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A date for the diary. On Wednesday 3rd March, Chancellor of the Exchequer, Rishi Sunak will be delivering Budget 2021. At its core will be measures to support the recovery from COVID-19.
HM Treasury are trailing “The Budget will set out the next phase of the plan to tackle the virus and protect jobs…”. In addition, the eligibility criteria for the fourth tranche of the Self-Employment Income Support Scheme grant will be announced.
It is no exaggeration to say that this will be the most important Budget in recent times. There are key dates around the corner:
Will there be much-needed support for those that have fallen through the cracks of the Self-Employment Income Support Scheme? Will the Furlough Scheme be extended into the summer? When does the VAT deferral instalment payment scheme go live? Are 2020-21 Business Rates to be scrapped for the retail, hospitality and leisure sectors? Will there be further extensions to existing policies? Is this the time for tax increases?
All these questions and more will be answered on Wednesday 3rd March.
As in previous years, CooperFaure will be providing a live Twitter feed as Rishi Sunak speaks in the House of Commons followed by a digest of the key announcements and a detailed review. Make date to join us on Wednesday 3rd March for Budget 2021.
As Chancellor of the Exchequer, Rishi Sunak, announced in his Winter Economy Plan in September, the 2019-20 Personal Tax Payment Plan system is now live.
HMRC has now launched an online platform to enable you to arrange an instalment plan for your 2019-20 tax payment that would normally be due on 31st January 2021.
This has to be done by the individual. Accountants and tax advisors like CooperFaure are prohibited from accessing this service through our Agent’s portal.
There are five qualifying criteria:
– you must have no outstanding tax returns, unpaid debts or existing payment plans with HMRC;
– your tax due is no more than £30,000;
– you must set up the payment plan within sixty days of the original payment date (in other words by 31st March 2021);
– you have to pay the instalments by direct debit; and
– your tax is paid in full by the end of January 2022.
If you qualify and are looking to pay your tax bill over time, the HMRC link is here.
For those without a Government Gateway account, this can be set up at the beginning of the process in the same manner as under the Self-Employment Income Support Scheme.
Most importantly, your 2019-20 tax return needs to have been submitted to HMRC before accessing this service for there to be visibility on the tax due.
For a large percentage of those who submit a personal tax return, in particular the self-employed, the payment due at the end of January would usually consist of the balancing payment for the 2019-20 tax year and the first payment on account for the 2020-21 tax year.
It may also need to cover the second payment on account for the 2019-20 tax year, if you took the option to defer this payment that was originally due by 31st July 2020.
As part of this process, our advice is to look at whether the level of the first payment on account for the 2020-21 tax year is appropriate.
The HMRC system is geared that the tax you pay in one tax year is a fair basis for the tax you will pay in the next. For many, the impact of COVID-19 means that this simply will not be the case and you have the right to reduce the 2020-21 payments on account accordingly.
However, in determining your likely 2020-21 income compared 2019-20, do not forget that any payments you receive from the Self Employment Income Support Scheme are taxable income that need to be included.
The HMRC platform will give you option to make an initial lump sum payment and to set the amount of the monthly instalment and the time period, up to the maximum of twelve months if the plan is implemented before 31st January 2021.
Whilst HMRC are indicating that around 95% of taxpayers due to make a payment by 31st January 2021 will qualify to use this self-serve option, all is not lost if you cannot.
You can contact either the Self-Assessment Payment Helpline on 0300 200 3822 or the COVID-19 Helpline on 0800 024 1222 to discuss the options with HMRC.
If you are looking for a payment period of over twelve months, HMRC will ask for more details, such as on your current level of income and expenditure, before agreeing an extension.
If you have any questions or concerns on your 2019-20 tax return, please contact us at personal.tax@cooperfaure.co.uk for an initial free and independent chat.
The week started with the last-minute reprieve of the Job Retention Scheme for November and ends with the scheme being extended through to March 2021.
The Chancellor has announced that, for December and January, the scheme will continue to cover 80% of an employee’s current salary for hours not worked, up to a maximum of £2,500. Flexible furloughing will continue to be allowed in addition to full-time furloughing. The employer will remain responsible for the National Insurance and pension contributions for hours not worked along with the full costs of hours worked.
The Government will review the landscape in January to determine whether an additional employer contribution would be appropriate.
As well as providing much-needed certainty for those businesses severely impacted by COVID-19, this also offers a lifeline for businesses that suffer turbulence from Britain leaving the European Union on currently unspecified terms on 31st December.
In a major change, employees that were employed and on the payroll on 23rd September 2020, which was the day before the Job Support Scheme was unveiled, and were then made redundant or stopped working can be re-employed and furloughed.
The Government also announced increased support under the third instalment of the Self-Employment Income Support Scheme, with people receiving 80% of average trading profits for the November to January period. The online service for this grant will be available from 30th November 2020.
