Coronavirus (Covid-19) and data protection: what you need to know

Posted by & filed under Coronavirus.

Although Covid-19 has caused a great deal of unprecedented disruption for businesses, the General Data Protection Regulation (GDPR) [and the UK equivalent, the Data Protection Act 2018 (DPA2018)] still applies.

The Information Commissioner’s Office (ICO) has acknowledged that personal information might need to be shared quickly or that your ways of working may need to be adapted to reflect less staff being available.

Data protection legislation will not stop you from doing that, it’s just about continuing to do things in a manner that respects an individual’s personal information and safeguards it from inappropriate disclosure.

There are two key aspects to the current situation:

  1. Collecting and processing health information
  2. Securely working remotely from home

Health information

Fundamental is that health information is Special Category Information and has additional safeguards and consent requirements that still apply.

For processing health information, you need a secondary condition for processing in place. The usual one for health information is explicit consent where the individual allows you to record their current health situation.

Although because of the importance of legally obtaining health information to fight this pandemic, you are likely to rely on vital interests or public health, depending on the type of organisation you are, for example, care homes would look to use vital interests in order to protect the vulnerable residents. If the individual has already made the information publicly available, this could also be your secondary condition. 

Anonymised sharing of information

Although a member of staff has provided you with health information if you need to share it the information can be anonymised. For instance, you can tell your staff that a colleague may have potentially contracted Covid-19 and are self-isolating, however, you probably don’t need to name the individual and you shouldn’t provide more information than necessary.

You have an obligation to protect your employees’ health, but that doesn’t necessarily mean you need to gather lots of information about them. It’s reasonable to ask people to tell you if they have visited a particular country or are experiencing Covid-19 symptoms, however, to minimise the information you need to collect you can merely advise staff to call 111 and comply with Government advice. This approach should help you to minimise the information you collect.

Remote working

With one of the key measures to prevent the spread of Covid-19 being social distancing, huge numbers of people are now working remotely. This does, however, offer some information security risks with potentially less secure access to your systems and the potential use of non-organisational devices.

Staff should be aware that they still need to ensure the security of the information that they have access to and use it appropriately. 

Remote working essentials – Employees

  • Secure Wi-fi connection
  • Fully updated anti-virus/malware protection
  • Updated operating system and the latest software updates
  • Use the computer, laptop or device so as to minimise the risk of anyone else in the household seeing what’s displayed on the screen. This is especially important when working with Special Category Information
  • Do not allow other members of the household to use the same device wherever possible. They may inadvertently compromise the integrity or security of the data you’re working with
  • Lock your screen before moving away from your device
  • If you are working without cloud or network access, ensure any locally stored data is adequately backed up periodically in a secure manner

Remote working essentials – Employers

  • Provide initial and then updated information on how to react in case of problems e.g. who to contact
  • Set out in a policy your expectations about security whilst working from home – it will ensure everyone knows what they need to do
  • Reiterate the need to recognise and report information about data incidents
  • Ensure adequate support is available
  • Consider restricting access more than usual e.g. to sensitive business information
  • Keep in touch with your team as isolation can have a negative effect on their mental health. Video conferencing can be a very useful tool to do this

Remote working enhancements – Employers

  • Provide access via a VPN with multifactor authentication to allow ‘normal access’ to your network and avoid the need for the employees to store your data on their own device
  • Consider providing devices to employees. This will allow you to ‘lock down’ the device to only software you’ve approved and authorised. In the event the device is lost or stolen it will also allow you to remote memory wipe, where possible, to safeguard your data
  • If you’re likely to consider increased working from home in the future ensure that devices like new laptops are encrypted to enhance the security of your data

Emails

  • Wherever possible, use work email accounts rather than personal ones for work related emails
  • If you need to temporarily use a personal email account, ensure that you keep the contents professional and appropriately worded by complying with your organisation’s email guidelines. Once you return to ‘working normally’, these emails should be removed from your personal email account and added to the organisations data. They are disclosable if the individual receiving or sending them makes a Subject Access Request and they contain personal information
  • Before sending an email, ensure you’re sending it to the correct recipient, particularly for emails involving large amounts of personal data or special category information. When sending large amounts of special category data, the data should be password protected or ideally encrypted (with the password provided by a completely different medium e.g. text message, telephone call)

Paper records

Don’t forget that GDPR applies not only to electronically stored or processed data, but also personal data in manual form (such as paper records) where it is, or is intended to be, part of a filing system.

If you are working remotely with paper records, take steps to ensure the security and confidentiality of these records, such as by keeping them locked in a filing cabinet or drawer when not in use, disposing of them securely (e.g. shredding) when no longer needed, and making sure they are not left somewhere where they could be misplaced or stolen.

