Author: lindsay

There was a lot of speculation in the run up to March’s budget announcement. Following the cost of the pandemic, it seemed inevitable that taxes would need to rise somewhere. But although there were some rises, there was also a great deal of welcome news, and support to businesses in many areas was extended, further helping through the ongoing effects of this troubling time.

But now another quarter has passed, and there are still many changes happening all the time. So, to help, I’ve put together a summary of where we’re currently at:

Options for paying back Bounce Back Loans

As of this month, for businesses that took out a Bounce Back Loan at the start of the pandemic, it is the end of the 12 month payment holiday, and they have to start paying it back. Companies can opt to pay back or all some of their loan to reduce the interest costs, but to help those who are still struggling, there is also the option for Pay as You Grow. With this companies can:

• Request an extension of their loan term to ten years from six years, at the same fixed interest rate of 2.5%
• Reduce their monthly repayments for six months by paying interest only. This option is available up to three times during the term of their Bounce Back Loan
• Take a repayment holiday for up to six months. This option is available once during the term of their Bounce Back Loan

I owe a supplier money and I still can’t afford to pay them, can they wind me up?

The temporary restrictions preventing statutory demands and winding-up petitions being issued were due to come to an end on 30 June 2021. The Government announced on 16 June 2021 that they intend to pass legislation to extend these restrictions to 30 September 2021. These restrictions mean that a creditor may not issue a statutory demand or present a winding-up petition unless it has reasonable grounds to believe that Covid-19 has not had a financial effect, and the debtor would not have been able to pay its debts irrelevant of the pandemic.

Can my landlord now evict me?

Last year the government put a ban on landlords evicting firms for unpaid commercial rent. This was due to end on 30 June 2021, but it has now been extended for another nine months. This ruling stops landlords taking tenants to court for non-payment.

 Is the Coronavirus Job Retention Scheme still active?

The Coronavirus Job Retention Scheme (also called the furlough scheme) remains in place. For claims made up to and including June, the government will continue to pay 80% of an employee’s wages for the hours that they cannot work, capped at £2,500 each month.

The government then intends to begin removing the support over a period of time, tapering the amount that they are prepared to fund. In July they will pay 70% of wages, capped at £2,187.50 each month, and the employer will need to pay 10% (up to £312.50). Then between 1 August to 30 September 2021 the government will pay 60% of wages, capped at £1,875 each month, and the employer will need to pay 20% (up to £625).

Despite the recently announced delays to what has been termed Freedom Day, the government has said that there are no current plans to extend the scheme beyond 30 September 2021, when it is due to come to an end.

What are the Corporation Tax changes?

One of the taxes that did get changed dramatically in the budget was the policy of encouraging businesses to come to the UK with an appealing low corporation tax rate. You may recall that in recent years it has dropped to 19%, irrespective of whether you were a large corporation or a small business.

However, in April 2023 the rate of Corporation Tax will no longer be aligned between the two bands and the rates will be split as follows:

• Businesses with profits of £50,000 or less will continue with the 19% rate of tax
• Firms with profits of more than £250,000 will pay 25% rate
• There will be marginal relief for profits between £50,000 and £250,000.

 I’m Self-Employed, can I still get income support?

The Self-Employment Income Support Scheme will be available until September. The fourth grant under the scheme will be paid at 80% of 3 months’ average trading profits. It is paid out in a single instalment and capped at £7,500. The grant will be open to those who filed a Self-Assessment tax return for 2019-2020. The remaining eligibility criteria is unchanged. However, as widely reported in the press, the government is scrutinising professional advisors and whether they are complicit with assisting their clients in making false claims. It would be worthwhile for all self-employed workers to review the guidance to make sure that they genuinely meet the criteria.

What are the current VAT and Business Rates?

The existing VAT rate of 5% for hospitality, accommodation and attractions in the UK will be extended until the end of September. The subsequent rate will be 12.5% until 31 March 2022.

Eligible retail, hospitality and leisure properties in England will continue with 100% business rates relief from 1 April to 30 June 2021 and then, following this, 66% business rates relief is planned to be in place until 31 March 2022. There is a wide range of businesses that may be eligible for relief or assistance with business rates and we recommend that you contact your local Council to see what support they offer.

Suspension of wrongful trading provisions

The suspension of liability for wrongful trading in Great Britain continues until 30 June 2021 for directors who continue to trade a company through the pandemic with the uncertainty that the company may not be able to avoid insolvency in the future. This essentially means that if a company ultimately does get liquidated, the directors won’t get prosecuted for trading whilst it wasn’t making any profit. However, this will no longer be in place from July 2021.

At StarAdvise, we offer advice and guidance to businesses helping them through difficult financial periods. If you’d like to discuss any issues, please don’t hesitate to get in touch.

For some time now it has been widely known within the business community that there are a number of unscrupulous directors – those who have probably done some dodgy things in their company that they’d rather not admit to – who instead of winding up the affairs of their company properly using the services of an insolvency practitioner, try to dissolve the company instead. In reality, why wouldn’t you? It’s a simple form and an £8 fee if you submit it via the online process, or a heady £10 if you use the paper form.

