Support available for businesses due to COVID-19

The impact of the ongoing coronavirus pandemic on businesses is unsettling and evolving fast.

At gHawk Accounting, we are working hard to support our clients starting with those with the greatest need. Our team is fully set up and working from home as our software is cloud based and can be accessed over the internet.

Below is a summary of the help available from the government to support businesses affected by Covid-19.  We will continue to update this page as more information is released on the support schemes available, who is eligible and how to get the assistance.

Full details are available on this government page

Ask gHawk: COVID-19 Frequently Asked Questions

We will update this page with questions we are receiving from our clients, so feel free to message us with your question and we will add to our Frequently Asked Questions.

Am I self-employed or employed?

A self-employed person trades in their own name as opposed to through an intermediary e.g. a recruitment agency of company. So, if you are a director or shareholder of a limited company and the company runs a Pay As You Earn (PAYE) Scheme – then you are an employee, and not self-employed

How do I get the support if I am self-employed?

You can claim a grant of up to £2,500 per month through the coronavirus (COVID-19) Self-employment Income Support Scheme

How do I access the grants recently announced?

Refer to the image above -your local council will write to you if you are eligible.

What taxes can I defer

You can defer VAT payments from 20 March 2020 to 30 June 2020. Income tax payments due under the self-assessment system may be deferred until January 2020. If unable to pay any other taxes, you should apply for a Time To Pay arrangement by calling HMRC on 0800 0159 559

What if I can’t pay the rent for my commercial property

The government has introduced Protection from eviction for commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.

These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.

There is the option for the government to extend this period if needed.

This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.

I am an employer and may have to lay off employees as our work has run out. What should I do?

You can access up to 80% of your employees’ wages up to £2,500 per month through the Coronavirus Job Retention Scheme. This allows an employer to ‘Furlough’ their employees for up to 3 months from 1 March 2020. Furloughed employees cannot provide services to a business, otherwise a claim cannot be made under the scheme.

I am a director of a company and pay myself a salary and dividends. Are my dividends covered by the coronavirus job retention scheme?

No Sadly dividends is not covered by the scheme, but your salary is.

How can I apply for the Corona Virus Business Interruption loan?

All major banks are now offering the scheme. Speak to your bank or visit the British Business Bank website to find out the participating banks.

Millions to get Tax Cut from April 2020

Tax changes for new tax year 2020/2021: Tax Cut from April 2020

New legislation introduced in January 2020 will see millions of taxpayers save around £100 in the financial year 2020-21. This is following the increase in the National Insurance Contributions threshold to £9,500 from April 2020. The previous threshold was £8,632 for the financial year 2019-20.  

Chancellor of the Exchequer Sajid Javid said: 

We’re determined to do what we promised and put more money into the pockets of ordinary hard-working people. That’s why we’re starting this government as we mean to go on, by cutting their bills. 

We want everyone to feel that they can contribute to the new chapter we are opening for the economy and our country because under this Government work will always pay. 

This is certainly good news for taxpayers and especially the self-employed. It is the equivalent of receiving an extra £100 in your pocket. Tell us – what would you do with an extra £100? We would love to find out. Leave your comments on our website

How to pay your taxes: Income tax, VAT and Corporation tax

How to pay your taxes

Taxes don’t have to be difficult or confusing. If you’re a freelancer or sole trader, it can be much easier to keep on top of your tax contributions than you might think.

For many sole traders, software and spreadsheets allow them to manage their day-to-day finances. When it comes to a tax return, using an accountant can be helpful in terms of ensuring that you’re not making any mistakes on your return, you’re maximising on all available benefits and you’re certain that you’re paying the correct amount of tax.

How do I know how much tax to pay?

Throughout the year, it’s advisable to keep 10-20% of your earnings to one side, in preparation for your tax bill.

At the end of your tax year, or when HMRC ask for it, you need to submit a tax return. Once that has been submitted, HMRC will inform you of how much tax you owe. You can pay this calculation (known as an SA302 form) online or by cheque, within a designated deadline.

How do I submit my earnings to get a tax calculation?

