The headlines last week were all about the Job Support Scheme that is replacing the furlough scheme, but an extension to the grant scheme for the self employed was also announced, along with a couple of other changes to help businesses.

What new help was announced?

The self-employed have been able to claim 2 payments from the Government so far.

This new extension provides for 2 more claims to be made, each covering a 3 month period, and in total covering November 2020 to April 2021.

The criteria is the same as before, which is disappointing for those who did not qualify previously, as they still do not qualify.  You do not however have to made a claim before to be able to make a claim this time.

You will have to declare that you are currently trading, and that you intend to continue to trade, and also that your business has suffered as a result of Covid-19 in this claim period.

The support offered this time is also significantly reduced, in line with the support being offered to employees and in line with the stated aim of only supporting viable businesses during the Winter months.

The first grant will be paid in a single instalment and will be up to 20% of average trading profits, capped at £1,875.  This will cover November to January.  No details have yet been announced as to the level of the second grant.

What other help was announced?

The self-employed and others who submit self-assessment tax returns had already been given more time to pay taxes due, with the amount that was due by 31 July 2020 deferred until 31 January 2021.

Now the Government has extended that further and will allow the amount due in January 2021 to be paid over 12 months, (including the amount already deferred from June 2020,) meaning the bill won’t be paid in full until January 2022.

A similar scheme has been set up for VAT.  Businesses were able to defer vat due between March and June 2020 until March 2021.  They may now opt-in to a scheme which allows this bill to be paid in smaller amounts up the end of March 2022 interest free.

If you would like any more information or assistance with submitting your tax return before the deadline, then do get in touch with Rosie Forsyth at Wilkins & Co.

The virus has adversely affected many business and sadly for some the decision may be that the business is just no longer viable.  Making the decision to close your business is an extremely tough one, as you will have poured your life and soul into making it work.  Talking through your options with someone outside the business is useful as the emotional connection is removed, but at the end of the day you may decide its time to move on and face a new challenge.

Closing down a business has tax implications so this series of 2 blogs runs through what you need to be aware of, and how to go about closing a business.

This blog relates to the self employed.

(We have assumed the business has no significant business assets and does not cover business asset disposal relief)

If your business has made a loss

It is likely if you have decided enough is enough that the accounts show that the business has been making a loss.  You may be able to get tax relief for these losses, so it is important that you don’t miss out.

If you have other income from a different source (eg a PAYE job) or your business made a profit in the previous tax year, then you can offset your trading loss against this other income in the current or previous tax year– this could generate a tax refund for you.  You need to determine the best way to use your losses to maximise any tax rebate, so you need to speak to your accountant who will be able to advise you on this.

There is also an additional relief for a loss made on the cessation of the business – called “terminal loss relief”.  This allows you to calculate the loss for the last 12 months of trading, and potentially offset this against profits of the previous 3 tax years, starting with the earliest year.  For example, if you ceased trading in Sept 2020, you could potentially offset that loss against profits made in 17/18 first, then 18/19 and finally 19/20.  Again we would recommend you take advice as to the best way to make any loss claim, as only the basic details are covered in this blog.

How do I close my business down?

You need to tell HMRC when you stop trading and cease being self-employed – by completing this form.

https://www.tax.service.gov.uk/shortforms/form/CeaseTrading

You will also need to file a tax return for the year in which you ceased trading.  Eg if you cease trading in Sept 20, you will still need to complete a tax return for 20/21 which needs to be filed by 31 January 2022.

You will no longer need to pay class 2 NIC once you stop being self employed, but this is due for the weeks up to the date you tell HMRC that you have ceased trading.

If you were registered for VAT, you must cancel this and submit a final vat return up your final day of trading.  If you had deferred any vat payment under the Covid-19 help scheme, this must still be paid!

If you receive any money in after the business has officially ceased trading (eg old invoices are paid) or you incur expenses, then these need to be taken into account, either by showing them separately on your tax return, or by increasing the loss already calculated for the year.

Not fully closed down?

You can earn income of up to £1,000 from self-employment in a tax year without having to declare this to HMRC.  This is covered by the “trading allowance”.  You do still need to keep records of your income and expenses for your business and there are situations when you would still need to declare this income as detailed here

https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income

It is worth bearing in mind though that this allowance does exist, so you can still earn small amounts of income from a business without the need to declare it to HMRC.

Closing down a self-employed business therefore is relatively straightforward from an accounting and tax perspective.  If you do have trading losses, it is important to take advice to ensure these are utilised in the best way for you.

Ceasing trading as a limited company owner is, as you would expect, more complicated and will be covered in our next blog.

If we can help you in determining the future of your self-employed business then do get in touch.

The way we work has changed and for many working from home has become the norm.

If you are self employed – then you will already be including in your accounts a charge for the additional costs incurred from working from home.  There are 2 ways you can calculate this charge – one is a simple flat rate method based on the hours you work from home, and the second is a more complicated calculation, based on allocating a percentage of the actual running costs of your home to your business.  Both methods are outlined in detail in my previous blogs.

Whichever method you use, the hours you work from home have probably increased significantly over the last 6 months, so you should ensure that this is reflected in the amount that you charge your business.  It may be that the second method would now give you a higher figure – you need to do the sums!

If you are an employee, and have been working from home since lockdown, there is also a small amount that you can claim.

Your employer can pay you the grand sum of £6 per week to cover the additional costs you are incurring from having to work at home.  If you don’t like to ask, or your employer is not able to pay you this, then you can instead claim tax relief on the £6 per week via HMRC.  Not a fortune, but a gain of £1.20 per week for a basic rate taxpayer, and £2.40 a week for a higher rate tax payer.

How to claim as an Employee?

Either claim on your tax return if you complete one, but if you don’t then you need to simply file a P87 form.  This can be done online if you have a government gateway set up – or by good old fashioned post otherwise.  The section to complete is the “using your home as an office” section.  Once submitted, your tax code will be amended to give you the tax relief on your claim.

Other costs

If you have had to buy other office equipment to use at home during lockdown, and your employer is paying you back for this, this would normally be taxed on you as a benefit in kind.  However, for this tax year, there is a relaxation of this rule!  With many more hours being spent in your home office, it is important to have the right equipment to enable you to work from home – a proper desk and office chair etc, to save aches and pains in the future!

If you would like any more information, then please do contact Rosie Forsyth at Wilkins & Co.