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Self-Employed Granted Furlough Extension

Written by admin on . Posted in Budget, COVID-19, Self-Employed, Tax. No Comments on Self-Employed Granted Furlough Extension

Two further grants under the SEISS were announced in September and have now been updated.

Following the announcement last week, of a second lockdown, the government’s new package of support measures announced in the Chancellor’s Winter Economy Plan has been reworked, including an increase to the self-employed income support scheme (SEISS).

The extension covers a six-month period divided into two additional grants. The level of the upcoming third grant has now been increased from its initial 40% to 55% of average monthly profits. Applications for the third grant covering the three months from November 2020 to January 2021 will open on 30 November and will be capped at a maximum of £5,160, paid in a single instalment.

The fourth grant will cover the three months from February to April 2021, however, no further details have been released as yet.

Eligibility

To be eligible for the third grant you must have been eligible for the previous two (even if they were not actually claimed), so this excludes anyone with:

  • average annual profits exceeding £50,000; or
  • self-employed income that makes up less than 50% of total income.

In addition, you will have to declare that you intend to continue trading and are either currently actively trading, but are impacted by reduced demand due to Covid-19, or were previously trading but are now temporarily unable to do so due to Covid-19. The requirements to be actively trading and to be impacted by reduced demand are new and might indicate that HMRC is tightening up the rules.

The first two grants were based on average profits for the tax years 2016/17, 2017/18 and 2018/19. At this point, there is no indication if HMRC will allow profits for 2019/20 to be taken into consideration.

The Chancellor’s latest round of grants have faced widespread criticism offering less support than that available for employees who cannot work due to Covid-19, and, even with the increased level of 55%, the third grant is still less than 70% of the amount paid under the first grant.

If you need help with any support grants, please get in touch.

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Winter Blues: Furlough Scheme Version 2.0

Written by admin on . Posted in COVID-19, Employment Law, Tax. No Comments on Winter Blues: Furlough Scheme Version 2.0

With the announcement of another national lockdown, the furlough scheme has been extended for a further month from 1 November until 2 December.

The extension of financial support under the Coronavirus Job Retention Scheme (CJRS) is the same as that given for August, with employees receiving 80% of their salary for hours not worked, capped at £2,500 per month. Employers have to cover National Insurance contributions (NICs) and workplace pension costs.

Two new job support schemes (JSS Closed and JSS Open) set out in the Chancellor’s Winter Economy Plan will now not take effect until the furlough scheme ends.

Differences

One important difference from the previous furlough scheme is that claims can be made for employees notified to HMRC with an RTI submission by 30 October. Otherwise, the extension is similar to the old scheme:

  • Employees recently made redundant can be rehired and furloughed if they were employed up to 23 September.
  • Businesses will be paid upfront to cover their salary costs.
  • Flexible furloughing is allowed, with the employer paying as normal for hours worked. For hours not worked, the employer can make up the employee’s full pay if they wish.
  • Employees can be on any type of contract.
  • Hours not worked will be calculated by reference to the usual hours worked by the employee.
  • The employer’s furlough claim must be for a minimum period of seven consecutive days.
  • Neither the employer nor the employee needs to have previously used the furlough scheme prior to 1 November.

When will the extension end?

There are conflicting reports of whether the lockdown will end, as planned, on 2 December, or whether it will be extended if the infection rate has not fallen sufficiently. Presumably, the furlough scheme will be extended in line with any lockdown extension, although the government is not making any promises.

There should, however, be no gap in eligibility for support between the furlough scheme ending and the new JSSs being introduced.

If you need help in assessing your situation, please let us know.

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What Now, Autumn Budget?

Written by admin on . Posted in Budget, Business Rates, Capital Gains Tax, COVID-19, Tax. No Comments on What Now, Autumn Budget?

So, the Autumn Budget has been pushed into spring 2021, with tax rises on the cards. What should we expect in the Spring Budget?

With intense speculation around tax rises to pay for the raft of Covid-19 support measures, the first serious clue to a possible Autumn Budget delay emerged on 8 September, when the Office of Tax Simplification (OTS) slipped out a statement about its review of capital gains tax (CGT), which had been commissioned by the Chancellor in July. The statement announced the response deadline on the technical part of the OTS consultation would be deferred by four weeks, to 9 November. This was a surprising move as the OTS CGT report was expected to feed into the Autumn Budget.

Soon after, the Chancellor himself issued a brief written statement saying he had asked the Office for Budget Responsibility (OBR) to prepare an economic and fiscal forecast ‘to be published in mid-to-late November’. The vagueness surrounding the timing was evident, as the OBR report is produced alongside the Budget and incorporates costings for Budget measures.