You can find out more about the process on the BLB Advisory website, and unless a creditor regularly trawls the adverts in the London Gazette, who is ever going to know about it? Some proposed dissolutions do get objected to, mainly by HM Revenue & Customs, but the large majority do not. Once a company has been dissolved, there is a significant cost to undertake a Court application to attempt to get the company restored to the company register, and this is why it is considered to be a lacuna.

Thankfully, the government has finally taken steps to make the dissolution route less attractive to directors who are seeking to abuse the process. Last month it announced new powers that it was giving to the Insolvency Service to investigate directors of companies that have been dissolved. The aim is to close a legal loophole, and the government hopes that it will act as a strong deterrent against the misuse of the dissolution process.

This has all come about as a reaction to a few company directors that dissolved their present business only to then restart in a different name, most likely in a bid to avoid repaying government backed financial support, such as the Bounce Back Loan or HMRC arrears.

With so many businesses still facing tough times, paying back a loan can add extra unwanted pressure, but those directors who have found a solution by dissolving their company in the hope of avoiding their actions being investigated, will hopefully think twice before doing so.

What Will Happen
The government has given this power to the Insolvency Service to investigate directors of companies to track down why the business is being dissolved. This power also includes other relevant sanctions, such as the disqualification from acting as a company director for up to 15 years.

The new measures will not only identify directors that are falsely closing their business, but it will also help to prevent directors of dissolved companies from setting up a near identical business after the dissolution. When this happens it often leaves customers and other creditors unpaid.

Responsibilities
In the government PR that was sent out about this, it was stated that without these measures, confidence in UK businesses may suffer. This legal loophole had before enabled directors to deliberately leave their employees, suppliers, and also taxpayers out of pocket. Some people actually found a way to avoid their responsibilities as business owners, but the government now wants to make them accountable.

Corporate dissolution should never be deemed as a viable solution for a business. It should be the last thing that is considered when all other options have been exhausted. Simply using this technique to avoid paying back a loan – a loan that many other businesses across the UK heavily relied upon to get through these tough times – is not acceptable, and I praise the government for giving the Insolvency Service these new powers.

If a director is struggling, then I would urge them to seek proper professional advice and explore all their options. These new powers are no longer a simple ‘get out of jail free’ card. The consequences could severely affect how you make an income for a long time in the future.

I’ve recently heard some discussion across the professional services sector that OPBAS*, which is the oversight regulator of the professional bodies, is concerned with the level of compliance with the Money Laundering Regulation (AML). It has noted in particular that compliance with the 5th Anti-Money Laundering Directive (5MLD) is generally poor. From what I’ve heard, it certainly seems that professional services companies aren’t doing what they should be in regards to this. But is that okay, or is this something we should be taking more seriously?

This really isn’t the most interesting of subjects. Complying with AML and 5MLD could definitely be deemed as boring red tape. Perhaps this is why it’s generally perceived that the compliance of it by solicitors, accountants and Insolvency Practitioners (IP) is below par. Perhaps it has become nothing more than a box ticking exercise in our minds.

On the contrary, though, I think we need to be far more proactive with it. If you’re a Money Laundering Regulation Officer (MLRO) then it’s your duty to assess this regularly, and at least annually. Across StarAdvise, we’ve just been through this process. It took a significant amount of time to check everything, enhance systems and go through the necessary internal training. But it’s necessary.

If you’re an accountant, are you checking with your clients during the annual review that you have the most up to date company information? Is the shareholding the same, who is the Person of Significant Control (PSC)? Is the information on Companies House accurate? More than just ticking that box, knowing this information is vital, particularly if you are responsible for maintaining the Statutory Record Books. As an Insolvency Practice, if a company enters into an insolvency process, we have to report to Companies House if a PSC register is not adequately maintained.

There is also a concern that Suspicious Activity Reports (SARs) aren’t being submitted by solicitors, accountants and IPs, which only reinforces the notion that system compliance here isn’t good enough.

It’s not an exciting task. There’s no reason to pretend otherwise. But if the process isn’t properly followed and the level of scrutiny that is needed isn’t anywhere near met, then it could mean records get quickly out of date and it could mean that the FCA will be left with no choice but to take over the role of monitoring.

I think as an industry we need to take this far more seriously, but do other people share this view? I’d like to hear your thoughts.

*The Government established OPBAS as part of a wider package of reforms to strengthen the AML supervisory regime in the United Kingdom. The OPBAS Regulations 2018 came into effect on 18 January 2018 and give OPBAS duties and powers to ensure the professional body AML supervisors meet the standards required by the Money Laundering Regulations 2017. OPBAS is housed within the FCA and will facilitate collaboration and information sharing between the professional body AML supervisors, statutory supervisors, and law enforcement agencies. OPBAS aims to improve consistency of professional body AML supervision in the accountancy and legal sectors, but does not directly supervise legal and accountancy firms.