Key takeaways

  • GDPR and DPA 2018 still apply
  • Working from home is most successful when it’s carefully planned and the member of staff receives appropriate support and guidance
  • Ensure all work emails are professionally worded
  • Unless you’re working on the business network or in the cloud, ensure you periodically back up your work – it’s just as annoying to lose a morning’s work now as when you’re sat at your normal desk!

Tips

  • Create a remote working policy which sets out the behaviours and practices that staff should be implementing when working from home
  • Ensure that data incidents continue to be recognised, recorded and reported to the ICO as appropriate
  • Create a Business Continuity Plan using the experience and lessons learned to create a robust plan for the confidentiality, integrity, and accessibility of business information
  • There’s lots of free help and advice available to help you e.g. downloadable infographics to help clarify things for your staff

In summary

Data protection legislation will not stop you remote working from home, it’s just about continuing to do things in a manner that respects an individual’s personal information and safeguards it from inappropriate disclosure.

Further reading:

Who wins and who loses in the Self-Employed Income Support scheme?

Posted by & filed under Coronavirus, Run your business.

The Government has launched a ground-breaking scheme to help self-employed people remain solvent through the worst of the coronavirus (Covid-19) crisis.

The Self-Employed Income Support scheme will pay a direct cash grant of 80% of their profits, up to £2,500 per month.

But payments won’t be made before June. And those who turned self-employed recently will be excluded along with those who pay themselves via company dividends.

Self-employed people across the UK will be able to receive a taxable grant worth 80% of their average monthly profit over the last three years, up to a maximum of £2,500 per month.

This is similar to support for furloughed employees under the Corona Virus Job Retention Scheme. But it is likely to come at the cost of increased tax and National Insurance in future.

The scheme will run for an initial three months but could be extended if necessary.

Conditions  

To receive the grant, individuals must meet the following conditions.

  • They must be genuinely self-employed, earning the majority of their income from self-employment. This will rule out gig economy workers with additional jobs.
  • They must earn no more than £50,000 trading profit in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19. (This threshold is expected to cover 90% of self-employed people. Of the remaining 10%, half are claimed to have average income in excess of £200,000.)
  • Recipients must be adversely affected by the coronavirus crisis – i.e. showing a loss of income.
  • They must already be self-employed, having filed a 2018-19 tax return. This excludes those who recently turned to self-employment.

How to access the scheme

  • HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.
  • Applications will be made online using a “simple” form which should be up and running by the beginning of June.

The grant will then be made in a single payment, backdated.

Until then the self-employed will have to rely on welfare, grants or bank funding to survive. 

Exclusions

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes. 

Coronavirus loses

Individuals must show they have suffered financially from the coronavirus crisis. In theory, even losing a small job or amount of pay could qualify. However, HMRC will be able to verify whether loses are genuine or sufficient when individuals file 2020-21 tax returns.

Future tax rises

The Chancellor hinted the self-employed would have to pay a future price for short-term support.

“It is now much harder to justify the inconsistency of contributions of people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally.”

Reaction

Brian Palmer, tax policy adviser for AAT, said:

“This is a positive step and is to be welcomed. We recognise the complexity of arranging a scheme of this type. However, I do feel concerned for the newly self-employed who will not qualify. The three-month wait for funds will leave many people worried.

“The self-employed should also realise that the quid pro quo for this help is that in a few years time they will be asked to pay the same tax and national insurance to, in the Chancellor’s words, level the playing field.”

Get the latest on the Covid-19 situation:

Managing the impacts of coronavirus: 10 expert tips for business owners

Posted by & filed under Coronavirus.

The Insolvency team from leading legal firm Aaron & Partners have produced a guide aimed at helping UK business owners to navigate the current economic climate in relation to Coronavirus (Covid-19).

Senior insolvency solicitors at Aaron & Partners, Mark Davies, and Jan Chillery, who are both listed in the industry’s coveted Legal 500 rankings have put together the advice based on an influx of questions from businesses and more than 30 years’ experience of managing insolvency cases.

Damage limitation for businesses

Mark said: “The impact of Covid-19 is projected to be very significant and although health concerns rightly trump all others, many business owners are now having to assess the damage this could have on their business and livelihoods.

“As a business owner, it’s vital to move quickly and take the necessary steps in order to give your business the best chance of surviving through these uncertain and unpredictable times.”

To offer some help and guidance, here is a list of tips for business owners, highlighting considerations and best practice advice that should be adopted now.

