what our clients say

From our Business clients:

A big thank you…

A big thank you…

The staff and directors of Lewis Brownlee want to say thank you to our loyal and valued clients for your continued support as we all navigate the COVID-19 situation.

You’ve played an important role in ensuring we can continue to do what we do best, which is supporting businesses and individuals with their finances, which is now more critical than ever. As we navigate these unprecedented times, our team will try to transparently communicate in real-time and be as flexible as we can to support your needs.

If you see opportunities for stronger collaboration, we invite you to speak with your usual contact at Lewis Brownlee. We truly believe a strong partnership between you as our client and us as your accountant will ensure that we can both survive and thrive, and hopefully come out of this stronger than ever. If you feel there’s anything we can do to help you or others in our community do get in touch and let us know your thoughts.

We will continue to keep you updated with the latest news and information via emails, social media and our website – and again, thank you!

Take care and stay safe!

Thank you from Lewis Brownlee!

Professional Quality – A Profession Under Review

Professional Quality – A Profession Under Review

HMRC has published a call for evidence into ‘Raising Standards in the Tax Advice Market’ on 19 March 20 – Why?

In brief, off the back of the Disguised Remuneration Loan Charge review in December 2019 (not discussed here), the Government wants a closer look at the tax advisory profession because from where they stand, they see that ‘the profession is not working as well as it should be’. They believe that ‘some advisers are incompetent, some unprofessional, a few actively corrupt’ – they are not pulling their punches.

Individuals who obtain professional qualifications through extensive study and maintain their qualification by adhering to professional standards may, for example, identify as a Chartered Accountant or a Chartered Tax Advisor. There is however no requirement for an advisor to hold a relevant professional qualification to offer advice to clients – a scary thought I know.

The consultation is not targeting one group or another. It is seeking to strengthen the process in how advice is given, the creditability that may be placed upon it, and if the advice is poor, the accountability of the adviser.

Any change which raises standards in the profession, ensuring accountability of those providing advice is very welcome by us. Lewis Brownlee does not and never has promoted or engaged with users or promoters of tax avoidance schemes, nor do we seek to push the ‘tax envelope’ to the client’s detriment.

The advice we provide is carefully designed to ensure it is in our client’s best interests both in terms of ensuring the minimum amount of tax has to be paid in accordance with a reasonable interpretation of the UK laws, whilst also trying to ensure we do not increase the chances of triggering a tax investigation or getting involved in a dispute with the taxman.

We are not concerned by the outcome of the Government’s consultation and the resultant changes it will bring, but instead looking forward to the increased credibility it will bring to our client offering. As the saying goes, a rising tide lifts all boats.

If you want an established accountancy practice to guide you through the regulatory complexities, implement sound tax planning strategies, feel free to get in touch with us.

You can call us on 01243 782 423 or head to our contact page.

Profession Under Review?

FRS 102 recognition issues under COVID-19

FRS 102 recognition issues under COVID-19

The impact of COVID-19 is being felt throughout the UK.  Coronavirus will change the way business operates, even if only in the short-term.  Detailed consideration for the financial statements of entities impacted by the coronavirus situation will be needed in many areas.  Here are some in relation to the figures that make up the financial statements under FRS 102.

The impact of COVID-19 is being felt throughout the UK.  Coronavirus will change the way business operates, even if only in the short-term.  Detailed consideration for the financial statements of entities impacted by the coronavirus situation will be needed in many areas.  Here are some in relation to the figures that make up the financial statements under FRS 102.

Impairment – financial asset

Section 11 of FRS 102 Basic Financial Instruments is applied when assessing whether financial assets (listed below) should be impaired.

  • trade and other receivables;
  • loans to directors, employees and shareholders; and
  • loans to connected entities.

COVID-19 factors could indicate that some or all of a debtor will not be recovered, or recovered later than originally expected.  There could be debtors in significant financial difficulty and entering, or potentially entering, bankruptcy or some reorganisation.

Impairment – non-financial assets

All non-financial assets, dealt with in Section 27 Impairment of Assets, should be tested for impairment when there is an indication of impairment – i.e. something that indicates that an asset might be carried at more than it can be recovered for.  There is no doubt that COVID-19 will have a significant impact on many entities when they assess whether non-financial assets are recoverable.  There are already impairment indicators such as difficult trading conditions, decline in the economy and job losses.  This means that careful consideration and a detailed impairment test will be required for many entities to determine whether goodwill, intangible assets, property, plant and equipment, investment property, investments in associates and joint ventures, and investments in subsidiaries are recoverable.

Fair value measurement

Items measured at fair value (e.g.  investment property) require careful consideration.  Fair value is determined based on market data at the measurement date (year end) under current market conditions.  Shares prices are highly volatile.  Based on the current position, one would expect significant declines in the fair values of shares, with a corresponding expense in profit or loss.  Similarly, the fair values of investment property are likely to decline; and lessors may find that tenants are unable to pay.

Stock and WIP write-downs

The current circumstances could result in stocks being carried at an amount that exceeds the estimated selling price less costs to complete and sell.  This might be because demand for the products has declined or the selling prices may have declined even if demand remains constant.  In these circumstances, stock is written down to the lower of cost and estimated selling price less costs to complete and sell.

