BUSINESS NEWS - MAY 2021-(2)

Welcome to our round up of the latest business and Covid-19 news for our clients. Please contact us if you want to talk about how these updates affect your business. We are here to support you through these tough times.

This week we learnt that more than 35 million people have had at least one jab and following the recent elections, Prime Minister Boris Johnson, has called for a Covid recovery summit.  In letters sent to regional leaders, the Prime Minister highlighted the Covid vaccine rollout as an example of "Team UK in action", with the UK procuring doses at scale, and he urged them to continue the "cooperative spirit".  

There is more unease over the India Covid variant in the UK which has been made a variant of concern. Scientists also believe it is at least as transmissible as the variant detected in Kent last year. The current vaccines used in the UK are thought to offer some protection against variants but can never completely stop all infections, particularly among the vulnerable or elderly. News of a booster jab, probably from September for the over 50’s is awaited.

Bank of England latest Monetary Policy Report

The latest Bank of England (BOE) monetary policy report published last week set out their economic analysis and inflation projections. Their initial analysis that Covid has hit spending, incomes and jobs in the UK, stating the Pandemic has put a big strain on UK businesses’ cash flow and is threatening the livelihoods of many people. This analysis is not unsurprising because all regions of the UK are still in some form of lockdown and have been for some time. The BOE then confirm vaccines are now helping the UK economy recover rapidly as more people are vaccinated, restrictions to control the spread of the virus are being lifted. They also comment that inflation is 0.7%, but they expect it to rise to around the 2 % target this year as people may also become more confident about spending and as the high street opens back up. Interest rates remain at 0.1% to help keep inflation within target.

The good news in the BOE report!

The good news is the BOE predicts the economy to expand by 7.25% this year, with Government spending helping to limit job losses.  There is also the good news that fewer jobs are being lost and earlier predictions of 7.75% unemployment will not happen, and they predict around 5.5% later this year.

The Office for National Statistics (ONS) business impacts and insights report

The ONS latest figures show the percentage of businesses currently trading has increased from 77% in early April to 83% in late April 2021. This is now at a similar level to that seen in mid-December 2020 (Business Insights and Conditions Survey (BICS)).

In the period ending 3 May 2021, the proportion of working adults that had travelled to work (both exclusively and in combination with working from home) in the last seven days was 60%. This proportion has been gradually increasing since mid-February (44% in the period 10 to 14 February 2021).

Estimates for UK seated dinner reservations on Saturday 1 May 2021 were at 71% of the level seen on the same Saturday of 2019, up 9 percentage points from the equivalent figure in the previous week. This follows the reopening of restaurants, cafés and bars in Scotland and Wales on 26 April 2021, and Northern Ireland on 30 April 2021.

Are you ready for the “Bounce back”?

All of us must agree that the “Bounce back” in the economy is good news and many of our clients are reporting increased activity as the lockdown eases and economy returns to somewhere near normal over the next few months. Of course there are uncertainties about new virus variants, but all the indicators are pointing to a summer recovery, with the economy being repaired by the end of this year.

Please talk to us about planning for the future, we are here to help drive your business forward!

BREXIT - HMRC Guidance on moving goods between GB and the EU

HMRC have recently sent letters to VAT-registered businesses in Great Britain trading with the EU, or the EU and the rest of the world.

They explain what businesses need to do to comply with the new rules and processes for moving goods between Great Britain and the EU, including:

  • making sure they have a UK Economic Operator Registration and Identification (EORI) number
  • ensuring they are ready to make customs declarations
  • checking if their goods are eligible for the preferential zero duty rates
  • preparing for the end of staged import controls on 1 January 2022

https://www.gov.uk/government/publications/letters-to-businesses-about-importing-and-exporting-goods-between-great-britain-and-the-eu

Making Tax Digital (MTD) for VAT – end of “soft landing”

MTD for VAT currently applies to VAT registered businesses with taxable turnover in excess of £85,000, the current VAT registration threshold. From 1 April 2022, MTD for VAT is being extended to all VAT registered businesses.

HMRC have updated their guidance in VAT Notice 700/22 regarding MTD for VAT:

https://www.gov.uk/government/publications/vat-notice-70022-making-tax-digital-for-vat

This publication is essential reading for all VAT registered business as some of the content has the force of law.

The notice:

  • explains the digital records businesses must keep, and ways to record transactions digitally in certain special circumstances
  • explains what counts as compatible software, and when software programs do and do not need to be digitally linked where a combination of programs is used
  • gives examples of when digital links are required

Section 4 alerts businesses to the end of the “soft landing” period:

HMRC gave a period of time (known as the soft landing period) during the first 2 years of Making Tax Digital, to help businesses put digital links in place between all parts of their functional compatible software. Businesses were not required to have digital links in place until their first VAT Return period, starting on or after 1 April 2021.

During the soft landing period, if a digital link was not established, HMRC accepted the use of ‘cut and paste’ or ‘copy and paste’ as being digital links.

The soft landing period has now ended.

Latest version of CEST to check employment status of workers

With the extension of the “off-payroll” working rules to large and medium-sized organisations from 6 April 2021, HMRC have updated their Check Employment Status for Tax (CEST) diagnostic tool to assist those organisations in determining whether the new rules apply to workers supplying their services through personal service companies (PSCs).

https://www.gov.uk/guidance/check-employment-status-for-tax

Note that once the determination has been carried out the end user organisation is required to issue the worker, and the fee payer making payments to the PSC, with a Status Determination Statement.

The housing market

The pandemic has had many unexpected economic effects, but some of the most surprising have been on the property market. Some experts predicted house price falls as a result of Brexit and from the economic fallout of lockdown. In fact, the market boomed up and down the country for much of last year. But when according to lender Nationwide the upward trend faltered in March, falling 0.2% month-on-month the doomsayers were back, and keen to point to the end of the upward trend.