In this month’s E News there is an emphasis as we might expect upon the measures linked to the continuing COVID-19 pandemic. The UK economy is now officially in recession and unemployment continues to rise within a number of major sectors across the country. There is increasing concern regarding potential changes in tax policy and we are hearing from more and more SME business owners that are concerned as to whether they will be bearing the brunt of re-financing the costs of lockdown and furlough. We hope that you will find some of the articles thought provoking.
- HMRC outlines Job Retention Bonus criteria
- Treasury sets out next steps for Making Tax Digital
- Government announces review of business rates scheme
- Eat Out to Help Out now up and running
- Scottish government cuts LBTT to help home buyers
- Wales reduces LTT rate
- Chancellor asks OTS to review capital gains tax
- Overclaimed COVID grants
- Chancellor unveils three-point plan for jobs
- Stamp duty temporarily reduced
- Flexible furloughing starts on job retention scheme
- Government expands aid for start-ups and innovators
- Bank of England increases stimulus package for UK economy
- FCA confirms further support for consumer credit customers
- Private sector off-payroll reforms given go ahead for April 2021
- Late payment crisis has worsened during coronavirus lockdown
- COVID-19: delay to VAT reverse charge on construction services
- Changes to insolvency and company law going through Parliament
- UK sets out post-Brexit tariff regime
- MPs open inquiry into £155 billion of tax reliefs
- Get ready for 30-day returns and payments for residential property gains
- New tests and new car benefit percentages
- Rise in contactless card payment limit
HMRC has outlined the eligibility requirements for the Job Retention Bonus (JRB) that follows the furlough scheme as part of the government’s measures to support the economy through the COVID-19 lockdown.
The government’s Coronavirus Job Retention Scheme ends on 31 October 2020 and the JRB aims to provide additional support to employers who keep on their furloughed employees in meaningful employment.
The JRB is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the scheme, and who remains continuously employed through to 31 January 2021. Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Employers will be able to claim the JRB after they have filed PAYE for January and payments will be made to employers from February 2021.
All employers are eligible for the scheme including recruitment agencies and umbrella companies. They should ensure that they have complied with their obligations to pay and file PAYE accurately and on time under the Real Time Information (RTI) reporting system, maintained enrolment for PAYE online and have a UK bank account.
Employers will be able to claim for employees who were furloughed and had a Coronavirus Job Retention Scheme claim submitted for them that meets all relevant eligibility criteria for the scheme.
They must have up-to-date RTI records for the period to the end of January and not be serving a contractual or statutory notice period, that started before 1 February 2021, for the employer making a claim.
HMRC will publish further details about this process before the end of September 2020.
Internet link: GOV.UK publications
On 21 July, the Treasury set out the next steps in its plan to extend Making Tax Digital (MTD) to all businesses and those taxpayers that file self assessment returns.
Currently, businesses above the VAT threshold of £85,000 are required to comply with Making Tax Digital for VAT (MTD for VAT).
From April 2022, the initiative will be extended to all VAT-registered businesses including those with turnover below the VAT threshold. From April 2023 MTD will apply to taxpayers who file income tax self-assessment tax returns for business or property income over £10,000 annually.
According to the Treasury, the MTD changes will affect the way that taxes are reported, not the level of tax that is collected. They will help to minimise avoidable mistakes, which cost the exchequer £8.5 billion in 2018/19.
Jesse Norman, Financial Secretary to the Treasury, said:
‘We are setting out our next steps on MTD… as we bring the UK’s tax system into the 21st century.
‘MTD will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.’
Internet link: GOV.UK publications
The government has published a call for evidence on the overhaul of the business rates system that applies in England.
The government announced at the 2020 Budget in March that it would conduct a review of the business rates system in England. It is seeking views from businesses, business representative organisations, local authorities, rating agents, others involved in the operation of the system and anyone interested in the business rates or wider tax system.
The call for evidence seeks views on how the business rates system currently works, issues to be addressed, ideas for change and a number of alternative taxes.
The government stated that it welcomes views on the multiplier and reliefs sections of the call for evidence by 18 September 2020, to inform an interim report in the autumn.