Recoverability of deferred tax assets

Where a decline in the trading and profitability of an entity is present that could result in deferred tax assets not being recoverable, reassessments of any recognised deferred tax assets will be necessary and then being written down to the extent that they are not recoverable.  Section 29 Income Tax requires entities to recognise deferred tax assets only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Provisions and contingencies

Entities should consider, under Section 21, the impact of COVID-19 on the following:

(a) Provisions and contingent liabilities; an example of when this is relevant is legal cases.  If anyone sues an entity as a result of COVID-19, the entity is required to determine whether a provision and related expense should be recognised or whether disclosure of a contingent liability is required.

(b) Onerous contracts; Onerous contracts could arise in many instances.  An example of when an onerous contract could arise is when entities do not pass on increased costs to their customers and the costs exceed the revenue they earn.  This is more likely to occur if margins are tight.  Entities have already started incurring additional costs as a result of COVID-19 (e.g. increased costs for products, higher transport costs or additional cleaning costs for deep cleans and increased daily cleaning).  Entities are required to recognise a liability (and an expense in profit or loss if a contract becomes onerous).

(c) Restructuring plans; entities that start to consider, or implement, restructuring plans should apply Section 21 to determine when to recognise a liability (and an expense in profit or loss), and how to measure it subsequently.

(d) Employee terminations; unfortunately, it seems likely that many entities will need to terminate the employment of some employees.  Section 28 Employee Benefits should be considered when this occurs.  It explains when termination benefits should be recognised as a liability (and expensed in profit or loss) as well as how these should be subsequently measured.

Breaches of loan covenants

If a loan is in default (for example, a payment is not made when due or a specified ratio is breached), this could result in the classification of the liability changing from non-current to current.  Section 4 Statement of Financial Position states: ‘Unless an entity chooses to apply paragraph 1A(1) of Schedule 1 to the Regulations, an entity shall classify a creditor as due within one year when the entity does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least 12 months after the reporting date.  For example, this would be the case if the earliest date on which the lender, exercising all available options and rights, could require repayment or (as the case may be) payment was within 12 months after the reporting date.’

 

If you have any questions, or would just like to speak to someone as to how your business can survive and thrive through this, please get in touch! You can call us on 01243 782 423 or head to our contact page.

Stay safe!

FRS 102 recognition issues under COVID-19

Investors Relief – Do you qualify?

Investors Relief – Do you qualify?

Investor’s Relief (‘IR’) came into play 17 March 2016, so by no means is it new.

So why are we talking about it? Well, the conditions imposed to qualify for the relief where that shares had to be held for three years post introduction of the relief. This means that the 2018/19 tax year was the first year a claim was possible, but we suspect more people will qualify in the 2019/20 tax year.

What is it all about then? IR allows for a flat rate of ten percent on qualifying capital gains up to a lifetime limit of £10 million. It forms part of the group of tax reliefs which aim to encourage investment and entrepreneurial activity. It broadly works along the same lines as the more well-known Entrepreneur’s Relief (‘ER’), albeit IR is targeted at non-working investors (i.e. not a Director or Employee at time of subscription), but it may also be considered when relief may no longer be available via such schemes as EIS and SEIS. 

To qualify for IR, you had to have subscribed for ordinary shares (fully paid up) in an unlisted trading company, to which neither you nor a person connected to you, is associated with.

When considering the structure of future investments, IR might be something to factor into your decision-making process to expand your investment opportunities. Although the lifetime limit for ER was reduced from £10 million to £1 million in the March 2020 budget, the lifetime limit for IR remains at £10 million and therefore, if available to you, should be utilised to the fullest extent while you still can.

If you currently hold investments and/or are considering making a new investment, but you’re uncertain as to what relief might be available, please do get in touch and we can assist you in looking at your options.

Investors Relief

Self-employment income support scheme!

Self-employment income support scheme!

The Government’s self-employment income support scheme is going to be launched next week, with a staggered roll out to those who are eligible.

The main conditions for eligibility can be summarised as follows;

  • Your self-employment needs to have commenced before 5 April 2019
  • You should still have been trading when the Covid-19 Pandemic struck in March 2020 and you plan to carry on trading
  • Your business has been adversely affected by the pandemic
  • Your trading profits should exceeds income from other sources
  • Your profits in 2019 should not exceed £50,000, or your average trading profits over the 3 year period to 5 April 2019 should not exceed £50,000 per annum

There is a web page where you can check whether HMRC consider you are entitled to submit a claim. This can be found here:  https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference. This web page should confirm a time and date that the scheme will be first available for use.

The government’s intention will be to pay a single lump sum payment to those who qualify, which should be paid 6 business days after the submission of the claim. The payment should be equivalent to 80% of 3 months’ worth of trading profits, taken as an average from profits reported on your tax returns during the 3 year period to 5 April 2019. The maximum payment available will be capped at £7,500.

