Business Support

The Annual Investment Allowance (AIA) is a generous tax relief that was first introduced in 2008. The AIA allows for the total amount of qualifying expenditure on plant and machinery to be deducted from profits before tax.

The AIA can be claimed by an individual, partnership or company carrying on a trade, profession or vocation, a UK non-residential property business or a furnished holiday let. Only partnerships or trusts with a mixture of individuals and companies in the business structure are unable to qualify for AIA.

The AIA was permanently set at £200,000 for all qualifying expenditure on or after 1 January 2016. Following the pandemic, this limit has been temporarily increased to £1 million until 31 March 2023.

The AIA is available for most assets purchased by a business, such as machines and tools, vans, lorries, diggers, office equipment, building fixtures and computers. The AIA does not apply to cars.

A claim for AIA must be made in the period the item was bought. This date is defined as the date when a contract was signed – if payment is due within 4 months of the contract being signed – or the actual payment date if it’s due more than 4 months later.

Companies also have the option to claim the super-deduction for purchases of qualifying equipment up to 31 March 2023. As this relief effectively provides a 130% deduction, this would be a better choice under most circumstances. Unfortunately, this super-deduction is only available to companies. The best choice for the self-employed is the AIA.

New grant opportunities to help farmers have been announced. The new grants will help farmers boost their businesses and add extra value to their produce. The Adding Value grant opened for applications on 9 June 2022 and will close at midnight on 21 July 2022. The funding will be offered in sums between £25,000 and £300,000.

In total, £30 million worth of funding will be provided from the Farming Investment Fund (FIF) for farmers in England to purchase equipment to process, diversify and add value to their products after they have been harvested or reared. This could include premises and equipment for the preparation or processing of agricultural produce, for example turning milk into cheese or yoghurt, processing meat into sausages, and potatoes into crisps or chips; or equipment such as vending machines and display facilities for selling food direct to customers.

The Environment Secretary, commented:

‘We want to support the choices that farmers make for their businesses. We are spending around £600 million on farm-based innovation over the next three years, and the money announced today will support farmers across England with their investment plans, to improve their profitability and productivity.’

It was also announced that new Slurry Infrastructure grants, worth £13 million, will be available later this year. These new grants will help livestock farmers in England to upgrade their slurry storage and nutrient management systems.

Financing a new Start Up business is one of the most crucial aspects of helping a new venture to succeed. Obtaining finance for a new business can be an arduous process. For example, borrowing money from a mainstream bank may not be an option or only possible with security conditions such as a personal guarantee. 

There is a government backed scheme known as the Start Up Loan scheme that may be able to help. This scheme offers personal loans to individuals looking to start or grow a business in the UK. Applicants that are accepted are also paired with a business mentor for 12 months. This loan is unsecured, meaning there is no need to provide any personal assets or guarantors to support an application.

Business owners or partners in a business can individually apply to borrow from £500 – £25,000 each, with a maximum of £100,000 available per business. The average loan amount using this scheme is in the region of £7,200. There is a fixed interest rate of 6% per annum with the option of a 1-to-5 year loan repayment term. There is no application fee and no early repayment fee.

To apply for the loan all of the following must apply:

• you live in the UK
• you are 18 or over
• you have (or plan to start) a UK-based business that has been fully trading for less than 36 months.

The Bounce Back Loans scheme was launched in May 2020 to provide financial support to businesses across the UK that were losing revenue and cashflow as a result 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. In most cases business receive the cash within 24 hours of approval. The scheme closed to new applications and top-up applications on 31 March 2021.

A director of a small consultancy business applied for a £30,000 Bounce Back Loan on behalf of his company in May 2020, despite the company accounts showing annual turnover of £50,000. The maximum the company was eligible to claim under the scheme was just under £13,000. Part of the loan was spent on personal expenditure in clear breach of the rules. 

The business was placed in voluntary liquidation in March 2021 before the liquidator passed on concerns regarding the director’s conduct to the Insolvency Service for further investigation.

The director admitted applying for a larger Bounce Back Loan than the company was entitled to and using some of the money for personal expenditure. This has resulted in the director being banned from acting as a director for 8 years. 

The Chief Investigator at The Insolvency Service said:

‘We will not hesitate to take action against directors who have abused Covid-19 financial support, and ultimately the taxpayer.’

A reminder that the super-deduction, offering 130% first-year tax relief, is available to companies until March 2023. The super-deduction is designed to help companies finance expansion in the wake of the coronavirus pandemic and to drive growth.

The super-deduction tax break was introduced on 1 April 2021 and allows businesses to deduct 130% of the cost of any qualifying purchase of most new plant and equipment that would ordinarily qualify for 18% main rate writing down allowances. This means that for every £1 incorporated businesses invest they can reduce their tax bill by up to 25p. The temporary tax relief applies on qualifying capital asset investments until 31 March 2023. 

In addition, an enhanced first year allowance of 50% on qualifying special rate assets also applies expenditure within the same period. This includes most new plant and machinery investments that would ordinarily qualify for 6% special rate writing down allowances. 

The super-deduction is only for companies, which means that self-employed traders are unable to benefit. However, they could benefit from the temporary increase in the Annual Investment Allowance (AIA) cap to £1 million. The AIA allows for a 100% tax deduction on qualifying expenditure on plant and machinery. The temporary limit of £1 million will also remain in place until 31 March 2023 before reverting to the usual £200,000 limit.

