Haulage company charged with loan fraud

An interesting case has seen a haulage company based in the West Midlands have their operator licence revoked. This followed a public inquiry into the company by the traffic commissioner for the West Midlands.

The traffic commissioner found that almost all the company’s financial resources had been provided by a £50,000 Bounce Back loan in May 2020. The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing revenue, and seeing their cashflow disrupted, because of the COVID-19 pandemic. The scheme allowed qualifying small businesses to borrow between £2,000 and £50,000 with no fees or interest to pay for the first 12 months.

However, the company in question had a turnover that was far below the £200,000 necessary to qualify for such a loan – the maximum permissible being 25% of turnover or £50,000, whichever is the lower.

There were also issues with the company’s bank statements that were provided as evidence of financial standing. The company also had a very poor maintenance record and numerous tachograph infringements. 

Raising capital using the EIS

The Enterprise Investment Scheme (EIS) has been designed to increase investment in the early development of high potential growth businesses. Companies seeking EIS investment are typically more developed than those looking for funding using the Seed Enterprise Investment Scheme (SEIS) and the investment limits and tax reliefs available reflect this. 

The maximum amount of funds that a company can raise through investments qualifying for the EIS is £5M in any 12 months with a maximum of £12m over the company’s lifetime. The company must receive investment under a venture capital scheme within 7 years of its first commercial sale.

There is a maximum limit on the number of employees that the investee company can have when shares are issued. The company must have less than 250 full-time employees or their part-time equivalents. For groups of companies, the limit applies across the group.

The company’s gross assets (or of the group assets where the company is a parent company) must not exceed £15 million before any shares are issued and not be more than £16 million immediately afterwards.

There are also time limits when investments can be raised by the company and how and when the money must be spent. 

There are different rules, typically more generous criteria, for ‘knowledge-intensive’ companies that carry out a significant amount of research, development or innovation.

Reporting grants received to HMRC

Most COVID support grants are treated as taxable income in the same way as other taxable receipts and need to be reported to HMRC. The grants are treated as income where the business is within the scope of either Income Tax or Corporation Tax.

This treatment extends to support measures including the following:

  • the Self Employment Income Support Scheme (SEISS)
  • test and trace or self-isolation payments
  • the Coronavirus Job Retention Scheme (CJRS)
  • Eat Out to Help Out
  • Coronavirus Statutory Sick Pay Rebate
  • Coronavirus Business Support Grants

HMRC’s guidance is clear that whether or not any tax is paid will depend on the business profits of the grant recipient (taking into account the grant and other business income and expenditure under normal tax rules), any other taxable income they may have and their personal and any other allowances to which they are entitled.

HMRC also has the power to recover payments and charge penalties when claimants have made support grant claims to which they were not entitled. There is no requirement to report COVID welfare payments made by a council such as those to help with council tax payments and housing benefit.

Loans, such as Bounce Back Loans or those from the Coronavirus Business Interruption Loan Scheme (CBILS), are not COVID-19 support payments.

SEISS claims deadline in a few days

The final deadline for making a claim under the 5th Self-Employment Income Support Scheme (SEISS) is 30 September 2021. The SEISS scheme is only open to those self-employed with annual profits of less than £50,000 and who receive at least half their income from self-employment. 

Self-employed persons whose turnover has fallen by more than 30% will qualify for an 80% grant, capped at £7,500. Those with decreases in turnover of less than 30% are restricted to a 30% claim, capped at £2,850. When making a claim, the online service will ask for turnover figures and compare them. The claims service will then tell the applicant if they can claim the higher or lower grant amount.

The turnover figures will be used to compare turnover in the pandemic year from April 2020 – April 2021. This ‘pandemic’ year turnover should then be compared to a previous year's turnover, known as the ‘reference’ year. For most self-employed the turnover reported in 2019-20 should be used as the reference year. However, this is not always the case and if 2019-20 was not a normal year for the business in question, the turnover reported in 2018-19 can be used. 

COVID-19 support payments such as previous SEISS grants, and local authority or devolved administration grants should not be included in the turnover figure. 

Outdoor measures to be made permanent

Temporary measures that have given a huge boost to high streets and hospitality during the pandemic could be made permanent following a public consultation launched in September 2021.

From marquees being put up in pub grounds, to street markets operating all year round, permitted development rights that have allowed people to enjoy al fresco dining and visit town centres and tourist attractions as the nation reopened from the pandemic.

These planning reforms also gave businesses and councils a lifeline to operate alongside the right to regenerate and new licensing arrangements.

The government is aiming to make a number of these permanent so that people can continue to enjoy outdoor hospitality and local attractions, and businesses can innovate, as we build back better from the pandemic. The public will now be able to give their views on the proposed reforms, so they can continue to benefit everyone in the future.

These changes will be welcomed by the hospitality trades badly affected by COVID restrictions.

Now we just need good weather in the coming winter months so that these relaxations can be fully exploited by affected traders. 

The Help to Grow Management scheme

The Help to Grow: Management course is a government backed programme to help business leaders develop their strategic skills, create jobs and boost their business performance.

The 12-week programme is delivered by over 40 leading business schools across the UK and combines a practical curriculum with 1 to1 business mentor support throughout and includes modules on financial management, strategies for growth and innovation, and approaches to digital adoption. 

The government has committed to making 30,000 places available on the course over the next 3 years. The cost of the course is 90% subsidised by the government and costs only £750.

UK businesses from any sector that have been operating for more than one year, with between 5 to 249 employees are eligible to enrol. The participant in the course should be the decision maker or member of the senior management team within the business. Charities are not eligible as the scheme is designed to support commercial enterprises.