Regrettably, despite being registered agents we are unable to submit any claims on behalf of our clients. Claimants will be required to access their own individual account on the Government Gateway. If you have not yet set up an account on the government gateway, and you do not yet have a government gateway ID number, we would strongly recommend you register now. You will need to answer security questions to prove your identity, which could be regarding your driving licence or passport. You will also need to know your unique taxpayer reference and your national insurance number. You can register at this web page: https://www.gov.uk/log-in-register-hmrc-online-services 

If the procedure for making the claims is similar to that for the employment support scheme, we expect the claim process itself should be fairly straight forward. We do not yet know if HMRC will automatically calculate what you are entitled to claim, but the indications are that this could be the case, as grant entitlement is determined from information previously submitted in tax returns.

Whilst we will be unable to help with the actual claim process, we will of course be pleased to assist should you have any queries or require any information to help you with this. You can call us on 01243 782 423 or head to our contact page.

Stay safe!

Self-employment income support scheme

Coronavirus Support for the Self-Employed

Coronavirus Support for the Self-Employed

Will you qualify for the Self-employment Income Support Scheme?

Take a look at HMRC’s guidance on how to work out your total income and trading profits. 

Who is eligible to get the grant?

Self-employed individuals are eligible for a taxable grant representing up to 80% of average profits if their 2018/19 trading profits were less than £50,000 and account for more than half of their taxable income. If 2018/19 profits don’t meet the requirements then individuals can still qualify by using the average of 2016/17, 2017/18 and 2018/19 trading profits.

Calculating trading profits

HMRC has confirmed that it will use the figures on personal tax returns for total trading income (turnover), then deduct any allowable business expenses and capital expenditure. This is the trading profit after all expenses including flat rate expenses, the trading allowance and capital allowance claims, but before taking off the personal allowance. If trading losses from previous years were used to reduce the trading profit, HMRC will ignore the loss relief claim. This means that an individual can still get the grant even if they didn’t pay tax on profits due to loss relief. However, if a trading loss was made during 2016/17, 2017/18 or 2018/19, then it will reduce the average trading profits and the grant.

How do you apply? 

HMRC will contact you if you are eligible and invite you to apply online. The maximum amount is £2,500 per month for three months, so to get the full amount you would need to have average profits of at least £37,500 per annum. The payments are expected to be made in June 2020.

Be aware of scams!

As HMRC will be contacting you, please be extra vigilant about ensuring you’re not being tricked by fraudulent emails. HMRC will never text, email or phone to ask for bank details, PIN or passwords. HMRC are very aware that scammers will be taking advantage of these ongoing circumstance and have shared the following advice: “If you receive an email, text or call claiming to be from us that asks you to click on a link or give information such as your name, credit card or bank details, it’s a scam.”

Do not:

  • Give out private information
  • Reply to text messages
  • Download attachments
  • Click Links

HMRC has put together a list of examples of Coronavirus (COVID-19) scams in different formats so you can be aware of what to watch out for: 

https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

If you do receive any communications you are unsure of please get in touch with us by calling 01243 782 423 and our team will be happy to help!

Self Employed Coronavirus Support

Auditing issues under COVID 19 – going concern

Auditing issues under COVID 19 – going concern

As at 31 December 2019 China had alerted the World Health Organisation (WHO) of several cases of an unknown illness. Further information about what has now been identified as Coronavirus (or COVID-19) only came to light in early 2020.

One of the biggest areas for an auditor to be focusing their work will be on going concern.

An entity is a going concern unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.  

It is the responsibility of management to make the assessment as to whether the entity is a going concern.  An auditor responsibility is to review and test the appropriateness of those assessments. 

Management would generally be expected to prepare detailed forecasts, updated regularly, until the financial statements are authorised for issue. These forecasts should reflect potential scenarios and management’s plans and contingencies.  Again, the auditor will be examining and analysing the appropriateness of those forecasts and plans.  

Management should be considering the impact of COVID 19 on its entire supply chain including customers, suppliers and staff.  The auditor will do the same. 

When management is aware, in making its assessment, that the existing or potential impact of COVID-19 results in there being material uncertainties which may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties are required to be disclosed in the financial statements. 

In some circumstances it may be necessary to consider whether it is appropriate to prepare the accounts on a going concern basis.

For more information on our audit services please contact us on 01243 782 423 or head to our contact page.

Stay safe!

Auditing

Positive change is afoot with Pension Rules

Positive change is afoot with Pension Rules

Although the current climate makes it difficult to think about your long-term financial plans, the government’s changes to the pension rules may provide you with welcome relief when completing your 2020/21 Tax Return. 

What has changed? Since the 2016/17 tax year and the introduction of the pension tapering rules, if your ‘Adjusted Income’ (Net Income, plus employer pension contributions) exceeded £150,000, and your ‘Threshold Income’ (Net Income, less private pension contributions) exceeded £110,000, your standard Pension Annual Allowance of £40,000 was tapered down to the restricted minimum of £10,000 (tapered by £1 for every £2 that the adjusted income exceeds £150,000). If your pension contributions exceeded the adjusted annual allowance (and you had no brought forward surplus entitlement to offset) you will have been subjected to an annual allowance charge, taxable at your marginal rate of tax – most unwelcome. 

The good news is that the ‘Adjusted Income’ threshold has now been raised from £150,000 to £240,000, and the ‘Threshold Income’ threshold from £110,000 to £200,000. This will allow significantly more people earning around the £150,000 mark to contribute more towards their retirement nest egg without the fear of HMRC kindly stinging them at the end of the year with a bumper tax charge.  

