Paying back the costs of Covid

Paying back the costs of Covid

22.9.2021 | Tax

Paying back the costs of Covid

Andrew Diver, Head of Tax at Beatons Group, looks at the impact of the pandemic on businesses.

Protecting the country from the coronavirus has come at a considerable cost, be that for the treasury, businesses or even the average worker.

The government has borrowed record-breaking figures to help finance the furlough scheme and ensure the NHS and other public services can win their fight against the virus. But as with any loan – that money needs to be paid back.

Andrew Diver, head of tax for Beatons Group, looks at the impact of the Covid pandemic on business and how the hundreds of billions of pounds could be reimbursed.

The situation
The 2020/21 financial year saw the government borrow the highest amount since records began in 1946, with a staggering £299 billion of borrowed money pumped in to stabilise the economy.

The figure for 2021/22 is expected to be lower thanks to the effects of the vaccines in reopening the economy – at a figure still forecast well above £200bn – although this level of borrowing can’t go on forever.

But with more money going out and less coming in, borrowing more remains the only option available to the government for the foreseeable future.

How could the government pay it all back?
We are now beginning to see the first signs of how the government will attempt to pay back the costs of coronavirus.

The government has already announced its controversial 1.25 percentage points rise in National Insurance for businesses and their employees, alongside a tax increase on income from dividends.

Any notion of a tax on wealth or property has been quashed in favour of a levy on wages – while the “triple lock” for pensions has been suspended for a year in a bid to help fund social care.

Rishi Sunak’s budget announcement on October 27 will set the tone for the post-Covid tax landscape up until the next general election.

It is yet to be revealed whether the budget could bring with it higher taxes for businesses, although Mr Sunak’s insistence that taxes would have to rise to cover the £12bn annual social care boost has been firmly endorsed by Boris Johnson.

Fears have been raised by business leaders that further tax rises could harm job creation and investment, but tackling inflation remains high on Mr Sunak’s agenda.

A one percentage point rise in inflation would add as much as £27bn to debt servicing costs over the next four years. It could again be employers who bear the brunt of paying that figure back.

Looking to other countries, Argentina is an example of a state taking a different path. There, the government imposed a one-off tax on domestic and international assets of people whose wealth exceeded 200 million pesos (around £1.7million).

Some may point to the policies spearheaded by John Maynard Keynes in the wake of the Bretton Woods Conference following the Second World War, with increased spending on public infrastructure projects helping economies recover.

Either way, the focus now remains on supporting economic growth and tackling the inflation dilemma, with the UK having suffered its biggest drop in economic output in more than 300 years.

If you need help with your personal or business finances, visit beatons.co.uk for support.

Logistics groups say leasing should be included in Chancellor’s super-deduction

Logistics groups say leasing should be included in Chancellor’s super-deduction

7.9.2021 | Tax

Leasing should be included in Chancellor’s super-deduction

The decision does not support agile, efficient operations.

One of the key announcements in this year’s budget was the introduction of the super-deduction – a new tax break aimed at boosting business growth.

The deduction essentially allows businesses to set 130% of the cost of purchasing new assets, including plant machinery and office equipment, against its profits.

However, business group Logistics UK and six other trade groups have written to Chancellor Rishi Sunak, arguing the deduction should also include leasing and short-term hire to allow more businesses to take advantage.

Here, Andrew Diver, Head of Taxation at Beatons Group, takes a look at the super-deduction and whether it could be extended.

The super-deduction
The chancellor’s budget contained a raft of measures seeking to kickstart the nation’s economy as the pandemic subsides, including the super-deduction.

The tax break can be applied to a business’ asset purchases – from items such as diggers, lorries and tractors to office furniture or computer screens.

Any business that pays corporation tax can apply for the super-deduction, however, trade groups say many smaller businesses may miss out.

Leasing and short-term hire
Seven business trade groups have now written to the chancellor, arguing the eligibility criteria should include leasing and short-term hire.

Stephen Haddrill, Director General of the Finance and Leasing Association said that ‘the age of buying plant and machinery outright is long gone’ and that for many firms, it is more efficient to hire or lease machinery instead of buying it.

The trade groups have invited officials to a discussion in September to talk about the vital role leasing and hiring play in smaller companies to invest in their future.

Supporting logistics is crucial
We have recently seen the logistics sector’s huge importance in keeping our supermarket shelves stocked and our restaurants in ingredients.

With KFC and Nandos running out of chicken and Wetherspoons running out of beer, it is clear the sector needs to be supported.

It faces difficulties on a number of fronts – the disturbance caused by Brexit, the upheaval caused by the pandemic and a shortage of UK-based HGV drivers – and needs assistance to keep the country running.

