Taxation and trusts; IFS debates, Stamp duty land tax and latest UK property statistics and more.

• Managing access to cash: Finalised FCA guidance
• Support for consumer credit and overdraft customers
• Consumer investment market review
• IFS debate: The future of capital gains tax
• Reforms to companies house to clamp down on fraud
• Parliamentary business: COVID-19: NHS long-term plan
• IFS/CIOT labour party conference fringe debate
• Stamp duty land tax: New rates for non-UK residents
• Next stage of support for mortgage borrowers: New FCA guidance
• Chancellor’s winter economy plan
• Latest UK property statistics now available

 

 

Managing access to cash: Finalised FCA guidance

(AF1, RO3)

 

The Financial Conduct Authority (FCA) has finalised its expectation for firms on maintaining access to cash for customers

The FCA has now published its finalised guidance, in which it makes it clear that banks, building societies and credit unions are now expected to keep the FCA informed of any plans for branch or ATM closures, or conversions of a free-to-use ATM to pay-to-use, in good time before any final decision is made. The FCA says that this will enable it to monitor whether customers are being treated fairly.

Before making a final decision, the FCA will expect firms to provide a clear summary of their analysis of the needs of customers currently using the sites, the impact of the proposals on those customers, and alternatives that are, or could reasonably be, put in place if they implement the proposals. 

If a firm decides to implement its closure or conversion proposals, it will be expected to clearly communicate information about this to its customers no less than 12 weeks before the proposals are implemented. This should include making customers aware of alternatives they can use. This will give customers time to take action, such as changing banking provider. 

This guidance applies to FCA-regulated firms that operate physical sites such as bank branches, building society branches, credit union offices or cashpoints. 

You can read the finalised guidance here. It applies from 21 September 2020. 

The FCA is also collaborating with the Payment Systems Regulator (PSR) as part of its wider work to ensure an appropriate and sustainable model of maintaining access to cash. 

Source: FCA News: FCA finalises its expectation for firms on maintaining access to cash for customers - dated 14 September 2020.

Support for consumer credit and overdraft customers

(AF1, RO3) 

The FCA has announced further proposals to ensure that firms provide tailored support for users of consumer credit and overdraft products who continue to face payment difficulties due to COVID-19.

Following the Financial Conduct Authority (FCA)’s July guidance, the FCA has now published updated proposals, which cover users of credit cards and other revolving credit (store card and catalogue credit), personal loans, overdrafts, motor finance, buy-now pay-later (BNPL), rent-to-own (RTO), pawnbroking and high-cost short-term credit (HCSTC) products.

The new draft guidance applies both to consumers, who have benefited from payment deferrals and support with the cost of their overdrafts under the current guidance and who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends. It is intended to ensure they get the support they need in these extraordinary times.

The FCA expects its July guidance will expire on 31 October 2020, but will keep this under review depending on how the wider situation develops.

The FCA’s latest proposals are designed to help people who have been facing payment difficulties because of the pandemic get back on track with tailored support from firms.

If these measures are confirmed, the FCA would expect that firms:

• Recognise the uncertainties and challenges that many customers will face in the coming months, and provide tailored support which reflects their individual circumstances.
• Work with customers approaching the end of a payment deferral to provide support before they miss payments.
• Be flexible and employ a full range of shorter and longer-term options to support their customers to minimise stress and anxiety experienced by customers in financial difficulty.
• Put in place sustainable repayment arrangements which are affordable and take account of their customers’ wider financial situation, including their other debts and essential living expenses. 
• Give customers time and opportunity to repay and do not pressurise them into repaying their debt within an unreasonably short period of time.
• Prevent customers’ balances from escalating by suspending, reducing, waiving or cancelling any interest, fees or charges necessary to make that happen.
• Recognise and respond to the needs of vulnerable customers.

The FCA says that it will monitor firms to ensure borrowers are treated fairly having regard to their individual circumstances.

Additionally, the FCA is proposing that firms contact overdraft customers who have received temporary support to determine if they still require assistance. Where a customer needs further support, firms should use measures such as reducing or waiving interest, agreeing a programme of staged reductions in the overdraft limit, or supporting customers to reduce their overdraft usage by transferring the debt. The guidance sets out when these options may be appropriate. 

