Accountants Newsletter Jul/Aug 2020

Businesses and individuals now have an extra three months to appeal any HMRC decision if they have been ’affected by coronavirus’. The normal time limit for appeals is 30 days and the extension also applies to appeals against penalties. The announcement does not define ‘affected by coronavirus’, but HMRC guidance on this for the Self-Employment Income Support Scheme indicates that this would include businesses that have scaled down or stopped trading as a result of staff being unable to work because of Covid-19, fewer customers or supply chain interruptions. Taxpayers relying on the extended time limit must submit appeals as early as possible and explain how the delay is the result of Covid-19. Both these conditions are needed to establish a ‘reasonable excuse’ – the legal requirement for HMRC to accept a late appeal. You may be asked for evidence of how Covid-19 prevented the appeal being submitted within the 30-day limit. HMRC’s announcement does not specifically cover other missed deadlines, such as for submitting returns, paying taxes, notifying liability to tax or complying with an HMRC information notice. However, all these obligations are covered by the general rule that penalties are not charged if the taxpayer has a reasonable excuse for the failure – and that may include the effects of coronavirus. Shortage of funds is ruled out as a reasonable excuse in legislation, but the reason for the shortage might be a valid excuse. Coronavirus and the resultant lockdown have caused huge and sudden financial disruption for many businesses – something they could not reasonably foresee and avoid. Establishing a reasonable excuse for a late payment could be more difficult where it is open to a taxpayer to seek a ‘time to pay’ agreement with HMRC but they fail to do so. Let us know if we can help. Taxation of life assurance bonds Only the top-sliced portion of a life assurance policy gain is now included in calculating the available personal allowance, not the entire gain. However, the full gain is still counted when calculating any other relief or allowance. Increase in minimum and living wage Remember that when furloughed employees resume work, they will have to be paid at least the increased minimum and living wage rates introduced from 1 April 2020. For those over 25, this could mean a 6.2% increase to £8.72 an hour. In specie contributions into SIPPs The Upper Tribunal has ruled that pension tax relief is not available on in specie (non-cash) contributions. As a result, HMRC may look to claim back millions of pounds in tax relief across the self-invested personal pension (SIPP) industry. Lifetime ISA withdrawal charge From 6 March 2020 to 5 April 2021, the Lifetime ISA withdrawal charge is reduced from 25% to 20%. The charge applies unless the funds are used for a first home, or the investor has a terminal illness or reaches 60. News round up NEWS IN BRIEF Printed on paper produced using wood fibre and manufactured at a mill that has been awarded the ISO14001 and EMAS certificates for environmental management. Is your business a going concern? Many businesses have been so adversely affected by the Covid-19 pandemic that their futures may be in doubt. Understanding a business’s prospects is important for many reasons, with detailed forecasting a crucial element in applying for any loans or other finance. If a business is likely to fail, early recognition and acceptance of that fact will save the owners money and effort. Analysing the viability of a business as a going concern is a key step in the process of drawing up the business accounts and the directors of each company take the responsibility for it. This is because the value of many items on the balance sheet are based on the assumption that the business will continue trading. The assessment of whether a business is a going concern should cover at least the 12 months from the date the directors approve the accounts. A good starting point is to prepare a cash flow forecast for that period rather than just a budget, which on its own might not reflect the business’s ability to meet its obligations at all times during the period. You should record any assumptions for cash flow planning so that your conclusions can be verified for the audit. We can advise whether your accounts should include any additional disclosures about going concern, so that shareholders and creditors can understand the impact of Covid-19 on the business. This might also be a useful opportunity for a SWOT analysis to identify the various strengths, weaknesses, opportunities and threats your business faces and its ability to adapt to the changing circumstances. Credit: Artur Szczybylo/Shutterstock.com C r e d i t: k a n _ c h a n a / S h u t t e r s t o c k . c o m BUSINESS BUSINESS Defining reasonable excuse under Covid-19