Kickstart Scheme – A Guide for Employers?

| 18th September 2020

Please note: This scheme has been updated for employers with 29 or less placements – please click here to find out more.

In July 2020, Rishi Sunak announced the Government’s “plan for jobs,” with yet further Government investment being ploughed into helping the economy in the wake of the Coronavirus pandemic.

Amongst the announcements was that of the “Kickstart Scheme,” designed to prevent young people at risk of long term unemployment from meeting that fate.

But what is it, what are the benefits for employers and how do you get involved.

We’ve done the research for you and will as usual continue to keep you updated as things change.

What is the Kickstart Scheme?

The government will introduce a new Kickstart Scheme to fund the direct creation of high quality jobs for young people at the highest risk of long-term unemployment. It will give young people the chance to build their confidence and skills in the workplace, and to gain experience that will improve their chances of going on to find long-term, sustainable work. 

https://www.gov.uk/government/publications/a-plan-for-jobs-documents/a-plan-for-jobs-2020

Essentially, the Government wants employers to create 6 month work placements for those aged between 16 and 24 and at risk of long term unemployment and will therefore pay employers directly by reimbursing the minimum wage, National Insurance contributions and pension contributions for a 25 week placement.

Which employers can apply for the Kickstart Scheme?

The Government is encouraging all businesses to apply to take on a young person for 6 months, the Chancellor was clear:

And I urge every employer, big or small, national or local, to hire as many Kickstarters as possible. Rishi Sunak – Chancellor

However, when the scheme launched on 2nd September it is clear that only employers making 30 or more placements available will be able to apply directly with the Government.

How do employers apply for the Kickstart Scheme?

So for micro businesses, it will be essential to form some sort of partnership or collective with other similar employers to apply together.

If your organisation is creating fewer than 30 job placements, you cannot apply directly. You must partner with other organisations in order to create a minimum of 30 job placements before applying. Other organisations can include local authorities, charities, other employers and trade bodies.

The Government’s initial recommendation is to contact your local DWP partnerships team and they’ve provided details here.

Current information?

  • There’s no requirement to maintain the placement after 6 months. 
  • The Government pays the employer directly
  • While there is no formal guidance on what employers should offer, the aim is clearly of offer real work experience
  • The grant will only be paid if you hire someone referred to you as part of the scheme (so you can’t just go handpicking your own Universal Credit recipients). But there’s no confirmed information about whether all recipients will be eligible.

Considering a Sale to an Employee Ownership Trust?

| 18th September 2020

This is an article recently posted on LinkedIn by Cathy Cook, Partner of LCF Law and reproduced below with permission.

Anyone keeping an eye on the business pages will have seen that sales to Employee Ownership Trusts (EOTs) are growing in popularity, and are providing a useful way for business owners to exit in an uncertain market or where there is a limited market due to the niche nature of the business. We’re all aware of the partnership model operated by John Lewis and the sale of Aardman Animations (the company behind Wallace and Gromit), but do we really understand what an EOT is and why they are so attractive?

WHAT IS AN EOT?

Essentially an EOT is a unique trust for the benefit of employees, which means that the Company is effectively owned by and for the benefit of the employees. This is often a very attractive proposition in creative or niche technical businesses which might otherwise struggle to find a buyer, and which enable a founding shareholder to exit and hand over control to a competent and deserving management team. If structured correctly to meet the requirements of the tax legislation, using an EOT structure can mean that the selling shareholders pay no Capital Gains Tax on disposal and the employees also gain certain income tax exemptions on the payment of future bonuses. As you might expect, however, there are caveats which include:

  1. there must be a trading company as part of the sale;
  2. the sellers must relinquish control in terms of dividend, capital and voting rights;
  3. any sellers who held 5% of the shares in the Company at any point in the 10 years prior to the sale cannot benefit under the terms of the EOT if they remain with the Company as employees after the sale (this doesn’t affect their CGT position); and
  4. the selling shareholders and their connected parties must not have comprised more than 2/5th of the overall workforce in the 12 months prior to sale or to the end of the tax year in which the sale takes place (‘the Limited Participation requirement’).

The last of these is designed to ensure that individuals who had a substantial shareholding in the company, and who together with family members and other selling shareholders made up a significant proportion of the business’s workforce before and after the creation of the EOT, cannot benefit from the tax advantages of the EOT.

Points 3 and 4 above will often inadvertently affect individuals who have been structuring their shareholdings for an open market sale, as often shares have been transferred to spouses who are also appointed as officers of the Company to ensure that they qualify for entrepreneur’s relief. If the business is relatively small and also employs other family members of a founding shareholder then it can quickly fall foul of the Limited Participation Requirement.

For the correct businesses EOTs can be extremely successful, but if you think it would work for your business then you do need to take early advice as you may need to do some preparatory restructuring (potentially up to 12 months prior to planned sale) to ensure that you will comply with the rules on exit.

