11 May Government’s help – should we be grateful or wary?
Government’s help
The British Government helped businesses. Hmmm….
Yes, they did but businesses now must pay big time to stay afloat and open. There was a hefty price tag attached to their aid.
As far as I am aware nearly every business received some grants and if your business still showed a profit at the end of financial year (COVID time) you need to pay tax on that. Fair enough. It seems reasonable, but the balance sheet hides the added burden on business.
THE STAFF
Furloughed staff. The government was publishing all the time about how we can ‘save’ staff and not make them redundant, and government encouraged us to put workers who were made redundant back on the pay roll as the UK government would help pay wages. Great! So generous! As a result, many businesses, signed up to the scheme and put workers back on the payroll. During the first lock down the government informed they are paying NI but after that it was clear we have to pay NI and it was our choice to keep staff.
END OF THE YEAR ACCOUNTS
Now many are having end of year accounts for last year, that was Covid year, where hospitality did not operate for 5.5 months. Almost half of the time we were in forced closure and the rest of the time was 3 months normal, and 3 months was on various restrictions. Clients are in shock to learn that now they must pay corporation tax on furloughed wages they received from the government for their employee’s.
Many of these employee’s did not return to the hospitality industry – statistics are showing a 1/3 of employees over the time either did not come back or changed the job to Ocado or Amazon jobs.
Many of these employee’s did not return to the hospitality industry – statistics are showing a 1/3 of employees over the time either did not come back or changed the job to Ocado or Amazon jobs.
Government’s help. What happened to the hospitality industry?
They must pay 20% tax received on their wages.
The British government is saying we did this to save your business – really? I do not see the deal very clear and fair. It appears like the midas touch, gold but at a heavy price.
I have taken calculation of one client’s business – they have received in their last tax year 2020, which ¾ of it was COVID, a £10,000 grant, money paid directly in their business as well as they relief on the council tax (which in their case was very little as they had small business relief for the council tax and they were paying £250 council tax per month). They have also received approximately £100,000 for the staff wages. As business was profitable before and very well managed during COVID, they did not show a loss in their books. But now they have to pay approximately £20,000 in tax on the grants and furlough wages they received. They were forced into a position where they had no choice but to accept government aid – and then charged for the privilege.
What happen to ‘Linda’ who was receiving furloughed wages while employed by this business?
During the first lock down, she received 80% of her wages, then she had the choice in later months to work for Amazon while still on furlough. A few months later she decided to pursue her career with Amazon. Her previous employers are still paying tax on her furloughed wages.
Many employees were just waiting at home, and returned – it is thanks to them and their commitment, you can go out and have your dinner or your coffee!
How fair is this? Who has lost here?
I am very much against Brexit, but I thought people of the UK voted for it in order to be able to keep control of their country. One of the comments were – we do not want socialist Europe to control our economy. Sorry? Did they say Europe was socialist? Or I got it wrong, and they meant to say UK is the best socialist country.
Sorry? Did they say Europe was socialist? Or I got it wrong, and they meant to say UK is the best socialist country.
That is all great, but for you to order that cappuccino you need to have that business employing a ‘Linda’. And where is this boss now? Crying to HMRC over the repayment scheme. Bank of course would not help records are not good for last year, and they do not take Covid in consideration.
The question remains will this boss be able to survive all the repayment schemes that the British government’s help gracefully offered?
Thank you, Rishi Sunak. You played your cards well, but I prefer fair play.