What had started to look inevitable was confirmed on 24 September when the Treasury cancelled the Autumn Budget. The Chancellor will still have a set piece event towards the end of the year; not only is there the OBR report to present, but Mr Sunak must also publish a Spending Review. The latter was also a victim of the general election and ought to have been produced a year ago to cover the three years from April 2020. Instead, the then Chancellor published a one-year Spending Round. Given the pandemic uncertainties, it is likely that Mr Sunak will take a similar short-term view, rather than introduce a multi-year plan.

The postponement of the Autumn Budget does not mean the spectre of tax increases has also evaporated. The level of government borrowing (£174 billion in the first five months of 2020/21) makes tax rises virtually inevitable. However, the Chancellor has afforded you more time to plan and take action in areas such as CGT and pension contributions.

Any thoughts?

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HMRC Related Scamming On The Rise

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Given the amount of Covid-19 financial assistance available, it comes as no surprise that there is an increase in HMRC-related scams this year.

What is worrying is that scammers have become more sophisticated; it is no longer a matter of  simply ignoring emails offering tax refunds. Recent scams have targeted the self-employed receiving income support grants, and, with two further payments to come, the scams are expected to continue.

So what are the scammers after?

The holy grail for a scammer is to obtain sufficient personal information to access and empty a bank account. For instance, a Covid-19 goodwill payment may be conditional on providing bank details so the funds can purportedly be paid direct into the account.

As banks strengthen security, the focus of scams will shift to identity theft, especially where passport details are involved. Other scams may call for the payment of upfront fees to help claim a tax refund.

Moving away from emails

As scam email detection improves, many scammers have switched to text messaging. Telephone numbers are spoofed to show HMRC as the sender, with links to very convincing HMRC-lookalike websites.

Automated voicemails, voice calls and messages sent via social media are other means of making initial contact.

Prevention

A bit of common sense will protect you from most scams, although the best ones can be quite convincing. Remember that HMRC will:

  • Always include your 10-digit tax reference on any correspondence;
  • Never use email, texts or social media to contact you regarding a tax refund; and
  • Never ask for bank account details or personal information.

If still in doubt, contact us or check the legitimacy of a proffered tax refund by logging on to your personal tax account.

HMRC have published examples of phishing emails and bogus contact here.

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Pop Quiz on Capital Gains Tax

Written by admin on . Posted in Capital Gains Tax, Tax. No Comments on Pop Quiz on Capital Gains Tax

HMRC has published some interesting research into capital gains tax (CGT).

Here are three CGT questions for you to ponder:

  1. How many individuals made enough capital gains in 2018/19 to face a CGT bill?

The answer is just 256,000, according to the latest provisional figures from HMRC – 9,000 fewer than in the previous tax year. Viewed another way, that is less than 1% of all income taxpayers. However, over the 10 years since 2008/09 the number of CGT payers has nearly doubled.

Now you know that individual CGT payers numbered only about a quarter of a million, try the next question…

  1. How much tax did they have to pay in total?

The answer is £8,805m, which is over £3,400m more than was collected in inheritance tax (IHT) in 2018/19. IHT and CGT are both capital taxes, often levied on the same asset, albeit usually at different times. Yet CGT attracts much less criticism than IHT, which has been rated as the UK’s most-hated tax.

With the information on how many taxpayers and how much tax was collected, the third question might look easy…

  1. What proportion of that £8,805m was paid by the top 5,000 CGT payers?

The top 5,000 – about 2% of all CGT payers – contributed 54.4% (£4,789m) of all CGT paid. They all had gains of at least £2,000,000. Expand the band a little and 18,000 individuals, with gains of at least £500,000, accounted for just under three quarters of the CGT paid.

The answers to these three questions highlight two points which give pause for thought, one to the Chancellor and the other for investors:

  • As with some other personal taxes, the amount raised from a small number of the wealthiest individuals is a significant proportion of the total. This means that the results of increasing the tax rate(s) will heavily depend upon how those individuals react. If some of them decide not to realise their gains, the overall tax take could fall rather than rise.
  • The annual CGT exemption is £12,300 in 2020/21. Investment returns that are received as capital gains are usually taxed more lightly than those received as income. The relatively small number of taxpayers is a reminder of the current generosity of the exemption.

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Covid related VAT reduction extended to 31 March 2020

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The temporary reduced standard VAT rate of 5% for the tourism and hospitality sector was due to end on 12 January 2021, but has now been extended to 31 March 2021.

