Covid-19-related rent concessions

Covid-19-related rent concessions

The Financial Reporting Council (FRC) has issued amendments to FRS 102 and FRS 105 – Covid-19-related rent concessions beyond 30 June 2021

 

To help them through the pandemic, many businesses that lease property have been supported by their landlords and have been granted rent concessions.

Before the pandemic, FRS 102 and FRS105 didn’t explicitly specify how to account for changes in lease payments resulting from rent concessions. In order to avoid businesses interpreting FRS 102 in different ways, the FRC acted fast and issued an amendment to the standards in October 2020 looking specifically at COVID-19 related rent concessions.

Prior to this amendment, businesses may have looked to treat these rent concessions in the same way as lease incentives, such as rent-free periods at the beginning of a lease, and spread the benefit over the remaining life of the lease.

This amendment changes this treatment. These concessions were specifically to help businesses out during the pandemic period, and are temporary in nature, and so should be recognised in the P&L in the period that the concession is intended to compensate – so effectively you recognise the reduction in the rent charge as it happens.

There are certain conditions to apply this treatment

  • the change has to be a reduction in rent
  • there has to be no other change to the terms of the lease – otherwise the rent concession could be due to those changes rather than just COVID-19
  • the original amendment only applies to payments which were due on or before 30 June 2021. However, in June 2021, the FRC issued further amendments to the standards, such that the revised requirements now apply to rent concessions that reduce lease payments originally due on or before 30 June 2022.

The revised standards require disclosure of the change in lease payments in the financial statements.

The effective date is periods commencing on or after 1 January 2020, but early application is permitted, and Hawsons would recommend that such early application is adopted.

Here is a link to a video of our Technical Director Paul Hutchings discussing the revision to the standards.

Free initial meeting

Craig Burton, Partner

Craig Burton

Partner, Sheffield

0114 266 7141

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Are we heading towards a cashless society?

Are we heading towards a cashless society?

Has COVID-19 affected the use of cash?

In the last few years, the use of cash has been declining as electronic payments have been on the rise, with many believing that cash would eventually become antiquated. In 2008 63% of all transactions were made in cash, in 2018 it was 34% (data from Which). This demonstrates that the use of cash was on the decline before the pandemic. But, has the COVID-19 pandemic accelerated this process?

Given the reports about the spread of coronavirus through physical contact, many people will have started to avoid the use of cash payments to bypass physical contact. Therefore, more people will start to use different payment methods particularly contactless methods, such as card payments and phone payments. Many retailers are now asking their customers to avoid paying in cash if possible, in addition to wearing masks and maintaining social distancing.

The Bank of International Settlements has said in a bulletin released in April 2020 stating that COVID-19 may speed up the trend towards digital payments worldwide.

The contactless payment limit increased

On 1st April 2020, the contactless spend limit was increased from £30 to £45, this was an attempt to reduce the use of paper money during the covid-19 pandemic (Find out more information here). Payments via cash have decreased by 15% in April 2020. Barclaycard reported that 90% of face-to-face transactions were made via contactless payment in April (Data from Charged Retail). The evidence suggests that it is looking increasing likely that the world will be heading into a cashless society quicker than expected. However, will this move be positive or negative?

What are the pros and cons of a cashless society?

Pros

 

  • A decrease in crime rates as their will be no physical money to steal
  • Money laundering will be more difficult to execute
  • Quicker and easier to exchange currency globally
  • Less fraud and tax evasion
  • You will always be able to pay the exact amount every time
  • More convenient as will always have ‘money’ to hand

 

Cons

  • Higher risks of cyber attacks
  • Risk of contactless payments if cards are stolen – particularly with increased contactless spend limit.
  • The older generation may struggle with new technology.
  • No alternative money if scammers clear out your bank account or if your card provider are experiencing technical issues.
  • Difficultly budgeting without seeing physical money in hand, leading to more people overspending.
  • More difficult to give money to the homeless and to charity collections.