1. Adopt a laser-like focus on managing cash

This means understanding the current position and preparing cash flow forecasts, then monitoring the position regularly. Decisions may need to be made as to which are business-critical payments and which are not.

Many will be able to produce their own forecasts, particularly with modern accounting software. Others will need specialist assistance and your accountant is a good starting point. 

2. Keep up to date with Government announcements 

This appears to be updated literally on a daily basis, however at the time of going to press the Government has announced the following::

A package of measures to assist small businesses such as:

  • small business grant funding of £10,000 for all businesses in receipt of small business rates relief, or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value of £15,000 to £51,000
  • Covid-19 Business Interruption Loan Scheme offering loans of up to £5 million for SMEs

Covid-19 Corporate Financing Facility, a new lending facility from the Bank of England to help support liquidity among larger firms, helping them to bridge disruption to their cash flow from loans.

Covid-19 Job Retention Scheme, available to all employers. This includes cash grants of up to 80% of wages for each employee not working due to Coronavirus issues (up to £2,500 per month). 

Deferral of VAT due in the next 3 months to the end of the year.

12 month business rates holiday for all retail, hospitality, leisure and nursery businesses. This by no means an exhaustive list and we anticipate further announcements will be made.

3. Seek support from your bank 

Traditional banks have experienced teams of relationship managers which take control when their customer becomes financially distressed. In our experience, these tend to be supportive, provided they are approached at an early stage. 

4. Consider the Tax liabilities 

Tax liabilities can be an issue for many businesses. HMRC has always been willing to consider a Time To Pay arrangement in a suitable case and HMRC is scaling up this service.

If you’re self-employed, the Chancellor has recently announced deferral for self-assessment tax payments to January 2021.

5. Be aware of the support available

Business owners may be able to handle their own negotiations with creditors, including Time To Pay with HMRC. However, there are specialist Time To Pay advisers who use their experience to best position a request and have considerable success.

6. Review contractual terms with suppliers 

During these times, relations with suppliers can quickly become strained. The contractual terms may need to be reviewed to see if they permit room for maneuver. Irrespective of the parties’ legal rights usually there will need to be a dialogue to see whether both sides can agree on a way forward.

7. Communicate with creditors 

In our experience, it pays to keep the lines of communication open with all creditors. This doesn’t mean telling them everything, and indeed that can be counterproductive. If there is or may be an issue then it is better to raise it sooner rather than later. 

8. Understand the threat of winding up petitions 

So far there has been no change to the tapestry of laws which govern the position of struggling businesses, such as the right available to a creditor to present a company winding up petition if owed the sum of only £750. 

This is in contrast to a bankruptcy petition against an individual, which must be for at least £5,000. Changes may be brought forward by the Government if levels of financial distress spike. 

9. Always take advice from qualified specialists 

There are a number of options to be considered if the business is insolvent, and it is often possible to preserve value and jobs if matters are looked at early enough. We recommend seeking advice from those who specialise in this area of work. Beware of unlicensed advisers. 

10. Adapt and innovate 

We foresee the business community adapting its practices and being accommodating where it can. There are already stories of large businesses paying suppliers more promptly: this will make a significant positive difference to suppliers’ cash-flows. 

Flexibility on all sides and a collaborative approach, based on honest communication, will go a long way to preserving businesses and therefore jobs. 

Further reading 

Local Government finance teams on the front line helping business

Posted by & filed under Coronavirus.

Local Government Finance Teams are at the sharp end of the Covid-19 crisis, helping businesses and administering Government help to businesses and individuals.

They are responsible for delivering aid in the form of hardship grants, business rate relief and other forms of financial assistance.

Rishi Sunak, the Chancellor, announced a business rates holiday to all businesses in the retail, hospitality and leisure sector, irrespective of their rateable value.

He also announced cash grants of up to £25,000 per business to firms in this sector that have a rateable value below the £51,000 threshold. He said local authorities would be “fully compensated” for the cost of these measures. This will have an impact on council finance teams who are trying to administer the rescue package for local businesses and individuals.

What is the current situation?

According to the Local Government Chronicle (LGC), councils have been promised they will get their £1.6 billion allocations of the £5 billion coronavirus response fund by 3 April.

Councils could be forced into effective bankruptcy unless ministers relax restrictions that prevent borrowing to fund services, experts claim. The LGC reported that Rob Whiteman, chief executive of the Chartered Institute of Public Finance & Accountancy, has said that the financial effects on local government will be profound.

He has asked for government support for councils to be equivalent to that given to the NHS and business. The sector’s “expenditure will go up and its income is likely to fall”, and there is mounting concern about cashflow amongst treasurers.