Self-employed individuals (including partnerships) who have overclaimed the Self-Employed Income Support Scheme (SEISS) must pay back the overpayment to HMRC. The rules for repayment state that you must tell HMRC if you were not eligible to have claimed the grant. There can also be penalties for not informing HMRC.

However, there are complications with the agent authorisation process for SEISS grants. This is because HMRC’s existing process – the 64-8 agent authorisation – was not designed to cover the support provided in response to coronavirus, such as SEISS grants, in which case the usual taxpayer confidentiality rules apply. For this reason, additional authorisation is required.

HMRC’s advice to agents states as follows, if you plan to contact us regarding your client’s SEISS grants, please speak to them and make sure relevant consent is in place where necessary and allow time for required authorisation to be processed by us.

The fifth and final SEISS grant was available for the period between 1 May 2021 and 30 September 2021. The last date for making a claim was 30 September 2021.

HMRC’s internal manuals consider the reliefs available where there is an exchange of joint interests in land.

The manuals state that:

The exchange of interests in land which are jointly owned by two or more persons constitutes a disposal by each owner for Capital Gains Tax purposes. In some cases, the exchange is made simply to rationalise the ownership of the land and to make it easier to deal with. The exchange may give rise to a charge to Capital Gains Tax or Corporation Tax on Chargeable Gains, and this is the case even where no money changes hands.

An Extra-Statutory Concession (ESC) – ESC/D26, published in 1984 provided relief in relation to these types of disposals but was withdrawn in April 2010. The ESC was replaced by a modified relief for exchanges on or after 6 April 2010. This relief is provided by way of TCGA1992/S248A-E in the form of roll-over relief in certain circumstances to facilitate rearrangements of holdings of land.

There are five separate conditions that must be met to claim roll-over relief under the applicable legislation. Where the relevant conditions are met then a landowner can make a claim for roll-over relief. 

A number of business tax cuts came into effect from April 2022. This includes an increase in the Employment Allowance from £4,000 to £5,000.

The allowance enables eligible employers to reduce their National Insurance liability. An employer can claim less than the maximum if this covers their total Class 1 NIC bill. This increase represents a tax boost for around 495,000 small businesses who can claim an increased reduction in their NIC liabilities or even reduce their bills to zero.

The Employment Allowance is only available to employers with employer NIC liabilities of under £100,000 in the previous tax year. Connected employers or those with multiple PAYE schemes will have their contributions aggregated to assess eligibility for the allowance. 

A news release from HM Treasury also highlighted a number of other measures on offer to spur business growth, including:

• A new 50% business rates relief worth almost £1.7 billion, for eligible high street businesses, subject to a £110,000 cash cap per business.
• A freeze to the business rates multiplier worth £4.6 billion over the next five years.
• A temporary twelve-month-long 5p cut to fuel duty.
• The super-deduction tax break that allows companies to deduct 130% of the cost of any qualifying investment on most new plant and machinery investments that would ordinarily qualify for 18% main rate writing down allowances continues until 31 March 2023.
• Help to Grow programmes are supporting SMEs to adopt productivity enhancing software and to get mini-MBAs.

A new law that seeks to resolve certain remaining commercial rent debts accrued during the pandemic received Royal Assent on 24 March 2022. The new law introduces a legally binding arbitration process to resolve certain outstanding commercial rent debts related to the pandemic. It is hoped that this new law will help resolve disputes about certain pandemic-related rent debt and help the market return to normal as quickly as possible.

The law applies to commercial rent debts of businesses in England and Wales including pubs, gyms and restaurants which were mandated to close, in full or in part, from March 2020 until the date restrictions ended for their sector. Debts accrued at other times will not be in scope.

Before using the arbitration process, commercial landlords and tenants are strongly encouraged to negotiate agreements using the Commercial rents Code of Practice that was published in November 2021. The Code of Practice applies across the UK.

The general moratorium on commercial evictions and restrictions on Commercial Rent Arrears Recovery (CRAR) in England and Wales also ended on 24 March 2022, but eligible firms remain protected for the next 6 months during which arbitration can be applied for or until the conclusion of an arbitration.

The moratorium provided firms with breathing space to negotiate how to address the cost of commercial rent debts caused by the pandemic before the new law came into place.

A reminder that the temporary extension to the eligible carry back period for trading losses applies for company accounting periods ending between 1 April 2020 and 31 March 2022 and for tax years 2020-21 and 2021-22 for unincorporated businesses. This extended loss relief allows trading losses to be carried back for three years (rather than one).

The extended relief was introduced to help businesses who suffered increased losses as a result of the coronavirus pandemic. Carrying back a trading loss may allow businesses to generate tax repayments from an earlier profit-making period. 

The extension to the relief applies to both incorporated and unincorporated businesses and is subject to a £2,000,000 cap. The £2,000,000 maximum applies separately to unused trading losses made by incorporated companies, after carry-back to the preceding year, in relevant accounting periods ending between 1 April 2020 and 31 March 2021 and a separate maximum of £2,000,000 for periods ending between 1 April 2021 and 31 March 2022.

The £2,000,000 for companies is subject to a group cap for each relevant period. Extended loss carry-back claims must usually be made as part of a company tax return. However, smaller claims below a de minimis limit of £200,000 may be made without having to wait to submit a company tax return.