Although there is still a maximum lifetime limit, the freedom to contribute to your pension has greatly been expanded. Pension contributions are favoured by many due to being able to both provide you security in retirement, whilst also potentially helping to reduce your income tax liability on an annual basis.

So, assuming one day soon we may again be able to leave our homes and our thoughts can turn from the here and now, remember it could be beneficial to find a few extra pounds for your pension pot.

If you have any questions about how this may affect you, contact our tax team on 01243 782 423 or head to our contact page.

Government changes to pension rules

Coronavirus Job Retention Scheme (CJRS) Claim Service is live!

Coronavirus Job Retention Scheme (CJRS) Claim Service is live!

The HMRC online Coronavirus Job Retention Scheme (CJRS) claim service is now up and running and it has been reported that 67,000 claims were submitted in the first 30 minutes of it being live!

This service allows employers to make a claim for the Coronavirus Job Retention Scheme (CJRS) which is scheduled to run for four months between 1st March – 30th June 2020, and it is recommended to make a claim for each month that the scheme is active.

Claimants can use the scheme to stipulate the time period for which you want to claim the grant. It therefore appears you can now claim through to 30 April. HMRC are saying payments will be paid six business days after the date of submission and claims must be submitted by Wednesday (22 April) in order to secure payment by the end of April. This therefore could be of critical significance to anyone who is going to be dependent on this money to be able to fund April’s wages.

HMRC have published a step by step guide for employers to assist them through the claim process and they have designed the service so it should be straightforward and simple to navigate, however if you do have any problems or questions when processing your claims do get in touch with the Lewis Brownlee team and we’ll be happy to assist you.

Do check you’ve referred to HMRC’s guidance when calculating how much you should be claiming of your employee’s wages; you can use their online calculator to confirm your claim amounts. Once you have made your claim HMRC will check your claim amounts are correct and then pay you the total claim amount within 6 working days via BACS to the Bank Account details you provide. They will also provide you with a claim reference number for each claim you make which you should keep a record of. Alongside this you should be recording your claim calculations should HMRC need more information, plus the amount claimed and claim period for each employee.

You can refer to our Coronavirus Government Support Guide for further details on whether you’re eligible for the scheme or get in touch with our team by calling 01243 782 423 if you require assistance preparing or processing your claim. Our professional and experienced team are here to help!

Coronavirus Job Retention Scheme Claim Service is live!

We’re here to help!

We’re here to help!

As the dust now begins to settle into this new normal, we wanted to let you know how we can offer Business Support to you!

1. Keeping you informed

You can access our Coronavirus Help Centre to read our regularly updated Government Support Guide, plus if you follow us on our Social Media pages we regularly share information and updates.

2. Cash flow projections

We are proud to be providing all our clients, who use Xero or Quickbooks Online with FREE artificial intelligence cash flow prediction software. Alternatively we have provided free and easy to use Excel & Word Cash Flow Tools and Templates.

3. Applications for funding

We are seeing bank loan approvals coming through very quickly but only if there is a robust cash flow and business plan. We can help in guiding you through this process and supplying you with the supporting financial information that you require for a successful application.

4. Business remodelling

We have no doubt that when “normality” resumes, things will have changed. Now is the time to review income streams and costs. Is there anything that can be done to improve matters whilst arguably you have the time to do so? The government support for furloughed employees has been a huge relief for lots of businesses, but it is only a short term solution. Is it simply kicking the problem down the road? Sadly some businesses will be faced with an unavoidable need to make redundancies.  How much is that likely to cost the business in the short term? With our team’s skills and experience we can assist you with your decision making processes.

5. Other business opportunities? 

We have seen many examples of businesses tweaking what they do, such as Garden Centres taking orders over the phone/website and providing delivery services or collection slots.  Pubs and restaurants offering take away services. These are viewed as doing what is needed to survive at the moment, however it could be that you find an opportunity within this crisis that fundamentally moves your business forward in a whole new direction?

6. Business Support Services

Our team offer a diverse range of skills and expertise, and we want to offer our support to your business.

Some of the services we can assist you with include:
Bookkeeping Support – Let us carry the burden of your bookkeeping should you be missing your finance staff. On a no fixed term basis, with a 14 day notice period and available at an affordable hourly rate to suit your needs.
Payroll Services – As payroll functions become more complex and confusing, why not consider using our professional Payroll team who can ensure your businesses payroll is done in a timely and compliant manner.
Cash Flow Monitoring –  Ensuring that your business maintains a healthy and consistent cash flow is vital during these strenuous times. We can monitor and help you manage your business cash flow so your business doesn’t suffer due to bad cash flow management.

The Lewis Brownlee team are currently working remotely and our team are fully equipped at home with a networked telephone, emails, hosted environments and Teams for video meetings. Our modern approach means we can facilitate electronic approvals of documents plus our team are trained in multiple cloud accounting packages.

If you have any questions, or would just like to speak to someone as to how your business can survive and thrive through this, please get in touch! You can call us on 01243 782 423 or head to our contact page.

Stay safe!

