Coronavirus Update: Tax appeal deadlines extended

HMRC has extended the period available for taxpayers to appeal a tax decision by an additional three months, in light of the current pandemic.

Under normal circumstances, HMRC writes to tell individuals if they can appeal, and they usually have 30 days in which to do so.

Updated guidance now states that if an individual or their business have been affected by coronavirus), HMRC will give them an extra three months to appeal any decision dated February 2020 or later.

Taxpayers should send their appeal as soon as they can, and explain the delay is because of the impact of Covid-19.

Pat Sweet

Reporter, Accountancy Daily, published by Croner-i LtdView profile and articles.

Under normal circumstances, HMRC writes to tell individuals if they can appeal, and they usually have 30 days in which to do so.

Updated guidance now states that if an individual or their business have been affected by coronavirus), HMRC will give them an extra three months to appeal any decision dated February 2020 or later.

Taxpayers should send their appeal as soon as they can, and explain the delay is because of the impact of Covid-19.

Anyone who wants to appeal a decision about ‘indirect tax’ (for example VAT, excise duty, customs duty) can request a review by HMRC or appeal straight to the tax tribunal. 

Following an appeal, taxpayers can accept HMRC’s offer of a review, or request one, if it is for direct tax.

A review will be carried out by someone who was not involved in the original decision. This usually takes 45 days. Anyone who disagrees with HMRC’s review can ask the tax tribunal to hear their appeal.

This should usually be done within 30 days of the review decision, but because of coronavirus, HMRC will not object if someone asks the tribunal to hear their appeal after 30 days, if two conditions both apply.

These are that their review decision is dated February 2020 or later, and that they ask within three months of the normal deadline. The same extension applies to appeals against penalty assessments, and to the provision of ‘reasonable excuse’.

HMRC is looking to help people most acutely affected by Covid-19, for example those bereaved, but also taxpayers impacted by the challenges the lockdown presents. For example, some businesses and accountants haven’t been able to collect their post and will miss deadlines where HMRC only correspond by post. 

More than 500,000 UK Companies in Significant Financial Distress

509,000 UK companies are in significant financial distress—the highest number ever measured.

The coronavirus lockdown has seen the largest quarterly increase in the number of businesses in significant distress since the end of 2017, growing by 15,000 companies.

This figure is expected to increase throughout Q2 as COVID-19 restrictions continue.

The number of critically distressed businesses increased by 10% in the last quarter alone.

During Q1 2020, the number of UK companies experiencing significant financial distress exceeded the half a million mark for the first time since our research began.

Latest figures show a 3% quarterly increase in the number of companies that are unable to meet their debts—that’s 15,000 businesses, representing the largest increase since the end of 2017.

The leading cause of this is the coronavirus restrictions and our data shows that SMEs have been worst hit, representing over 99% of all businesses in distress.

Companies with less than 250 employees are particularly vulnerable at this time as many have struggled to access government support schemes.

Even more concerning is that our data shows a 10% jump in the number of businesses in critical distress in the last quarter—this is usually a precursor to insolvency.

A recent survey from redflaghalert has suggest that there has been a significant increase in businesses experiencing critical distress; 2,289 companies are now in this category. Between Q4 2019 and Q1 2020, the increases in certain sectors have been dramatic:

  • Bars and restaurants: +37%
  • Real estate and property: +21%
  • Construction: +11%
  • Retail: +8%
  • Manufacturing: +8%

The sectors that have been hardest hit by significant financial distress in the last quarter are:

  • Real estate and property: +6%
  • Hotels and accommodation: +5%
  • Construction: +4%
  • Health and education: +4%

Since 2014, several sectors have had huge increases in the number of businesses in distress. These sectors include:

  • Utilities: +132%
  • Real estate and property services: +104%
  • Sport and health clubs: +86%

Year-on-year, all but one (printing and packaging) of the 22 sectors monitored by Red Flag Alert have seen increases in the number of companies in significant distress over the past 12 months, with the worst affected being:

  • Real estate and property: +17%
  • Sport and health: +8%
  • Food and beverage: +7%

Many businesses are currently not failing immediately because the government support schemes. The suspension of court action has stopped many businesses from also going under. However, this will only be a short-term solution and once things start to normalise again the figures may increase.