Internet link: TM Treasury consultations
On 1 August, the government’s Eat Out to Help Out scheme began operating at eateries across the country.
The scheme was announced by Chancellor Rishi Sunak in his Summer Economic Update. It provides a 50% reduction of up to £10, for sit-down meals in participating cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.
Those establishments taking part in the scheme will display stickers and posters in their windows. Diners can take advantage of the offer as many times as they like during the month and do not need to present a voucher.
Chancellor of the Exchequer Rishi Sunak said:
‘Our Eat Out to Help Out scheme’s number one aim is to help protect the jobs of 1.8 million chefs, waiters and restaurateurs by boosting demand and getting customers through the door.
‘More than 72,000 establishments will be serving discounted meals across the country, with the government paying half the bill. The industry is a vital ingredient to our economy and it’s been hit hard by coronavirus, so enjoy summer safely by showing your favourite places your support – we’ll pay half.’
Internet link: GOV.UK publications
On 15 July, the Scottish government reduced the rate of Land and Buildings Transaction Tax (LBTT) following a similar reduction to the rate of residential Stamp Duty Land Tax (SDLT) announced by Chancellor Rishi Sunak in the recent Summer Economic Update.
LBTT is payable by the purchaser in a land transaction occurring in Scotland. SDLT applies to land transactions in England and Northern Ireland.
The threshold at which residential LBTT is paid has been raised from £145,000 to £250,000 in order to help homebuyers following the coronavirus lockdown. Announcing the change, Finance Secretary Kate Forbes said that 80% of homebuyers will be exempt from paying LBTT.
Scottish Finance Secretary Kate Forbes said:
‘Overall, increasing the LBTT threshold will help increase housing market activity, boost the construction sector and stimulate our economy.
‘Alongside this distinctive Scottish approach to raising the starting threshold for LBTT, I am also targeting further support in other areas. For example, we are injecting £50m into our First Home Fund, which provides first time buyers with up to £25,000 to buy a property. This will help an estimated 2,000 first time purchases.
‘To mitigate the immediate adverse impact on the housing market in Scotland as a result of the Chancellor’s announcement, we are now working at pace on the necessary legislation and to ensure Revenue Scotland is ready to collect and manage the tax.’
Internet link: Scottish government LBTT
On 27 July, the Welsh government reduced the rate of Land Transaction Tax (LTT) following the cuts made to SDLT and LTT across the rest of the UK.
LTT is payable by the purchaser of residential or non-residential property occurring in Wales.
From 27 July 2020, the starting threshold for residential LTT rose from £180,000 to £250,000. This applies until 31 March 2021. The tax reduction does not apply to purchases of additional properties, including buy-to-let and second homes.
The Welsh government predicts that around 80% of homebuyers in Wales will pay no tax when purchasing their home, and that buyers of residential property who would have paid the main rates of LTT before 27 July will save £2,450 in tax.
Rebecca Evans, Welsh Minister for Finance, said:
‘These rates and thresholds have been set so they more closely reflect the property market in Wales and will ensure that we retain a progressive regime that expects those with the broadest shoulders to contribute a larger share in tax.’
Chancellor Rishi Sunak has asked the Office of Tax Simplification (OTS) to carry out a thorough review of capital gains tax (CGT).
In a letter to the OTS, the Chancellor requested that the independent office review CGT and aspects of the taxation of chargeable gains in regard to individuals and small businesses.
Mr Sunak requested that the review identifies and offers advice on the opportunities to simplify the taxation of chargeable gains to ‘ensure the system is fit for purpose’.
In the letter, the Chancellor said that he would be interested in proposals from the OTS on the regime of allowances, exemptions, reliefs and the treatment of losses within CGT, in addition to the interaction of how gains are taxed compared to other types of income.
The OTS has published a call for evidence in the form of an online survey, which seeks views on CGT. The OTS wants to hear from businesses, individuals, professional advisers and representative bodies about which aspects of CGT are complex and difficult to get right, as well as suggestions on how the tax can be improved.
Taxpayers who have received CJRS or SEISS grants are urged to doublecheck their entitlement as the 90 day period to inform HMRC of any overclaimed amounts is now law.