Lewis Brownlee Business Support

From our Personal clients:

A big thank you…

A big thank you…

The staff and directors of Lewis Brownlee want to say thank you to our loyal and valued clients for your continued support as we all navigate the COVID-19 situation.

You’ve played an important role in ensuring we can continue to do what we do best, which is supporting businesses and individuals with their finances, which is now more critical than ever. As we navigate these unprecedented times, our team will try to transparently communicate in real-time and be as flexible as we can to support your needs.

If you see opportunities for stronger collaboration, we invite you to speak with your usual contact at Lewis Brownlee. We truly believe a strong partnership between you as our client and us as your accountant will ensure that we can both survive and thrive, and hopefully come out of this stronger than ever. If you feel there’s anything we can do to help you or others in our community do get in touch and let us know your thoughts.

We will continue to keep you updated with the latest news and information via emails, social media and our website – and again, thank you!

Take care and stay safe!

Professional Quality – A Profession Under Review

Professional Quality – A Profession Under Review

HMRC has published a call for evidence into ‘Raising Standards in the Tax Advice Market’ on 19 March 20 – Why?

In brief, off the back of the Disguised Remuneration Loan Charge review in December 2019 (not discussed here), the Government wants a closer look at the tax advisory profession because from where they stand, they see that ‘the profession is not working as well as it should be’. They believe that ‘some advisers are incompetent, some unprofessional, a few actively corrupt’ – they are not pulling their punches.

Individuals who obtain professional qualifications through extensive study and maintain their qualification by adhering to professional standards may, for example, identify as a Chartered Accountant or a Chartered Tax Advisor. There is however no requirement for an advisor to hold a relevant professional qualification to offer advice to clients – a scary thought I know.

The consultation is not targeting one group or another. It is seeking to strengthen the process in how advice is given, the creditability that may be placed upon it, and if the advice is poor, the accountability of the adviser.

Any change which raises standards in the profession, ensuring accountability of those providing advice is very welcome by us. Lewis Brownlee does not and never has promoted or engaged with users or promoters of tax avoidance schemes, nor do we seek to push the ‘tax envelope’ to the client’s detriment.

The advice we provide is carefully designed to ensure it is in our client’s best interests both in terms of ensuring the minimum amount of tax has to be paid in accordance with a reasonable interpretation of the UK laws, whilst also trying to ensure we do not increase the chances of triggering a tax investigation or getting involved in a dispute with the taxman.

We are not concerned by the outcome of the Government’s consultation and the resultant changes it will bring, but instead looking forward to the increased credibility it will bring to our client offering. As the saying goes, a rising tide lifts all boats.

If you want an established accountancy practice to guide you through the regulatory complexities, implement sound tax planning strategies, feel free to get in touch with us.

You can call us on 01243 782 423 or head to our contact page.

FRS 102 recognition issues under COVID-19

FRS 102 recognition issues under COVID-19

The impact of COVID-19 is being felt throughout the UK.  Coronavirus will change the way business operates, even if only in the short-term.  Detailed consideration for the financial statements of entities impacted by the coronavirus situation will be needed in many areas.  Here are some in relation to the figures that make up the financial statements under FRS 102.

The impact of COVID-19 is being felt throughout the UK.  Coronavirus will change the way business operates, even if only in the short-term.  Detailed consideration for the financial statements of entities impacted by the coronavirus situation will be needed in many areas.  Here are some in relation to the figures that make up the financial statements under FRS 102.

Impairment – financial asset

Section 11 of FRS 102 Basic Financial Instruments is applied when assessing whether financial assets (listed below) should be impaired.

  • trade and other receivables;
  • loans to directors, employees and shareholders; and
  • loans to connected entities.

COVID-19 factors could indicate that some or all of a debtor will not be recovered, or recovered later than originally expected.  There could be debtors in significant financial difficulty and entering, or potentially entering, bankruptcy or some reorganisation.

Impairment – non-financial assets

All non-financial assets, dealt with in Section 27 Impairment of Assets, should be tested for impairment when there is an indication of impairment – i.e. something that indicates that an asset might be carried at more than it can be recovered for.  There is no doubt that COVID-19 will have a significant impact on many entities when they assess whether non-financial assets are recoverable.  There are already impairment indicators such as difficult trading conditions, decline in the economy and job losses.  This means that careful consideration and a detailed impairment test will be required for many entities to determine whether goodwill, intangible assets, property, plant and equipment, investment property, investments in associates and joint ventures, and investments in subsidiaries are recoverable.

Fair value measurement

Items measured at fair value (e.g.  investment property) require careful consideration.  Fair value is determined based on market data at the measurement date (year end) under current market conditions.  Shares prices are highly volatile.  Based on the current position, one would expect significant declines in the fair values of shares, with a corresponding expense in profit or loss.  Similarly, the fair values of investment property are likely to decline; and lessors may find that tenants are unable to pay.

Stock and WIP write-downs

The current circumstances could result in stocks being carried at an amount that exceeds the estimated selling price less costs to complete and sell.  This might be because demand for the products has declined or the selling prices may have declined even if demand remains constant.  In these circumstances, stock is written down to the lower of cost and estimated selling price less costs to complete and sell.

