The situation around COVID-19 and the economy is constantly evolving. See the latest news and updates that all accountants should know.
Keep on top of the facts
The COVID-19 pandemic continues to change the country’s economic landscape - and fast.
Here we’ve picked out some of the most relevant news and updates from recent days and weeks that business accountants should know about.
The UK is officially in recession as employment falls at the fastest rate since 2009
Between April and June this year, 220,000 employees were dropped from company payrolls with an additional 81,000 in July.
Economists typically consider the total number of hours worked to be a good indicator of the impact on COVID-19 on employment. The number stands at 849.3 million between April and June, down 191.3 million hours on the previous quarter, and also down a record 203.3 million hours on 2019.
The Office for National Statistics (ONS) has revealed that approximately 7.5 million people were away from work temporarily in June, a whopping 5.5 million more than would be expected in normal times.
It seems that although the furlough scheme has been a great success, instrumental in preserving the UK job market, things will go downhill fast when it finishes in October. Additionally, with companies continuing to face reduced footfall, dwindling cash reserves and rising costs, unemployment is likely to soar even further into 2021.
January 2021 tax deadlines: Many of your clients could struggle to pay
Individuals who were due to make their half-year self-assessment payments at the end of July were offered a reprieve by HMRC if they were badly affected by the pandemic. Instead, the July 2020 payment could be deferred and rolled in with the January 2021 payments, however for many this may have only prolonged the agony. Additionally, UK self-employed individuals who availed of the government’s SEISS grants will need to include the extra income on their 2021/22 tax year and pay tax on it. Again, many small businesses may have needed the tax money they’ve put aside simply to stay afloat in the immediate term, bringing problems down the line.
PASA issues new COVID-19 guidance
The Pensions Administration Standards Association (PASA) has published follow up coronavirus guidance designed to highlight best practice companies who are trying to get back on their feet post-pandemic.
It discusses a range of issues, including KPIs and projects, productivity, in-person meetings, well-being and homeworking, digital workflow, offshoring, visibility and accessibility, investment managers and AVCs, recruitment and more.
For more information, see the latest PASA guidance.
Changes to COVID-19 small business loan rules
Businesses up and down the UK have already taken huge advantage of the coronavirus business interruption loan scheme (CBILS). However, following government and industry lobbying further loans of up to £5 million are now being made available to smaller companies. The change kicked in on the 30th July.
Around 60,000 firms have already benefitted from the CBILS, designed to financially prop up businesses during the COVID-19 crisis. Before the 30th July, businesses which were categorised as ‘undertakings in difficulty’ were not able to claim CBILS support due to EU rules. This is typically because they had high accumulated losses, lower turnover and/or substantial debts. However, now companies with less than £9 million in turnover, and under 50 employees, can apply.
The change was brought about after extensive lobbying for a relaxation of the rules in the European Temporary State Aid Framework. This was to ensure that small, solvent businesses who are not in receipt of rescue aid can benefit from the support.
Download the Treasury letter Coronavirus Business Interruption Loan Scheme (CBILS): EU State Aid Rules and “Undertakings in Difficulty” for more details.
Accountants urged to be on guard for COVID-19 fraud
Unfortunately, the COVID-19 pandemic has led to a sharp rise in fraud. As your clients’ business accountant it’s worth knowing these scams exist and warning your clients where necessary. The National Crime Agency recently published an article on this which you may find useful.
Fraud includes online shopping scams where unsuspecting customers have bought hand sanitiser, face masks, PPE and other protective equipment which are fake, counterfeit or that never arrived. Fake coronavirus testing kits, including antibody testing kits, have also made their way on to the market despite being unreliable and/or unsafe.
Government branding is also being used by criminals to make their scams appear more realistic. For example, there’s been an increase in emails, calls and texts purporting to be from HMRC that usually look to harvest bank details by telling the recipient they’re owed money. Additionally, with more employees than ever working remotely, people have become vulnerable to computer service fraud. This is where criminals make contact and imply that there’s something wrong or illegal with the person’s computer or broadband connection. They then ask for private details including passwords to ‘fix’ whatever is wrong. Going forward, it’s likely there will be even more scam calls claiming to be from accountancy firms or government departments offering compensation, tax rebates, loans or grants.
Pension changes from this month
Previously, from the 1st July 2020, staff who are furloughed under the Coronavirus Job Retention Scheme have been able to work flexible hours. This means they spend fewer hours at work and receive furlough payments for the time they’re away. However, since the 1st August 2020, employers can no longer receive a grant to get them up to the statutory minimum automatic enrolment (AE) employer contribution level.
See ThePensionRegular.gov.uk for the latest guidance.
COVID-19: tax-free childcare extended
The government has said it’s extending Tax-Free Childcare (TFC) until the 31st October 2020. This is for parents that may have fallen below the minimum income requirement due to the COVID-19 outbreak.
HMRC have said that key workers will also continue to receive the support, even if they exceed the income threshold for the 2020/21 tax year because of longer working hours during the pandemic.
The scheme works by providing families with a £2 boost for every £8 parents pay in themselves. The maximum allowed is £2,000 per child up to age 11, or £4,000 for children who are disabled up to age 17. Find out more.
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