FAQ

 How can we help you?
  • Budget 2021 for Limited Companies
    With the budget 2021 announced on the 3rd of March, some significant changes are happening that will affect limited companies in the UK. Here’s our summary of key points that limited companies need to be aware of, including the increase of corporation tax.
     
    Restart Grant
     
    What is the Restart Grant?
     
    A £5 billion Restart Grant has been revealed by Chancellor Rishi Sunak in the budget 2021 announcement. This grant begins in April and its purpose is to help businesses that have closed due to lockdown restrictions, open again.

    Non-essential retail businesses can receive up to £6,000 per premises to help them re-open shops. Other businesses in hospitality, accommodation, leisure, personal care, and gyms that are due to open later, according to the government’s roadmap, can receive up to £18,000.

    The grant will replace the monthly Local Restrictions Support Grant that will be closing at the end of March 2021.
     
    Who can apply for the Restart Grant?
     
    According to government guidance, your business may be eligible if it’s:
    Based in England
    Occupies a property which it pays business rates and is the ratepayer
    Hasn’t been able to provide its usual in-person customer service for the premises
    Has had to close due to lockdown restriction from 5th January 2021 or between 5th November and 2nd December 2021

    You can’t apply for the Restart Grant if your business:

    Doesn’t depend on providing in-person services from premises
    Has not been required to close due to restrictions but has
    Is in administration, insolvent, or struck off the companies house register
     
    How to apply for the Restart Grant
     
    The Restart Grant will be managed by local councils. To apply and check your eligibility, click here. Applications for the Restart Grant will close at the end of March 2021.
     
    Recovery Loan scheme
     
    What is the Recovery Loan Scheme?

    The recovery loan scheme was revealed in the budget 2021 announcement. It is set to launch on 6th April 2021 and will remain open until 21st December 2021 subject to review. It’s designed to ensure businesses of any size affected by Covid-19 can access loans and other kinds of finance. The loan can be used for any legitimate business purpose.

    The government will guarantee 80% of the loan to the lender to encourage confidence lending to small businesses. There are two types of finance that will be made available:

    Term Loans and overdrafts between £25,001 and £10 million per business
    Invoice finance and asset finance between £1,00 and £10 million per business

    A term loan is a loan for a specific amount that has a set repayment schedule with a fixed or floating interest rate. Invoice finance is where you borrow an amount of money against the value of unpaid invoices. Asset finance is often associated with purchasing expensive equipment or using assets your business owns as security against a loan.
     
    Who can apply for the Recovery Loan Scheme?
     
    According to government guidance, you can apply for the Recovery Loan Scheme if:
    Your business is trading in the UK
    Your business is viable or would be viable if not for the Covid-19 pandemic
    Your business has been impacted by the Covid-19 pandemic
    Your business is not insolvency proceedings

    You can’t apply for the Recovery Loan Scheme if:

    You’re a bank, building society, insurer, and reinsurers (not including insurance brokers)
    You’re public sector body
    You’re a state-funded primary or secondary school.
     
    How to apply for the Recovery Loan Scheme
     
    As stated above, the Recovery Loan Scheme will start on 6th April 2021, more information and details of lenders will be released closer to the time.
     
    Corporation Tax Increase 
     
    It was announced in the budget 2021 that there will be a Corporation Tax increase, but not until 2023, to 25% for some limited companies. This is to help pay for the government's Covid-19 response and support.

    A key point on the rise of Corporation Tax is that this will not apply to all limited companies. Limited companies with profits under £50,000 will still pay 19% corporation tax.

    Businesses that have over £50,000 will not jump straight to 25% Corporation Tax, this applies to those who have over £250,000 profits. For businesses that are between £50,000 and £250,000, their Corporation Tax percentage will increase as their profits increase.
     

    Freeze on the tax-free personal allowance
     
    To help recover debt from support and the government’s response to the Covid-19 pandemic, there will be a freeze on tax-free personal allowance according to the budget 2021 announcement. Currently, the tax-free personal allowance is £12500 and this will increase to £12,570 in April 2022 and then be frozen until 2026.

    For limited companies, this is a blow, especially if your salary is paid as the max tax-free personal allowance. This means that your salary won’t be able to increase until 2026. However, there was no mention of an increase in tax on dividends.
     
    VAT cut for hospitality and tourism
     
    Businesses in the hospitality and tourism industry will benefit from the 5% VAT cut for another 6 months until the end of September 2021. VAT will then rise to 12.5% for yet another 6 months until the end of March 2022 and return to the full 20% in April 2022 according to the budget 2021.