Finance Act 2020 includes legislation that the Coronavirus Job Retention Scheme (CJRS), Self-employment Income Support Scheme (SEISS), Coronavirus Statutory Sick Pay Rebate Scheme and coronavirus business support grants are taxable. As well as including HMRC powers to recover grant payments to which the taxpayer is not entitled and penalty provisions.
HMRC has published guidance on how to repay overclaimed grants. This guidance confirms that the onus is on the taxpayer to notify HMRC if they have overclaimed a CJRS or SEISS grant and this must be done by 20 October 2020 or 90 days of receipt of the grant, whichever is the later.
On 8 July, Chancellor Rishi Sunak announced a three-point plan to support jobs in the wake of the COVID-19 pandemic when he delivered a Summer Economic Update to Parliament.
Mr Sunak confirmed the Coronavirus Job Retention Scheme (CJRS) will end as planned this October. The Chancellor said furloughing had been the right measure to protect jobs through the first phase of the crisis. The second phase will see a three-point plan to create jobs, support people to find jobs and to protect jobs.
The CJRS will be followed by a Job Retention Bonus, which will be introduced to help firms keep furloughed workers in employment. This will see UK employers will receive a one-off payment of £1,000 for each furloughed employee who is still employed as of 31 January 2021. To qualify for the payment, employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021.
The Chancellor also launched a £2 billion Kickstart Scheme that will aim to create subsidised six-month work placements for young people aged 16-24 who are claiming Universal Credit. Funding available for each placement will cover 100% of the National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic enrolment contributions. Employers will be able to top this wage up.
In order to support the UK’s tourism and hospitality industry, the Chancellor announced a cut in the rate of VAT from 20% to 5% for the sector. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, as well as supplies of accommodation and admission to attractions, including theme parks and zoos, across the UK.
Additionally, the Eat Out to Help Out scheme will entitle every diner to a 50% discount of up to £10 per head on their meal at any participating, eligible food service establishment from Monday to Wednesday. Participating establishments will be fully reimbursed for the 50% discount.
Mr Sunak said:
‘Our plan has a clear goal: to protect, support and create jobs. It will give businesses the confidence to retain and hire. To create jobs in every part of our country. To give young people a better start. To give people everywhere the opportunity of a fresh start.’
Internet link: GOV.UK publications
Chancellor Rishi Sunak announced a temporary cut in the rate of Stamp Duty Land Tax (SDLT) in order to boost confidence in the flagging housing market in his Summer Economic Update.
Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential SDLT in England and Northern Ireland from £125,000 to £500,000. This will apply to purchases from 8 July 2020 until 31 March 2021.
Additionally, the Chancellor announced a £2 billion Green Homes Grant, providing at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, up to £5,000 per household. The scheme aims to upgrade over 600,000 homes across England, helping to reduce energy bills and support the green economy.
Eric Leenders, Managing Director of Personal Finance at UK Finance, said:
‘The Chancellor’s announcement on stamp duty should give a welcome boost to the housing market and in turn have positive knock-on effects for the wider economy.
‘This measure designed to re-boot the housing market builds on the wide package of support put in place by mortgage lenders, working with the regulator and HM Treasury, to help customers through these tough times.
‘The industry has a clear plan to help homeowners whatever their financial situation and is committed to providing ongoing support to those customers who need it.’
On 1 July, changes to the Coronavirus Job Retention Scheme (CJRS) saw flexible furloughing introduced, so employees will no longer have to be furloughed for a minimum period of three weeks.
Following the change the CJRS has more flexibility to allow claims on a pro rata basis. Employers will be able to permit employees to work some of the week and be furloughed for the rest.
An employee needs to have been furloughed for at least three consecutive weeks between 1 March and 30 June to be eligible for furlough from 1 July. Additionally, after 1 July, employers may be subject to a cap on the number of employees that can be claimed for in a CJRS claim they are able to make.
The CJRS changes have effect from 1 July until the closure of the scheme on 31 October.
Parents returning from statutory maternity leave, paternity leave, adoption leave, shared parental leave and bereavement leave are broadly exempt from the CJRS furlough changes. So parents who are returning to work over the coming months will be eligible for the CJRS despite the scheme closing to new entrants on 30 June.
