BoE increases QE

The Bank of England increased quantitative easing by £100bn and kept base rates at 0.1%. That takes the total to £745 bn. The program was started with an initial £200 bn back in 2009.

UK government being paid to borrow money!

The government has sold a gilt with a negative yield for the first time. An auction by the Debt Management Office of a gilt maturing in July 2023 sold at an average yield of -0.003 per cent.
A negative yield means that the government is effectively being rewarded to borrow as investors agree to be repaid slightly less than they lent.

Central banks have cut rates 148 times this year

Since the start of this year, research has calculated central banks around the world have cut their key interest rates 148 times by a cumulative 12,488 basis points (bp). While the US has cut rates by 150 bp so far this year and the European Central Bank has left rates on hold – at already very low levels – Argentina has cut by 1700bp, Ukraine by 550bp and Pakistan by 425bp. Source: Datastream, AXA IM

US oil price drops below $0

The consequence of an oil price war and the pandemic has resulted that in the first time in history the oil producers failed to find enough space in the US to store a glut of crude, forcing them to pay buyers to take it off their hands. West Texas Intermediate (WTI), the US benchmark, fell to -$37.63 a barrel, a loss of approximately 300 per cent.

UK Government funding – world first

The UK became the first country in the world to respond to the coronavirus by having its central bank directly finance its government, rather than through the intermediary of the government debt market. It involves the government’s account at the Bank of England (the “Ways and Means facility”) being extended to a temporarily unlimited amount. That will enable the government to raise money faster in the short term, avoiding the need to tap the gilts market.

COVID-19 – Help for the self-employed

If you have at least one year’s self-assessment history and have filed your 2018-19 tax return, you are eligible as long as you have trading profits of under £50,000 per annum.

You will receive a taxable grant of 80% of your average profits. You do not need to apply, you should receive details in the post and the grant in June.

COVID-19 – Employee homeworking expenses

In general, the reimbursement by an employer of employee expenses is treated for tax purposes as earnings from the employment for the tax year in which they are paid (ITEPA 2003 ss 70 and 72) and will be taxed in the normal way. There is, however, an exemption for ‘homeworking arrangements’ which covers payments made by an employer to an employee in respect of reasonable additional household expenses incurred in carrying out duties of their employment at home (ITEPA s 316A). This is currently up to £4 a week (or £18 a month) but, as announced in the Budget, will be increased to £6 a week from 6 April 2020. An exempt homeworking payment under s 316A can be made to employees who work at home under a voluntary homeworking scheme (which is a crucial difference to other expenses claimed by employees outside of these arrangements).

Costs that may be covered by such homeworking payments include additional costs of heating and lighting the work area or the metered cost of increased water use, provided that the additional household costs are reasonable and incurred in carrying out the employee’s duties. There might also be increased charges for internet access, home contents insurance, business telephone calls or the additional cost incurred as a result of business rates liability (EIM01474). Broadband costs will only be tax exempt if the employee is not already paying for a broadband connection (EIM01475). Payments for costs that would be incurred whether or not the employee worked at home – for example, mortgage interest, rent, council tax or water rates – will not be tax exempt.

COVID-19 Self-employed July payments deferred

The chancellor has announced that payments under income tax self-assessment, normally due on 31 July 2020, will be deferred until 31 January 2021.

During this period, individuals will not be charged any penalties or interest for late payment.

The deferral will apply automatically to all. Taxpayers who believe that their 2019/20 income will be lower than their 2018/19 income can make a claim to reduce their payments on account.  

COVID-19 VAT deferment

Deferment of VAT payments is effective immediately. Businesses should cancel their VAT direct debits to HMRC now; otherwise payments will still be taken automatically. 

These VAT direct debits should be restarted after 30 June 2020. The deferment applies to VAT payments due to be made to HMRC between 20 March 2020 and 30 June 2020.  HMRC says that interest will not be applied to the deferred VAT payments.

However, VAT returns must still be submitted on time: it is only the payment which is deferred.