By David King, a member of the ASM Plus civil/commercial, family and small claims teams
These are strange times that we live in! However, a great time to take a cool long look at ourselves and question what is important in our lives.
What is certainly true is that lots of people are working really hard to keep us all safe and well but most of the “rules” of sensible financial husbandry are safely filed in the “no longer relevant” basket. Our Government is handing out money in a desperate attempt to keep the economy from being destroyed and has been launching financial lifeboats like the Captain of a sinking super-liner (note no reference to “Titanic” or others).
Those of us lucky to live in rural areas have had the chance to walk the dog in splendid isolation whereas those in cities must be getting cabin fever but it is all so necessary to keep us all safe and well.
I have been spending my time in assisting my accounting clients in trying to keep their heads above water and to negotiate the ins and outs of the various Government schemes put in place to save them. There is no doubt that these schemes are innovative and definitely completely outside of anything that we have seen before. Clearly the Civil Servants have been working hard and they should be applauded for this. However, it is only when you start poking bits of them with a sharp stick that you begin to see the sticky tape that has been used to cobble things together.
A great example of this is the “Small Business Grant Fund” – a payment to the smaller businesses which have premises but which do not pay rates due to “Small Business Relief”. This was first announced in the 2020 Budget when it was to be £3,000. However, as soon as it became obvious that COVID19 was not simply “bad flu”, this was increased to £10,000 and very welcome it is too. But the one aspect that does not seem to have been explicitly mentioned is the tax and accounting treatment for the funds. OK, not the most important consideration for 99% of the population; however, if you are a tax geek (and proud to be) then immediately you ask yourself two fundamental questions: Is it taxable? How should we account for it? (Is it any wonder I don’t struggle with distancing people from me in times of pandemic?)
The answer to the first bit is almost certainly “yes”. No great surprise there and so there is a good chance that around 20% of it will eventually flow back to the Treasury from whence it came.
The second bit is pretty much “unknown”. So why does it matter?
I got my grant on 7 April and my year end is 31 March. If the grant is for the three months to 31 May then firstly, do I get another lot if the lockdown continues to the end of June (I bet not), but when I do the 31 March accounts – do I have to accrue a third of it in the 2020 accounts (and pay tax on it)*? Who knows (or perhaps cares)?
The upshot of all this is that there will be all sorts of differences of opinion and when legislation and the like is not crystal clear who knows what the right answer is?
I am certain this will not be the only unknown in this unsettling period but it does point to lots of disputes at the end of it and when the foundations that a dispute are built on are unsure (like this) it is a good time to bring in the Mediators so the parties can properly talk it through! This can even be done on-line via Zoom or Skype so no difficulty over safe-distancing either.
*I am going to recognise it in accounts on the date it is PAID – I am pretty sure that is right (and that HMRC don’t know the answer either).
ADR Accredited Civil and Commercial Mediator, Certified Accountant and member of the Chartered Institute of Taxation (former Chair of the East Anglia Branch), university lecturer and trainer and a member of the CIOT Dispute Resolution and Litigation working group.