There will be a fourth grant covering February to April 2021 and the Government will set out further details, including on this in due course.
It is important to remember that these grants are taxable income and also subject to National Insurance contributions.
Whilst this is welcome news for those already on the scheme, to qualify for this third tranche, self-employed individuals, including members of partnerships, must:
This means that the original eligibility criteria remain the basis. These being that the individual:
It seems extraordinary and, quite frankly, shameful that those groups that have fallen through the cracks continue to remain on the outside.
The individual who started their self-employment after the 2018-19 tax year, the freelancer working through their limited company and many small business owners are left neglected other than, potentially, access to Universal Credit.
Given that that the filing deadline for the 2019-20 Self-Assessment falls within the period of the third grant, it is inexplicable to why it cannot be used as the eligibility base.
As well as those who started trading in the 2019-20 tax year, this would also extend the level of support two other groups. Those whose self-employment income has declined to below the £50,000 average threshold in the year and those who started their self-employment part way through the 2018-19 tax year.
Whilst the Job Retention Scheme is a vital lifeline for many small businesses, the stark reality is that those business owners whose remuneration had been driven primarily through dividends and whose business has been crushed by COVID-19 are getting no tangible personal support. One wonders how many of these businesses will survive into the spring.
In other announcements:
The original Job Retention Scheme was due to end at midnight on 31st October to be replaced by the Job Support Scheme. In a dramatic development, literally hours before the deadline, the scheme has been extended to cover the period of the new national lockdown to December.
In addition, the scheme is reverting to the position in August covering 80% of an employee’s current salary for hours not worked, up to a maximum of £2,500.
Flexible furloughing will continue to be allowed in addition to full-time furloughing. The employer will remain responsible for the National Insurance and pension contributions for hours not worked along with the full costs of hours worked.
Broadly, the scheme will continue to operate in the same manner as before. However, there are a couple of significant changes:
– neither the employer nor the employee needs to have previously used the scheme to be eligible; and
– an employee must be on an employer’s PAYE payroll before 31st October 2020. In practice, this means a Real Time Information submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.
The Job Support Scheme has been postponed until the furlough scheme ends.
The government also announced that businesses required to close in England due to local or national restrictions will be eligible for the following to the following grants through their local authority:
– for properties with a rateable value of £15,000 or less, £1,334 per month or £667 per two weeks;
– for properties with a rateable value of between £15,001 and £51,000, £2,000 per month or £1,000 per two weeks;
– for properties with a rateable value of over £51,000, £3,000 per month, or £1,500 per two weeks.
Finally, the period for mortgage payment holidays was also due to end on 31st October. This has also been extended. Borrowers who have impacted by COVID-19 who are yet to have a mortgage payment holiday will be entitled to a six month holiday whilst those who have started will be able to top up to six months without this being recorded on their credit file.
The Chancellor of the Exchequer, Rishi Sunak, has announced major changes to the Job Support Scheme in response to the changing COVID-19 landscape.
The Job Support Scheme Open starts from 1st November and will run for six months. It is designed to support businesses that can operate safely but are facing lower demand over the winter months due to COVID-19.
Under the scheme, the minimum hours required for employees to work has been reduced from 33% to 20% and the employer contribution for non-worked hours has been lowered from 33% to 5%.
The Government will pay 61.67% of hours not worked up to a cap of £1,541.75 per month, with the employer contributing 5% of non-worked hours up to a cap of £125.00 per month. These caps are driven by a monthly base amount of £3,125.00.
As a result, an employee will earn a minimum of 73% of their normal wages where these usual wages do not exceed the base amount.
As before, the scheme is open to all employers with a UK bank account and a UK PAYE scheme but large businesses will be required to demonstrate that their business has been adversely affected by COVID-19.
Importantly, the Job Support Scheme Open will be available to businesses even if they have not previously used the furlough scheme.
For an employee to be eligible, they must be on the company payroll before midnight on 23rd September 2020. In other words, a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made on or before 23 September 2020.
Employees will be able to be moved on and off the scheme and do not have to be working the same pattern each month. However, the minimum claim period will be seven consecutive days.
Along with the 5% of non-worked hours, the employer will be responsible for the full Employer’s National Insurance and automatic enrolment pension contribution.
In the same manner as the Job Retention Scheme, the grant payments reimbursing the element covered by the Government will be made in arrears.
For the worked hours, the employer must pay the employees their contracted rate. For the non-worked hours, the employer must pay the employees the Government and employer contributions in full. However, employers can top up employee’s wages above the 5% contribution at their own discretion.
Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
Employers using the Job Support Scheme Open will also be able to claim the Job Retention Bonus which offers a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed and paid through to the end of January 2021.
It is important to recognise that short time working arrangements are a change to the employee’s employment contract. As a result, this can only be done by mutual accord and with the signed agreement of the employee. HMRC may ask for these agreements to be made available.