You don’t get that many gifts from HM Government, so it’s worth repeating something you’ve no doubt already heard recently ie that with Covid-19 restrictions continuing for the foreseeable future, this winter is likely to be quite challenging for many tourism and hospitality businesses, so the extension will be welcomed across the sector.

The current reduced rate applies to food and non-alcoholic drinks from restaurants, pubs, bars and cafes. Holiday accommodation and admission fees to tourist attractions are also included.

Businesses can choose to pass on the VAT reduction to customers and benefit from increased footfall or pocket the savings.

Flat rate scheme

Flat rate percentages have been correspondingly reduced and these will also continue through to 31 March 2021. For example, the rate for restaurants and takeaways has been cut from 12.5% to 4.5%. Given the reduced rates do not apply to alcohol sales, any decision on joining or leaving the flat rate scheme is currently quite complex. Professional advice is essential.

Some anomalies

  • A gin and tonic consists mainly of tonic, but the 20% standard rate still applies (the tonic being an incidental extra). On the other hand, VAT is apportioned for an offer combining food (5% rate) and a pint (20% rate).
  • Hot takeaway food benefits from the reduced rate, but not confectionery, crisps, and the like. However, they qualify if eaten on the supplier’s premises.
  • Off-premises catering is not included within the reduced rate as it is not on the supplier’s premises.

The use of the flat rate scheme eliminates these anomalies, as just the one rate is used across a business sector.

VAT deferral

The government has also introduced an interest-free payment window for any VAT payments deferred from 20 March to 30 June 2020. Instead of paying the full amount by March 2021, businesses will now be able to make 11 equal instalments over the 2021/22 financial year.

Full details of HMRC guidance can be found here.

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Chancellor Unveils Winter Economy Plan

Written by admin on . Posted in Budget, COVID-19, Employment Law, Tax. No Comments on Chancellor Unveils Winter Economy Plan

The latest pandemic support measures are much less generous than before.

Despite cancelling this year’s Autumn Budget, Rishi Sunak has still made an early autumn appearance before the House of Commons to announce his ‘Winter Economy Plan’. He announced new employment support and amendments to existing schemes.

Job Support Scheme (JSS)

The JSS is the next stage of the furlough scheme (strictly the Coronavirus Job Retention Scheme (CJRS)), which comes to an end on 31 October. The JSS, which will run until 30 April 2021, is aimed primarily at small and medium-sized employers and will only apply to employees who work at least one third of their normal hours. For the hours that are not worked, the government and the employer will each pay one third of lost pay. The net results in terms of employee income and employer costs are shown in the table.

Hours Worked

As

%

Normal Hours

 Employee Income Earned

 

% Full Pay

 Employer Non-working Contribution

 

% Full Pay

 Government Non-working Contribution*

   

% Full Pay

 Total Employee Income

 

% Full Pay

 Total Employer Outlay  

          

% Full Pay
25.00 25.00   0.00   0.00 25.00 25.00
33.33 33.33 22.22 22.22 77.77 55.55
50.00 50.00 16.67 16.67 83.34 66.67
75.00 75.00  8.33  8.33 91.66 83.33
      100.00    100.00 – –     100.00     100.00

*Capped at £697.92 per month.

Payments under the JSS will not affect an employer’s entitlement to the £1,000 Job Retention Bonus.

Self-Employed Income Support Scheme (SEISS)

The existing scheme has been restructured and extended to April 2021. Only those already eligible will be entitled to claim. The first grant, covering the three months to 31 January 2021, will cover 20% of average monthly trading profits and is capped at £1,875. The terms of the grant for the next three months will be set ‘in due course’.

Both the JSS and revised SEISS are considerably less generous than the existing CJRS and SEISS, which have so far (to 20 September) cost the Treasury over £52 billion. This cut to support is understandable from the government’s financial viewpoint, but it is also a reminder of the importance that your personal financial planning makes provision for an adequate cash reserve.

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When is a van a car?

Written by admin on . Posted in Company Car Tax, Employment Law, Law, Tax. No Comments on When is a van a car?

The tax treatment of cars and vans is quite different, with van classification far more beneficial from both an employer and employee perspective. However, the distinction is not always clear-cut, especially where vans have been modified to turn them into multi-purpose vehicles.

In what is now being referred to as the “Coca Cola van case”, the Court of Appeal has ruled that three modified crew-cab vehicles provided by Coca-Cola to its employees, who used them privately, are cars rather than vans, despite the vehicles having the outward appearance of a van.