 

Conclusion

The evidence does suggest that COVID-19 has accelerated the shift into a cashless society, as COVID-19 has caused payments by cash to decline and contactless payments have increased and starting to become the new norm. Individuals need to be aware of the downsides of this move and take actions to mitigate the cons while enjoying the benefits of the cashless society.

 

Free initial meeting

Craig Burton, Partner

Craig Burton

Partner, Sheffield

0114 266 7141
Summer Statement Summary

Summer Statement Summary

Summer Statement Summary

 

On the 9th July the Chancellor announced his Summer Statement to kick-start the economy. Rishi Sunak has pledged to “protect, support and create jobs” and get pubs and restaurants “bustling again”

 

Hospitality

 

The Chancellor has announced a 50% discount for diners to increase restaurant demand. Additionally, a large VAT cut has been confirmed for hospitality and tourism sectors.

 

VAT on certain items will decrease from 20% to 5% from 15 July to 12 January 2021. However, this reduced rate is only available on the following items:

 

  • Food
  • Non-alcoholic drinks
  • Accommodation
  • Attractions

 

Every UK citizen will receive a “eat out to help out” discount. This discount will be valid from Monday to Wednesday in August from participating businesses. It will be a discount of 50% of up to £10 per head.

 

Stamp duty holiday

 

The Chancellor announced on Wednesday 8 July 2020 that the threshold for stamp duty in England and Northern Ireland would be temporarily raised from £125,000 to £500,000 until 31 March 2021. The aim of this is to increase activity in the property market. This will also help house buyers that have been financially affected by a coronavirus.

 

The Government says that “the average stamp duty bill will fall by £4,500. And nearly nine out of 10 people buying a main home this year, will pay no stamp duty at all.”

 

Jobs and training

 

Job retention bonus: The Government will pay employers £1,000 for every furloughed employee brought back to work by the end of January 2021. It has been calculated that if every furloughed worker is brought back to work the scheme will cost £9 billion. For employers to be valid for this scheme, the employee must earn a monthly average of more than £520 in November, December, and January.

 

£2bn Kickstart Scheme: This scheme will create jobs for unemployed young people, which will enable employers to offer young people between the age of 16-24 years old a six-month placement. The Treasury will cover the National Minimum Wage for each young employee a company employs for up to 25 hours a week. With companies topping up workers’ pay if they choose to employ them for longer hours.

 

The government is also investing in traineeships and apprenticeships. The government will offer £1,000 per trainee to businesses. (Capped at 10 jobs per firm).

 

New apprentice under 25 years old: Businesses will receive grants of up to £2,000 for each new apprentice employed.

 

New apprentice over 25 years old: Businesses will receive grants of up to £1,500 for each new apprentice employed.

 

The National Careers Service will receive a funding increase of £32m over the next two years.

 

The Environment

 

Rishi Sunak announces £2bn home insulation scheme

 

The Chancellor has announced a £2bn grant scheme for homeowners for energy-saving home improvements, this is part of a wider £3bn project to cut emissions. The Treasury has said that this funding would help support over 100,000 jobs. Households will receive vouchers for up to £5,000 and the poorest households will receive up to £10,000 for their energy-saving home improvements.

 

The scheme known as the Green Homes Grant will mean that the government will cover two-thirds of home improvement costs that will save energy. This scheme will start in September.

 

Conclusion

 

It is clear to see that the Chancellor’s priority is to kick-start the economy after the coronavirus pandemic, by protecting, supporting, and creating jobs. He is also attempting to create demand in the hospitality sector by offering UK citizens the “eat out to help out” discount. However, all of this has resulted in the government borrowing more money to fund the restart of the UK economy, which could cost the country more in the long run.

 

How can we help?

 

At Hawsons we have a dedicated team of accountants at our offices in Sheffield, Doncaster, and Northampton. Hawsons has provided accounting services to individuals and businesses for over 165 years. If you would like to find out more about Hawsons please visit our website here.