Managing council cash flow

Mr. Whiteman told the LGC: “If councils have a negative cash flow… the rules governing local government’s treasury management and cash flow will need to be relaxed because councils will need to borrow in order to fund services. It wouldn’t serve anybody – the public, councils or government – for [section] 114 notices to be issued during a crisis.”

He said a chief executive or director of finance who found themselves in such a situation should work with the government. “There’s no purpose at all to freezing expenditure at the time of the greatest crisis in public services for 75 years,” he said. “So we’re all going to have to do the right thing and ordinary rules don’t apply in my view.” He predicted that when the coronavirus crisis was over there was likely to be long term reform of local government finance.

His comments came as the LGC also reported that the Bellwin scheme for emergency funding will be deployed to make sure that councils are able to meet service needs in the face of the coronavirus. The Bellwin formula is usually used to compensate councils for exceptional costs in the event of disasters such as flooding.

What is the impact on local government finance teams likely to be?

Nigel Wilcock is Executive Director of the Institute for Economic Development, the UK’s leading independent professional body for economic development and regeneration practitioners working for local and regional communities. He explains the impact of the government’s announcement and what it will mean for finance teams.

How is the help being administered and who is eligible?

“It is important to note that Local Government is in a position where, in a fast-moving environment, it is expected to help roll-out many of the services announced by the Central Government. For the most part, it isn’t yet devising its own proactive policies – but Local Enterprise Partnerships and Combined Authorities have more scope to do so.

“Central Government measures have been aimed specifically at the leisure, retail, and hospitality sector. There is a sliding scale of eligibility according to the rateable value of a property because the first wave of support is focused on business rates and grants for SMEs. A broader package of loan guarantees is also being made available.

What are the current challenges for local government finance teams?

“The challenges are the same for all organisations in a crisis but this is genuinely compounded by a lack of resources in Local Authorities over a long period of time. Local Government is being instructed to deliver a package of measures by the Central Government but has no ability to input on their capability to provide the service required.

“One important example is the expectation that the SME grant scheme will be administered by Local Government through the Business Rates system. It is completely correct to acknowledge that Local Authorities know of exempt business rate customers – but they do not know their banking details – and so the process of delivering the expected grant payment becomes extraordinarily difficult at a time when the funds are expected to flow quickly.

What are the challenges for businesses applying for financial help from the local government?

“The challenges for business are the reverse side of the coin – businesses are being given messages from Central Government but in many cases, these messages are being received at the same time as those expected to administer the scheme. Everyone is playing catch-up. Public finance needs to ensure reasonable governance is in place even in times of crisis – and administrative processes and staff aren’t in place to allow immediate delivery.

What are the problems that they need to overcome? 

“These are organisations that have been forever juggling how they cover deficits, for almost a decade now, and with no certainty of future funding. The IED has been critical of this approach and coming out of this crisis it will be really important to recognise that the UK needs a local response mechanism and Local Government emaciation has gone too far.

How are they redrawing budgets as income from services (leisure, parking) dries up, and new needs emerge?

“The IED has no quantitative knowledge of this – but a strong suspicion is that budgeting resource means that these line items are not re-forecast quickly in light of economic changes – but they all add nails into the coffin of Local Government budgets. The budgeting departments will be playing catch up while they also try to react to additional demands from the Central Government.

What do the coming months hold?

“The IED’s central view on this is that in these times of immense difficulty the only goal for everyone is to try to deliver from the position that they find themselves in. The aftermath will be different – the dismantling of local delivery of good governance and service delivery is something that we need to recognise and reverse post-crisis.”

Further reading 

Can my business claim on insurance for coronavirus related losses?

Posted by & filed under Coronavirus.

Every person in the country is being affected by coronavirus (Covid-19) and many businesses are suffering losses and face an unspecified amount of time of complete uncertainty.

In the case of losing takings and paying additional costs in relation to the Covid-19 outbreak, can businesses claim on their insurance? 

Which businesses are suffering losses to Covid-19?

Organisations are doing the best they can to adapt as quickly as possible to facilitate remote working, help employees to take care of children, assist customers and to change their offering to best suit the marketplace but many will still have huge losses.

The government has now officially ordered the closure of: 

  • Food and drink venues with consumption on-site
  • Pubs, bars, and nightclubs
  • Entertainment venues like cinemas, theatres and bingo halls
  • Museums and galleries
  • Spas and wellness centres
  • Casinos and betting shops
  • All indoor leisure and sporting facilities including gyms

And this still leaves many businesses with the ambiguity of whether they should continue to trade or not and whether they should send their staff home if remote working isn’t an option. 