Where consumers require further support from firms, either at the end of payment deferrals under the guidance, or where they need support for the first time, this will be reflected on credit files in accordance with normal reporting processes. This will help lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. The

FCA expects firms should be clear about the credit file implications of any forms of support offered to consumers.

Source: FCA News: FCA proposes the next stage of support for consumer credit and overdraft customers - dated 16 September 2020.

Consumer investment market review

(AF4, FA7, LP2, RO2) 

The FCA has launched a Call for Input to help shape its work on improving the consumer investment market.

The Financial Conduct Authority (FCA) is seeking views on the following key questions:

• What more can it do to help the market offer a range of products that meet straightforward investment needs? 
• How can it better ensure that those who have the financial resources to accept the risks of higher-risk investments can do so if they wish, but in a way that ensures they understand the risks they are taking?  
• How can it use the regulation of financial promotions to make it easier for people to understand the level of regulatory protections afforded to them when they invest?  
• What more can it do to ensure that when people lose money because of an act or omission of a regulated firm, they are appropriately compensated and that it is paid for fairly by those who cause the loss?
• How can people be better protected from scams?
• How does the FCA help this market to be competitive, with firms striving to offer better products and services?  

This Call for Input is aiming to help shape the future of consumer investments, including regulation, to ensure consumers can have faith in the market. You can read it here.

Comments can be made using the FCA’s online response form or via email to ConsumerInvestmentsCFI@fca.org.uk by 15 December 2020. 

Source: FCA News: FCA seeks views on how to improve the consumer investment market - dated 15 September 2020.

IFS debate: The future of capital gains tax

(AF1, AF2, JO3, RO3) 

The Institute for Fiscal Studies and Chartered Institute of Taxation recently held a debate about the future of capital gains tax.

The Office of Tax Simplification (OTS) is in the process of carrying out a review of capital gains tax (CGT) for individuals and small businesses, commissioned by Rishi Sunak in July. The unexpected request from the Chancellor has been seen as an indication that CGT is one area where he will seek extra revenue.

On Thursday 17 September, the Institute for Fiscal Studies (IFS) and Chartered Institute of Taxation (CIOT) ran a virtual debate on the topic with four speakers, all with different CGT-related backgrounds. The discussion covered many familiar areas, although a few interesting new nuggets emerged:

• Taxing gains as income. Three of the four speakers were broadly in favour of this approach, as have been a number of think tanks. A couple of speakers reminded listeners that the idea was originally put into practice by a Conservative Chancellor (Nigel Lawson) and survived for 20 years. It has the advantages of removing the current avoidance incentive to transform income into capital gains, and potentially raising more tax. However, behavioural effects could limit just how much extra revenue comes to HMRC – just 10,000 individuals accounted for over half the CGT paid in 2018/19 according to the latest HMRC statistics. The IFS wanted to see gains subject to National Insurance contributions (NICs) as well as income tax, a view which echoes its long-held wish to integrate the two.

The idea of taxing the wealthy more found favour with 61% of the public, but surprisingly among Conservatives, this figure rose to 67%. Tax rises are surprisingly popular, but that may be because those in favour think they will not be affected – probably a fair assumption for CGT.

• CGT uplift on death. Scrapping the automatic rebasing of asset values on death also found favour. It was noted that if CGT rates were increased, leaving the automatic uplift in place would further discourage sales of assets. There was a plea for some coherence to be introduced at the interface between CGT and IHT – some assets can end up suffering both taxes while others are untouched by either. Given that CGT and IHT are both on the Chancellor’s and OTS’s reform list, there could even be a new overall capital taxes framework introduced.

• The annual exemption. Several speakers made the point that there seemed little logic in having both an income tax personal allowance and a CGT annual exemption of the same amount, especially if gains were to be taxed at income tax rates. Instead, it was suggested that the current £12,300 exemption could be replaced with a de minimis figure of around £1,000. Nobody commented on how many more people this would drag into self-assessment.

• Taxing private residences. The tax exemption for main residences was felt to be wrong in principle, but politically suicidal to do anything about. Even creating a rollover relief system for those moving home, which some other countries have, was thought to be too incendiary. The IFS speaker suggested that a viable alternative – albeit with its own political toxicity – would be to reform council tax so that it was more closely related to a property’s current value (as opposed to 1991, the last valuation date in England).

