Cash payments fall by over a third during 2020

The number of cash payments made in the UK fall by 35% during 2020, according to the latest figures from banking trade body UK Finance.

However, cash remains the second most frequently used payment method behind debit cards, accounting for 17% of all payments.

During 2020 the number of contactless payments made in the UK increased by 12% to 9.6 billion payments. In the last four years contactless payments have jumped from being just 7% of all payments to 27%.

The total number of payments in the UK declined last year, falling by 11% to 35.6 billion transactions. It was the first decline in six years as the COVID-19 pandemic slowed down the economy.

David Postings, Chief Executive of UK Finance, said: ‘The pandemic resulted in some marked changes in payments behaviour and while it’s too early to say whether they are permanent changes, we did see an acceleration in some existing trends such as the reduction in cash usage and the growth in contactless and mobile payments. 

‘The increase in the contactless limit to £45 coupled with retailers encouraging its use meant that more than a quarter of all payments in 2020 were made via contactless. The use of cash fell, reflecting the fact that large parts of the economy were closed during the year, although it still remained the second most popular payment method behind debit cards.’

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UK economy back to pre-covid level by end of year

Despite the delay on the lifting of all lockdown restrictions for another month, the UK economy is set to bounce back to its pre-COVID level towards the end of 2021, according to the latest figures from the Confederation of British Industry (CBI).

The latest CBI Economic Forecast shows that the easing of some COVID-19 restrictions, rapid roll-out of vaccines and the unleashing of pent-up demand means the economy is poised for growth over the summer.

However, this recovery will not be felt as strongly by those sectors still working under restrictions.

The CBI is forecasting GDP growth of 8.2% this year, and 6.1% in 2022 following a historically large fall of 9.9% in output over 2020.

Business investment nonetheless remains 5% below its pre-Covid level at the end of 2022, reflecting both the scale of the decline seen over the crisis, and lingering uncertainty. 

CBI Director-General, Tony Danker, said: ‘The imperative now must be to seize the moment to channel this investment into the big drivers of long-term UK prosperity. That’s why it’s the right time for Government to come forward with far more detailed plans on everything from decarbonisation, to innovation to levelling up.

‘Clearly this does not apply to the hardest hit sectors from the pandemic who even now face continued delays and genuine challenges to stay viable. Extending the commercial rent moratorium will help keep some firms’ heads above water, but the Government must also do the same on business rates relief.’

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UK Infrastructure Bank opens for business

The first ever UK Infrastructure Bank has opened for business with the aim of investing in sectors such as clean energy and transport.

The bank was opened in Leeds by Chancellor Rishi Sunak, who announced its launch in March’s Budget.

The UK Infrastructure Bank has an initial £12 billion of capital to deploy and can issue £10 billion of government guarantees, helping to unlock more than £40 billion of overall investment.

The Bank is tasked with accelerating investment into ambitious infrastructure projects, cutting emissions and levelling up every part of the UK.

It will help to finance important projects in every region and nation of the UK in sectors including clean energy, transport, digital, water and waste.

Chris Grigg, Chair of the UK Infrastructure Bank, said: ‘The new UK Infrastructure Bank is open for business. I am delighted to be leading this institution, which will be a catalyst for investment to support regional economic growth and net zero ambitions.

‘I look forward to building strong partnerships with project sponsors, institutions and local leaders.’

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Delayed EU import declarations due

The first supplementary delayed declarations on imports of non-controlled goods from the EU are due from 25 June 2021, HMRC has reminded businesses.

Businesses that made imports from 1 January this year were able to use delayed declarations instead of declaring their goods to HMRC at the time they had imported them. Supplementary declarations need to be made within 175 days, so imports made in January will become due from 25 June onwards.

HMRC said: ‘You should check the date when you imported your goods and add on 175 calendar days from that date to get the deadline for when your supplementary declaration is due.

‘If you’re delaying your declarations and planning to make the supplementary declarations yourself, you will need a Duty Deferment Account (DDA). You need to apply to HMRC for a DDA. It allows you to make one payment each month for any imports, rather than paying every time you import goods, which can be helpful in managing your cashflow.

‘Even if someone else is doing your declarations, such as a freight forwarder, customs agent or fast parcel operator, most will require you to have your own DDA. You should check this with them if they haven’t already advised you to set one up.’

Applications for a DDA can be made here.

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Commercial rent moratorium extended until March 2022

The government is to extend the ban on commercial evictions introduced during the coronavirus (COVID-19) pandemic until March 2022, the Treasury has confirmed.

Chief Secretary to the Treasury, Stephen Barclay, said the moratorium for business tenants will not expire at the end of this month as planned and will instead continue until 25 March 2022 – two years after it was introduced.

Restrictions on landlords using laws permitting them to recover rent arrears by selling a tenant’s goods will also continue.

Matthew Fell, Chief UK Policy Director at the Confederation of British Industry (CBI), said: ‘An extension to the commercial rents moratorium will give much-needed breathing space to firms in the hardest-hit sectors. For many, this could make the difference in keeping businesses afloat and people in jobs.

‘Treating debts accrued through COVID-enforced closures differently makes sense, and the CBI welcomes guidance for occupiers and landlords to deal fairly with these arrears. The promise of arbitration to settle disputes should encourage grown-up conversations in the months ahead.’