What business insurance will cover Covid-19 losses?

According to advice from the Association of British Insurers (AIB), not many businesses will have purchased insurance that covers losses due to an infectious disease, particularly not that of the Covid-19 pandemic. Many insurers will make you state the name of the infectious disease(s) that you want to cover for when you take out the insurance and Covid-19 is a new virus. 

The AIB said, “Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus.”

Business interruption insurance

Generally, business interruption insurance will need to have been specifically requested to be added on to a business insurance package and even this will normally just cover if the premises or equipment is damaged by fire, flood or storms of if essential equipment breaks down.

Your business might be entitled to claim if it has bought a ‘non-damage, denial of access’ extension to a business interruption policy if infectious diseases are unspecified, or you have included ‘notifiable diseases’ (which Covid-19 has been made by the government) or if you have specifically included Covid-19. And your business should be covered if it has cover for both pandemics and government-ordered closure (if it has been ordered to close).

If you are in any doubt you should check your policy documents and with your insurance broker as to what cover you have.

What to do if your business isn’t covered by insurance? 

If like most businesses you don’t have any relevant cover, you may be able to take advantage of the government schemes to support businesses and individuals including: 

  • Business loans that are interest-free for 12 months (extended from 6 months).
  • The paying of 80% of wages up to £2,500 a month for workers who aren’t working but are kept on the payroll.
  • A 100% business rates holiday for hospitality, retail and leisure businesses.
  • An increase in the grants available to small businesses and to retail, leisure and hospitality.
  • Mortgage holidays of up to three months for individuals.

Key takeaways 

  • If your business has been ordered to close, you should be covered by insurance if you have cover which states pandemics and government-ordered closure.
  • Check with your policy documents and your insurance broker as to what your cover states.
  • Most businesses don’t have the relevant business interruption insurance with the specific terms required.
  • Check if you are entitled to assistance from one of the government help schemes for businesses and individuals. These are likely to be updated and added to as the situation changes.

Further reading 

Government to pay 80% of salaries, and tipped to help self-employed

Posted by & filed under Coronavirus, News.

The Government says it will pay 80% of workers’ wages and is considering options to help the self-employed.

The Government will underwrite the wages of PAYE employees in a bid to slow down redundancies and job losses.

The Chancellor announced the help through the Coronavirus Job Retention Scheme. Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month.

The employer is not obliged to contribute the remaining 20%.

Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are kept on the payroll, rather than being laid off.

How the scheme will work

Employers will have to go through three steps to access help.

  1. They must designate affected employees as ‘furloughed workers.’
  2. They must inform the employee of their new status.
  3. They must then inform HMRC about the employees that have been furloughed and their earnings.

Employers will submit claims to HMRC via an online portal, which will be available sometime in April.

PAYE the priority

Chief Secretary to the Treasury, Steven Barclay, said on Saturday the Government had prioritised PAYE over helping the self-employed because it was deliverable.

“We have worked with what is deliverable operationally to a very pressing timescale. Part of the reason for the support package for the employed is that we can do that through the PAYE system.

“The best way forward is to support the economy as a whole.”

He appealed to businesses to put a break on shedding more staff:

“We are putting measures in place to support you [business owners] as you take your decisions. Stand behind your workers because the Government will stand behind you.”

No help for self-employed – yet

IPSE (the Association of Independent Professionals and the Self-Employed) said the self-employed were left “trailing far behind employees”.

“Given that there are now more than five million self-employed people in the UK, accounting for over 15% of the workforce, it is vital that government does not treat this group as an afterthought in its preparations and public communications.”

Help could be on the way though.

Chancellor Rishi Sunak told the House of Commons: “There are genuine practical and principled reasons why it is incredibly complicated to design a scheme analogous to the one we have for employed workers.”

But he promised his officials were working on a scheme that would be “deliverable and fair to the vast majority of British workers”. Discussions were ongoing with stakeholder groups and there are hopes of an announcement on Friday (27 March).

Some commentators argue the self-employed should be included in the statutory sick pay scheme. They also suggest HMRC could estimate past income of the self-employed from tax returns and provide immediate income support.

Timetable for business help

Meanwhile, employers of salaried staff face immediate cash flow challenges while they wait for help.

With the Coronavirus Job Retention Scheme still weeks away, the Federation of Small Businesses warned many small firms face “an immediate, potentially terminal cash flow crunch”.

The Chief Secretary told the BBC the help would come online quickly:

“The wage support scheme will take a few weeks. While we are doing that, the £5 million loans [interest-free for six months] will be available from Monday [23 March].