Recoverability of deferred tax assets

Where a decline in the trading and profitability of an entity is present that could result in deferred tax assets not being recoverable, reassessments of any recognised deferred tax assets will be necessary and then being written down to the extent that they are not recoverable.  Section 29 Income Tax requires entities to recognise deferred tax assets only to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Provisions and contingencies

Entities should consider, under Section 21, the impact of COVID-19 on the following:

(a) Provisions and contingent liabilities; an example of when this is relevant is legal cases.  If anyone sues an entity as a result of COVID-19, the entity is required to determine whether a provision and related expense should be recognised or whether disclosure of a contingent liability is required.

(b) Onerous contracts; Onerous contracts could arise in many instances.  An example of when an onerous contract could arise is when entities do not pass on increased costs to their customers and the costs exceed the revenue they earn.  This is more likely to occur if margins are tight.  Entities have already started incurring additional costs as a result of COVID-19 (e.g. increased costs for products, higher transport costs or additional cleaning costs for deep cleans and increased daily cleaning).  Entities are required to recognise a liability (and an expense in profit or loss if a contract becomes onerous).

(c) Restructuring plans; entities that start to consider, or implement, restructuring plans should apply Section 21 to determine when to recognise a liability (and an expense in profit or loss), and how to measure it subsequently.

(d) Employee terminations; unfortunately, it seems likely that many entities will need to terminate the employment of some employees.  Section 28 Employee Benefits should be considered when this occurs.  It explains when termination benefits should be recognised as a liability (and expensed in profit or loss) as well as how these should be subsequently measured.

Breaches of loan covenants

If a loan is in default (for example, a payment is not made when due or a specified ratio is breached), this could result in the classification of the liability changing from non-current to current.  Section 4 Statement of Financial Position states: ‘Unless an entity chooses to apply paragraph 1A(1) of Schedule 1 to the Regulations, an entity shall classify a creditor as due within one year when the entity does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least 12 months after the reporting date.  For example, this would be the case if the earliest date on which the lender, exercising all available options and rights, could require repayment or (as the case may be) payment was within 12 months after the reporting date.’

 

If you have any questions, or would just like to speak to someone as to how your business can survive and thrive through this, please get in touch! You can call us on 01243 782 423 or head to our contact page.

Stay safe!

Investors Relief – Do you qualify?

Investors Relief – Do you qualify?

Investor’s Relief (‘IR’) came into play 17 March 2016, so by no means is it new.

So why are we talking about it? Well, the conditions imposed to qualify for the relief where that shares had to be held for three years post introduction of the relief. This means that the 2018/19 tax year was the first year a claim was possible, but we suspect more people will qualify in the 2019/20 tax year.

What is it all about then? IR allows for a flat rate of ten percent on qualifying capital gains up to a lifetime limit of £10 million. It forms part of the group of tax reliefs which aim to encourage investment and entrepreneurial activity. It broadly works along the same lines as the more well-known Entrepreneur’s Relief (‘ER’), albeit IR is targeted at non-working investors (i.e. not a Director or Employee at time of subscription), but it may also be considered when relief may no longer be available via such schemes as EIS and SEIS. 

To qualify for IR, you had to have subscribed for ordinary shares (fully paid up) in an unlisted trading company, to which neither you nor a person connected to you, is associated with.

When considering the structure of future investments, IR might be something to factor into your decision-making process to expand your investment opportunities. Although the lifetime limit for ER was reduced from £10 million to £1 million in the March 2020 budget, the lifetime limit for IR remains at £10 million and therefore, if available to you, should be utilised to the fullest extent while you still can.

If you currently hold investments and/or are considering making a new investment, but you’re uncertain as to what relief might be available, please do get in touch and we can assist you in looking at your options.

Self-employment income support scheme!

Self-employment income support scheme!

The Government’s self-employment income support scheme is going to be launched next week, with a staggered roll out to those who are eligible.

The main conditions for eligibility can be summarised as follows;

  • Your self-employment needs to have commenced before 5 April 2019
  • You should still have been trading when the Covid-19 Pandemic struck in March 2020 and you plan to carry on trading
  • Your business has been adversely affected by the pandemic
  • Your trading profits should exceeds income from other sources
  • Your profits in 2019 should not exceed £50,000, or your average trading profits over the 3 year period to 5 April 2019 should not exceed £50,000 per annum

There is a web page where you can check whether HMRC consider you are entitled to submit a claim. This can be found here:  https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference. This web page should confirm a time and date that the scheme will be first available for use.

The government’s intention will be to pay a single lump sum payment to those who qualify, which should be paid 6 business days after the submission of the claim. The payment should be equivalent to 80% of 3 months’ worth of trading profits, taken as an average from profits reported on your tax returns during the 3 year period to 5 April 2019. The maximum payment available will be capped at £7,500.

Regrettably, despite being registered agents we are unable to submit any claims on behalf of our clients. Claimants will be required to access their own individual account on the Government Gateway. If you have not yet set up an account on the government gateway, and you do not yet have a government gateway ID number, we would strongly recommend you register now. You will need to answer security questions to prove your identity, which could be regarding your driving licence or passport. You will also need to know your unique taxpayer reference and your national insurance number. You can register at this web page: https://www.gov.uk/log-in-register-hmrc-online-services 

If the procedure for making the claims is similar to that for the employment support scheme, we expect the claim process itself should be fairly straight forward. We do not yet know if HMRC will automatically calculate what you are entitled to claim, but the indications are that this could be the case, as grant entitlement is determined from information previously submitted in tax returns.