This article was written by Cathy Cook. Cathy is a Partner in the Corporate Department of LCF Law and is based in Leeds.

Her clients include owner managed businesses specifically suppliers into the large retailers for whom she has reviewed and drafted terms and conditions, framework agreements and outsourcing agreements.

You can contact Cathy 01132 384 042 or email ku.oc.fcl@koocc

Autumn Budget 2020: when is it and what will it contain?

| 18th September 2020

We don’t know exactly when the Autumn Budget will be, as the Treasury hasn’t set a date.

The earliest it will happen is ‘mid to late November’, as this is when Mr Sunak asked the Office for Budget Responsibility (OBR) to publish an economic forecast – a prerequisite to holding a Budget. But this doesn’t mean the Budget will definitely take place in November.

Reports emerged in The Telegraph over the weekend that the statement could be delayed in the event of a large second wave. According to The Telegraph’s sources, a December date would be ‘unlikely’ due to time constraints in parliament, so it would likely be pushed into next year if it is delayed. This echoes reports in the Financial Times from August, which said a delay until spring 2021 could be a possibility, but with an autumn ‘mini spending review’ to tide us over.

Whether or not you agree with his decisions, Mr Sunak is under huge pressure to deliver bold policies to help the nation through the coronavirus pandemic,  so what’s next?

At the moment, nothing is confirmed. But there’s a lot of speculation about what the Chancellor could, and should, do when he next steps up to the dispatch box. There’s much speculation over how Mr Sunak will hold back a wave of redundancies that could come after the end of the furlough scheme on 31 October. However, it’s now clear a Budget won’t come before that date.

What will the Autumn Budget include? It’s all speculation at this stage, but that doesn’t mean there won’t end up being truth to at least some of the following rumours.

Boris Johnson and Rishi Sunak have prepared Conservative MPs for tax rises to fund the coronavirus response, with the Prime Minister warning: “It’s about to get tougher.”

The Chancellor claimed there would not be a “horror show of tax rises with no end in sight” but both he and Mr Johnson made clear there would be some increases for taxpayers to fund the coronavirus bailout.

There have also been reports that the Chancellor is considering options including corporation and capital gains tax increases, or cuts to pension tax relief and aid spending

Living Wage U-turn Ministers and officials are considering putting an ‘emergency brake’ on the already announced increase in the National Living Wage due to concerns the pandemic has made it unaffordable, according to The Telegraph.

After borrowing and spending billions on the COVID-19 response so far, the Chancellor is reportedly considering different ways he could earn back funds for the Treasury.

The Sun reports that Mr Sunak is considering increasing Class 4 National Insurance – paid by the self-employed – from 9% to 12%, which could add £200 to the average self-employed tax bill. This would bring self-employed National Insurance contributions in line with those paid by employees. He hinted at a move like this when he announced the self-employed support scheme in March. He said: ‘If we all want to benefit equally from state support, we must all pay in equally in future.

As well as increases to NICs, there are rumours that Income Tax bands may also be reviewed in the Autumn Budget based on HMRC’s calculations. In May, HMRC’s official statistics relating to the “Direct effects of illustrative tax changes” shared details on how a 1% increase in the basic rate of Income Tax from 20% to 21% could raise £4.7bn in 2020-21, while increasing the higher rate from 40% to 41% could raise £1bn.

There are also rumours of changes to Corporation Tax to help balance the public finances. Corporation Tax could be increased from 19% to 24% – the global average tax rate for business – which would raise £12bn next year, according to The Sunday Times.

To help fund other recovery plans during this financially turbulent time, tax changes on pensions are expected to be announced. The triple lock on state pensions, which guarantees they rise at least as much as wages or inflation, could be suspended. Mr Sunak is said to be considering making a cut to pension tax relief, potentially changing this to a flat rate for all taxpayers, rather than at 20% or 40% for higher earners. There are reports that the Chancellor is also considering simplifying Inheritance Tax rules to further help raise funds to support the UK’s economic recovery.

Changes to the way Capital Gains Tax works has also been anticipated, with the Chancellor considering reforming CGT so it is paid at the same rate as Income Tax.

There have also been reports that tax breaks for businesses are being considered alongside these proposals. Mr Sunak dubbed his summer fiscal statement his ‘Plan for Jobs’. It included schemes to entice employers into bringing employees back from furlough and into creating new jobs for young people, but that hasn’t put a stop to fears that unemployment could reach historic highs towards the end of the year.

Mr Sunak could offer alternative measures to keep people in work. In a recent speech to Conservative MPs, Boris Johnson hinted at a ‘new green industrial revolution for the UK’, which would create ‘hundreds of thousands of new green jobs’, The Guardian reports. He said announcements on this were due in the autumn, so it could well make its way into the Budget.