    The VAT threshold for businesses to register for VAT will maintain at £85,000 until it is reviewed in March 2024
     
    Business rates holiday extension
     
    Businesses that have been forced to shut due to the pandemic such as non-essential retail premises, hospitality, and tourism businesses will remain exempt from paying business rates for another 3 months, up until the end of June.
    After that, business rates will still be discounted to a third of their normal charge for the rest of the financial year.
     
    Extension of loss carry-back rules explained
     
    Put simply, the loss carryback rules mean you can offset trading losses against profits, which means you pay less tax on your profits. Before the budget 2021 announcement, a limited company could only do this in the same accounting period.

    With the new extension of loss carryback rules, limited companies can do this for accounting periods ending between 1st April 2020 and 31st March 2022, not only the same accounting period but going back three years. The new Loss carryback rules for the 2 previous accounting periods are capped at £2,000,000 for each accounting period.

    An extended loss carryback claim below £200,000 may be carried outside a return, this means you won't have to wait to submit a company tax return. If your claim exceeds £200,000, your claim must be made in your company tax return. We suggest speaking to an accountant if you have any further questions or are unclear on anything.
     
    Super deduction tax relief
     
    The super deduction tax relief means that businesses can claim 130% capital allowances on qualifying machinery investments made from April 1st, 2021 to the end of March 2023. This means for every £1 you invest in qualifying plant and machinery; your taxes will be cut by up to 25p.

    Plant and machinery are classed as tangible assets that are brought new. There isn’t a list of all plant and machinery assets but here‘s a list of some assets that may qualify (but not limited to) for the super deduction tax relief:
    Tractors, lorries, vans
    Ladders, drills, cranes
    Office chairs and desks
    Compressors
    Solar panels
    Computer equipment and servers

    For more information on the super deduction tax relief, you can visit the government's website here.
     
    Furlough extension
     
    The existing furlough scheme that has paid 80% of employees’ wages up to £2,500 (including limited company directors) has cost around £50 billion so far. The scheme has been extended to 30th September 2021 with gradual reductions in government contributions.

    From July 2021 the government will contribute 70% and employers will have to pay 10% for hours that an employee has not worked. In August and September 2021, the government will contribute 60% and employers will have to pay 20%.
     
    Double the incentive to hire apprentices
     
    The previous apprentice hiring scheme was if an employer hired an apprentice, they would receive £1,500 (£2,000) for someone aged 24 and under. The new rules state that if an employer hires an apprentice at any age and between 1st April and 31st September 2021, they will receive £3,000.

    This new payment is on top of the £1,000 payment for new apprentices aged 16-18 and those under 25 with an education, health, and care plan. This could mean an employer could receive up to £4000 in total for hiring an apprentice!
     
    Help to Grow 
     
    This new initiative from the government will see small business owners learn and develop the skills necessary to make their business a success and help them get the tools to help them and their online presence. The initiative is split into 2 sections, Help to Grow: Management and Help to Grow Digital.
     
    Help to Grow: Management

    Help to Grow: Management will be available in June and is a 12-week program that will include support from a business mentor and peer-learning sessions all alongside full-time work. It will give business leaders the chance to develop their strategic skills in key areas of business.

    There are 30,000 spaces available over 3 years and the course is 90% subsidized by the government, meaning participants will have to pay £750. Your business has to be operating for more than 1 year and has between 5 and 249 employees. To register your interest in the Help to Grow: Management initiative, click here.
     
    Help to Grow: Digital

    Help to Grow: Digital is slightly different to Help to Grow: Management, its purpose is to allow businesses to get free and impartial advice on how technology can help grow their business online. Eligible businesses will get 50% off vouchers for approved software worth up to £5,000 and will help their business increase sales online, manage their accounts and finances digitally, and build customer relationships.

    Advice is free to all businesses, but to qualify for the 50% off vouchers your business needs to have been trading for more than 12 months, employ between 5 and 249 employees, and are a registered limited company with Companies House. Click here to register your interest in Help to Grow: Digital.

  • What is 30- day CGT reporting on UK property disposal

    You may have to pay Capital Gains Tax if you make a profit (‘gain’) when you sell (or ‘dispose of’) property that’s not your home. For example, buy-to-let properties, land, or inherited property.

    In most cases, you do not need to pay the tax when you sell your main home.

    For UK property disposals made from 6 April 2020, you have 30 days after the property’s completion date to report and pay any Capital Gains Tax due on your UK property disposals.

