There have been a plethora of measures announced which aim to support business and at Mercer & Hole we are regularly adding to and updating our advice on these within our dedicated COVID-19 Business Support Hub. If you are an individual, who is neither an employee nor owns a business, you might be wondering about the measures for you – there are some to think about. The team here at Mercer & Hole are very much still here so please do get in touch with us if you would like to talk through your affairs with a friendly and understanding approach.
Tax payments deferral and cash flow planning
The most generous measure is deferring the usual payment date for tax where you make payments each year toward your tax bill. For those who make payments on account, they do so with one payment during the tax year in question (January 2020) and one following it (July 2020) with a catch-up if there is more to pay six months later (January 2021).
You do not now need to make the July second payment on account, but rather it can be carried forward to 31 January 2021. This means in practice, assuming your tax return is finalised and has been filed, that you only need to pay what is actually due in relation to the 2019/20 tax year instead of an estimate in July based on the prior year income.
This will be a considerable help to many people, where they are keen to hold on to as much cash as possible in light of the current uncertainties on their future income. Some clients are already seeing the impact of missed rental payments from properties they let and we are seeing announcements by companies on pausing their dividend pay outs in the months ahead.
Looking further ahead, whilst 31 January 2021 will see the balance of tax due for 2019/20 along with any capital gains tax, for those due to make payments on account, it will also be the date for their first instalment toward their 2020/21 tax bill. As part of our usual tax return completion service, we will be considering and consulting with our clients on whether there is any scope in light of their circumstances for this to be reduced and making an appropriate application to HMRC. It is unlikely to be an automatic deferral as above for the July payment but we are very familiar with preparing calculations and making applications as part and parcel of our service.
Government support initiatives
If you are a landlord, many tenant’s may have reduced income which will could impact your income. If you have borrowings to support or are likely otherwise to have a material effect on your income, we can assist with projections and accounts to help you approach your bank. Not all let property activities are “businesses” in technical terms but if you have employees then you may be able to use the job retention scheme.
The job retention scheme may apply to any UK employer so if you have domestic staff on a payroll, it will be worth checking with us to see how this applies to you.
There are some gaps in the government’s plans – directors of a personal company often remunerated by taking dividends, for example. We are able to explore how you are affected and what options are available to you.
Many individuals have found themselves forced to remain in the UK or return here sooner than they had planned. In many cases, people who usually work elsewhere are having to do so from the UK. This could change your tax status. If you are spending money in the UK from overseas, you will need to understand if you must make a UK tax return or could have a UK tax bill.
If you are usually non-resident, you will be familiar with the limit to the number of days you can spend here. Although HMRC accept the outbreak as exceptional circumstances, the maximum number of days to be disregarded is 60. For the 19/20 tax year, this may be manageable but for 20/21, 60 days expires by 5 June so the remainder of the 20/21 tax year is an unknown at this stage. The best advice is to retain all records such as diaries showing your location and whether or not you worked on a given day. Emails of flight cancellations or other evidence that you planned to leave the UK should be retained in case HMRC requires it.
The Mercer & Hole team are happy to further advise on your individual circumstances, the impact of your becoming inadvertently UK resident and how any adverse implications can be mitigated. Conversely if you have been forced to remain in a country outside the UK we can use our friends in TIAG to obtain local advice for you and make sure your affairs are considered on a global basis.
Capital Gains Tax (CGT)
If you have stocks and shares which you purchased or are selling in a different currency, remember that the UK computes capital gains by comparing the sterling value at acquisition with the sterling proceeds. It is, therefore, not uncommon with volatile exchange rates to find a breakeven or loss position in one currency, that is a gain in another. If you are realising some losses now, you need to make sure that the loss is a sterling one. Similarly, for countries who tax on a worldwide basis, such as the USA, recognising a UK loss may not reduce your worldwide tax burden and we should look at your affairs on a global basis.
A new 30 day reporting limit for any disposals of UK residential property comes into play at 6 April. There has been no announcement that this measure will be deferred but as house moves are now strongly discouraged, this may not have the urgency that we had expected. Nonetheless, if you do dispose of a property by way of gift perhaps, after 6 April, you should let us know as soon as you can and ideally before the transaction so that we can make sure you do meet the deadlines in question.
Resilience and Cash flow
Individuals and families should urgently review their cash flow to ensure they have sufficient means to meet their own expenditure and also identify pots of wealth which may be available to assist other family members with significant expenditure. This may be assisting with school fees or other similar large expenditures as well as planning ahead for a time when the economy returns.
There are often still tax implications of making and sometime receiving gifts of family support and we are able to help you find the right path for your family. In these instances, cashflow modelling and more specifically an individual’s capacity for loss, i.e. the amount that their investments could fall without putting their financial goals in jeopardy, should be reviewed.
Asking yourself a few basic questions, such as “what are my long-term goals? Has the recent market volatility changed those? Am I currently making decisions based on emotions?” These questions can help with clarity of decision making.
If you have any concerns about how your circumstances are affected by COVID- 19, we are very happy to discuss this with you. Please contact us by email or telephone.