• Investment incentives. The IFS speaker expressed the view that the lesson of Entrepreneurs’ Relief was using CGT rates to incentivise investment was tackling the issue from the wrong end. His suggestion was that the incentive should be at the beginning of the investment, e.g. allowing the initial investment to be set against income, but then taxing all of the proceeds.

CGT looks a prime candidate for a revenue-raising revamp. However, it is only a start of any tax-raising by the Treasury. Even if the CGT tax take were doubled, it would only produce about an additional £10bn.

Residential property profits notwithstanding, CGT is generally paid in arrears – the tax received in 2020/21 is almost entirely based on gains made in 2018/19 (with tax payable on 31 January 2020). Thus, any reform that does not alter the tax due date will make little difference to the Treasury’s coffers until 2023/24. For 2021/22 the Office for Budget Responsibility (OBR) is currently forecasting CGT receipts of £7.6bn, down from a projected £10.5bn for the current financial year because of the pandemic.

The debate did not consider the question of when any changes to CGT might take effect, a question which we are regularly asked. If there are increases in rates and/or reductions in allowances, we would expect that they would take effect from the start of the day of announcement, like many other past Budget measures. Our logic for this is based on three main points:

• When George Osborne increased the rate of CGT from 18% to 28% for higher and additional rate taxpayers in his June 2010 Budget, the change was effective from the end of Budget Day. When Entrepreneurs’ Relief (ER) was cut from £10m to £1m (and changed to Business Asset Disposal Relief (BADR)) in the March 2020 Budget, this took effect from the start of Budget Day. Notably, the ER-to-BADR change also included a set of anti-forestalling measures, something that might reappear in the future.

• Behavioural aspects. If there is a gap between announcement and implementation, then this would encourage a flood of pre-emptive disposals and realisations. While this would boost tax income in the short term, it would reduce the overall CGT tax take. For an example of the potential behavioural reaction, think back to the consequences of the dividend tax changes announced in July 2015, but effective from April 2016.

• Tax timing. With the exception of tax on residential property gains, CGT is generally payable on 31 January in the tax year after the tax year of disposal. Thus, there is not the administrative problem in dealing with an instant change to CGT that there can be with other measures.

Source: CIOT and IFS Online Debate: Where next for Capital Gains Tax? (https://www.tax.org.uk/ciotifs17092020-live) – dated 17 September 2020.

Reforms to companies house to clamp down on fraud

(AF1, AF2, JO3, RO3) 

Compulsory identity verification is to be introduced to help trace people who are committing fraud or money laundering. Companies House will be given greater powers to query, investigate and remove false information.

According to Companies House statistics, at the end of June 2020, there were 4,513,392 companies on the total Companies House register. (This figure includes 413,069 companies in the course of dissolution and liquidation.) The Companies House register can be a very useful source of publicly available business information.

The UK’s register of company information is to be reformed to clamp down on fraud and money laundering.  Under the plans, directors will not be able to be appointed until their identity has been verified by Companies House.

The changes aim to increase the reliability of the data showing who is behind each company so that businesses have greater assurance when they are entering transactions with other companies, such as when small businesses are consulting the register to research potential suppliers and partners.

It will also improve the ability of law enforcement agencies, such as the National Crime Agency, to trace their activity for suspected fraud or money laundering. Identity verification will, says the Government, take place through a fast, efficient, digital process and is expected to take a matter of minutes.

The Government believes its reforms will not impact on the typical speed at which a company or organisation is formed and other filings are completed. For example, to facilitate the new identity verification requirement, Companies House will develop a fast, efficient, 24/7 digital verification process to minimise any strain on business, and prevent delays in incorporations and filings. It believes most companies will be able to be incorporated easily within 24 hours as is the case now.

The reforms will give Companies House more powers to query and reject information, to improve the quality of data on the register, as well as affording users greater protections over their personal data, to help protect them from fraud and other harms.

You can read the Government’s full response to the Corporate Transparency and Register Reform consultation here.

The Government says that it will also consult on further changes to make Companies House more useful and usable, including reforms to the filing of company accounts and a broader transformation of Companies House systems and processes.

It will bring forward legislation to enact the reforms to the register “when Parliamentary time allows”.