“There will also be tax deferment. Tax that companies have already collected will be available to support them through the coming days.”

Get the latest on the Covid-19 situation:

Coronavirus: What if my small business can’t pay the tax bill?

Posted by & filed under Coronavirus, Run your business.

Surprisingly, there may be no need to panic.

How is Covid-19 impacting businesses?

As Covid-19 continues to overwhelm countries throughout the world, businesses of all types and sizes will be affected in numerous ways. 

Some businesses may be forced to cease trading altogether, because their sales will grind to a juddering halt, or fall off too much. Many employees won’t be able to come into work, because they’re sick, need to self-isolate or need to look after loved ones.

Some won’t be able to work from home, simply because of the nature of the work they do.

Many businesses will attempt to “keep calm and carry on” by allowing their staff to temporarily work from home, until (hopefully) things start to improve. But having less, or indeed no, revenue coming in will give many small-business owners and managers sleepless nights.

Staff and suppliers will still need to be paid, and failure to do so can have a disastrous domino effect on cash flows throughout supply chains.

Many cash-strapped businesses will also have tax bills to pay in the coming months, too.

So, if that includes you – what can you do?

Deferring Income Tax and VAT payments

The government has announced that it will defer payments of Income Tax and VAT in order to ease the pressure on self-employed workers and businesses. 

  • The next quarter of VAT through to the end of June has been deferred (those payments can now be paid at the end of the financial year).
  • If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

HMRC Time To Pay service

“All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.” says
GOV.UK.

  • It adds: “If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.”
  • It operates from Monday to Friday 8am to 8pm, and Saturday 8am to 4pm (charges apply). 
  • Some “2,000 experienced call handlers” are available to support businesses and individuals who believe they may struggle to pay their tax bills.

According to HMRC:

“For those who are unable to pay due to coronavirus, HMRC will discuss your specific circumstances to explore:

  • agreeing an instalment arrangement
  • suspending debt-collection proceedings
  • cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.”

Before contacting HMRC, have to hand your tax reference number (eg your 10-digit Unique Taxpayer Reference and/or VAT reference number) and know the amount of tax that you’re struggling to pay. You may be asked how much you can pay immediately and how long you’ll need to pay the rest.

How does Time To Pay work?

For some years, companies, businesses and the self-employed have been able to seek a Time To Pay (TTP) arrangement. They “allow HMRC to collect tax in a cost effective way, as “viable customers who cannot pay on the due date [can] make payment(s) over a period that they can afford.” 

TTP arrangements are a kind of debt-repayment plan, and “viable customers” are businesses and self-employed people experiencing short-term cash flow problems, but who are otherwise profit-making. 

TTP arrangements are tailored to the customer’s ability to pay and typically last for two or three months, but can be longer (although TTP arrangements lasting more than 12 months are rare).

As explained by HMRC on gov.uk: “Most TTP arrangements involve [making] regular monthly payments, but in exceptional cases they may involve a short period of deferral.”

According to HMRC: “Objective criteria are applied in each case” and “they’re entered into on a case-by-case basis.” HMRC must be satisfied that a business genuinely cannot pay its tax liability on the due date. The business must also make the best payment proposal that it can make.

Payments must increase if the business’s ability to pay improves. 

And HMRC must be convinced that the business can pay the TTP, as well as other tax due during the period. Sums owed will vary, of course, and according to HMRC: “As a rule, the larger the liability, the greater the risk and the greater the need for more information” from the business.

HMRC will never reduce the amount of tax due as part of a TTP arrangement.

Read more on Covid-19:

Study tips: Understanding fixed overhead variances

Posted by & filed under Professional Diploma, Students.

Explore over and under absorption of fixed overheads using variance analysis with our AAT tutor.

Tracking income and expenditure regularly as part of the process of monitoring and controlling budgets, is one of the primary purposes of standard costing

Flexing budgets and comparing the volume adjusted figures gives accurate variances, but requires a good understanding of how costs behave and can be a little confusing when it comes to fixed overhead variances.

Fixed overhead variances

Understanding fixed overhead variances requires us to build on our knowledge and understanding of calculating overhead absorption rates and determining over and under absorption, gained at the Advanced Diploma level. This means remembering that:

  • fixed overheads can be absorbed into the cost of production on either a unit, machine hour or labour hour basis
  • the overhead recovery/absorption rate is calculated in advance, based on estimates of the production levels and costs, and both production and non-production overheads
  • when a budget is flexed, the fixed overheads figure is not flexed because fixed costs do not change with production volume
  • however, actual fixed costs are often different to budgeted fixed costs, for reasons such as price changes.