As an example, under the scheme, an employee with a monthly gross salary of £1,800.00 who can work for one day a week would be paid £360.00 for the time worked. For the time not worked, the employer would pay £72.00 and the Government would pay £888.05. As a result, the employee would receive £1,320.05 gross pay.
Earlier in the month, the Chancellor announced that there will be a Job Support Scheme expansion for closed business premises where the business is legally required to close as a direct result of COVID-19 restrictions. The Job Support Scheme Closed will run under the same eligibility criteria.
However, businesses required to close as a result of a specific workplace COVID-19 outbreak are not eligible for this scheme.
For each eligible employee, the Government will cover two-thirds of their normal pay up to a limit of £2,083.33 per month.
Although there is no requirement for the employer to top up this amount, they will still be responsible for the Employer’s National Insurance and automatic enrolment pension contribution.
As with the Job Retention Scheme, these grants will be payable in arrears. The first claim for pay periods ending and paid in November will be able to be submitted from 8th December. HMRC are due to be publishing further guidance on the claim process this week.
Negotiations with our partners in the European Union towards a trade deal seem to be faltering, increasing the probability of a “No Deal Brexit”.
Despite a sneaking suspicion that it is in both sides interests to pull a deal from the fire at the last minute, there will be guaranteed changes from 1st January 2021.
Businesses with an EU connection will have a new relationship and it is vital to be prepared. The reality is that, notwithstanding the other challenges businesses are currently facing, the UK will be outside of the single market and customs union in what is now a matter of days.
The government has launched a website https://www.gov.uk/transition with a checker tool where you can see the impact on you and your business.
As the website apocalyptically states – Time is Running Out. As of today, there are seventy-three days to go until the end of the transition period and there will be no extension, so you need to act now.
Whatever happens, there are guaranteed to be changes to:
More than that, you need to consider other factors from where personal data is stored and whether there is any impact on your accounting and reporting requirements to having a GB sticker on the back of your vehicle.
We have run a simulation for a professional services company below to give you an idea of the matters to consider and we would urge you to do the same for your business and to subscribe for updates at the end of the process.
How to get ready for new rules in 2021: Your results
What you need to do may change
Subscribe to email updates about changes that may affect you and get a link to your results
Your business or organisation
Because you said:
Check if your employees need a visa or work permit and that they meet professional requirements for the country they’re going to
You or your employees might not be able to enter or work in some countries.
More information:
Providing services to any country in the EU, Iceland, Liechtenstein, Norway or Switzerland from 2021
Check if you need to change your contract to keep accessing personal data from the EU, Norway, Iceland or Liechtenstein
You may not be able to access personal data from the EU without the right arrangements in place.
More information:
Using personal data in your business or organisation from 2021
Appoint a representative in the EU if you run a large UK-based online business providing digital services in the EU
You risk being fined if you do not have a representative to help you meet online security standards.
More information:
NIS Regulations – what digital service providers in the UK should do from 2021
Check what you need to do if you own a UK legal services business
You risk not being able to continue providing legal services in the same way if you do not meet new requirements.
More information:
Legal services business owners from 1 January 2021
Check what you need to do to continue to work or provide legal services in the UK, if you’re a lawyer with a qualification from the EU, Norway, Iceland or Liechtenstein
You risk not being able to continue working or providing legal services in the UK if you do not prepare.
More information:
EU lawyers in the UK from 1 January 2021
Check the rules for providing online services to the EU, Norway, Iceland or Liechtenstein
You may be breaking the law if you do not follow the rules in the country you provide online services to.
More information:
The eCommerce Directive after the transition period
Check which carbon pricing policies you need to comply with
You risk not complying correctly with emissions reporting and carbon pricing regulations, which could lead to a fine.
More information:
Meeting climate change requirements from 2021
Check if you need to change how you do accounting and reporting
You risk breaching reporting requirements in the EU, Norway, Iceland or Liechtenstein if you do not make any changes you need to.
More information:
Accounting for UK companies from 1 January 2021
Check the rules for reporting unfair trade practices using the UK’s new trade remedies service
You risk being affected if imported goods are dumped on the UK market or are benefiting from subsidies – or if there is a sudden increase in imports to the UK of a certain product.
More information:
Applying for a trade remedies investigation
Get your UK qualification recognised if you want to work in a regulated profession in the EU, Norway, Iceland or Liechtenstein
You risk not being able to continue working or providing services in the EU if you do not prepare.
More information:
Recognition of professional qualifications
You and your family
Visiting the EU
Because you said:
Check if you need a visa or work permit and meet the professional requirements to travel to the EU, Switzerland, Norway, Iceland or Liechtenstein for work
You may not be able to enter or work in some countries if you do not meet the requirements.