Source: Companies House Press Release: Reforms to clamp down on fraud and give businesses greater confidence in transactions– dated 18 September 2020.

Parliamentary business: COVID-19: NHS long-term plan

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8) 

The 2019 Conservative Party Manifesto committed to urgently seek a cross-party consensus in order to bring forward the necessary proposal and legislation for long-term reform. However, even though the Select Committee concluded that a review of financing long-term social care is necessary, a recent discussion which took place in the House of Lords has confirmed that there are no plans to do this before the end of the year.

In a wide-ranging speech on 30 June this year, the Prime Minister stated that now was the time to fix the problems that were “most brutally illuminated” by the coronavirus outbreak, including “the problems in our social care system.” He added that: “…we won’t wait to fix the problem of social care that every government has funked for the last 30 years. We will end the injustice that some people have to sell their homes to finance the costs of their care while others don’t. We are finalising our plans and we will build a cross-party consensus.”

However, at a Select Committee meeting on 15 September, Lord Bethell said, in answer to the question: “When can we look forward to the proposals for radical social care reform…?”

“My Lords, I cannot commit to a social care plan before the end of the year. It will require a huge amount of political collaboration and I suspect it will take longer than the next few months. …”

It will be interesting to see what, if anything, comes of this in the coming year.

Sources:

• Parliamentary business: COVID-19: NHS Long-term Plan - Lord Bethnall “My Lords, I cannot commit to a social care plan before the end of the year” – dated 17 September;
• Parliamentary Briefing Paper: Number 8001, Adult social care funding reform: developments since July 2019 (England) – dated 8 July 2020. (https://researchbriefings.files.parliament.uk/documents/CBP-8001/CBP-8001.pdf)

IFS/CIOT labour party conference fringe debate

(AF1, AF2, JO3, RO3) 

The Institute for Fiscal Studies (IFS) and Chartered Institute of Taxation (CIOT) recently held a virtual debate entitled ‘Tax after the Pandemic’ as one of the Labour Party’s fringe events. The comments from the Shadow Chancellor were interesting for what they did not contain.

Question:       Who is the Shadow Chancellor?

Answer:          A  Angela Rayner

                        B  Lisa Nandy

                        C  Rachel Reeves

                        D  Anneliese Dodds

Ten points if you opted for D. So far, the Shadow Chancellor has been somewhat overshadowed (sic) by the actual occupant of 11 Downing Street. To no small degree that it because of the pandemic and the resultant massive jump in spending (and borrowing) undertaken by Rishi Sunak. There is no obvious benefit for Her Majesty’s Opposition in calling for less expenditure and clear dangers in calling for much more. Hence, Anneliese Dodds was criticising the quality, not quantity, of spending in her conference speech.

The following day she took part in a joint CIOT/IFS debate about tax after the pandemic. Anyone hoping for an insight into future Labour tax policy would have been disappointed:

• When asked whether she would implement the tax proposals in the 2019 manifesto, she gave the answer that Labour’s tax policies would depend upon conditions at the time. As the next Election still appears to be four years away, that is an understandable, if frustrating, political response.

• Similarly, when asked which one tax she would raise now to bolster the Exchequer’s coffers, she sidestepped a direct answer and talked about wanting general tax reform, rather than increasing any single tax. Interestingly, the other three speakers (from the IFS, CIOT and a public opinion consultancy) all favoured capital gains tax. That will have given the Chancellor some comfort as he waits for the report he commissioned on the subject from the Office of Tax Simplification.

To those who have been following the discussions about the future of tax, the debate did not contain anything new. It was more a reminder that the response to the pandemic:

• Is not a reason to raise taxes any time soon. The consensus is to wait for the economy to recover before addressing the fiscal deficit; and

• That time provides an opportunity to think more creatively about the tax system rather than tweak a few rates in the current creaking structure.

The IFS repeated its criticism of the differences in taxation between employees, self-employed and owner directors, a point which Anneliese Dodds accepted. She suggested that the “sticking plaster” of IR35 was evidence that an overhaul of earnings taxation was needed.                      

In theory, Anneliese Dodds’ circumspection will be less of an option in two weeks’ time when the CIOT and IFS run a debate with the same title as a fringe event at the Conservative Party conference. Then the political speaker will be Jesse Norman, Financial Secretary to the Treasury.