A business that is seasonal and has fluctuating production levels might well need to monitor its overheads carefully. 

Fixed overhead variance analysis example

Let’s say that we’re setting a budget to produce 10,000 units, with an estimated overhead cost of £17,500 in the quarter. At this point we’ll either have used a previously calculated standard absorption rate to estimate the overheads, or we’ll have estimated the costs and now must calculate the overhead absorption rate (OAR). 

In this case, we can only calculate a rate per unit, which is £1.75 (£17,500 ÷ 10,000 units). 

Therefore, £1.75 is added to the direct cost of each unit produced during the period, to ensure that by the end of the quarter £17,500 will have been recovered to pay the overhead costs, as long as the estimated production levels and costs are accurate.

Fast forwarding to the end of the quarter, let’s imagine that 12,500 units were actually produced. This means that £21,875 was recovered as the OAR would have been applied to all the units actually produced (12,500 units x £1.75).

Let’s say the actual cost of the overheads incurred in the period was £20,000. Therefore, the business has over-absorbed because £1,875 has been recovered in excess of the amount required to pay for the overheads. In effect, we have calculated the total fixed overhead variance, we just didn’t call it that at Advanced level. 

Total fixed overhead variance

The total fixed overhead variance is the difference between the amount that would be absorbed into the cost of the actual units produced, and the actual cost of the fixed overheads.

An adverse variance occurs when overheads have been under-absorbed, and a favourable variance means overheads are over-absorbed. So, we could have said that the fixed overhead variance is favourable by £1,875 instead of being over-absorbed.

Calculating sub-variances

This total variance can be further understood by calculating two sub-variances, the volume and expenditure variances. 

The fixed overhead volume variance highlights how much of the total variance is caused by the increase or decrease in production levels, and the fixed overhead expenditure variance measures the difference between the budgeted cost and the actual cost.

We know that planned production was 10,000 units and actual production was 12,500 units, so an additional 2,500 units were made and an extra £4,375 recovered (2,500 units x £1.75). This is the volume variance and it’s favourable as more units were made than budgeted.

The expenditure variance is £2,500 adverse because the budgeted cost was £17,500 and the actual cost £20,000.

As long as they’re correctly calculated, the sub-variances reconcile with the total variance: £4,375 favourable less £2,500 adverse equals £1,875 favourable.

Whilst fixed costs do not vary with production levels, the over- or under-absorption of fixed overheads is directly linked to production levels.

If fewer units than planned are produced, then insufficient overheads may be recovered to cover the actual costs. This will directly impact an organisation’s overall performance and any under-absorbed overheads will be charged as a cost against profit in the accounts. Over-absorption, like in this example, will result in additional income.

Increased production can result in positive over-absorption, however, it can also be caused by inaccurate absorption rates being included in the standard cost which will result in unintentionally inflated sales prices.

In summary

It’s important to monitor all income and expenditure lines within a budget and understanding the reasons for the variances is essential to inform good decision making.

Further reading on variance analysis:

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Member stories: Paul Donno FMAAT – keep calm and carry on

Posted by & filed under Coronavirus.

Paul Donno FMAAT, AAT Licensed Accountant and Council Member gives his perspective on battling through the pandemic.

Without a doubt, we are facing an unprecedented difficult time as small business owners trying to make money for ourselves, family and staff.  We will more than likely have to make some cutbacks and decisions that go against the grain.

Ours is a family business. My wife, my two daughters and I all work there and depend on it. We have very strong family values and hope that they come across in everything that we do and that is the core of our business.

Unfortunately, we will know someone who may well lose a loved one through this virus and we will be there to help them and support them.  My Dad has been in poor health and we worry continuously about him getting this virus, but we are there supporting him and my Mum by phoning at least once a day and doing the shopping when necessary.

We may catch this virus,  but it is something we will recover from.  After this pandemic, we will need to live again and we need to plan for that time, not just obsess about problems and uncertainties now.

Here are my tips – aimed at small businesses in particular – to get through this.

Positivity

Ration your news intake and limit it to balanced, reliable sources. I would suggest that you limit the news especially Facebook (I find this difficult) and get on with your life.

Plan ahead 

Take this time to plan, plan, plan you will need a great plan to cope in a couple of months.

Look for the small wins and keep your overheads covered, when this finishes in a couple of months people will want to engage with you and get some proper human contact.  Now is not the time to increase prices – people won’t forget.

Pivot

Ask yourself how can I sell toilet paper? What do people need at this point in time?  We have seen some great examples in and around Haverhill (the town where I live) of businesses delivering coffee, cakes, freshly baked bread to those that are self-isolating or are vulnerable. If customers can’t come to you, you may be able to go to them – but keep checking Government guidance.