To submit your income and expenses, you need to register for Self Assessment on Gov.UK. Here, you’ll be able to fill out all of your information when it comes to submitting a tax return. If you are confused or concerned about submitting your tax return, an accountant can do it for you.

What if I make a mistake on my tax return?

If you make a mistake on your tax return, you must tell HMRC as soon as possible. You can amend the return within 12 months of submitting it – the additional tax will be due. If you choose not to tell HMRC and you are found to have made mistakes on your tax return, the consequences can be quite financially severe. Read more about Self-Assessment penalties to watch out for.

What are payments on account?

You might be asked to make payments on account if your income has increased. Essentially, payment on account is the process of paying some of your tax bill in advance. You only make payments on account if your previous year’s tax and National Insurance bill was above £1,000 and only then if less than 80% of your tax liability was collected by being deducted at source.

What if I don’t have enough money to pay my tax bill?

Technically, HMRC prefer you to pay your tax bill all at once. However, if you are having financial issues, then you should contact HMRC to set up a ‘time to pay’ arrangement. Be aware that they will expect you to have tried other means to pay your tax bill before you contact them. For example, borrowing from friends and family or taking out a loan.

Does ‘Making Tax Digital’ affect me?

From 2020, sole traders will be expected to be compliant with the Making Tax Digital scheme. This scheme is already in place for VAT registered companies and means that tax returns must be submitted online every quarter. Speak to your accountant about becoming digital ready, or check out our post on what you need to do now!

Once you are used to the process of submitting a yearly tax return, it isn’t as complicated as it may seem. The easiest and most efficient ways to prepare for a tax return is to keep on top of your bookkeeping all year round, put regular chunks of income aside in preparation and always have an accountant that you can contact with queries or concerns.

Don’t go it alone – we’re here to help.

Claiming VAT on Director’s Mileage

Claiming VAT on Director’s Mileage

Questions surrounding VAT on mileage claims are common. It can be difficult to work out and hard to ensure that you have the correct evidence to give HMRC.

Let us clear up some of the terms surrounding VAT and mileage.

What is the Advisory Fuel Rate?

As VAT is charged on fuel, HMRC allow you to claim back the VAT from the fuel portion of the mileage. To calculate this, they use their advisory fuel rate, which estimates the amount of fuel used per mile based on engine size.

HMRC asses their Advisory Fuel Rate every quarter. As of March 2019 it stands that employees using a company car can claim between 7 to 21 pence based on car engine size and type of fuel used.

You are only able to claim back VAT on ‘work miles’, i.e not ‘private use’. Private use includes travelling between work and home. Work miles might include travelling to meetings, transporting items, using the vehicle as a taxi or being a driving instructor.

There are different ways to reclaim VAT on fuel, your accountant will be able to advise you on the best way for your business.

  • Reclaim the VAT and pay the correct fuel scale charge for the vehicle (see above).
  • Only reclaim VAT on fuel used for business and ensure that you keep a detailed record of all mileage.
  • Choose not to claim VAT back if it is a very low amount and the claim does not out way the administration effort.

What is the VAT Fuel Scale Charge?

Some businesses choose to provide their staff with the added benefit of ‘free’ fuel or a fuel card. In this case staff are provided with fuel for business and personal use and, therefore, the business can claim back VAT on the fuel purchased.

However, as there is a personal use element to the fuel, HMRC requests an amount of the VAT being claimed.  The amount of VAT requested by HMRC is called the Fuel Scale Charge. HMRC sets out flat rates for this charge, which is based on the CO2 emissions of the car being used – View the full VAT Fuel Scale Charge table here.

To work out your VAT Fuel Scale charge, HMRC has produced a calculator.

  • Simply designate which tax year you are you are wanting to calculate the charge for.
  • Then select the period of time (1, 3 or 12 months of that tax year).
  • Enter the car’s CO2 emissions band (you can use this Vehicle Certification Agency index to find out the CO2 emissions band for your make and model).
  • Your VAT Fuel Scale charge will be calculated and displayed with and without VAT.

What is the VAT Flat Rate Scheme and how does it affect the VAT Fuel Scale Charge?