More information:
Visit Europe from 1 January 2021: Business travel
Check whether your mobile phone company has changed its mobile roaming charges before travelling to the EU, Switzerland, Norway, Iceland or Liechtenstein
You may be charged for using your mobile device in the EU, Switzerland, Norway, Iceland or Liechtenstein if your operator has reintroduced roaming charges.
More information:
Visit Europe from 1 January 2021
Check for disruption to your journey before you travel between the UK and the EU – border checks may take longer
If you do not allow enough time, you could miss your flight, train or ferry.
More information:
Visit Europe from 1 January 2021
Check if you need an International Driving Permit before you drive in the EU, Switzerland, Norway, Iceland or Liechtenstein
You could get a fine or your vehicle could be seized if you drive without the correct documents.
More information:
Put a GB sticker on the back of your vehicle if it’s registered in the UK, even if your number plate already shows GB with a Euro symbol
You could get a fine if you do not have a GB sticker when you need one.
More information:
Driving in the EU from 2021 – GB stickers and number plates
Visiting Ireland
Because you said:
Check whether your mobile phone company has changed its mobile roaming charges before travelling to the EU, Switzerland, Norway, Iceland or Liechtenstein
You may be charged for using your mobile device in the EU, Switzerland, Norway, Iceland or Liechtenstein if your operator has reintroduced roaming charges.
More information:
Visit Europe from 1 January 2021
What you need to do may change
Subscribe to updates about changes that may affect you and get a link to your results.
The Chancellor of the Exchequer, Rishi Sunak, has delivered his Winter Economy Plan to support economic recovery in response to the current COVID-19 landscape. These measures include:
– A new Job Support Scheme;
– The extension of Self Employment Income Support Scheme;
– The extension of the 5% reduced VAT rate for the hospitality and tourism sectors to 31st March 2021;
– The extension of the application deadline for the various loan schemes to 30th November 2020;
– The introduction of Pay as You Grow flexible repayments under the Bounce Back Loan Scheme;
– The option to pay VAT deferred from the March to June 2020 by instalments across the 2021-22 tax year; and
– The option to pay 2019-20 personal tax liabilities by instalments between January 2021 and January 2022.
The new Job Support Scheme will be introduced from 1st November and will run for six months and is designed to help protect viable jobs in businesses who are facing lower demand over the winter months due to COVID-19.
The Government will contribute towards the wages of employees who are working a minimum of 33% of their normal hours due to decreased demand. The Government will review the minimum working requirement after three months.
The employer pays the wages for the hours worked by the employee but, for the hours not worked, the Government and the employer will each pay one third of their equivalent salary up to a cap of £697.92 per month.
For example, under the scheme, an employee with a monthly gross salary of £1,800.00 who can work for a third of their time would be paid £600.00 for the time worked. For the time not worked, the employer would pay £400.00 and the Government would pay £400.00. As a result, the employee would receive £1,400.00 gross pay.
However, it does mean that the employer effectively pays 55% of the salary for 33% of the work and, as we understand it, will also have to pay Employers’ National Insurance on the £1,400.00.
The decision to consider only businesses where employees can work as viable, leaves many businesses in the events sector, such as nightclubs that are required to be closed, without any support from the end of October.
The scheme is open to all employers with a UK bank account and a UK PAYE scheme but large businesses will be required to demonstrate that their business has been adversely affected by COVID-19.
Importantly, the Job Support Scheme will be open to businesses even if they have not previously used the furlough scheme and the Government will publish further guidance being in due course.
The Self-Employment Income Support Scheme will be extended through to April 2021 for those currently eligible and who are actively trading but are facing reduced demand due to COVID-19.
There will be two grants. The first will cover the three-month period from November to January and will cover 20% of average monthly trading profits paid out in a single instalment and capped at £1,875 in total. The second will cover the three-month period from February to April. The Government will set the level of this grant in due course.
The reduced 5% VAT rate for the hospitality and tourism sectors will be extended to 31st March 2021. This will continue to apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, supplies of accommodation and admission to attractions across the UK.
The Government is extending the new application deadline to 30th November 2020 for the following loan schemes:
– Bounce Back Loan Scheme
– Coronavirus Business Interruption Loan Scheme
– Coronavirus Large Business Interruption Loan Scheme
– Future Fund
All businesses that borrowed under the Bounce Back Loan Scheme will have the option to repay their loan over a period of up to ten years rather than the current six years under the new Pay as You Grow flexible repayment system. In addition, there will the option to move to interest-only payments for periods of up to six months with this option able to be used up to three times over the course of the loan. Alternatively, payments can be paused entirely for up to six months and, to qualify, a business will need to have made a minimum of six full monthly payments.
The Government also intends to allow Coronavirus Business Interruption Loan Scheme lenders to extend the term of a loan up to ten years.