The Business Secretary said:

‘Help to Grow: Management is a fantastic scheme to equip ambitious business leaders with the tools to take their business to the next level, helping create an even more high-productivity, high-wage economy we build back better from the pandemic.’

Further change to SEISS 5 legislation

HM Treasury has published a Correction Treasury Direction made under the Coronavirus Act 2020, section 76, which modifies and extends the effect of the Self-Employment Income Support Scheme (SEISS). The Direction mainly deals with the expansion of the SEISS from 1 May 2021 to 30 September 2021, officially referred to as the SEISS Grant Extension 5 (SEISS 5).

The modified direction makes small changes to the Financial Impact Declaration (FID) Test with effect to claims made on or after 29 July 2021. The changes may affect those carrying on trade in a partnership.

The online portal for making a claim reopened on 29 July. However, the earliest date taxpayers can use the portal is being rolled out on a staggered basis with all those eligible for the SEISS 5 allowed to apply by 6 August at the latest. The final date for making a claim for the SEISS 5 is 30 September 2021. 

To be eligible for an SEISS 5 payment, self-employed individuals, including members of partnerships, must meet the necessary criteria. This fifth and final grant is more complicated than previous grants as the level of turnover will affect the amount of the grant.

Self-employed persons whose turnover has fallen by more than 30% will continue to qualify for the 80% grant, capped at £7,500. Those with decreases in turnover of less than 30% will be restricted to a 30% claim, capped at £2,850.

Pub secures reduced tied rent and discounts

The Pubs Code Adjudicator is responsible for enforcing the statutory Pubs Code. The Pubs Code regulates the relationship between all pub companies owning 500 or more tied pubs in England and Wales and their tied tenants. Tied tenants are those that are obliged to purchase beer and/or other products or services from their landlord.

An interesting case study was recently published on GOV.UK by the Pubs Code Adjudicator and explains in some detail how an Amersham based Pub managed to use the Market Rent Only (MRO) procedure to negotiate a reduced tied deal and further discounts. The MRO option allows for the granting of ‘free of tie’ rent between the tenant and the pub owning business. An MRO can only be requested at specific intervals such as the receipt of a rent assessment proposal or lease renewal.  

In the case at point, the pub tenant managed to save £20,000 on their tied rent and a significant discount on barrelage. This created total saving of some £65,000 a year.

Any tied pub tenants seeking an MRO are advised to take specialist advice as to how best to negotiate a new deal.

SEISS – more red tape

Government support to the self-employed through the Self-Employment Income Support Scheme (SEISS) is due to end on 30 September 2021. A fifth and final grant covering the period May 2021 to September 2021 will be opened to claims from late July for those who have suffered a significant reduction in trading profits. To qualify for the grant, average trading profits must be £50,000 or less and non-trading income cannot exceed 50% of total income.

The grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant (capped at £7,500) whilst those whose turnover has fallen by less than 30% will receive a 30% grant (capped at £2,850). This is a change from the previous SEISS grants where there was only one grant available to qualifying applicants.

HMRC is in the process of contacting eligible taxpayers to notify them of their personal claim date. Taxpayers will be able to make claims from this date up until the claims service closes on 30 September 2021.

Most taxpayers claiming the fifth SEISS grant will be required to provide turnover figures to make a claim. The turnover figures will be used to compare the 'pandemic year' with a 'reference period'.

Newly self-employed people, who had previously been excluded from claims because they commenced their trade during the 2019-20 tax year, are eligible to claim the fifth SEISS grants if their tax return for 2019-20 was filed by midnight 2 March 2021. They must also have traded or intended to trade in 2020-21 and intend to continue doing so.

HMRC is also warning taxpayers to be on the lookout for SEISS-related scams and to only respond to correspondence that is verified to be legitimate.

Turnover defined for 5th SEISS grant

HMRC has published new guidance to help the self-employed calculate their turnover for making a claim under the 5th Self-Employment Income Support Scheme (SEISS) grant. The final date for making a claim for the 5th grant will be 30 September 2021. 

The figures will be used to compare turnover in the pandemic year from April 2020 – April 2021. The turnover for the ‘pandemic’ year can be calculated starting on any date from 1 to 6 April 2020 for a period of 12 months. For example, from 1 April 2020 to 31 March 2021 or from 6 April 2020 to 5 April 2021.

HMRC states that you can:

  • refer to your 2020 to 2021 Self-Assessment tax return if you’ve completed it
  • check your accounting software (if you use any)
  • go through your bookkeeping or spreadsheet records that cover your self-employment invoices and payments received
  • check the bank account you use for your business to account for money coming in from customers
  • ask your accountant or tax adviser (if you have one)

COVID-19 support payments such as previous SEISS grants, and local authority or devolved administration grants should not be included in the turnover figure. 

This ‘pandemic’ year turnover should then be compared to a previous year's turnover, known as the ‘reference’ year. For most self-employed the turnover reported in 2019-20 should be used as the reference year. However, this is not always the case and if 2019-20 was not a normal year for the business in question, the turnover reported in 2018-19 can be used. 

Self-employed persons whose turnover, as set out above, has fallen by more than 30% will continue to qualify for the 80% grant, capped at £7,500. Those with decreases in turnover of less than 30% will be restricted to a 30% claim, capped at £2,850. When making a claim, the online service will ask for turnover figures and compare them. The claims service will then tell the applicant if they can claim the higher or lower grant amount.

The SEIS scheme is only open to those self-employed with annual profits of less than £50,000 and who receive at least half their income from self-employment.