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Over 280,000 families now using Tax-Free Childcare

More than 282,000 working families used a Tax-Free Childcare (TFC) account during March, according to figures from HMRC.

HMRC said that it is the highest recorded number of families in any one month since the scheme was launched in April 2017. These families received a share of more than £33 million in government top-up payments for their childcare.

The TFC scheme can be used to help pay for accredited holiday clubs, childminders or sports activities – enabling parents and carers to save money on the costs of childcare.

The TFC initiative is available for children aged up to 11, or 17 if the child has a disability. For every £8 deposited into an account, families will receive an additional £2 in government top-up, capped at £500 every three months, or £1,000 if the child is disabled.

Myrtle Lloyd, Director General for Customer Services at HMRC, said: ‘We want to help kids stay active this summer, whether they are going to summer holiday clubs or a childminder. A childcare top-up will go a long way towards helping parents plan and pay for summer activities to keep their kids happy and healthy.’

More details and registration for TFC can be found here.

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Finance Act 2021 receives early Royal Assent

Royal Assent of Finance Act 2021 was granted on 10 June, bringing the extended loss carry-back, super-deduction and other measures into force.

The Act had not been expected to become law until July, but now Royal Assent has been granted it will prompt the issue of commencement orders for provisions, including the 130% capital allowances super-deduction for companies; the Plastic Packaging Tax; penalties for late filing of tax returns; penalties for late payment of tax; and VAT late payment and repayment interest.

The extended loss carry back provisions apply to trading losses arising in company accounting periods ending between 1 April 2020 and 31 March 2022 and trading losses of unincorporated businesses of the 2020/21 and 2021/22 tax years.

HMRC is now expected to update its guidance on the mechanism for making de minimis claims (standalone or group company with losses capable of providing relief up to a maximum of £200,000).

Royal Assent also triggers amendments to HMRC’s civil information powers by introducing a Financial Institution Notice (FIN), which makes it easier for HMRC to obtain information about a taxpayer from a third party, such as the taxpayer’s bank or building society.

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Business groups press for further support after lockdown easing delayed

The four-week delay to the easing of lockdown in England has prompted business groups to call for further government support for businesses.

The Confederation of British Industry (CBI) said ‘although the delay was regrettable it is understandable’ as a postponement is preferable to lifting lockdown and then reimposing restrictions. However, the CBI also warned of damage to the hospitality sector, leisure and live events.

Tony Danker, Director General of the CBI, said: ‘Continuing restrictions means the government must urgently revisit the support available. That starts with holding back on the tapering of business rates relief and extending the commercial rent moratorium for those sectors most impacted. A solution must also be found for the hard-pressed international travel sector.’

Meanwhile, Mike Cherry, National Chairman of the Federation of Small Businesses (FSB), said: ‘Despite a successful vaccine programme and all the best efforts from small firms, they will be bitterly disappointed to find they face at least another month of restrictions.

‘These sectors and their supply chains need ambitious and targeted support. The 19 July must be the final date for when these restrictions will be lifted.’

Claire Walker, Co-Executive Director of the British Chambers of Commerce (BCC) called for an extension to VAT deferrals and business rates relief. She stated: ‘Government should work with lenders to ensure that appropriate forbearance is in place for those who have used government lending schemes and already started to repay their loan without being able to open fully.’

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HMRC outlines intention to recover £1 billion in fraudulent furlough funds

HMRC has announced that it will recover over £1 billion in fraudulently claimed furlough cash over the next two years.

UK employers have claimed more than £60 billion in furlough funds since the introduction of the Coronavirus Job Retention Scheme (CJRS) in March 2020. The CJRS was extended in the 2021 Budget until 30 September.

Data published by the Office for National Statistics (ONS) recently revealed that workers in the hospitality sector were most likely to still be on furlough. At peak use of the CJRS, 91% of pub and bar staff were furloughed. 

HMRC stated that it intends to launch a handful of criminal investigations into suspected cases of serious CJRS fraud.

A spokesperson for HMRC said: ‘The CJRS has provided a lifeline to millions of people across the UK and fraudulent claims are unacceptable. It is taxpayers’ money and fraud limits our ability to support people and deprives public services of essential funding.

‘We’d ask anyone concerned that an employer might be abusing the scheme, or anyone with information about suspected fraud, to please contact us. All information is assessed and the most appropriate course of action taken.’

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R&D relief regime ready for update, says ICAEW

The UK’s current research and development (R&D) tax relief regime offers valuable support to companies but could be improved, according to a survey carried out by the Institute of Chartered Accountants in England and Wales (ICAEW).

The ICAEW’s survey found that the R&D tax relief regime could be improved by switching to regular periodic payments; incorporating it into the wider subsidy system; and by offering support tailored to specific industries’ needs.

Survey respondents outlined a desire for ‘more regular support closer to R&D investment spend’, as opposed to a one-off payment after the completion of the tax return process.

Respondents also suggested that the R&D tax relief regime could be aligned with the forthcoming Making Tax Digital for Corporation Tax (MTD for CT) initiative. This would allow claims to be made digitally every quarter, alongside the required MTD reports.

Additionally, the ICAEW’s Tax Faculty highlighted the need to update the definition of R&D used in the regime in order to ‘acknowledge the technological and commercial reality of the 2020s’.

The ICAEW’s report can be read in full here.

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