We have changed our business model to treat businesses’ immediate needs as a priority above our normal day to day work.  We are all in this together.

Periscope up!

Watch China and see what they are doing, they are in front of us and will be showing the rest of the world what is next and how their economy is starting to bounce back.

Watch out and listen to the people that have had this virus and how they have quickly recovered from it.

Communicate

Tell your customers what you are doing and if you are hurting tell them that too as you need everyone’s support now and when you get through this.

If you have a team keep them up to date as you need them as much as they need you.

Do not cut back on marketing if anything, increase your marketing and keep your message going.  Tell your investors and suppliers what is happening and ask for help if needed.

Cash is King

You will need cash more than ever now and securing your cash is paramount. 

Today I have put together a forecast for a client with some “what-if scenarios” and I will be working with them to get them through this difficult period with the knowledge that they also need to be ready when we come out of this.

If you pay rent to a landlord now is the time to discuss a rent holiday but only if needed as they will be struggling as well.  You can look at all lenders and suppliers and again we can help you with this.

Check your business interruption insurance to see if you are covered and work with your broker to see how you can claim.

Look at your personal position and where you can cut costs, be mindful of any small business that you trade with as they won’t have the reserves to get through this without our help.  Sky sports are not showing the football or Rugby, now is the time to discuss this and get a reduction.  Do you need the Cinema and Gym membership if you cant go?

Above all, remember we are in this together and we will come through it!

Paul Donno, FMAAT is Director at 1 Accounts Online Ltd, and an AAT Council member

Get the latest on the coronavirus developments here.

Launching your finance career after your AAT studies

Posted by & filed under Professional Diploma, Students.

If you’re heading towards the latter stages of your AAT Professional Diploma in Accounting, it’s time to apply for AAT full membership (MAAT). We spoke to Shakeel Dhunna MAAT about his fascinating journey and the benefits he’s seen from MAAT status.

A bit about Shakeel

Shakeel was a Chemical Engineering graduate from the University of Birmingham. He took a summer job as a baggage handler and forgot to leave. Six years later, a very early and particularly cold morning gave him a wake-up call – he didn’t want to be working outside the rest of his life.

After some research into accountancy, and discovering it’s not just made up of auditing and trawling through receipts looking for missing pennies, Shakeel set his sights on AAT. He started studying towards his Foundation Certificate in Accounting in September 2014 and then went on to do Levels 3 and 4.

He now works as a Management Accounts Assistant at BDO LLP in Internal Finance and is currently completing ACCA.

The process of applying for MAAT

Shakeel gained his MAAT status just one month after completing his Professional Diploma in Accounting.

“Once you’ve done Level 4, you’ve completed all the AAT education requirements so it’s then nice to become a full member. Whether you decide to go on to ACCA or not, you’re a full member of an accounting body.

The process was very easy, there are a few questions and you need a referee but there are examples given and they make it very clear what they want to see.”

Read the MAAT membership application guide here.

Watch the MAAT application guide video

Fulfilling the work experience requirement for MAAT

To attain MAAT status, you have to have completed a certain amount of work experience. Work experience examples can come from any role that you’ve had, whether it was finance-related or not. It could also be a voluntary or temporary role.

You can use a different workplace for each area, or use the same one for all competences.

Shakeel had already been working for two years in a small accountancy practice and was able to achieve the work experience criteria from that.

“I was working in accounts payable at the time but with extra duties with the treasury function and managing cash-flow. As AAT is a working qualification, I did a full-time job alongside my studies so I was able to fulfil the experience as I was going along.

For my referee, I asked a qualified accountant from the business who was the client manager and responsible for the preparation of management accounts and was assisting me in ensuring the payables side was looked after.”

The benefits of MAAT membership

It’s not just the letters after your name (although they do look very impressive). Typically, MAATs earn £7,000 more a year than an AAT graduate without professional membership, and FMAATs earn £16,200 more. As a MAAT status holder, you’ll also get access to a range of free CPD and professional resources to help you stay at the top of your game.

“It’s had a positive impact on my career, giving me a springboard to the main chartered bodies (with exam exemptions). It gives you a reputable standing in the market place where experience triumphs over qualifications. I’m also now able to start my own practice as an AAT Licensed Accountant and become my own boss.”

In summary

MAAT membership is the obvious next step after AAT Professional Diploma in Accounting and comes with lots of advantages. The process for applying is straightforward and it’s likely that you’ll already have the relevant work experience or easily be able to accomplish it. 

Apply for your MAAT status today

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