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The Positive Accountant - Vol 3, Ed 12


I was talking with my old friend and client George today about - what else - tax relief.


I should explain, George is the proprietor of a business that makes and distributes what I think are described as adult films.


George had read what the Chancellor said in the budget about '130% tax relief' on buying new plant and equipment.


He was, in fact, just about to purchase a couple of MacPros to help with his business, which together would cost just over £10,000. He likes Apple products, in fact he's used their naming conventions in some of his best selling videos, including iLash and iBalls. (Both, I am assured, named due to the focus on the faces of the actors.)


He thought that 130% tax relief meant that in return for spending £10,000 the nice Mr Sunak was going to give him a cheque for £13,000. He was quite titillated by that idea.


Sadly it was down to his accountant to prick his bubble.


- Firstly, George doesn't trade as a company but as a sole trader, the relief is only available to companies.

- Companies 'only' pay tax at 19%. Let's assume that the company makes £20,000 profit. That is £3,800 tax to pay

- Under the new allowances, the £10,000 spend means £13,000 is knocked off £20,000 to give £7,000 profit - a tax charge of £1,330.

- Even before these changes, the company would already have got £10,000 knocked off profits, reducing the tax to £1,900 anyway.


George felt a bit deflated by this news. He thought it was a bum deal.


In turn, I had to point out to him that tax is no different to his films - reality gets distorted in real life. Window cleaners get cold, fall off ladders and never see what he reckons they do. No traffic warden would ever behave like that. And no launderette worker has ever seen Nick Kamen (RIP) walk in and strip to his boxers.


In fact, unlike entendres, you rarely get double tax relief.


His response to me ? "Carry On Accountant."




(Confession time - As it's Friday, I mischievously changed some of the facts. George is really a haulier. You wouldn't have read a story about tax relief on a lorry, would you ?)



Moving very quickly on, what are my positives ?


1. Bounceback Loan Repayments are starting soon

That doesn't sound like a positive. But on the anniversary of drawdown, repayments start and interest is charged at 2.5%. Remember - repaying on day 364 doesn't cost a thing, the first year is interest free.


So why is this a positive ? Because some details have been released about payments.


- There can be an interest only period for up to six months, up to three times over the life of the loan;

- There can be a complete payment holiday for up to six months once over the life of the loan

- You can extend the time to repay from five years to nine years


Interest continues to accrue so it costs more overall. But failing to survive is a bigger cost.


On the other side of the coin, early repayment without penalty can always be made.



2. The Recovery Loan Scheme is here


The mainstream banks are open for business on these, many of the second tier lenders (eg Funding Circle) have applications pending.

You can apply for a loan if your business is trading in the UK, you need to show that your business:

  • would be viable were it not for the pandemic

  • has been adversely impacted by the pandemic

  • is not in collective insolvency proceedings

Business that received support under the earlier COVID-19 guaranteed loan schemes are still eligible to access finance under this scheme if they meet all other eligibility criteria. The following range of facilities are available:-

  • term loans or overdrafts of between £25,001 and £10 million per business

  • invoice or asset finance of between £1,000 and £10 million per business

No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.

The facility lasts for a period depending on the type of finance you apply for and will be:

  • up to 3 years for overdrafts and invoice finance facilities

  • up to 6 years for loans and asset finance facilities

See

https://www.gov.uk/guidance/recovery-loan-scheme

and

https://www.british-business-bank.co.uk/finance-hub/recovery-loan-scheme/?gclid=Cj0KCQjwytOEBhD5ARIsANnRjVgvawsPciRrxEEhyHauAm8S_b7yhEpv2x9OhBP4q4t16QyHyu5y6x4aAjU1EALw_wcB&gclsrc=aw.ds

for more information.


3. We can't fit Boris in the garden

Some regular readers might remember the scenes from our front garden at Christmas, The large collection of inflatable creatures that magically come to life each year, from the 8 foot Winnie the Pooh through to Snoopy in an almost life sized biplane.


But nothing we have could ever compete with what appeared at the end of Hartlepool pier - a 30 foot inflatable Boris Johnson.


Regardless of your politics, that really is something we can do without !




All this talk of loans reminds me of my friend Heidi. She was convinced her house was haunted and took out a remortgage to pay for an exorcism. Initially it worked quite well, but she fell behind on her payments and the house got repossessed




On that note, stay safe and stay positive. Enjoy your weekend



Adrian


adrian.mole@quove.co.uk


07917 338342


Just when you think you've seen everything !

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