Although Mr Sunak resisted widespread calls to continue the Eat Out to Help Out scheme into September, it’s possible that he could announce another unconventional way to stimulate consumer spending. Especially as people may be less likely to continue their trips out to restaurants and high streets as the weather cools. There are so far no indications of what these measures could be, but another discount scheme, or more vouchers akin to the Green Homes Grant may be less of a surprise this time around.

Stamp duty changes – residential property

| 14th August 2020

In his recent Summer Statement, Rishi Sunak announced changes to the nil rate band of Stamp Duty Land Tax (SDLT) to be applied in England and Northern Ireland.

This was followed by announcements from the Scottish and Welsh regional assemblies who set the rates in Scotland and Wales.

Here is a brief summary of the regional changes aimed at stimulating the UK property market. In all cases rates will revert to previous levels 31 March 2021.

England and Northern Ireland

From 8 July 2020, if you purchase a residential property you will only pay SDLT on the amount you pay above £500,000. This applies whether or not you have purchased a property before – it is not restricted to first time buyers.

Scotland

From 15 July 2020, if you purchase a residential property in Scotland you will only pay the Land and Building Transaction Tax on the amount you pay above £250,000.

Wales

From 27 July 2020, if you purchase a residential property in Wales you will only pay the Land Transaction Tax on the amount you pay above £250,000.

In all regions, it is presumed that buyers of second homes and buy-to-let residential properties will still pay the additional stamp duty charge.

VAT changes

| 14th August 2020

In an attempt to address the financial difficulties of businesses in the hospitality and tourism industries, Rishi Sunak also announced a range of VAT reductions on selected supplies for these sectors.

Summary of the changes are set out below:

Hospitality

When you supply food and non-alcoholic beverages for consumption on your premises, between 15 July 2020 and 12 January 2021 you will only need to charge 5% VAT.

You will also be able to charge the reduced 5% rate of VAT on your supplies of hot takeaway food and hot takeaway non-alcoholic drinks.

Hotel and holiday accommodation

You will also benefit from the temporary reduced rate if you:

  • supply sleeping accommodation in a hotel or similar establishment
  • make certain supplies of holiday accommodation
  • charge fees for caravan pitches and associated facilities
  • charge fees for tent pitches or camping facilities

Admission to certain attractions

If you charge a fee for admission to certain attractions where the supplies are currently standard rated, you will only need to charge the 5% reduced rate of VAT between 15 July 2020 and 12 January 2021.

However, if the fee you charge for admission is currently exempt, that will take precedence and your supplies will not qualify for the reduced rate.

Changes to your accounts’ software

In most cases these changes should be fairly easy to accommodate in your accounts’ software. If you are experiencing difficulties in this regard please call, we can help.

COVID-19: Changes to Coronavirus Job Retention Scheme

| 14th August 2020

Please note: An article on the Job Retention Bonus has been posted since this article was published – please click here to view this article or see our previous post for full details on original scheme.

From 1 August 2020, the level of grant will be reduced each month.To be eligible for the grant employers must pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed.

Summary of changes:

  • from 01/08/2020 a claim for Employers NIC and Pension can no longer be made.
  • From 01/09/2020 – CJRS rate changes to 70% with the employer topping up the remaining 10%
  • From 01/10/2020 – CJRS rate changes to 60% with the employer topping up the remaining 20% 

More in-depth detail can be found here.

Chancellor Eyes Capital Gains Tax Overhaul

| 14th August 2020

The chancellor announced on the 14th July that he has commissioned a review of Capital Gains Tax (CGT) in relation to individuals and smaller businesses, asking the Office of Tax Simplification to consider the overall scope of the tax and the rates which apply.

What will the Treasury’s tax gurus investigate?

The Chancellor has asked the Office of Tax Simplification (OTS), an independent arm of the Treasury, to identify opportunities to simplify capital gains tax in relation to individuals and small businesses.

Capital gains on assets ranging from shares to second homes and buy-to-lets are traditionally taxed at lower levels than income because people are taking a risk – whether an entrepreneurial one, or via their investments.

The annual exempt amount is currently £12,300, and after that CGT rates are 10 per cent if you are a basic rate taxpayer and 20 per cent if you are a higher or additional-rate taxpayer.

The rates are 18 per cent and 28 per cent respectively for capital gains made on residential property – excluding main residences.

But there is a vast array of rules and exemptions underlying the system, which has created all sorts of loopholes and incentives that weren’t originally intended by the Government.