Typically, it would be expected that 4.3% of these companies will fail each year not because of coronavirus restrictions, but because they were already at high risk of failure from any short-term drop in revenue and cash flow. However, the impact of COVID-19 will see this figure double and leave the UK economy with insolvent debts totalling £8.6bn this year.

Coronavirus Updates for Accountants

17 April 2020

  • HMRC emails two million eligible businesses login details for furlough portal
  • Government extends furlough end date to 30 June at £50bn cost
  • Confusion over private school fees and covid-19 lockdown closures

16 April

  • Top tips: furlough and the Coronavirus Job Retention Scheme
  • FCA remodels business plan to address coronavirus challenge
  • Higher rate child benefit – remember to claim if you’re on furlough with reduced salary

15 April

  • Furlough start date extended to 19 March
  • Covid-19: what’s the exit strategy? We ask accountants what they think
  • More lenders accredited for small business loan scheme

14 April

  • HMRC clarifies MTD for VAT deferral reporting process

9 April

  • £750m extra funding package for frontline charities working with vulnerable groups
  • Bank of England to underwrite government overdraft via Ways and Means facility
  • How to register for child benefit for new born babies

8 April

  • HMRC launches beta testing for 80% furlough portal, Harra tells MPs
  • MTD technical guidance being rewritten for VAT deferral
  • Tips and advice: directors’ duties and responsibilities in the age of covid-19
  • Government lending schemes create ‘cliff edge’ for business
  • Insurers cave in to demand to delay dividend payments

7 April

  • Top 10 tips: employee expenses during coronavirus homeworking
  • Financial support for Northern Ireland businesses and employers

    • 6 April

    • Coronavirus large business interruption loan scheme (CLBILS) launched
    • 80% rules allow training, volunteering and even second jobs
    • Zero hours PAYE employees entitled to 80% furlough scheme

    3 April

    • Coronavirus business interruption loan scheme (CBILS) amended
    • Football clubs fight to keep going as grounds remain closed
    • British Airways furloughs 30,000 and puts pilots on half time
    • Bus services support grant launched

    2 April

    • Public sector contractors given access to 80% furlough scheme
    • Electronic signatures and witnessing practicalities when isolating
    • FCA consults on three-month loan and credit card payment freeze

    1 April

    • Banks suspend £15bn in dividend payments
    • Duties and VAT waived on vital medical imports
    • Charity SORP guidance issued

    31 March

    • HMRC clarifies self-assessment tax payment deferral
    • Guidance on small business and retail sector grant schemes
    • EU Tax Authority tracker monitors cross-border covid-19 VAT changes
    • Returning NHS workers targeted by tax avoidance scammers

    30 March

    • Coronavirus Act 2020 allows for HMRC extended powers
    • Coronavirus Job Retention Scheme – government will pay employer NICs
    • Limited company directors have limited support under covid-19 measures
    • Insolvency rules to be relaxed, initial announcement
    • Annual leave rules will allow temporary two-year holiday rollover cycle

    27 March

    • Q&A: Self-employment Income Support Scheme
    • Partnerships offered income support
    • Contractors ‘fall through cracks’ in support
    • Changes to stamp duty payments process on share sales
    • Accounting and tax institutes cancel exams

    26 March

    • Self-employed package hints at future tax equity
    • HMRC changes coronavirus business helpline number to increase capacity
    • Self-employed will receive 80% package financial support
    • Chancellor finalising package of financial support for self-employed
    • Users of VAT deferral should review direct debits to HMRC
    • £3.5bn of dividends slashed
    • FTSE audit partner tenure extended
    • Regulators issue joint guidance on financial reporting and audit requirements
    • Taxpayers urged to weigh up savings withdrawals
    • Revised investment reporting standards delayed to September
    • Government demand for March beer duty payments ‘disappointing’

    25 March

    • HMRC looking to deploy more staff to business helpline
    • Warning on scammers and abuse of government schemes
    • Bank card contactless limit increased
    • FRC considers delay to audit quality inspections
    • Expat US taxpayers can defer federal income tax filing to 15 July
    • Business rates holiday extended to estate agents and bingo halls
    • Gender pay gap reporting suspended
    • ‘Your NHS needs you’ to volunteer