I will be keeping a watchful eye on the developments and hope this month’s discussions help develop new ways to support this important industry.

For more about Beatons Group, please visit beatonsgroup.co.uk

Pandemic’s toll on self-employed

Pandemic’s toll on self-employed

24.8.2021 | Tax

Pandemic's toll on self-employed

New survey reveals 2 out of 5 Freelance Sector Lost Over 40% of Turnover. 

The data, collected by the Association of Independent Professionals and Self-Employed (IPSE), also showed that two out of three freelance businesses suffered a financial hit.

Freelancers and the self-employed have been hit harder than most over the last 18 months, finding it more difficult to apply for vital public funds to get them through tough times.

Here Nick Marshall, Director at Beatons Group, takes a look at the self-employed sector and how to apply for the fifth and final grant on offer.

The impact
The survey from IPSE is a stark reminder of the financial toll the pandemic has had on some sectors.

The self-employed sector, which contributed more than £300billion a year to the UK economy before the pandemic, has suffered greatly through the pandemic.

Data reveals almost two-thirds of freelancers over the age of 35 saw a decrease in turnover, with half of those under 35 suffering a financial hit too.

Emergency funds
To add insult to injury, the self-employed have often found it more difficult to secure COVID-19 funding throughout the pandemic.

While it has been a relatively easy process to go on furlough for most people paid through PAYE, there have been many more hoops to jump through for the self-employed.

Many people who became self-employed before the pandemic struck found that they were unable to make a claim, as they were required to have filed Self-Assessment Tax forms in 2018/19.

And even if they fit the requirements for a grant, it has been a relatively complicated process to apply for the money compared to other available government funding.

The final self-employed grant
More financial help is on the way; however, with the fifth and final grant for the self-employed, the Self Employment Income Support Scheme (SEISS), now open for applications.

The grant is worth up to £7,500 and applies to self-employed workers who reasonably believe there is a ‘significant reduction’ in profits due to reduced demand, activity or capacity or that they were unable to trade due to covid 19 in the period 15th May 2021 to 30th September 2021.

If turnover fell by 30% or more, they can claim the full grant, worth 80% of three months average trading profits up to £7,500 – under 30%, they receive 30% of three months average trading profits up to £2,850.

The deadline to make a claim is 30 September 2021 and can be made using a Government Gateway account here.

For more on Beatons Group, visit beatons.co.uk or call 1473 659777.

Pandemic takes toll

East Anglia is well placed for a business bounce back

East Anglia is well placed for a business bounce back

10.8.2021 | Tax

How East Anglia is well placed for a business bounce back

Nick Marshall, Director at Beatons predicts a boom in business as the pandemic ends.

As the vaccine rollout continues at pace, and cases of coronavirus fall, businesses are now looking at how best to bounce back bigger and better than ever before.

East Anglia is in a strong position to do just that, with a wealth of skills and experience ready to fuel the fightback.

The government is playing its part too, with its Help to Grow scheme, announced in March’s budget, looking to give businesses the tools they need to thrive.

Here, Nick Marshall, Director at Beatons Group, has a look at the scheme, and some of the skills we have in the region set to drive the economic recovery post-COVID-19.

Help to Grow

The government-funded Help to Grow scheme has been designed to hone the skills of small and medium-sized business owners across the country.

Businesses can apply to attend management programmes – 12-week courses – providing them with skills to improve the performance and productivity of their company.

Five universities in the UK have already agreed to host courses, with four more to follow later this month.

Small changes

These small improvements can make a huge difference.

The Office of National Statistics reports that minor changes in management practices can increase productivity by up to 10%.

The Confederation of British Industry has said if the UK boosts the productivity of UK SMEs to match Germany’s, it could increase the economy by up to £100billion.

This shows the crucial role SMEs will play in the UK’s economic recovery following the pandemic and the wealth of expertise we already have.

An abundance of skills

East Anglia is very well placed for the recovery, and its expertise in a range of sectors will be vital to its recovery.

From logistics to IT, legal services to PR, the region is packed with talent – giving support to any businesses looking to flourish in the future.

This expertise gives a backbone of support to firms, helping them realise their goals for the future.

With the wealth of expertise in the region, and the UK Government doing their bit to make the most of these skills, I am confident we will see a boom in business as the pandemic comes to an end.

For more on Beatons Group, visit beatons.co.uk or call 01473 659777

The future financial impact of the pandemic

The future financial impact of the pandemic

27.7.2021 | Tax

The future financial impact of the pandemic

Stephanie Hammond, Director at Beatons Group, takes a look at the upcoming national bill.

As coronavirus restrictions are lifted in England, the financial impact of the pandemic on the nation’s economy is coming to light.