 

 

Free initial meeting

Craig Burton, Partner

Craig Burton

Partner, Sheffield

0114 266 7141

Hawsons makes history after 165 years in business

Hawsons Chartered Accountants is 165 years old

Hawsons Chartered Accountants was founded in the city of Sheffield in 1854 – more than 25 years before the creation of the Institute of Chartered Accountants in England and Wales – by Alfred Allott and John Hewett.

Hawsons remains one of the longest-standing independent firms of chartered accountants in the UK. One of the main reasons why clients choose Hawsons is not just because of our experience and expertise in accountancy but the high-quality advice and service our team delivers.

Our mission is to provide our clients with service of the highest quality and value in a professional, friendly, and responsive manner, to assist them to develop their business, to develop the maximum potential of our people and thereby be the leading independent practice in the area.

Our unrivalled history demonstrates that through many periods of change, we have evolved as a business to ensure we continue to remain relevant to our clients, providing them with the quality and breadth of service they need.  Clients understand that irrespective of how small they are when they become a client or how large they will grow, Hawsons will always be there for them.

Our belief in long-term client relationships is why we offer all prospective clients a free initial meeting so we can really get to know you and your business and you can get to know us.

Chris Hill, Senior Partner at Hawsons, said on the firm’s development: “We’re proud of our extensive history and the success we’ve achieved since we were founded in Sheffield 165 years ago. To have reached such an age and still be going strong is a great feat. Despite our company’s growth and expansion into other areas across the UK, we’ve stayed true to our philosophy that no matter what size or sector, every business we work with will always receive the same high standard of advice and service from our team.”

If you are looking for an expert accountant book your free initial meeting with us here.

If you would like to find out more about us visit our website here.

 

Free initial meeting

The Future of Audit?

The Future of Audit?

The Future of Audit?

It has been a difficult few months for the auditing industry – and in particular for the national firms that audit large listed companies and other ‘Public Interest Entities’.  After the high profile collapses of BHS and Carillion, amongst others – where the question of blame was put at the door of the auditors by the press – last week parliament’s Business, Energy and Industrial Strategy (BEIS) committee launched an inquiry into what it called the ‘broken audit market’.

The BEIS committee’s inquiry is the fourth ongoing review into the audit sector or its stakeholders along with the Competition and Market Authority’s review of the audit market, the independent review of the FRC (the auditors’ regulator) led by Sir John Kingman and Project Flora, a government-backed review into the future of the audit industry.

The outcome of these reviews is not yet known – but one thing that we can say with certainty is that the future audit market will look different to the one that exists today.

So, what does this all mean for firms like Hawsons?  The partners here see the potential future disruption as an opportunity.

Medium sized firms like ours are agile and have the ability to adapt quickly to the changing world around us.  Our partners have a wider skill set than that typically found in ‘Big Four’ partners, who tend to specialise in a service stream and have more time to spend with our clients, meaning that we can develop deeper working relationships.  David Grunberg, founding partner of Grunberg & Co, said in his recent article in Accountancy magazine ‘A commonly heard remark from clients who leave the Big Four is that they felt a stronger bond being created with the partner and the team they joined at the new firm’.

This wider skillset and closer relationships mean that we really understand our clients’ expectations and can adapt and innovate to meet those expectations.  Innovation has been important for us – evidenced by our partnerships with Xero and Quickbooks for online accounting and our ‘Making Tax Digital’ workshops – and will continue to be as the market and clients’ expectations change.  Innovation is also important in the world of audit – making sure that we combine tried and tested methods with new technology to deliver efficient yet robust and effective audits.

Clients also expect us to be able to offer international expertise.  Through our membership of HLB – the 12th largest global network of accounting firms – we have access to 25,000 professionals in over 150 countries.  In any country that our clients want to do business in, we can provide guidance and expertise through the network.  We currently do a great deal of work with the HLB network, so the service is seamless and the service level is similar to that offered by the Big Four networks.

The future of the audit market is unknown, but with our agility, close client relationships, ability to innovate and international network, Hawsons is well placed to be able to take advantage of any opportunities that arise.

Craig Burton

Partner, Hawsons

 

Free initial meeting