The amount of VAT a business pays or claims back from HMRC is usually the difference between the VAT charged by the business to customers, and the VAT the business pays on their own purchases. If a business is using the VAT Flat Rate Scheme, then no VAT is reclaimed on fuel and no scale charge is required.

  • You pay a fixed rate of VAT – therefore no estimations or advisory charges are necessary to calculate.
  • You keep the difference between what you charge your customers and pay to HMRC.
  • You can’t reclaim the VAT on your purchases.

Navigating the intricacies of claiming VAT on fuel can be very complicated. There are several hoops to jump through that become more complicated the more staff you have.

If you’re struggling to deduce the amount of VAT you could be claiming or the Fuel Scale Charges you may owe – get in touch today. We’re here to help.

Common contractor finance concerns & how to avoid them

Common contractor finance concerns & how to avoid them

If you are a contractor or are just stepping into the world of contracting – congratulations! Fluctuating income and financial concerns may be brewing, but don’t worry. Many freelancers and contractors have similar concerns and there are many ways to combat then. Ensure that you have a good accountant and be utterly compliant and protected from the start.

We’ve highlighted some of the major finance concerns contractors have voiced – and how to solve them.

Deciding between hourly and daily contract rates

When you start contracting, you’ll need to firm up your pay rates. There are two main pay rate structures: hourly rate and daily rate. Both have their pros and cons.

Daily rate is often used to give one rate for a ball pack ‘day’s work’.  A day’s work can be interpreted to be anything from 6 hours to 10 hours so be sure to have a clear contract which stipulates the expected working hours.

Beware, however, that some companies will expect a lot from one day – or those days might be excessively long. Have watertight terms of engagement before agreeing to any amount of work.

Hourly rate can be used when projects are shorter – or do not have a specific end date. Employers are usually happier with an hourly rate for lower priced services, or will agree a cap on the number of hours to be a worked a week. Hourly rate is great for ongoing retainers or project work – such as marketing, design or consulting.

Going from permanent to contracting at the same company

Whilst there are no laws against contracting to your previous employee, you may need to check your employment contract or their internal policies.

There may also be issues if your old company does not want to pay out more than it did previously, for your services. This may require some negotiation – but remember that you are now liable for paying your own tax and expenses. Take this into account.

IR35 compliance concerns

Another challenge for contractors is IR35. What is IR35? IR35 is tax legislation designed to prevent tax avoidance by workers supplying their services using an intermediary, such as a limited company, whereas the workers would be an employee if the limited company was not used.  Using an intermediary is also called ‘off payroll working’.

The off-payroll working rules are in place to make sure that where an individual would’ve been an employee if they were providing their services directly, they pay broadly the same tax and NICs as an employee.

IR35 means that if you choose to do that, you’ll have to pay a higher rate of tax as a ‘disguised employee’.

If you’re concerned about the tax implications of IR35, check in with your accountant for the most up to date advice.

Taking time off for holidays

During a contract, it’s unlikely that you’ll be able to take more than a week off. Any time you take as holiday will most likely be added to the end of the contract, so be aware of this when booking in future work. There are no set rules for booking holidays as a contractor. Ensure that you have discussed the potential for holiday days with the company you are working with – you may even wish to include this in your contract. Of course, if you are aware of a holiday at the conception of a project, it is a good idea to inform your client.

Negotiating pay and contracts

You may find clients try to use the cost of equivalent employees as a benchmark for what they are happy to pay contractors. This does not work as you are not an employee, you’re a specialist in one key area, your contract has defined outcomes and you get no employee benefits.

Think of the annual salary you would be aiming for and calculate the ideal day rate or hourly rate required to reach your goal. E.g. if you base your rate on working 200 days a year and you know exactly how much you’d like to take home after tax – divide that annual amount by 200 days and add 20% to cover your tax liabilities.

Pay is only one part of the contract. It is important to also think about how you will take time off for holidays, requirements for insurances, tools required for the work, flexibility of working hours, access to resources to support your work etc.

Contracting is an exciting and, at times, lucrative way to make a living. If you can cultivate a good reputation and a large portfolio, it could very well see you through to retirement. If you have financial concerns before or during your contracting, always ask your accountant for advice.