    24 March

    • 80% rule salary payments liable for income tax and NICs
    • Q&A: what does UK lockdown mean for employers?
    • Non-essential shops closed but not exhaustive list
    • Covid Corporate Financing Facility available
    • Sick pay to be refunded to small businesses
    • Moratorium on evictions by commercial landlords
    • Expats and non doms can claim ‘exceptional circumstances’
    • Urgent government action needed to support self employed
    • UK GDP to drop 2.6% before 2021 recovery
    • HMRC cuts interest rate for late/early payments

    23 March

    • Accountancy firms activate agile working as office premises close
    • Companies risk breaching banking covenants
    • Coronavirus Business Interruption Loan Scheme open for applications
    • VAT payments deferred for three months
    • Six month deferral on self-assessment payments
    • FCA implements two-week moratorium on FTSE corporate reporting
    • Companies House extends accounts filing deadline
    • Businesses rally to support NHS workers
    • Online coronavirus isolation notes for absence from work
    • Government to take over rail franchises

    20 March

    • Chancellor sets out radical employment support package to protect jobs
    • Coronavirus Business Interruption Loan Scheme hiked to £5m
    • HMRC needs to ramp up covid-19 time to pay guidance
    • Bank of England advice on liquidity reporting under IFRS 9
    • Rail services cut in response to covid-19

    19 March

    • Chancellor tells MPs business loans effective ‘beginning of next week’
    • Bank of England cuts base rate to 0.1%
    • Chancellor convenes emergency meeting with business groups and unions
    • London’s transport network cut back in face of coronavirus
    • Schools to close from Friday

    18 March

    • £330bn ‘unprecedented’ coronavirus emergency fund
    • IR35 private sector reforms delayed until 2021 (updated guidance issued 3 Apr 2020)
    • Covid-19 sees companies develop AGM contingency plans

    17 March

    • Covid-19 measures pose ‘catastrophic’ challenge for leisure industry
    • Regulator offers filing extension for charities affected by covid-19

    16 March

    • Accountants activate covid-19 contingency plans
    • FRC advice for auditors and financial reporting

Bookkeeping: Capturing and organising receipts

Keep your business receipts tidy and organised using the tips in this blog to make completing your tax return a cinch.

Here are our top tips for quickly and efficiently compiling, organising, and storing your business receipts.

Make notes – Get into the habit of writing a quick note on receipts about what they are for if it isn’t immediately obvious. This will make it quicker and easier for you to categorise your receipts at a later date.

Digitalise – When you have lots of paper receipts lying around it’s easy for them to get lost. Stacks of paper receipts also take up space and can easily become disorganised, making it time-consuming and frustrating trying to find the information you need. Over time, the ink on receipts can also fade, making them difficult to read. However, technology now makes it easy to go paperless by digitalising all your receipts. There are many ways you can do this, including:

  • Use a receipt scanner smartphone app and online service.
  • Photograph receipts with your smartphone’s camera.
  • Use the office scanner.

Categorise – Whether you choose to store paper receipts or go digital, you will benefit from categorising your stored receipts. Examples of common categories include:

  • Marketing
  • Travel
  • Rent
  • Entertainment
  • Office supplies
  • Utilities
  • Insurance
  • Postage

Some receipt scanner apps and online services will automate this process for you and even send the information to your accounting software.

Use accounting software – Keeping track of your receipts using accounting software is far more efficient, organised, and secure than trying to keep track of things using paperwork. When you digitalise your receipts and store the information in your accounting software you can perform a quick search to find the information that you require at the click of a button. It also makes it easy to quickly sort your receipts and analyse your expenditure. Most accounting software will store your data online in the cloud too, allowing you to access the information from anywhere and giving you peace of mind that it is safe and secure.

For more help or advice with your bookkeeping, get in touch with our team here at Michael Bell by calling us on 01484 690 730 and we will be happy to help you.

What is an exit strategy and why do I need one?

All good things must come to an end, and there will come a time in your life when you’re ready to either start playing a smaller part in the running of your business or say goodbye to it forever.

Having a well thought out exit strategy already in place will help you to sell or otherwise dispose of your business quickly, profitably, and with minimal stress and hassle.

What is an exit strategy?

An exit strategy is a plan for selling your business in order to maximise profit and the business’ chance of success once your involvement has ended.

Some common types of exit strategy include:

  • Sell to an outsider
  • Sell to investors
  • Sell to family
  • Liquidate
  • Initial public offering (IPO)

When planning and preparing your exit strategy you should aim to get your business to a point where all business information and accounts are up-to-date, and all business processes are documented. This will allow you to hand over ownership to someone else swiftly should you be unexpectedly required to do so.

