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bounce back scheme

Here’s All you Need to Know About Corona Virus Bounce Back Loan Scheme

30/03/2021Covid -19 , Uncategorised

Apply for the coronavirus bounce-back scheme before it’s too late. You can apply up till 31st March 2021. 

 

The main aim of the scheme is to make sure businesses get instant cash during these tough times. One interesting point to note is that currently sole traders and limited companies are getting the most out of this scheme. According to the stats, these segments needed a lot of help. So they had to be helped.

 

What Can you Expect?

 

You’ll be happy to know that you can get a loan of £2,000 as a starter to pay to your employees or support your business in whatever way you’d like to support. If you like talking in terms of percentages, let’s just say that you can get around 25% of the turnover of your businesses. The maximum threshold of the loan is around £50,000. 

 

We all know what COVID brought on many businesses. A lot of cafes, restaurants, pubs, stores closed around our vicinity. A good £50,000 is good for any business to save their sinking ship. 

 

What’s a Good Time to Pay Back?

 

The government has allowed you to pay the loan back interest-free in 12 months. If you pay your loans after that time period, you’ll have to pay an interest rate of around 2.5% in a year. If you need help, and you’ve not already applied for any coronavirus support, now is a great time to get started and apply for the Bounce Back Loan Scheme.

 

What if you’ve Already Taken Up Additional Loans?

 

You can take up a bounce-back loan scheme if you’ve already claimed other schemes. It’s just that you’ll be topping-up an additional amount to your scheme. 

 

What Makes you Eligible for the Scheme?

 

You can apply for the scheme if:

  • Your business is based in the UK. 
  • Your business took off before 1st March 2020. 
  • Your business faces the worst in the pandemic. 

 

What Makes you Ineligible for the Bounce Back Loan Scheme?

 

You cannot apply for the scheme if you fall under the following categories: 

 

  • Banks and Insurance companies excluding brokers.
  • Public Institutions.
  • Primary and secondary schools funded by the government. 

 

Please note that if you’ve applied for any of the following schemes, you might not be able to claim the bounce back loan scheme:

 

  • Coronavirus business interruption loan scheme.
  • Coronavirus large business interruption loan scheme. 
  • COVID-19 corporate financing facility, 

 

Do not forget the important dates i.e 31st March 2021. If you’re looking forward to applying, you need to fill in a brief form along with a self-declaration. The best part about the loan is that the lender gets to decide, whether to pay you the loan or help you out with another kind of finances. 

    

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loans for small business
What Tax Relief One Must Expect on Loans for Small Business?

17/12/2020Business Growth Ideas , Personal Tax , Tax Issues

You always need help when you’re looking forward to investing in a new business prospect. But how much tax relief one must expect on all those loans for small businesses? Christmas is one of the most trending topics these days, and people are grabbing every opportunity to invest in a long-term plan. But what about the interest on these loans? Do you have to pay taxes and VAT on all these loans for small businesses too? HMRC doesn’t consider the capital element of loans for income tax relief purposes. If the loans are exclusively for business purposes, interest paid on loans would be a deductible revenue expense. Let’s say you’re looking forward to investing in the machinery for your small business. The machinery is counted as a revenue expense, therefore it’s allowable for income tax or corporation tax. The loan you ask for in the form of cash is deductible for tax. Especially if the business owner is to borrow the loan personally. He may opt to introduce the cash in the form of a loan. The person borrowing a specific amount should make sure that they’re not just figuring out the tax amount but also maintaining whatever amount is due to them. You must know what you aim to do with the cash you’re borrowing for a loan. If you’re aiming to buy capital, its always a good idea to go for the capital. Make sure you take care of this part. Also, note that the capital may not be qualified if Broadly, the loan will become non-qualifying if either the capital ceases to be used for a qualifying purpose or is deemed to be repaid. For example, Bob borrows £100,000, secured on his house, and lends this to his business. The loan is a qualifying loan, so he can initially claim tax relief on the interest payments. Unfortunately, the rules relating to the repayment of qualifying capital mean that each time a capital credit is made to the account it is deemed to be the repayment of a qualifying loan. Since the capital value of the loan is reduced every time a payment is made, credits totalling £50,000 per year will mean that all tax relief is lost within just two years. Re-borrowing shortly after making repayment is not a qualifying purpose so future relief is also lost. It is also worth noting that a business cannot claim a deduction for notional interest that might have been obtained if money had been invested rather than spent on (for example) repairs. Double counting is not permitted, so if interest receives relief under the qualifying loan rules, it cannot also be deducted against profits so as to give double tax relief.   Restrictions under the Cash Basis Tax relief on loan interest is restricted where the ‘cash basis’ is used by a business to calculate taxable profits. Broadly, businesses using the cash basis are taxed on the basis of the cash that passes through their books, rather than being asked to undertake complex and time-consuming accruals calculations. Under the cash basis, bank and loan interest costs and financing costs, which include bank loan arrangement fees, are allowed up to an annual amount of £500. If a business has interest and finance costs of less than £500 then the split between business costs and any personal interest charges does not have to be calculated. Businesses should review annual business interest costs – if it is anticipated that these costs will be more than £500, it may be more appropriate for the business to opt out of the cash basis and obtain tax relief for all the business-related financing costs.   Private Use of Assets Where a loan is used to buy an asset that is partly used for business and partly for private purposes, only the business proportion of the interest is generally tax-deductible. Commonly cars and other vehicles used in a business fall into this category. Note, however, that a deduction for finance costs is not allowable where a fixed-rate mileage deduction is claimed.   Example Bob takes out a loan to buy a car and calculates that he uses it in the business 40% of the time. The interest on the loan he took out to buy the car is £500 during 2020/21. He can therefore deduct £200 (£500 x 40%) for loan interest in calculating his trading profits. Finally, interest paid on loans used to fund the business owner’s overdrawn current or capital account is generally not deductible for tax purposes.

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