Speculation……

  • the main rate of CGT of 20% is set too low, and some have suggested that it should be aligned to the income tax rates, up to 45%.
  • Capital Gains Tax rates have been low for many years, and therefore it seems to be an obvious source of income for the Government to consider when looking at how to recuperate the cost of Covid-19
  • Cutting or reducing Main Residence Relief – the relief could become subject to a per transaction or lifetime cap or abolished completely
  • The current CGT annual allowance could be reduced
  • Review CGT uplift on death. In effect, CGT is overlooked when an individual dies and they hold taxable assets that have appreciated in value. This is because when the assets are transferred to someone else, normally a spouse or family member, they are ‘re-set’ for CGT purposes. Instead, the assets may be subject to Inheritance Tax (IHT). The Treasury may explore changes in this area.
  • Capital Gains that lie outside the current system, such as winnings from gambling – including lotteries – may no longer be exempt.
  • Entrepreneurs’ relief’ for assets relating to businesses – aimed at encouraging entrepreneurship – means gains are taxed at a lower 10 per cent.  Now renamed business asset disposal relief, the applicable lifetime gain was already cut from £10million to £1million, but it could be reformed again or abolished.

The role of the OTS is to offer proposals to simplify certain areas of UK tax – however, they have occasionally strayed into making policy recommendations, which is not strictly within their remit. 

‘There is a very compelling case for tax reform and simplification generally. 

There are five different CGT rates which could apply for an individual realising a capital gain – 0/10/18/20/28 per cent. 

There is a good argument to say that there should be a single flat rate of CGT.

There is also an argument to abolish CGT (and inheritance tax) completely – the taxes combined raise less than 1 per cent of total tax revenue for the Treasury, but there is significant cost of administration for HMRC to manage the collection of the tax.

While the treasury are down playing the review, it is clear that reform is certainly a possibility!

COVID-19: Claim a grant through the Second Self-Employment Income Support Scheme

| 14th August 2020

The scheme has been extended. If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, you’ll be able to make a claim for a second and final grant from 17 August 2020.

You can make a claim for the second and final grant if you’re eligible, even if you did not make a claim for the first grant.

What you will need

You will need your:

  • Self Assessment Unique Taxpayer Reference (UTR) – if you do not have this find out how to get your lost UTR
  • National Insurance number – if you do not have this find out how to get your lost National Insurance number
  • Government Gateway user ID and password – if you do not have a user ID, you can create one when you make your claim
  • UK bank details (only provide bank account details where a Bacs payment can be accepted) including:
    • bank account number
    • sort code
    • name on the account
    • your address linked to your bank account

COVID-19: Coronavirus Job Retention Bonus

| 14th August 2020

Further details of how jobs will be protected through the government’s new Job Retention Bonus were unveiled by HMRC on the 31st July.

The bonus – announced by Chancellor Rishi Sunak as part of his Plan for Jobs last month – will see businesses receive a one-off payment of £1,000 for every previously furloughed employee if they are still employed at the end of January next year.

The scheme is designed to continue to support jobs through the UK’s economic recovery from coronavirus by encouraging and helping employers to retain as many employees who’ve been on furlough as possible.

A policy statement published by the HMRC today gives employers further details on eligibility requirements and how they can claim the bonus.

VAT – a few updates – Even if your business is not VAT Registered

| 14th August 2020

Making Tax Digital deadlines, VAT payments deferral scheme and digital links

Making Tax digital will be:

  • Extended to vat registered businesses with turnover below the £85,000 Vat threshold from April 2022.
  • Introduced for Income Tax Self-assessment for businesses and landlords with income over £10,000 from April 2023

Covid-19 VAT payments Deferral Scheme

As part of the Government’s response to COVID-19, businesses were given the option to defer their VAT payments between 20 March and 30 June.

In June HMRC wrote to businesses to remind them the deferral scheme was ending (on 30 June) and VAT returns with a payment due date after 30 June must now be paid as normal.

Businesses that have deferred payments, and who normally pay by direct debit, should now set up a new one via their Business Tax Account (BTA). Please allow 3 working days before payment is due for direct debits set up via a BTA.

You should check the email address is correct (or input a new email address). Email addresses are required as part of banking regulations – HMRC will not use the email address given here to contact clients unless it is about their direct debit.

HMRC’s Time To Pay is still available for businesses struggling to pay their tax bills. See the guidance on GOV.UK.

Any deferred payments should be paid in full on or before 31 March 2021.

Business can make ad hoc payments or additional payments with their subsequent VAT returns if they wish, to reduce the amount outstanding.

There is guidance on GOV.UK.

Digital Links Extension

HMRC have provided MTD businesses with more time to put in place digital links between all parts of their functional compatible software. It is important for businesses to note that despite this relaxation they still need to ensure they are keeping digital records, submitting VAT returns via an API enabled software and maintaining all digital links they currently have in place.

As a result of the Coronavirus (COVID-19) situation the “soft landing period” to implement digital links has been extended to 31 March 2021. Previously there were 2 start dates – from 1 April 2020, or 1 October 2020 for deferred businesses. Now all businesses will not be required to have digital links between software programs until their first VAT Return period starting on or after 1 April 2021.