Modification

The three vans in question were panel vans modified with a second row of seats behind the driver, turning them into crew cabs. With two of the vehicles, the additional seats could only be removed with tools. For the other vehicle, the seats were removed during working hours.

Primarily suited

For benefit purposes, classification as a van depends on a vehicle being primarily suited to the carrying of goods.

The Court of Appeal’s view was that the modifications had transformed the three vans into multi-purpose vehicles, equally suitable for carrying either goods or passengers. Not being primarily suited to the carrying of goods, the vehicles therefore did not qualify as vans.

What a vehicle looks like on the inside overrides its outward appearance.

The decision could also see crew cabs reclassified for capital allowance purposes (so no annual investment allowance), but still considered vans for VAT purposes provided they can carry a payload of one tonne or more.

Implications

Employers should be aware of the tax implications of providing similar modified crew cab vehicles where private use is permitted.

The decision will mean a higher benefit charge for employees, and additional class 1A NICs for employers. The change should be applied from 2020/21 onwards, and also potentially backdated to 2018/19 (when the case was heard at the Upper Tribunal).

HMRC guidance on the difference between cars and vans for car benefit purposes can be found here .

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HMRC targets employers over CJRS claims

Written by admin on . Posted in COVID-19, Employment Law, Law, Tax. No Comments on HMRC targets employers over CJRS claims

With reports of two-thirds of furloughed employees continuing to work during the Covid-19 lockdown, despite the initial prohibition of work as an explicit condition of furlough, it is no surprise that HMRC has already written to 3,000 employers it believes may need to repay some or all of the grant they have received under the Coronavirus Job Retention Scheme (CJRS).

Until 30 June, it was a condition of the scheme that furloughed employees cease all work in relation to their employment. Flexible furlough was brought in from 1 July, so HMRC are likely to only pursue the most blatant cases of employees continuing to work, such as where an employer instructed them to do so.

Incorrect claims

HMRC will also be concerned where an employer has:

  • Claimed more grant than they are entitled to, for example, where a claim is based on inflated wage figures.
  • Claimed the grant despite not meeting the conditions such as including ineligible employees.
  • Not passed the grant on as wages to the furloughed employees.

HMRC’s target is those who have deliberately defrauded the system. However, even if they believe no mistake has been made in their claims, any employer contacted by HMRC should respond to the enquiry.

Amnesty

An employer can repay any overpaid amount of CJRS grant without incurring a penalty provided HMRC is notified within 90 days of the later of:

  • 20th October 2020;
  • the date the grant was received, or
  • the date when circumstances changed so the employer is no longer entitled to keep the grant.

Failure to meet the deadlines could result in a minimum penalty of 30% of the grant improperly claimed, with a potential maximum penalty of 100%.

The overpaid amount may be recovered by HMRC making an assessment. Otherwise, the employer will be subject to a tax charge payable on the usual tax due dates for an individual or a company.

Latest HMRC guidance on eligibility for the furlough scheme can be found here.

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Defining ‘adversely affected’ for the self-employed

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Many self-employed workers will have already claimed their second, and final, Self-Employment Income Support Scheme grant, but otherwise have until 19 October to do so. A key condition is that the business must have been ‘adversely affected’ by Covid-19 on or after 14 July 2020, and HMRC has provided guidance as to what this means.

Timing

Since applications will close on 19 October, the adverse effect must occur before then. However, if a business subsequently recovers, eligibility will not be affected.

Amount

There is no minimum threshold over which income or costs need to have changed, so just a small drop in income or an increase in costs will meet the ‘adversely affected’ requirement. Of course, the change must be Covid-19 related.

There are several ways in which Covid-19 could impact on income and costs. For example:

  • Not being able to work due to shielding, self-isolation, sickness or having caring responsibilities;
  • Having to scale down or stop trading due to supply chain interruptions, fewer customers or clients, staff being unable to work or having contracts cancelled; and
  • Additional costs incurred to buy protective equipment to meet social distancing rules.

A business is still classed as ‘adversely effected’ should contracts lost prior to 19 October be subsequently revived.

Records

You need to have records of how and when the business has been adversely affected. This should be fairly straightforward and will often just be a case of noting relevant dates when you were unable to work or trade or saving invoices for additional costs.

As regards income, retain any correspondence for cancelled work. A comparison to the same period for previous years may be needed if a business is open but has fewer customers.

The ‘adversely effected’ requirement will not be met if income has risen compared to last year, even if income would have been even higher if not for the Covid-19 pandemic.

Full details of HMRC guidance can be found here,

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