The type of exit strategy you choose may depend on several factors including:

  • Whether you want any continued involvement in the business.
  • Your business type and size.
  • How successful your business is.
  • How quickly you wish to exit.
  • How important it is to you that your business continues in the same way.

Why is it important to have an exit strategy?

A well thought out exit strategy can help you to get more from your business when you eventually decide to part ways with it. Even if the business has not been successful, an exit strategy will be beneficial as it can help you to minimise losses.

You never know what could be around the corner and having an exit strategy in place will allow you to sell your business quickly, efficiently, and with minimal stress in the event of the unexpected.

Some reasons you may require an exit strategy in place and ready to implement include:

  • Retirement
  • Business isn’t doing very well.
  • A new opportunity comes along.
  • A change in your personal life.

It is wise to seek professional and objective help with planning your exit strategy to ensure that your valuation is realistic, and your plan is as profitable as it can be.

Preparing your accounts

You will need to make sure that all your business’ financial records, accounts, and bookkeeping are up-to-date and organised before seeking a buyer for your business.

For help or advice with planning your exit strategy or preparing your business accounts for selling your business, get in touch with our team of experts here a Michael Bell by calling us on 01484 690730.

Bookkeeping tasks to complete in January

January is a great time to review your bookkeeping processes and get your business’ finances organised for the new year.

For many businesses, January is a quiet time of year that is best used to review performance and processes and plan and prepare for the year ahead.

Complete the following bookkeeping tasks in January to make looking after your business’ books simple in 2020.

Make sure everything is up to date

Start the new year as you mean to go on by ensuring that your business is up to date with all payments to suppliers and ensure that any late payments owed to you have been chased so that you’re starting the year with a clean slate.

Review your bookkeeping software

The right software can help make bookkeeping tasks quick and simple to complete whilst keeping all your business’ important information organised and secure.

Bookkeeping software can also automate certain tasks, saving you time and reducing the risk of human error.

If you don’t yet use bookkeeping software, or are unhappy with the system you’re currently using, January is a great time to research an alternative solution. We recommend QuickBooks, Freshbooks, Sage and Xero.

Review performance

The new year is the perfect time to review your business’ performance throughout the previous year in order to create a cashflow forecast for the year ahead.

Identify where any seasonal dips and peaks occurred and create a budget to help you to manage your cashflow over the year.

Review processes

If you feel like you’re forever playing catchup with your bookkeeping or losing important information, then now is a good time to review and improve on the processes you have in place.

Get organised by setting reminders for submission deadlines and invoice due dates for the year ahead. Create a process to capture and store receipts electronically at the time of purchase to keep your records secure and accurate.

For further help or advice with your business’ bookkeeping and accounts in 2020, speak to our team here at Michael Bell & Co by calling us on 01484 690 730.

Plans to cut corporation tax put on hold

Prime Minister Boris Johnson has announced that the planned cuts to corporation tax are to be put on hold.

On 1st April 2020, corporation tax was due to fall from 19% to 17%. However, in the run up to the December general election, Conservative party leader Boris Johnson has announced that this cut to corporation tax is to be put on hold to help fund “other priorities”.

Johnson has said that the money that would have been spent on the cut, will instead be put into the NHS and other national services. An article on the BBC website, however, claims that the cut would not mean any additional money being spent on the NHS, instead it would be used to fund an existing pledge to GP training.

During the speech where Johnson made the announcement, he made a plea for business leaders to understand his decision, claiming that it was the “fiscally sensible thing to do” and would allow him to put £6bn into public services.

With the general election on the horizon, it’s thought that Johnson has made the decision to distance the conservative party from their image of being a party for big businesses and the wealthy.

At the same conference, Labour leader Jeremy Corbyn announced that he planned to raise corporation tax but promised that rates would be no higher than they were in 2010 when Labour were last in power.

Corbyn, who has been accused of being “anti-business”, justified his decision by saying: “It’s not anti-business to say that the largest corporations should pay their taxes just as smaller companies do.

“And it’s not anti-business to want prosperity in every part of our country – not only in the financial centres of the City of London.”

For help or advice regarding corporation tax, give our team of accountants here at Michael Bell and Co a call on 01484 690 730.