Businesses that deferred VAT due in the March to June 2020 period will have the option to spread their payments over eleven equal interest-free instalments across the 2021-22 tax year. All businesses which took advantage of the VAT deferral will be able to use this New Payment Scheme by opting in. HMRC will put in place an opt-in process in early 2021.
The self-employed and other taxpayers will Self-Assessment liabilities of up to £30,000 in the 2019-20 tax year will be given more time to pay these taxes that would normally be due in January 2021. HMRC will launch a self-service Time to Pay facility to enable a payment instalment plan to be implemented on the proviso that the tax is paid in full by the end of January 2022.
The Chancellor of the Exchequer, Rishi Sunak, has delivered his Summer Economic Update which contained a number of policy decisions intended to support the recovery from COVID-19. There were a number of flagship announcements.
Under the Job Retention Bonus, the government will introduce a one-off payment of £1,000 to UK employers for every furloughed employee who remains continuously employed and paid through to the end of January 2021.
The payments will be made from February 2021 and further details on the scheme will be announced by the end of July.
However, Mr Sunak reiterated that the Job Retention Scheme would finish at the end of October. Whilst understanding the complexity in targeting particular sectors, there is a strong likelihood many businesses will still be unable to trade at that point leaving closure as the only option.
To offset the impending loss of jobs, the government will introduce a new Kickstart Scheme in Great Britain. This £2 billion fund is designed to create hundreds of thousands of high-quality six-month work placements and is aimed at those aged 16-24 who are on Universal Credit and are deemed to be at risk of long-term unemployment.
The employer will be funded to cover the relevant National Minimum Wage for a twenty-five hour week plus the associated employer National Insurance contributions and employer minimum automatic enrolment pension contributions.
To encourage businesses to hire apprentices, the government will introduce a new payment of £2,000 to employers in England for each new apprentice they hire aged under twenty-five and a £1,500 payment for those hired twenty-five and over between 1st August 2020 and 31st January 2021.
The tourism and hospitality sectors have been particularly severely impacted by COVID-19 with around 1.4 million staff furloughed. A number of measures were announced to stimulate demand.
The Eat Out to Help Out scheme will run in August to encourage people to return to eating out. This will entitle every diner to a 50% discount of up to £10 per head on their meal at any participating restaurant, café, pub or other eligible food service establishment. The discount can be used unlimited times and will be valid from Monday to Wednesday on any eat-in meal including on non-alcoholic drinks.
The participating establishments will be fully reimbursed for the 50% discount and registration opens on 13th July. Further details can be found here.
Some key points for an establishment to consider are that:
There will be a temporary cut in the rate of VAT from 20% to 5% for food, non-alcoholic drinks, accommodation and attractions between 15th July 2020 and 12th January 2021.
This reduced rate of VAT applies to:
There is some ambiguity as whether this benefit is intended for the provider or to be passed through to the consumer. Further guidance on the scope of the relief is due to published by HMRC in the next few days.
On property and housing, the government has temporarily increased the Nil Rate Band of residential Stamp Duty Land Tax in England and Northern Ireland from £125,000 to £500,000. This is in force from now until 31st March 2021.
Those purchasing second homes, buy-to-let properties and property investors who purchase through limited companies will also benefit. However, the 3% surcharge will still apply.
Finally, the government will introduce a £2 billion Green Homes Grant that will provide at least £2 for every £1 that homeowners and landlords spend to make their homes more energy efficient up to £5,000 per household.
The last date to furlough an employee under the Coronavirus Job Retention Scheme has now passed but, from 1st July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.
This option only applies to employees who have previously been furloughed for at least three consecutive weeks taking place any time between 1st March and 30th June 2020, with the exception of those employees returning from statutory parental leave.
Another consideration is that the number of employees that can be included in any single claim period starting from 1st July is capped at the maximum number of employees claimed for in any claim ending by 30th June.
For example, if an employer has submitted three claims for thirty, forty and thirty employees then the maximum number of employees that could be furloughed in any single claim starting on or after 1st July would be forty.
To flexibly furlough employees, the employer will need to agree this with each employee and keep a written, signed agreement that confirms the new furlough arrangement. It is essential that the agreement is consistent with employment, equality and discrimination laws and it must be kept on file for five years.
Flexible furlough agreements can last for any amount of time and an employee can enter into a flexible furlough agreement more than once.
There are a couple of traps to avoid. Prior to 1st July, a furlough period must be for a minimum of three consecutive weeks regardless of whether this period ends before or after 1st July.
For example, a previously furloughed employee can start a new furlough period on 22nd June which would have to continue for at least three weeks. As a result, the first date the employee could be flexibly furloughed would be 13th July.
After 1st July, employers cannot make claims that cross calendar months, so in this scenario, the employer would need to make a separate claim for the period up to 30 June.
For worked hours, the employee must be paid at their contractually agreed rate of pay.