    How to report and pay the tax

    You’ll need to create a Capital Gains Tax on UK property account before you can report and pay the tax using this service.

    To use this service, you’ll need a Government Gateway user ID and password. If you do not have a user ID, you can create one. If you already have a self-assessment gateway account, please use the same user ID and password to create the Capital Gains Tax on UK property account using the below link:

    https://www.access.service.gov.uk/login/signin/creds

    You can contact HMRC on 0300 200 3300 for general inquiries about Capital Gains Tax if you need help accessing the service.

    If you can not access the above link, please follow the steps provided in a separate attachment to this email

    Please keep the following information ready:

    • property address and postcode
    • the date you got the property
    • the date you exchanged contracts when you were selling or disposing of the property
    • the date you stopped being the property’s owner (completion date)
    • value of the property when you got it
    • value of the property when you sold or disposed of it
    • costs of buying, selling, or making improvements to the property
    • details of any tax reliefs, allowances or exemptions you’re entitled to claim
    • property type, if you’re a non-resident
  • What is Let Property Campaign
    The Let Property Campaign is an opportunity for landlords who owe tax through letting out residential property, in the UK or abroad, to get up to date with their tax affairs in a simple way and take advantage of the best possible terms.

    If you’re a landlord and you have undisclosed income, you must tell HMRC about any unpaid tax now. You’ll then have 90 days to work out and pay what you owe. This guide explains how you can do that.

    If there is anything about your health or personal circumstances that may make it difficult for you to deal with this matter, please call the helpline. We’ll help you in whatever way we can.

    Phone for help with HMRC’s My Let Property campaign, including checking if it applies to you.

    Telephone:

    0300 123 0998

    Outside UK:

    +44 300 123 0998

  • Are Directors personally liable for company debts?

    If you have signed a Personal Guarantee…

    Often directors are required to provide a personal guarantee as security for business loans. Attractive at the time, this is security at the end of the day and will be used as such to recover money owed, just like any other security e.g. Property or assets

    Am I Liable?

    If anything goes wrong or the terms of the loan agreement are broken, any previous repayment agreements become null and void. This means the guarantor(s) are liable for the full value of the liability.

    Not only are all signatories liable, but repayment can also be requested at any time. If you do not have the cash reserves to satisfy the creditor’s demand this will result in serious repercussions.

    In this case, the creditor can issue a statutory demand, make you bankrupt and ultimately repossess your personal assets including your home and businesses.

    Loan Sales

    Recently we have seen an increase in the number of directors having their loans sold to third parties. The companies, sometimes called “Vulture funds” employ aggressive repossession techniques and are commercially-minded, making them harder to negotiate with.

    If you haven’t signed a Personal Guarantee 

    In this case, you are not automatically liable for the business’s debts however, there are some circumstances in which you may be made liable. Especially as a result of recently introduced legislation:

    Finance Act 2020 

    Under Schedule 13 of this bill, HMRC can pursue directors of ‘Phoenix’ companies, i.e. companies that have been dissolved to shed liabilities and then re-established under a new name. Companies can be investigated in relation to:

    • Number of company Insolvencies
    • Non-payment cases

    This legislation allows for the removal of the corporate ‘veil’ in such instances and will see HMRC issue joint and several liability notices to guilty directors, potentially leaving them liable for:

    • Unpaid tax liability in the new company
    • Any tax liability in Newco for 5 years, from the date of the Joint and Several Liability Notice
    • Any old company liabilities

    Coronavirus (Ratings) and Director Disqualification (Dissolved Companies) Bill

    This bill is not yet in law but its retractive nature means investigations can be carried out for companies dissolved up to 3 years ago. Its main purpose is to:

    • Prevent the dissolution of companies to avoid investigation into the directors
    • To prevent ‘pre-pack’ administration i.e. the dissolution of companies to shed liabilities and transfer assets to a new company
    • To prevent directors from using the company dissolution process as an alternative to formal insolvency proceedings

    If you have/are planning to dissolve a limited company, you may find yourself under the microscope. If your conduct is found to be questionable, it could have dire consequences for you and your business.

    Again, the corporate ‘veil’ can be lifted, leaving former directors liable for the company’s debts. This is especially likely if the company was a recipient of a CBILs/BBLs loan.

    What do I do next?