Source: Tax after the pandemic (Labour Party Conference fringe event) – dated 22 September 2020.

(https://www.ifs.org.uk/events/1842)

Stamp duty land tax: New rates for non-UK residents

(AF1, RO3) 

The Society of Trust and Estate Practitioners and the Chartered Institute of Taxation have said that the new SDLT legislation needs further clarification.

The Society of Trust and Estate Practitioners (STEP) recently produced an article in relation to the new 2% stamp duty land tax (SDLT) surcharge for non-UK resident purchasers of residential property in England and Northern Ireland, which will apply from 1 April 2021. It will be payable in addition to the SDLT liability including the 3% surcharge for additional homes.

Broadly, an individual will be treated as UK resident if they have spent 183 days in the UK during a continuous period of 365 days that falls within the relevant period. The ‘relevant period’ starts 364 days before the purchase and ends 365 days after. So, for example, a non-UK resident moving to the UK may have to pay the surcharge initially as they have not been in the UK long enough to be regarded as UK resident, but if they then spend sufficient time in the UK over the next year they could become UK resident and be entitled to a refund of the 2% surcharge. 

STEP has said that the draft legislation needs further clarification in relation to the residency rules because at present there is a discrepancy in the way the legislation is drafted as it carves out certain circumstances under which the ‘relevant period’ is not in line with that stated above.

STEP has asked for detailed guidance prior to 1 April 2021 to ensure that taxpayers and their advisors are fully aware of the new rules.

The Chartered Institute of Taxation (CIOT) has also raised concerns when providing responses to the consultation regarding the residency rules applicable to companies which has a number of complexities. Broadly, a non-UK company which is not managed and controlled in the UK will generally be a non-UK resident company for the purposes of the surcharge. However, in some cases a company that is UK resident for corporation tax purposes, so a UK incorporated company which is managed in the UK, can also be deemed to be a non-UK resident company if it is controlled by non-UK residents. To complicate matters, under the control test, a non-UK resident may be deemed to hold control rights that are held by a UK resident connected person, for example, a spouse, or child. This may then lead to the company being treated as though it is controlled by non-UK residents even though it is not. Again, the CIOT has asked for clarification of these rules prior to 1 April 2021.

Sources: STEP News: UK government SDLT draft legislation needs further clarification, says STEP – dated 17 September 2020.

               CIOT News: SDLT: increased rates for non-resident transactions – dated 17 September 2020.

               (https://www.tax.org.uk/policy-technical/submissions/sdlt-increased-rates-non-resident-transactions)

Next stage of support for mortgage borrowers: New FCA guidance

(ER1, LP2, RO7) 

Following a short consultation, the Financial Conduct Authority (FCA) has now finalised proposals to ensure that firms provide tailored support to mortgage borrowers who continue to face payment difficulties due to coronavirus.

The FCA originally published Mortgages and Coronavirus guidance on 20 March 2020 which was updated on 4 June and 16 June 2020.

On 26 August, the FCA published additional draft guidance for firms, intended to ensure that consumers – both those who have benefited from payment deferrals under the current guidance who continue to face financial difficulties, as well as those whose financial situation may be newly affected by coronavirus after the current guidance ends - get the support they need.

Stakeholders were not given long to make comments on this draft guidance – the deadline was 1 September 2020. You can read the issues raised, and the FCA’s responses here. The finalised guidance came into force on 16 September 2020.

The previous guidance will continue to provide support for those impacted by coronavirus until 31 October 2020 – with consumers able to take a first or second three-month payment deferral until this date. The previous guidance will expire on 31 October, and the FCA does not intend to extend this guidance. The new guidance should ensure consumers will still be able to obtain the support they need from their lenders after their payment holiday ends or they are newly affected by coronavirus after 31 October. The FCA says that it will keep the guidance under review depending on how the wider situation develops.

The new guidance confirms that firms should consider the appropriateness, and use, of a range of different short and long-term support options to reflect the specific circumstances of their customers. This could include extending the repayment term or the restructuring of the mortgage. Where consumers need further short-term support, firms should offer arrangements for no or reduced payments for a specified period to give customers time to get back on track.