Whilst we will be unable to help with the actual claim process, we will of course be pleased to assist should you have any queries or require any information to help you with this. You can call us on 01243 782 423 or head to our contact page.

Stay safe!

Coronavirus Support for the Self-Employed

Coronavirus Support for the Self-Employed

Will you qualify for the Self-employment Income Support Scheme?

Take a look at HMRC’s guidance on how to work out your total income and trading profits. 

Who is eligible to get the grant?

Self-employed individuals are eligible for a taxable grant representing up to 80% of average profits if their 2018/19 trading profits were less than £50,000 and account for more than half of their taxable income. If 2018/19 profits don’t meet the requirements then individuals can still qualify by using the average of 2016/17, 2017/18 and 2018/19 trading profits.

Calculating trading profits

HMRC has confirmed that it will use the figures on personal tax returns for total trading income (turnover), then deduct any allowable business expenses and capital expenditure. This is the trading profit after all expenses including flat rate expenses, the trading allowance and capital allowance claims, but before taking off the personal allowance. If trading losses from previous years were used to reduce the trading profit, HMRC will ignore the loss relief claim. This means that an individual can still get the grant even if they didn’t pay tax on profits due to loss relief. However, if a trading loss was made during 2016/17, 2017/18 or 2018/19, then it will reduce the average trading profits and the grant.

How do you apply? 

HMRC will contact you if you are eligible and invite you to apply online. The maximum amount is £2,500 per month for three months, so to get the full amount you would need to have average profits of at least £37,500 per annum. The payments are expected to be made in June 2020.

Be aware of scams!

As HMRC will be contacting you, please be extra vigilant about ensuring you’re not being tricked by fraudulent emails. HMRC will never text, email or phone to ask for bank details, PIN or passwords. HMRC are very aware that scammers will be taking advantage of these ongoing circumstance and have shared the following advice: “If you receive an email, text or call claiming to be from us that asks you to click on a link or give information such as your name, credit card or bank details, it’s a scam.”

Do not:

  • Give out private information
  • Reply to text messages
  • Download attachments
  • Click Links

HMRC has put together a list of examples of Coronavirus (COVID-19) scams in different formats so you can be aware of what to watch out for: 

https://www.gov.uk/government/publications/phishing-and-bogus-emails-hm-revenue-and-customs-examples/phishing-emails-and-bogus-contact-hm-revenue-and-customs-examples

If you do receive any communications you are unsure of please get in touch with us by calling 01243 782 423 and our team will be happy to help!

Auditing issues under COVID 19 – going concern

Auditing issues under COVID 19 – going concern

As at 31 December 2019 China had alerted the World Health Organisation (WHO) of several cases of an unknown illness. Further information about what has now been identified as Coronavirus (or COVID-19) only came to light in early 2020.

One of the biggest areas for an auditor to be focusing their work will be on going concern.

An entity is a going concern unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so.  

It is the responsibility of management to make the assessment as to whether the entity is a going concern.  An auditor responsibility is to review and test the appropriateness of those assessments. 

Management would generally be expected to prepare detailed forecasts, updated regularly, until the financial statements are authorised for issue. These forecasts should reflect potential scenarios and management’s plans and contingencies.  Again, the auditor will be examining and analysing the appropriateness of those forecasts and plans.  

Management should be considering the impact of COVID 19 on its entire supply chain including customers, suppliers and staff.  The auditor will do the same. 

When management is aware, in making its assessment, that the existing or potential impact of COVID-19 results in there being material uncertainties which may cast significant doubt upon the entity’s ability to continue as a going concern, those uncertainties are required to be disclosed in the financial statements. 

In some circumstances it may be necessary to consider whether it is appropriate to prepare the accounts on a going concern basis.

For more information on our audit services please contact us on 01243 782 423 or head to our contact page.

Stay safe!

Positive change is afoot with Pension Rules

Positive change is afoot with Pension Rules

Although the current climate makes it difficult to think about your long-term financial plans, the government’s changes to the pension rules may provide you with welcome relief when completing your 2020/21 Tax Return. 

What has changed? Since the 2016/17 tax year and the introduction of the pension tapering rules, if your ‘Adjusted Income’ (Net Income, plus employer pension contributions) exceeded £150,000, and your ‘Threshold Income’ (Net Income, less private pension contributions) exceeded £110,000, your standard Pension Annual Allowance of £40,000 was tapered down to the restricted minimum of £10,000 (tapered by £1 for every £2 that the adjusted income exceeds £150,000). If your pension contributions exceeded the adjusted annual allowance (and you had no brought forward surplus entitlement to offset) you will have been subjected to an annual allowance charge, taxable at your marginal rate of tax – most unwelcome. 

The good news is that the ‘Adjusted Income’ threshold has now been raised from £150,000 to £240,000, and the ‘Threshold Income’ threshold from £110,000 to £200,000. This will allow significantly more people earning around the £150,000 mark to contribute more towards their retirement nest egg without the fear of HMRC kindly stinging them at the end of the year with a bumper tax charge.  

