Accountants Newsletter Jul/Aug 2020

New legislation on company insolvency and corporate governance is aimed at helping companies in difficulty deal with the Covid-19 pandemic by giving them more time to create a rescue plan. The Corporate Insolvency and Governance Act, which gained Royal Assent on 25 June 2020, makes the biggest changes to insolvency legislation in 20 years. On a permanent basis it: ■ ■ Introduces a new moratorium of 20 business days, extendable to 40 days, to give companies breathing space from their creditors while they seek a rescue. ■ ■ Safeguards a company’s supply chain by prohibiting the use of termination clauses that come into force when a company enters an insolvency procedure, a new moratorium period or a new restructuring process. Suppliers will not be able to rely on contractual terms to stop supplying or vary contract terms such as price, while a company is going through a rescue process. ■ ■ Introduces a new restructuring plan for companies in financial distress, to allow more companies to be rescued rather than go into liquidation. Companies will be able to propose a plan for restructuring their liabilities, which can bind a class of creditors even if they do not agree to the plan. There are safeguards for affected creditors. The restructuring plan process is a new option for businesses needing to restructure their liabilities – adding to the existing Company Voluntary Arrangement and Scheme of Arrangement. It will require 75% creditor consent and court approval. The new law also contains some temporary changes: ■ ■ For any period of trading between 1 March and 30 September 2020, directors who try to keep their company afloat will not be held personally liable for wrongful trading should the company ultimately become insolvent. ■ ■ Until April 2021, certain Companies House filing deadlines are extended. ■ ■ Companies are given greater flexibility to hold their AGMs in alternative safe ways. The permanent changes in particular have been widely welcomed by people working in restructuring and advising companies in difficulty. CGT disposals reminder HMRC is reminding people that they now only have 30 calendar days in which to inform them of any capital gains tax (CGT) payable on the disposal of a residential property and to pay the amount due. HMRC will not issue a late filing penalty for reports made by 31 July 2020, but after that the tight 30 days deadline will apply. It is therefore important to make sure all relevant information is available at the time of disposal, especially about any enhancement expenditure that might have been incurred years ago. The new rules are only relevant if CGT is payable, so they do not apply where full private residence relief is available or where the disposal is made to a spouse or civil partner. Any gain will also normally have to be included in the self-assessment tax return, and further CGT might be payable or a refund might turn out to be due. ECONOMY TAX To the rescue: insolvency law reforms The Chancellor’s summer of spending Almost four months after the Spring Budget and the start of the Covid-19 crisis, the Chancellor has had to return to parliament with a new round of spending measures: ■ ■ A temporary stamp duty cut The nil rate band for Stamp Duty Land Tax (SDLT) on residential property in England and Northern Ireland was increased from £125,000 to £500,000 with immediate effect until the end of March 2021. Scotland and Wales both followed suit, raising the nil rate bands on their land taxes to £250,000, but in Wales the increase does not apply to buyers of second homes, buy to let, etc. ■ ■ Green Homes Grant A £2 billion grant will provide at least £2 for every £1 that homeowners and landlords in England invest in making their homes more energy efficient, up to £5,000 per household. ■ ■ Job Retention Bonus UK employers will receive £1,000 for every previously furloughed employee who remains continuously employed from the end of the Coronavirus Job Retention Scheme in October through to 31 January 2021. Qualifying employees must earn over £520 per month on average. ■ ■ Kickstart Scheme This scheme aims to provide six-month work placements for those aged 16-24, who are on Universal Credit and considered to be at risk of long-term unemployment. Employers in Great Britain will receive a payment that will cover 100% of the relevant National Minimum Wage for 25 hours a week plus the associated employer NICs and automatic enrolment pension contributions. ■ ■ Apprenticeship payments Employers in England will be entitled to a new payment of £2,000 for each new apprentice aged under 25 they hire, and £1,500 for each new apprentice hired aged 25 and over. ■ ■ A temporary VAT cut A 5% rate of VAT will apply to supplies of food and non- alcoholic drinks from UK restaurants, pubs, etc and accommodation and admission to attractions. The rate will operate from 15 July 2020 through to 12 January 2021. As has become clear with many of other Covid-19 initiatives, the devil is in the detail. In many instances, expert advice is recommended before taking any action. BUSINESS Credit: Jeffrey Edwards/Shutterstock.com