Assessment and VAT extensions granted
As part of the Chancellor’s winter economic plan, self-assessed income taxpayers can extend their outstanding tax bill over 12 months from January. Rishi Sunak also announced that restaurants, hotels and cinemas would continue to pay VAT at 5% rather than the usual 20% until March 31 next year. The Chancellor suggested after his Commons statement that there would have to be tax rises in the long term to help balance the books. He said: “We need to have an eye on our public finances and make sure we stay in a strong and sustainable position. I will have to make some of the difficult decisions in the future as we get back on a path to sustainability.” He went on to say that a smaller state would be ideal following the crisis: “The state being as nimble and agile as possible means it doesn’t have to raise as much tax revenue from people and people can keep more of the money they own. That is in general a good thing. As we get through this we can get back to a normal situation.”
2m homeowners take on emergency debt to cover stamp duty bills
Research from Cornerstone Tax suggests that almost 2m people have had to take out short-term loans or emergency credit to cover the cost of unexpected stamp duty payments. The study also found that close to 2.7m homeowners believe they have overpaid stamp duty due to errors made by the professionals employed to advise them. David Hannah, principle consultant and founder of Cornerstone Tax, said: “These statistics are shocking, if not wholly surprising, when you consider how many amendments have been made to stamp duty in the past few decades.” Noting that the law around the levy is “incredibly complex”, he adds that many advisers “simply aren’t familiar with the intricacies of the law’s evaluation criteria, which has led to many consumers being mis-advised unintentionally.” The Cornerstone Tax poll suggests that around half of homeowners believe an independent office should be set up to audit stamp duty transactions so as to ensure people only pay what they owe.
Source: The Independent (30/09/2020)
Majority back tax rises to pay for COVID
A poll by the think tank Demos has found that 58% of the public would back increasing income tax for everyone by 2p in the pound to help pay for the coronavirus crisis, while raising the personal allowance to £20,000. Just 37% of respondents supported the idea of a 1p in the pound rise for everyone while 69% of people would support raising income tax on earnings over £100,000 per year by 10p in the pound.
Source: Yorkshire Post (24/09/2020)
Government to launch ‘Pay As You Grow’ loan payback scheme
The Government is to launch a ‘Pay As You Grow’ loan payback scheme to provide flexibility for businesses who took out loans amid the coronavirus crisis. Speaking in the Commons on Thursday, Chancellor Rishi Sunak said the repayment time will be extended from six years to a decade, nearly halving the average monthly repayment. He added that businesses can now choose interest only loans and that those who take on the initiative will not see their credit rating affected. The Government is also starting work on a successor loan plan to begin in January. The application deadline for coronavirus loan schemes has been extended to November. Charlotte Crosswell, chief executive of Innovate Finance, which represents fintech and non-bank lenders, said she was “encouraged” by plans for a “long-term solution for SME financing.” Elsewhere, Miles Celic, chief executive of TheCityUK, said the loan extensions would help “to preserve many viable firms, allowing them the chance to return to growth after the pandemic has passed”.
SMEs struggle to get bounce back loans
Concerns that a number of small firms missed out on government-backed coronavirus loans have led to calls for banks to ensure that no SMEs eligible for funding are “locked out”, with MPs saying lenders accredited under the scheme should re-open applications for bounce back loans. Mel Stride, chair of the Treasury Select Committee, said: “Accessing these loans may be a question of life or death for some of these businesses.” Pointing to reports that some eligible firms had missed out, he added: “If these reports are true, then it would be very concerning that businesses may be facing lengthy delays or are unable to access the scheme at all.” With it shown that of 28 lenders that have received accreditation to issue bounce back loans, just six are currently open to applications from new customers, Kevin Hollinrake, leader of the all-party parliamentary group for fair business banking, said a ll accredited lenders should “do the right thing”. He added that banks must “open their doors to new customers”. Shadow Business Secretary Ed Miliband has urged the Government to “work with lenders to ensure they reopen applications and assess them fairly”.
Source: City AM (29/09/2020)
Poll reveals climate for SMEs
Research from Aldermore Bank shows that the average small firm believes it would only survive for four months if the UK was to enter another period of lockdown. The poll shows that if the economy were to continue in its current state, 26% of small firms could survive indefinitely, a 36% increase on April’s survey. The average SME says it has seen a 30% loss in monthly business income, this compares to 34% in April. It was also found that 18% of smaller firms have seen their business income decrease by more than 70%. The report also shows that 69% of SMEs have taken steps to increase income amid the pandemic, with 20% increasing the amount they communicate with customers and clients, 19% moving more of their business online and 10% diversifying into a new market. While many have sought to boost income, 67% have cut costs to help cover losses, making an average saving of 25% on business expenditure.
Source: Daily Mirror (30/09/2020)
IFS: Taxes or austerity needed to cover coronavirus cost
The Institute for Fiscal Studies (IFS) has warned that the Government will need to roll out tax increases or a fresh round of austerity due to the increase in public spending in the wake of the coronavirus outbreak. Ben Zaranko, economist at the IFS, said extra spending “could swallow up huge amounts of money, and leave some public services facing another round of budget cuts for their core services.” He added: “Avoiding that scenario would require the Chancellor to find billions of extra funding, paid for at some point through higher taxes.” Paul Johnson, director at the institute, said: “It is entirely inappropriate for the Chancellor to consider raising taxes this year or next, or possibly even the year after,” adding: “The longer-term answer is clearly that if we have a bigger state we will need more tax.” The think-tank said Government spending as a share of overall economic output could rise from its current level of 40% of GDP to possibly 45% by the middle of the 2020s. The IFS also pointed to the economic uncertainty brought about by the pandemic and urged the Chancellor to abandon any plans for setting out a multi-year spending review, suggesting a one year plan would be a better option.
Source: The Times (29/09/2020) The Daily Telegraph (29/09/2020) The Guardian (29/09/2020)