For employees paid at the National Living Wage or National Minimum Wage level, these rates went up on 1st April. Although this does not impact the Job Retention Scheme which is based on prior earnings, these will apply to the pay for hours worked under flexible furlough. The new hourly rates are:
National Living Wage £8.72
21-24 Year-Old Rate £8.20
18-20 Year-Old Rate £6.45
16-17 Year-Old Rate £4.55
Apprentice Rate £4.15
Whilst there is no maximum length for claim periods, from July, claims cannot cross months. As a result, for every furloughed employee, there is an effective end period on 30th June which is a particular consideration for weekly paid staff as this is a Tuesday.
Going forward for the remainder of the lifecycle of the scheme, for weekly paid staff, there will be a misalignment between the pay period and the claim period accordingly.
The final date for a claim for periods ending on or before 30th June is 31st July 2020.
From July, an employer can only make one claim for any period which has to be a minimum of seven days and claim periods must not overlap. As a result, all furloughed and flexibly furloughed employees need to be included in the claim even if they are paid at different times.
The claim can continue to be made before, during or after payroll processing and a claim can be made up to fourteen days before your claim period end date.
However, for flexibly furloughed employees, the claim should only be made once there is certainty on the number of hours worked during the claim period.
For a flexibly furloughed employee, each claim period will need to show the usual hours worked, the actual hours worked and furloughed hours.
There are two different calculations for an employee’s usual hours, depending on whether they work fixed or variable hours.
Variable hours apply if either:
The employee’s working pattern does not have to match their pay period. For instance, an employee could be contracted to work forty hours in a five-day week but be paid monthly.
In this example, the usual hours in July would be 184 as a working day is eight hours and there are twenty-three working days in July.
For employees whose pay varies by the amount of time worked, the usual hours will be calculated based on the higher of either:
The usual hours will need to be calculated for each pay period, or part of a pay period, that falls within the claim period.
The furloughed hours for each employee are the usual hours less the actual hours worked, even if the actual hours differ to what was originally agreed.
Remember a copy of all records must be kept for six years, including:
For July, the scheme will continue to cover 80% of the employee’s pay up to a cap of £2,500 plus the Employer’s National Insurance and pension contributions for fully furloughed staff, with these amounts pro-rated for flexibly furloughed staff.
For August, the scheme will only cover 80% of the employee’s pay up to a cap of £2,500 for fully furloughed staff, with the amount pro-rated for flexibly furloughed staff.
For September, the scheme will cover 70% of wages up to a cap of £2,187.50 and, for October, the scheme will cover 60% of wages up to a cap of £1,875. However, for these months, the employee must continue to receive 80% of their pay up to a cap of £2,500. Again, these amounts would be pro-rated for flexibly furloughed staff.
The application process for the initial grant under the Self-Employment Income Support Scheme opened on 13th May 2020 and, at the end of 24th May, 2.3 million claims had been made for a total of £6.8 billion
The eligibility criteria for self-employed individuals, including members of partnerships, are that they:
Unlike the Job Retention Scheme, the self-employed individual can continue to work over the period covered by the grant.
For those eligible, the initial taxable grant equated to 80% of the average monthly trading profits and this has or will be paid out in a single instalment covering the profit for three months capped at £7,500 in total.
Applications for the initial grant will close on 13th July 2020.
The Chancellor, Rishi Sunak, has confirmed that there will be a second and final grant under this scheme equating to 70% of the average monthly trading profits. Again, this will be paid out as in a single instalment covering the profit for three months capped at £6,570 in total.
The eligibility criteria will remain the same and the individual will need to confirm that their business has been adversely affected by COVID-19 when applying for the second grant.
However, it is not a prerequisite to have claimed the initial grant for the individual to be eligible for the second grant.
Applications for the second grant will open in August 2020 and further information on the process will be published by HMRC on 12th June 2020.
Whilst this second grant will provide a vital lifeline to millions, it is frustrating that those groups that have fallen through the cracks remain on the outside.
The individual who started their self-employment after the 2018-19 tax year, the freelancer working through their limited company and many small business owners are left neglected other than, potentially, access to Universal Credit.
Given that is over two months until the application process for the second grant to open, it is mystifying as to why the Self-Assessment tax return for the 2019-20 tax year cannot be used as the eligibility base where filed.
As well as those who started trading in the 2019-20 tax year, this would also extend the level of support two other groups. Those whose self-employment income has declined to below the £50,000 average threshold in the year and those who started their self-employment part way through the 2018-19 tax year.
For the freelancer working through their limited company, the position is particularly galling.
On the one hand, in response to the House of Lords Economic Affairs Committee damning report into the upcoming IR35 reforms, Jesse Norman, the Financial Secretary to the Treasury, has opined the government view has not changed. In essence, where a freelancer is working like an employee they should be taxed broadly as an employee.
