expenses that are for both for private and business use (such as broadband) cannot be claimed. Employees may also be able to claim tax relief on equipment purchased. For example, a laptop, chair or mobile phone.

Since 6 April 2020, employers can pay up to £6 per week (or £26 a month for employees paid monthly) to cover an employee's additional costs if they have to work from home. Employees do not need to keep any specific records if they receive this fixed amount. 

If the expenses or allowances are not paid by the employer, then the employee can claim tax relief directly from HMRC. Employees will qualify for tax relief based on their highest tax rate. For example, if they pay the 20% basic rate of tax and claim tax relief on £6 a week they would receive £1.20 per week in tax relief (20% of £6).

Employees can claim more than HMRC's fixed amounts but may need to provide evidence to HMRC of the amount claimed. 

Note, that if an employee is working at home voluntarily, they cannot claim tax relief.

However, these tax reliefs are available to anyone who has been asked to work from home due to the COVID-19 outbreak. 

Source: HM Revenue & Customs Wed, 17 Feb 2021 00:00:00 +0100