    Most importantly, there are always options therefore you don’t have to face the stress and uncertainty of being liable for repayments by yourself. Please contact us and we will provide you the details of our associates and the best pre-insolvency consultants

  • Limited company directors salary vs. dividends in 2021/22

    Limited company directors – salary vs. dividends in 2021/22

     

    One of the main benefits of working via a limited company is that you can take advantage of tax planning measures not available via other business structures (such as umbrella companies).

    This article has been updated for the 2021/22 tax year.

    The main benefit of drawing down dividends from your company is that they are not subject to National Insurance deductions, unlike salaried income.

    As a company director, as you are in control of your own finances; you can decide when to declare company dividends – you may want to postpone taking a certain amount of dividends until a future tax year, for example.

    For a number of reasons, we will explore below, most limited company professionals pay themselves a small salary and distribute the rest of their company profits as dividends.

    Optimum salary for company directors in 2021/22 – key considerations

    When deciding on the level of salary you pay yourself in the current tax year, you need to consider various factors, particularly the current income tax (personal allowance) and National Insurance thresholds.

    ·         Take into account any salary already earned from a previous job (if applicable), when working out how much further salary you wish to draw down in the current tax year.

     

    ·         The current tax-free personal allowance is £12,570, so if your salary is less than this amount, you will have no PAYE income tax to pay at all.

     

    ·         The value of the personal allowance is gradually withdrawn by £1 for every £2 you earn above £100,000 each tax year. This means that your entire personal allowance will have been removed by the time you hit the £125,140 mark.

     

    ·         Your company pays 13.8% Employers’ NICs on salaries above the Secondary Threshold of £170/week (£8,840/year).

     

    ·         The ‘Employment Allowance’ allows eligible businesses to reclaim up to £4,000 in Employers’ NICs. However, company directors who receive small salaries will not benefit unless they earn £8,840 or more. You cannot claim the EA if you are a sole director, with no other employees.

     

    ·         As a company employee, you pay 12% Employees’ NICs on wages in excess of the Primary Threshold of £184/week (£9,568/year). You can check the latest NIC rates and thresholds here.

     

    ·         Check with The Pension Service to see if your state pension will be affected by the level of NICs you pay, as if you pay yourself too low a salary, you may affect your pension entitlement. You can access a personal pension statement if you register online via the Government Gateway.

     

    ·         If you have a contract of employment with your company (however unlikely this may be), then you must pay yourself the National Minimum Wage @ £8.91 per hour for adults aged 23 or over.

     

    ·         You should also check with your accountant if there is a minimum salary required if you make contributions to a personal or executive pension scheme.

     

    This article assumes that your contract work is not subject to the IR35 rules. Any income caught by IR35 must be taxed in the form of a deemed salary, rather than dividends.

    What is a tax-efficient directors’ salary in 2021/22?

    As well as looking at the new NIC thresholds, the optimum salary paid to directors depends on whether your company can claim the Employment Allowance (EA) or not. This incentive refunds the NIC bills of eligible businesses to encourage them to take on staff.

     

    The rules changed in April 2016, so if you’re the sole director of a company (with no other employees), you cannot claim it. There are several other restrictions that limit the eligibility of many small companies.

     

    a) £8,840

    For the 2021/2 tax year, if you pay yourself an £8,840 salary, you will pay no income tax or National Insurance at all. This number is the Secondary Threshold, below which no Employers’ NICs are payable.

     

    £8,840 is a tax-efficient salary if you cannot claim the EA. No NIC or Income Tax payable.

     

    This is likely to be the optimum salary level for sole director limited companies.

    b) £12,570

    If your company can claim the EA and pays a director/employee a salary of £12,570, there is no income tax to pay (as this is the same amount as the personal allowance).

    Ordinarily, you would also have to pay Employees’ and Employers’ NICs of £360.24 and £514.74 respectively.

    However, the Employers’ NIC element is cancelled out by the Employment Allowance, so your only liability is £360.24 in employees’ NICs.

    Also, by taking a £12,570 salary, you save £708.70 in additional Corporation Tax you’d have to pay if you take an £8,840 salary.

    So, £12,570 is the most tax-efficient salary to take for the 2021/22 tax year if you can claim the EA (you’re better off by £348), although there is a little more admin involved.

    Further Considerations

    The calculations in this article have been validated by our accountant. We recommend that you seek professional advice from your own accountant before setting your company’s salary levels.

    When working out dividend amounts, you must ensure that you have sufficient retained profit in your company, otherwise your dividend declaration could be classed as ‘illegal’.

     

    You should discuss your overall remuneration strategy with your accountant before relying on any information contained within this article; after all, this is the most important aspect of the service they should provide you.