On the other hand, at a time where agility and flexibility will be cornerstones to rebuild the economy, the freelancer is not getting the access to the same support as an employee.
For the small business owner whose remuneration is driven primarily through dividends, there is a perception that this is a tax avoidance strategy. Whilst there was an element of truth to this under the old tax credit regime, this changed from 6th April 2016.
Since then, once the Corporation Tax that the company must pay to generate a dividend is taken into account, the difference to the overall tax basket between a salary or a dividend is marginal.
The primary reason for a dividend-driven remuneration strategy is to reduce the monthly cash flow burden on a business, instead opting for a payment out of the company profit once this has crystallised.
The Treasury has reiterated their position that it would be impossible to design a scheme that distinguished the small business owner from those who earn dividend income through shares.
Rishi Sunak has written on Twitter “I don’t think it would be right to be giving huge grants to those with investment portfolios.”
However, the reality of the landscape for many small business owners is that they are being driven into debt rather than getting the same support as their employees on furlough.
At a time where the country is on an employment precipice, it would seem a better approach to support small business owners rather than focus on the collateral impact of a relatively small cohort of investors.
The Chancellor, Rishi Sunak, has announced three important updates to the Job Retention Scheme.
Firstly, the concept of flexible furloughing has been brought forward by a month to 1st July 2020. This will enable businesses to bring furloughed employees back to work on a part-time basis.
It will be left for the individual business to determine the best approach for their circumstances but there are some considerations to bear in mind:
HMRC will publish further guidance on flexible furloughing and the details for employers to calculate claims on 12th June.
The Job Retention Scheme will close to new entrants from 30th June. Thereafter, employers will only be able to furlough employees have been furloughed for a full three-week period prior to 30th June.
As a result, 10th June is the final date by which an employer can furlough an employee for the first time.
Employers will have the deadline of 31st July to make any claims in respect of the period to 30th June.
From 1st July, there are three significant changes to how the scheme will operate:
The optionality will remain for the employer to make the claim ahead of an imminent payroll run, at the point payroll is run or after payroll has been run.
From August, to continue to use the Job Retention Scheme, the employer will start to share some of the costs.
This will be on a tapered monthly basis between August and October but, throughout the period, the employee must continue to receive the 80% of their normal salary capped at £2,500.00.
In August, the employer will be required to pay the Employer’s National Insurance and pension contributions. It is estimated that, for the average claim, this represents 5% of the total cost.
In September, in addition to the Employer’s National Insurance and pension contributions, the employer will be required to cover 10% of the pay. Overall, this will equate to roughly 14% of the total cost.
In October, the level of the pay element for the employer will increase to 20% making the inclusive percentage covered by the employer up to 23%.
Official figures estimate that in the region of 40% of employers are not making a claim for Employer’s National Insurance and pension contributions, so the financial impact of the change would be less severe.
Whilst the tapered approach is sensible as part of a strategy to re-energise the economy, it does beg the question of how many businesses will even this limited contribution be too much.
The Chancellor also announced that Self-Employment Income Support Scheme will be extended, and we will review the details in our next newsletter.
At CooperFaure, we are nearing the tenth week of switching to a remote working model with the team working from home since the office was closed in response to COVID-19 on 16th March . We know that that this is the case for millions of employees up and down the country.
There is a cost to working from home and, understandably, in many cases, employers are not in a position to cover these costs.
In response to this, last week HMRC updated the guidance in their Employment Income Manual to say that, from 6th April 2020, it will accept that employees who are required to work at home can claim a deduction of £6 per week or £26 per month to cover the additional costs of incidentals such as light, heat and water without having to support the claim with receipts. For previous tax years, the rate has been set at £4 a week or £18 a month.
Rishi Sunak is currently evaluating increasing the amount for the 2020-21 tax year to £50 per month in light of evidence that the average actual extra costs are in excess of the current allowance.
In addition, tax relief is available for the full cost of items that an employee has purchased to facilitate home working such as an office desk, chairs, filing cabinets, bookcases, stationery and printer ink along with the actual cost of business telephone calls.
HMRC will not accept claims for costs that are not exclusively for work purposes such as broadband, insurance and clothing costs.
In theory, there is the ability to claim tax relief on the full cost of substantial equipment that an employee has had to purchase such as a laptop or printer. However, HMRC may challenge whether the purchase is exclusively for work purposes and, if so, this would have to be evidenced.
It is important to emphasize that the tax relief is only available where there is no alternative to working from home, such as office closure due to COVID-19, rather than where an employee chooses to do so.
For employees not required to submit a personal tax return and with a total claim of under £2,500.00 in a tax year, you can start the application process here.
Assuming that you meet the eligibility questions, HMRC will direct you to create a Government Gateway User ID and password. This process takes roughly ten minutes and you will need your National Insurance number and either a recent payslip or P60 or a valid UK passport.
