Newsletter - May 2021
Welcome to this months Newsletter.
We hope you find the articles in this month’s issue of our newsletter of interest.
A new government-backed loan scheme
Averaging profits for creators of literary or artistic works
Advisory Fuel Rates from 1 March 2021
Charity – using a subsidiary trading company
Tax Diary May/June 2021
Business Support - A new government-backed loan scheme
A new Recovery Loan Scheme was launched 6 April 2021, to provide much needed liquidity to businesses affected by COVID lockdown measures. Under the scheme, loans of up to £10m are available. The minimum facility sizes vary, starting at £1,000 for asset and invoice finance, and £25,001 for term loans and overdrafts.
Potentially, these loans will be attractive to businesses in retail and hospitality that are gradually being allowed to reopen.
As with the Bounce-Back Loans, the government is providing lenders – the high street banks – with a measure of guarantee to underwrite their risks.
In a recent press release government confirmed:
The scheme, which was announced at budget and runs until 31 December 2021, will be administered by the British Business Bank, with loans available through a diverse network of accredited commercial lenders.
26 lenders have already been accredited for day one of the scheme, with more to come shortly, and the government will provide an 80% guarantee for all loans. Interest rates have been capped at 14.99% and are expected to be much lower than that in the vast majority of cases, and Ministers are urging lenders to ensure they keep rates down to help protect jobs.
The Recovery Loan Scheme can be used as an additional loan on top of support received from the emergency schemes – such as the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme – put into place last year.
Business owners who are considering a recovery loan should apply the usual considerations. i.e., can they afford the interest and capital repayments.
Please call if you would like help considering your options.
Corporation Tax - Averaging profits for creators of literary or artistic works
A special relief is available for creators of literary or artistic works under which they can claim to add together their profits for 2 years and be taxable on the average of those profits if certain conditions are met. This helps to even out fluctuating tax charges for creative persons who may pay little tax one year but perhaps higher rates of Income Tax the following year. The averaging process may help to reduce overall liabilities.
You can claim averaging if your profits come from disposing of works or from royalties you get for allowing people to reproduce your works. So, for example, you can claim if you are:
- an author whose income comes from the sale of your written work – even if a small part of your income comes from personal appearances
- a computer software writer whose income comes from royalties for reproducing the code you write, which is protected by copyright
You cannot claim averaging if your profits come from the services you provide. So, for example, you cannot claim if you’re:
- an architect whose income comes mainly from your services – even if some of your income comes from selling material protected by copyright
- a computer programmer whose income comes from the service of writing scripts or programs, not the actual works.
Income Tax - Advisory Fuel Rates from 1 March 2021
|The advisory electricity rate for fully electric cars is 4 pence per mile.
Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.
The advisory fuel rates for petrol, LPG and diesel cars are shown in these tables.
From 1 March 2021
You can use the previous rates for up to 1 month from the date the new rates apply.
General - Charity - using asubsidiary trading company
One or more charities can set up a subsidiary trading company to trade on their behalf. This may be a useful strategy if your charity:
- makes profits on trading that is not linked to its primary purpose
- makes a profit that comes close to or is higher than the small trading tax exemption limit
- wants to protect its assets from any trading losses
- wants to have a separate organisation to carry out all its trading activities
A charity’s trading company will not have to pay VAT on:
- profits it makes from donated good sales (as long as it gives these profits to the parent charity)
- fundraising events it runs for its parent charity
Other types of VAT relief that charities get are not available for their trading subsidiaries.
Trading companies must pay tax and VAT on all their other income and profits in the same way as ordinary limited companies.
Tax Diary May/June 2021
1 May 2021 - Due date for Corporation Tax due for the year ended 30 July 2020.
19 May 2021 - PAYE and NIC deductions due for month ended 5 May 2021. (If you pay your tax electronically the due date is 22 May 2021).
19 May 2021 - Filing deadline for the CIS300 monthly return for the month ended 5 May 2021.
19 May 2021 - CIS tax deducted for the month ended 5 May 2021 is payable by today.
31 May 2021 - Ensure all employees have been given their P60s for the 2020-21 tax year.
1 June 2021 - Due date for Corporation Tax due for the year ended 31 August 2020.
19 June 2021 - PAYE and NIC deductions due for month ended 5 June 2021. (If you pay your tax electronically the due date is 22 June 2021)
19 June 2021 - Filing deadline for the CIS300 monthly return for the month ended 5 June 2021.
19 June 2021 - CIS tax deducted for the month ended 5 June 2021 is payable by today.
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DISCLAIMER - PLEASE NOTE: The ideas shared with you in this newsletter are intended to inform rather than advise. Taxpayers’ circumstances do vary and if you feel that tax strategies we have outlined may be beneficial it is important that you contact us before implementation. If you do or do not take action as a result of reading this newsletter, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.