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Super-deduction: attractive but time limited

The government’s new capital allowance ‘super-deduction’ hopes to boost business investment and productivity, but good planning and record-keeping are essential for businesses hoping to take advantage. It also only applies to companies.

For two years from April 2021, companies’ investments in plant and machinery will qualify for a 130% capital allowance deduction, providing 25p off company tax bills for every £1 of qualifying spending on plant and machinery.

This is the first time the government has introduced a rate of capital allowances relief that exceeded 100%. You spend £1 to get £1.30 off your profits liable to tax. There is no upper monetary limit and few exclusions in terms of the kinds of plant and machinery for which it could be used.

Companies will need to keep track of the assets they buy on an individual basis and ensure if they sell them, they put the right figure in their tax computations. We normally do this for you.

Companies using hire-purchase type arrangements would also be able to access the Chancellor’s super-deduction, provided payments are being made to acquire the asset and there is an expectation that legal ownership in the asset will pass at some point on exercising an option or another event occurring.

Questions remain over whether the super-deduction applies to software developed in-house that has been capitalised as an intangible fixed asset in the company’s accounts. There’s nothing specific in the legislation.

Given the limited lifespan of the tax break and the timings involved in decisions on expenditure on plant and machinery, companies should start planning now,

Remember that if the capital allowances create or enhance a tax loss in this same period, you can carry that loss back 3 years to get tax refunded that you paid previously.

UK employees ‘most reluctant’ to return to the office

According to a recent survey, one in four employees in the UK said they would resign from their current job if they were forced to return to the office, according to research conducted by HR software company Personio. The survey of 1,000 employees also found that more than 37% feel that their company is avoiding implementing new hybrid ways of working like flexible working schedules.

UK employees were found to be the most reluctant to return to the office, with only one in three returning to the office at least part-time, compared to 59% of those across Europe. The survey findings prompt questions about a possible disconnect between employees’ aspirations to split their time between working from home and office and widespread employer ambitions for staff to get back to the office.

Although many people have embraced homeworking, it is by no means without its challenges. More than a third of UK respondents said they felt less productive when they are not physically in the same space as their colleagues. One in three agreed that not being physically in the same space as their co-workers has lowered their morale.

The study prompts questions about the best way for employers to manage to transition away from enforced homeworking in a way that best meets their business objectives safely and effectively and satisfies the growing desire among staff to shun the daily commute. 

Recovery Loan Scheme set for April launch

A new loan scheme to support access to finance for UK business as they grow and recover from the disruption of the Covid-19 pandemic was announced at the Budget ensuring businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing Covid-19 loan schemes close,

Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April and is open until 31 December, subject to review. Loans will be available through a network of accredited lenders, whose names will be made public in due course.

Term loans and overdrafts will be available between £25,001 and £10 million per business.

Invoice finance and asset finance will be available between £1,000 and £10 million per business.

Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

You will be able to apply for a loan if your business is trading in the UK and that your business is viable or would be viable were it not for the pandemic, has been impacted by the coronavirus pandemic, and is not in collective insolvency proceedings.

Business that previously received support under the existing Covid-19 guaranteed loan schemes will still be eligible to access this new finance, if they meet all other eligibility criteria.

Employment Post Brexit

Three of the changes to employment law that you need to know.

1 January 2021 marked the end of the free movement of people, goods and services between the UK and the European Union.  Here is a brief guide to help you understand some of the changes. This is not exhaustive so please seek further guidance if this might affect you, your business or employees.

1. Employees must check and apply for the EU settlement scheme before 30 June 2021.

Employees from the EU, EEA, and Switzerland must apply to the settlement scheme by 30 June 2021 to continue living and working in the UK.  Passports and National Insurance cards will be acceptable evidence of an EU citizen’s right to work until 30 June 2021.

The settlement scheme applies to any EU, EEA and Swiss citizen that was a resident in the UK by 31 December 2020.  However, the Government has confirmed that individuals with ‘indefinite leave to remain’ or Irish citizens do not need to apply.

Successful applicants of the scheme will get one of the following statuses:

Settled status. This will be given to those who have lived continuously in the UK for five years.  It allows the employee to remain in the UK indefinitely.

Pre-settled status. This will be given to those who have not yet lived in the UK continuously for five years. These people can apply for settled status once they have lived in the UK for five years in a row.

2. Employers will need a sponsor licence to hire people from outside the UK.

Starting January 2021, employers will need a license to employ workers from the EU, EEA and Switzerland.  You don’t need to be a sponsor to employ:

EU citizens with settled status.

EU citizens with pre-settled status.

Individual with indefinite leave to remain in the UK.

It’s important for you to note that sponsoring someone does not guarantee that they’ll be allowed to

3. There’s no preferential treatment for EU citizens – From 1 January 2021, a new points-based immigration system is being implemented.  It applies to anyone planning to come to the UK to work – except for Irish citizens.

The Job Retention Scheme – extended again.

The Job Retention Scheme (JRS) was put in place by the Government to help employers retain staff even if they were unable to provide them with work due to the impact of coronavirus. The JRS has been extended to the end of September 2021.

Until June 2021, the Government’s grant is worth 80% of employees’ wages up to a maximum of £2,500 per employee per month for their unworked hours. Where an employee is on flexible furlough, they will be paid in full by you for the hours they work and the grant will cover 80% of pay for the unworked hours only, subject to a cap. The cap will be reduced pro rata for flexible furlough.

From 1 July 2021, the grant will reduce to 70% of furloughed employees’ wage costs for unworked hours. Pay for furloughed employees must remain at a minimum of 80% which means that you must contribute 10% from their own pocket.

Further, from 1 August 2021 until the closure of the JRS, the Government grant will reduce to 60% of furloughed employees’ wage costs for unworked hours. Employer contributions will therefore increase to 20%. This contribution from you will be in addition to the national insurance and pension contributions that you have been liable to pay for some months now.

From 1 May 2021 onwards, you will be able to furlough someone for the first time who was employed on 2 March 2021 if you have made a PAYE Real Time Information submission for them to HMRC between 20 March 2020 and 2 March 2021.

You will now be able to furlough those who were recruited between 31 October 2020 and 2 March 2021 who had also been notified to HMRC via a RTI submission between 20 March 2020 and 2 March 2021.This change only becomes effective from 1 May 2021 onwards; so until then you can only furlough those who were employed on 30 October 2020, as long as a PAYE Real Time Information (RTI) submission as made to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.

The cut-off date for re-employing employees who were previously made redundant has changed. These employees can now be brought back and furloughed up to the end of April 2021.

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