Although there is still a maximum lifetime limit, the freedom to contribute to your pension has greatly been expanded. Pension contributions are favoured by many due to being able to both provide you security in retirement, whilst also potentially helping to reduce your income tax liability on an annual basis.

So, assuming one day soon we may again be able to leave our homes and our thoughts can turn from the here and now, remember it could be beneficial to find a few extra pounds for your pension pot.

If you have any questions about how this may affect you, contact our tax team on 01243 782 423 or head to our contact page.

Coronavirus Job Retention Scheme (CJRS) Claim Service is live!

Coronavirus Job Retention Scheme (CJRS) Claim Service is live!

The HMRC online Coronavirus Job Retention Scheme (CJRS) claim service is now up and running and it has been reported that 67,000 claims were submitted in the first 30 minutes of it being live!

This service allows employers to make a claim for the Coronavirus Job Retention Scheme (CJRS) which is scheduled to run for four months between 1st March – 30th June 2020, and it is recommended to make a claim for each month that the scheme is active.

Claimants can use the scheme to stipulate the time period for which you want to claim the grant. It therefore appears you can now claim through to 30 April. HMRC are saying payments will be paid six business days after the date of submission and claims must be submitted by Wednesday (22 April) in order to secure payment by the end of April. This therefore could be of critical significance to anyone who is going to be dependent on this money to be able to fund April’s wages.

HMRC have published a step by step guide for employers to assist them through the claim process and they have designed the service so it should be straightforward and simple to navigate, however if you do have any problems or questions when processing your claims do get in touch with the Lewis Brownlee team and we’ll be happy to assist you.

Do check you’ve referred to HMRC’s guidance when calculating how much you should be claiming of your employee’s wages; you can use their online calculator to confirm your claim amounts. Once you have made your claim HMRC will check your claim amounts are correct and then pay you the total claim amount within 6 working days via BACS to the Bank Account details you provide. They will also provide you with a claim reference number for each claim you make which you should keep a record of. Alongside this you should be recording your claim calculations should HMRC need more information, plus the amount claimed and claim period for each employee.

You can refer to our Coronavirus Government Support Guide for further details on whether you’re eligible for the scheme or get in touch with our team by calling 01243 782 423 if you require assistance preparing or processing your claim. Our professional and experienced team are here to help!

We’re here to help!

We’re here to help!

As the dust now begins to settle into this new normal, we wanted to let you know how we can offer Business Support to you!

1. Keeping you informed

You can access our Coronavirus Help Centre to read our regularly updated Government Support Guide, plus if you follow us on our Social Media pages we regularly share information and updates.

2. Cash flow projections

We are proud to be providing all our clients, who use Xero or Quickbooks Online with FREE artificial intelligence cash flow prediction software. Alternatively we have provided free and easy to use Excel & Word Cash Flow Tools and Templates.

3. Applications for funding

We are seeing bank loan approvals coming through very quickly but only if there is a robust cash flow and business plan. We can help in guiding you through this process and supplying you with the supporting financial information that you require for a successful application.

4. Business remodelling

We have no doubt that when “normality” resumes, things will have changed. Now is the time to review income streams and costs. Is there anything that can be done to improve matters whilst arguably you have the time to do so? The government support for furloughed employees has been a huge relief for lots of businesses, but it is only a short term solution. Is it simply kicking the problem down the road? Sadly some businesses will be faced with an unavoidable need to make redundancies.  How much is that likely to cost the business in the short term? With our team’s skills and experience we can assist you with your decision making processes.

5. Other business opportunities? 

We have seen many examples of businesses tweaking what they do, such as Garden Centres taking orders over the phone/website and providing delivery services or collection slots.  Pubs and restaurants offering take away services. These are viewed as doing what is needed to survive at the moment, however it could be that you find an opportunity within this crisis that fundamentally moves your business forward in a whole new direction?

6. Business Support Services

Our team offer a diverse range of skills and expertise, and we want to offer our support to your business.

Some of the services we can assist you with include:
Bookkeeping Support – Let us carry the burden of your bookkeeping should you be missing your finance staff. On a no fixed term basis, with a 14 day notice period and available at an affordable hourly rate to suit your needs.
Payroll Services – As payroll functions become more complex and confusing, why not consider using our professional Payroll team who can ensure your businesses payroll is done in a timely and compliant manner.
Cash Flow Monitoring –  Ensuring that your business maintains a healthy and consistent cash flow is vital during these strenuous times. We can monitor and help you manage your business cash flow so your business doesn’t suffer due to bad cash flow management.

The Lewis Brownlee team are currently working remotely and our team are fully equipped at home with a networked telephone, emails, hosted environments and Teams for video meetings. Our modern approach means we can facilitate electronic approvals of documents plus our team are trained in multiple cloud accounting packages.

If you have any questions, or would just like to speak to someone as to how your business can survive and thrive through this, please get in touch! You can call us on 01243 782 423 or head to our contact page.

Stay safe!

Would you like to find out how we can help?

Get in touch to set up a free consultation meeting…

Would you like to find out how we can help?

Get in touch to set up a free consultation meeting…