The FCA requires firms to contact their borrowers in good time before the end of a payment holiday, and work with them to come up with a tailored plan to help get them back on track. Firms should not take a ‘one size fits all’ approach. Under the confirmed guidance, firms should prioritise giving tailored support to borrowers who are at most risk of harm, or who face the greatest financial difficulties. 

Firms should also provide borrowers with the support they need in managing their finances, including through self-help and money guidance, and refer borrowers to debt advice if this meets their needs and circumstances.

Where borrowers require further support from lenders, either at the end of payment holidays under the FCA’s guidance, or where they are in need of support for the first time, this would be reflected on credit files in accordance with normal reporting processes. This will, says the FCA, help to ensure that lenders have an accurate picture of consumers’ financial circumstances and reduce the risk of unaffordable lending. The FCA wants firms to be clear about the credit file implications of any forms of support offered to borrowers.

You can read the new finalised guidance here.

Sources: FCA News: FCA proposes the next stage of support for mortgage borrowers– dated 26 August 2020.

               FCA News: FCA News: FCA confirms the next stage of support for mortgage borrowers – dated 14 September 2020.

Chancellor’s winter economy plan

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8) 

The announcement on 23^rd September that the Autumn 2020 Budget was to be cancelled came as no real surprise. Events leading up to the news suggested there was no rush to make or announce current or even future tax changes. For example, there were the new restrictions recently announced by the Prime Minister, the Chancellor’s own request to the Office for Budget Responsibility ( OBR) to prepare an economic and fiscal forecast by mid/late November and the growing consensus among economists that any serious tax rises should be deferred until the economic conditions stabilized.

In place of the missing Budget, the Chancellor introduced his “Winter Economy Plan” (WEP). Much of its content had been well trailed beforehand, but we now have an official announcement and some (but not all) detail.

We found the following extract from the Government’s WEP summary particularly interesting in setting the context for the newly announced support, its consequences for Government borrowing and the potential impact on the timing of any future measures to deal with £2 trillion-plus of Government debt:

“The government’s economic response seeks to protect jobs and livelihoods in those areas of the economy that are most affected in the short term. This targeted and temporary support will continue to promote as rapid a recovery as possible once restrictions are lifted, minimising structural damage to the economy and public finances.

The work of the last ten years in bringing borrowing and debt back under control has meant that the UK has been well-equipped to respond to the challenges posed by COVID-19. The targeted and temporary policy support announced by the government has led to a significant but necessary increase in short-term borrowing and higher debt. Borrowing costs continue to be very low, so the costs of servicing this debt are affordable and sustainable. The government is committed to fiscal sustainability and ensuring the long-term health of the public finances.”

What follows is a brief factual summary of the main provisions of the Government’s Plan to further support individuals and businesses.

• Support for employment: For the six months from 1 November, the new  Job Support Scheme (JSS - effectively an evolution of the Coronavirus Job Retention Scheme – (JCRS)) will protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19.  Employees for whom JSS claims are made will need to work a minimum of 33% of their usual hours. For every hour not worked the employer and the government will each pay one third of the employee’s usual pay, and the government contribution will be capped at £697.92 per month.

As a result, employees for whom JSS claims are made will receive at least 77% of their full-time pay where the government contribution has not been capped. The employee’s pay will be taxed as it was under the CJRS scheme and the payments will, of course, be deductible for the employer. Amounts claimed by the employer under the JSS will be taxable, but the deductibility of payments out will mean that, overall, the scheme delivers tax “neutrality”. The employer will be reimbursed in arrears for the government contribution. The employee must not be on a redundancy notice. The scheme will be open to all employers with a UK bank account and a UK PAYE scheme. All Small and Medium-Sized Enterprises (SMEs) will be eligible; large businesses will be required to demonstrate that their business has been adversely affected by COVID-19, and the government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.

Whilst it is not covered in the guidance the UK government generally adheres to the EU definition of an SME, which is: micro-business = less than 10 employees and turnover under €2 million; small business = less than 50 employees and turnover under €10 million; medium-sized business = less than 250 employees and turnover under €50 million.

• Support for the self -employed: The Self-Employment Income Support Scheme (SEISS) will be extended for six months from 1 November and will support viable traders who are currently eligible for the SEISS and are actively continuing to trade but are facing reduced demand over the winter months. The extension will be in the form of two taxable grants:

• The first grant will cover a three-month period from the start of November until the end of January. This initial grant will cover 20% of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £1,875 in total.

