COVID-19: Information Hub – 24 April
The UK will remain on lockdown for “at least” three more weeks, Foreign Secretary Dominic Raab revealed at the Government’s daily coronavirus press conference on April 16. Mr Raab said that while there were signs of “light at the end of the tunnel”, the UK has not yet reached the peak of the virus.
We hope you are keeping safe and well. We are here to answer any questions or concerns you may have so please do not hesitate to contact us.
This week in our Information Hub we look at the impact on retirement, R&D tax credits and commercial contracts. We welcome questions and ideas on what to cover, please just reply to this email.
As always, we welcome questions and ideas on what to cover, please email Jennifer Macfarlane.
Impact on Retirement
The world has changed quickly in a matter of months, causing almost unprecedented market volatility, which will have impacted on those either approaching or now in retirement. Men and women today may well live into their eighties and beyond, which means retirees often have decades to live and pensions can be complex with so many considerations, including your family circumstances, health and changing pension legislation. A positive aspect of pensions is the Government continues to encourage us all to save for retirement by providing tax relief on individual pension contributions, which has the benefit of reducing your tax bill and/or increasing your pension fund. In the case of employer contributions, this reduces the employer’s corporation tax liability.
As financial advisers, our aim is to manage client expectations as to what retirement will be like for them – both the positive and negative aspects it may bring, so we can better prepare them for a new chapter in their lives. It’s always key to remember that members of pension schemes can access their pension savings early, provided they have reached the normal minimum pension age (currently 55). The next step, and a crucial one, is deciding what to do with your pension pot as it is a key decision for your future. What are your options to consider? These may include leaving your pension pot untouched for now until markets recover; receive a guaranteed income (annuity) for the rest of your lifetime or receive an adjustable income (flexi-access drawdown); or indeed, a combination of these two. For most individuals, they can also draw up to 25% tax-free, with the remainder being taxable income.
Finally, cash flow modelling should be an integral part of the advice process and an intrinsic part of the client proposition, to ensure all retirees fully understand what the future may look like. The good news is that whatever your situation, and however you want to enjoy retirement, Pareto can help set up and regularly review your pension to ensure they remain right for individuals ever changing circumstances. Please call or email us to discuss.
Research & Development (R&D) Tax Credits
The government has announced numerous special measures to help businesses to limit the impact of Covid-19, however, a valuable relief has been around for many years and could gain your company access to vital funds is R&D tax credits.
The research & development (R&D) tax credit is designed to encourage innovation and increase spending on R&D activities for companies operating in the UK. It’s one of the UK government’s top incentives for encouraging investment in research and development and allows up to 33.35% of a company’s R&D spend to be reduce corporation tax bill or recovered as a cash repayment from HM Revenue & Customs.
If your company is developing new products or processes, now could be a ideal time to review whether you can submit an R&D claim. You can make a claim for R&D relief up to 2 years after the end of the accounting period it relates to and monies can be used to reduce future corporation tax, get a refund for tax already paid or obtain a tax credit from HMRC.
Companies are entitled to claim R&D tax relief even when they have not resolved the problem they are looking to solve or the project has not been completed, as long as they can demonstrate investment and that the project meets the criteria of an advancement in the application of science and technology and have no existing internal solution. Details of the R&D reliefs are available on the gov.uk website, but you certainly don’t have to be wearing a white lab coat to qualify for R&D relief, the number of companies which have successfully made claims has increased dramatically over recent years.
Small and medium companies could claim 230% tax relief on qualifying expenditure that can be attributed directly to R&D activities, rather than a standard 100% relief. Such expenditure includes materials consumed in R&D, staffing time expended on R&D as well as software, consultancy and utility costs incurred on qualifying activities.
In numbers terms, an R&D spend of £50,000 could result in a company being able to reduce its profits saving corporation tax of up to £12,350 at the current UK company corporation tax rate of 19%.
Please contact us if you believe your business may be eligible for this scheme and we can put you in contact with our trusted network of professionals for a free initial consultation.
Businesses may be concerned whether their contracts are enforceable against third parties and whether third parties can enforce their contracts against them.
Aspects to consider include:
If there is a general right to terminate on notice, you may need to check:
If there is a force majeure clause, things to consider are:
As a last resort you may need to consider whether the contract has been ‘frustrated’.
Is it physically or commercial impossible to fulfil the contract; or is the obligation to perform now a radically different obligation from that undertaken at the moment of entry into the contract?
Generally speaking a frustrating event:
A business may be unhappy that a defaulting party is seeking to excuse itself from its obligations. There are different outcomes depending on which (if any) of the above can be relied upon.
Termination on Notice
If you have any concerns relating to contract issues as a result of COVID-19, please contact us and we can signpost you to the best support.