For those employees who are submitting personal tax returns, the claim will need to be included as part of the tax return process.
Employees who have a claim in excess of £2,500 in a tax year will need to register to submit personal tax return here.
Whilst we recognise that these are not huge sums, a standard rate taxpayer with £1,000 of expenses will get £200 of relief, these are an entitlement. As the Tesco’s tagline says ‘Every Little Helps’.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.
HMRC has announced that the application process for the Future Fund will go live from Wednesday 20th May initially until the end of September 2020.
The Future Fund is designed to provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
The key eligibility criteria for the business are that:
Before going into the details, it is important to flag that this scheme in underpinned by Convertible Loan Notes which enables the investor both to opt to have their loan repaid and to earn interest on their investment. As a result, the investment from private investors will be outside the scope of SEIS and EIS tax relief.
The rationale for making the Future Fund incompatible with SEIS and EIS is to ensure that the government support goes to businesses that have been scrutinised by professional investors rather than by a cohort of friends, family and crowdfunders. This higher level of scrutiny is hoped to ensure fewer failures.
In addition, it would require legislation to bring the scheme inside SEIS and EIS which would have further delayed the launch which is time critical.
However, research undertaken by British Business Bank and the UK Business Angels Association indicates that over 85% of angel investors use EIS and SEIS to support their investments.
The British Business Bank will be delivering the Future Fund and the link to the scheme overview is here.
The application process will be investor-led. This means an investor, or lead investor of a group of investors, applies in connection with an eligible company. However, businesses will be able to register their interest.
The Future Fund will match up to 100% of the private investment from a minimum amount of £125,000 to a maximum of £5 million.
There are some restrictions on how the funds can be used and they must not:
The loans will carry a minimum of non-compounding interest rate of 8% per annum. The level of interest can be higher if the business and private investors agree.
Unlike a standard bank loan, the interest is not payable on a monthly or annual basis. Rather, it will accrue until the loan converts at which point the loan and interest will either be repaid or convert in equity.
Under the scheme, the Convertible Loan Notes will mature after thirty-six months. The loan cannot be repaid early by the company except with the express agreement of the investors.
The Convertible Loan Note Agreement is predefined and cannot be negotiated. The template is available here.
A business needs to consider carefully whether the Future Fund is the right vehicle for them. The scheme has been primarily designed for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme or Bounce Bank Loan Scheme as they are either pre-revenue or pre-profit.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.
HMRC has announced that the application process for the Self-Employment Income Support Scheme will go live from today.
The scheme is open to a self-employed individual or a member of a partnership who:
HMRC has given examples of ‘adversely affected by COVID-19’ to include those who:
If you meet these conditions, the final qualifying criteria are that your trading profits in a year must be no more than £50,000 and at least equal to your non-trading income.
The first step is to check whether HMRC believe that you are eligible for the scheme here. For this you will need your Self-Assessment Unique Taxpayer Reference number and your National Insurance number.
If this check confirms your eligibility, you will be given a date between 13th and 18th May from which you can apply.
You will need your personal Government Gateway User ID and password. Perversely, we as agents are not able to make the application on behalf of our clients through our online portal.
If you do not have these, there will be a fast-track process to set them up without the need for activation codes through the post.
It is vital that you ensure that your bank and contact details are up to date on this platform.
HMRC will first look at your 2018-19 Self-Assessment tax return in isolation but, if you are not eligible based on this tax return, they will then look 2016-17, 2017-18 and 2018-19 collectively.
HMRC have published worked examples on the calculation process here.
The application process will show how HMRC has calculated the grant that they believe you are due to receive. At this point, you can share the calculation with your agent for verification and the agent can seek a review of the calculation where appropriate.
Once your claim has been submitted, you will be notified immediately if your grant is approved and, if this is the case, the grant will be paid into your bank account within six working days.
It is important to remember that the grant itself is taxable income and, as such, it will need to be reported:
At this stage, the Self-Employment Income Support Scheme covers the period between April and June 2020 with a maximum grant of £7,500.00. However, with the news that the Job Retention Scheme has been extended to October, we expect further developments.
There are two glaring categories who will receive little or no financial support, those who started in Self-Employment after 6th April 2019 and those Company Directors whose earnings are predominantly paid in Dividends.
For the latter category, Rishi Sunak again highlighted in parliament the difficulty in distinguishing between the Dividends that are earned from those received as passive income from a share portfolio.
However, everyone who has a second payment on account for 2019-20 tax year due on 31st July can choose to delay that payment irrespective of the income source. No application is necessary for this and no penalties or interest will be charged in the deferral period.
The final payment for the 2019-20 tax year will be due by 31st January 2021 and we would strongly advise that your tax return be filed as soon as possible to crystallise the amount the due or, indeed, any potential rebate.