• The second grant will cover a three-month period from the start of February until the end of April. The government will review the level of the second grant and set this in due course.

• Access to business finance: A range of measures have been proposed to extend access to finance for business with a view to helping with all important cash flow.

The main provisions are as follows:

• Bounce Back Loan Scheme (BBLS) – The BBLS has (unsurprisingly) had significant (£38 billion) take up. To remind you, loans are between £2,000 and £50,000, capped at 25% of turnover, with a 100% government guarantee to the lender to provide them with the confidence they need to support the smallest businesses. The borrower does not have to make any repayments for the first twelve months, with the government covering the first twelve months’ interest payments.

Under the new Pay as you Grow options, BBLS borrowers will all be offered the choice of more time and greater flexibility for their repayments. All businesses that borrowed under the BBLS will have the option to repay their loan over a period of up to ten years (the current maximum is six) . This will reduce their average monthly repayments on the loan by almost half. UK businesses will also have the option to move temporarily to interest-only payments for periods of up to six months (an option which they can use up to three times), or to pause their repayments entirely for up to six months (an option they can use once and only after having made six payments).

• Coronavirus Business Interruption Loan Scheme (CBILS) CBILS was launched ahead of the BBLS and provides loans of up to £5 million with an 80% government guarantee to the lender, giving lenders the confidence to provide finance to SMEs. The government does not charge businesses for this guarantee and also covers the first twelve months of interest payments and fees. Lenders will now be permitted to allow borrowers to extend the term of a loan for up to ten years, providing additional flexibility for UK-based SMEs who may otherwise be unable to repay their loans.

• Taxation help: Three key measures to help consumer demand, business and self-employed cash flow respectively

• VAT cut: The 15% VAT cut (to 5%) for the tourism and hospitality sectors has been extended to the end of March next year.

• Deferred VAT payments: Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest-free payments over the course of 11 months - benefiting up to half a million businesses.

• Enhanced Time to Pay for Self-Assessment taxpayers: The self-employed and other taxpayers will be given more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020. Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that Self-Assessment liabilities due in July 2020 will not need to be paid in full until January 2022. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.

Latest UK property statistics now available

(AF4, FA7, LP2, RO2)

HMRC recently issued a press release stating that the number of UK residential property transactions has increased since June. This is also reflected in the latest UK Property Statistics.

The increase in transactions came after the Chancellor, Rishi Sunak, announced a stamp duty holiday at the start of July that will last until 31 March next year. Under these rules, individuals will only begin to pay stamp duty land tax (SDLT) on the value of a property above £500,000. These changes broadly mean that nearly nine out of ten transactions will no longer be subject to SDLT. (Although people purchasing buy-to-let properties and second homes will still be required to pay the 3% surcharge.)

After a 14.5% rise in July, residential property transactions in August rose a further 15.6%!

 

Further, it appears that the introduction of the stamp duty holiday has helped to protect nearly 750,000 jobs - benefiting businesses across the housing supply chain and beyond, with the Bank of England estimating that households who move home are much more likely to purchase a range of durable goods, such as furniture, carpets or major appliances.

In addition, it is expected that, among others, housebuilders, estate agents, tradespeople, DIY stores, removal and cleaning firms could all benefit from the increased activity.

According to the press release, figures from the Building Societies Association show that there has been a marked uplift in the number of people who say that now is a good time to buy a property - 37% in September compared to 25% in June, whilst figures from Checkatrade show that:

• more than one in ten (11%) of Brits are hoping to have bought a new home by the end of March 2021;

• 33% of those that are hoping to move plan to spend the ‘extra’ cash from their stamp duty savings on home improvements and renovations.

Sources: HMRC National Statistics: Monthly property transactions completed in the UK with value of £40,000 or above / HM Treasury News story: House sales rise following the introduction of stamp duty holiday supporting nearly 750,000 jobs – dated 22 September 2020.

https://www.gov.uk/government/news/house-sales-rise-following-introduction-of-stamp-duty-holiday-supporting-nearly-750000-jobs

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/919311/MPT_Com_Sep_20__cir_.pdf