Throughout the pandemic, the UK Government has sought to support businesses financially while at the same time having to make difficult decisions that negatively affect them.

The latest figures from HM Treasury reveal the government paid out nearly £80billion in emergency loans to limit the damage caused by COVID-19 restrictions.

Here, Stephanie Hammond, Director at Beatons Group, takes a look at the upcoming national bill.

Turbulent times
You would be hard-pressed to find a business that hasn’t been negatively affected by the pandemic and the measures brought in to limit the spread of the virus.

From logistics to hospitality, almost every firm has had to adapt to the circumstances, often with little time to prepare.

And the impact doesn’t end there – with thousands being ‘pinged’ every day by the NHS app and forced to self-isolate, many businesses are now suffering a staffing shortage.

However, the damage to business has been mitigated somewhat by a raft of loans and grants on offer.

Financial support
According to HM Treasury, more than 1.6 million government-backed loans were approved between April 2020 and May this year.

Figures reveal almost £80bn worth of emergency loans were issued during the COVID-19 crisis.

These include £47.4bn in Bounce Back Loans, £26.4bn in Coronavirus Business Interruption Loans, £5.6bn in Coronavirus Large Business Interruption Loans and £1.1bn for the Future Fund.

The UK government’s Recovery Loan Scheme is also set to run until December 31 this year, providing an 80% guarantee to lenders for short term loans, overdrafts and invoice and asset finance.

The bill
As the scale of the pandemic was revealed, it was crucial the government stepped in to help businesses, especially as it brought in restrictions to fight the spread of the virus.

However, this financial support does not come without a price to pay later down the line.

From April 2020 to April 2021, the UK Government borrowed a staggering £229bn – the largest sum in a single year since records began.

And although the figure is set to be down on last year’s, it is expected to still be in excess of £200bn.

As restrictions are lifted, and our lives go back to some semblance of normality, the next question will be how we pay off this debt.

Will the government raise taxes to recoup the money, or cut spending?

We will have to wait to see what the government has planned.

Either way, the full impact of the pandemic will be felt for generations until the debt is paid off.

For more on Beatons Group, visit beatons.co.uk or call them on 01473 659777

 

Ever Given heads back to Felixstowe after Suez Canal fiasco

Ever Given heads back to Felixstowe after Suez Canal fiasco

13.7.2021 | Tax

Ever Given heads back to Felixstowe after Suez canal fiasco

Stephanie Hammond, director at Beatons Group, looks at the deal struck to release the container ship from its limbo. 

The notorious cargo ship the Ever Given – which caused a crisis at the Suez Canal in March – is on its way back to the Port of Felixstowe.

The enormous vessel, which became lodged in the vital trade route for six days, blocking the canal completely, will set sail to the Suffolk port from Rotterdam on July 24, arriving the very same day.

It will be a brief stopover, with the ship heading off again the next day after unloading its cargo.

Following a salvage operation, the ship was impounded by the Suez Canal Authority (SCA) and has only recently been released after the authority reached a settlement with the ship’s insurer.

Here, Stephanie Hammond, Director at Beatons Group, looks at the drama and how a deal was finally reached.

The rescue
The 400m-long vessel became lodged diagonally in the canal on March 23 after running aground in high winds.

A large-scale salvage mission was launched, with a fleet of boats sent out to re-float the ship.

The Ever Given was finally freed on March 29 with the help of 14 tugboats and a particularly high tide thanks to a supermoon.

However, the retrieval of the vessel was just the start of the drama, as the SCA, which is part of the Egyptian government, seized the ship a few days later, demanding compensation for losses incurred.

Compensation
Once the ship had been seized, the SCA sought compensation from the vessel’s Japanese owners, Shoei Kisen – to pay for the salvage operation cost and damage to the canal.

Initially, the SCA requested £664 million from Shoei Kisen, which included £217million for the salvage and £217million for loss of reputation.

This was rejected by the firm’s insurers, UK Club, which described the claim as ‘extraordinarily large’.

Settlement
Three months later, a deal has finally been reached.

The SCA had later lowered its compensation claim to £362million, however, the final settlement figure has not been disclosed.

An SCA lawyer later said the authority would keep the terms of the agreement a secret.

The Ever Given is still carrying the load it set off with in March. The containers, totalling around 18,300, will be offloaded at Felixstowe later this month.

The crisis showed how crucial the Suez Canal is to international trade and the huge costs involved if something goes wrong.

It shows the fine lines the logistics sector is run by, and the complexities involved in transporting goods worldwide.

For more information on Beatons Group, visit beatons.co.uk

Image: Ever Given, credit Adam Howlett, Prominent PR