Additionally, from 1 August, the level of the grant will be reduced each month. From August the employer will need to pay employer national insurance and pension contributions for the time the employee is furloughed. For August, the government will continue to pay 80% of wages up to a maximum of £2,500 proportional to the hours the employee is furloughed. For September, the government will pay 70% of wages up to £2,187.50, and for October, the government will pay 60% of wages up to a maximum of £1,875. During these months employers will have to top up employees’ wages to ensure they receive 80% of their wages up to the £2,500 cap.
Internet link: GOV.UK publications
The government has expanded its COVID-19 support for start-ups and innovative companies with the launch of a new fund.
On 27 June the government announced the Sustainable Innovation Fund (SIF), which is aimed at helping businesses to keep ‘cutting edge’ projects and ideas alive during the pandemic.
The SIF will make almost £200 million available to UK companies that are developing new technologies in certain areas. These include making homes and offices more energy efficient, creating ground-breaking medical technologies, and reducing the carbon footprint of public transport.
The government is asking research and development-intensive businesses to apply for the funding.
Internet link: Sustainable Innovations Fund
On 18 June, the Bank of England increased the stock of purchases of UK government bonds by an additional £100 billion to help boost the UK economy following the coronavirus (COVID-19) pandemic.The £100 billion in additional quantitative easing funds takes the total to £745 billion.
The MPC also voted to cut the cost of borrowing to a record low of 0.1%. The Committee admitted it is ‘hard to draw conclusions about the UK’s recovery prospects’ and stated that extra stimulus is needed to help boost the UK economy and push inflation.
The MPC said:
‘The unprecedented situation means that the outlook for the UK and global economies is unusually uncertain.
‘It will depend critically on the evolution of the pandemic, measures taken to protect public health, and how governments, households and businesses respond to these factors.
‘Inflation is well below the 2% target and is expected to fall further below it in coming quarters, largely reflecting the weakness of demand.’
Internet links: Bank of England’s Market Notice.
The Financial Conduct Authority (FCA) has confirmed further support for users of certain consumer credit products if they are experiencing temporary payment difficulties due to the coronavirus pandemic.
The measures outline the options firms will provide for credit card, revolving credit and personal loan customers who are coming to the end of a payment freeze. They also outline options for customers who have agreed an arranged interest-free overdraft of up to £500.
In addition, customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500 will have until 31 October 2020 to apply for one.
According to UK Finance, its members have offered over 27 million interest-free overdrafts, provided 992,400 payment deferrals on credit cards and 686,500 payment deferrals on personal loans during the pandemic.
Christopher Woolard, Interim Chief Executive at the FCA, said:
‘Since the coronavirus crisis began, we have made support available for those borrowers financially affected by the pandemic.
‘For those who are now in a position to restart payments, it will be in their best interests to do so. But for those who still need it, the package we are confirming today ensures there is help and further support.’
Internet link: FCA press release
The introduction of off-payroll rules to the private sector will go ahead as planned next April after an attempt to delay them failed in the House of Commons.
The reforms of the off-payroll rules to the private sector, which are known as IR35 and have applied to the public sector since 2017, was reviewed earlier this year.
They will shift the responsibility for assessing employment status to the organisations employing individuals.
The rules would have applied to contractors working for medium and large organisations in the private sector and were due to come into effect on 6 April this year. Due to the disruption caused by the outbreak of the coronavirus, the decision was taken in March to delay the introduction until 6 April 2021.
An amendment to the Finance Bill, brought by a cross-party group of MPs, was designed to delay the IR35 changes until 2023, but was defeated by 317 votes to 254.
The move to introduce new IR35 rules to the private sector has proved highly controversial, amid claims that the regulations are too complex and that HMRC’s online tool Check Employment Status for Tax (CEST), used to determine whether they apply, is flawed.
Internet link: Parliament website.
The Federation of Small Businesses (FSB) has found that the UK’s late payment crisis has worsened during the coronavirus (COVID-19) lockdown.
62% of small businesses have been subject to late or frozen payments during the COVID-19 pandemic, according to research carried out by the FSB. Just 10% of small firms have agreed changes to payment terms with their clients. In addition, 65% of small businesses that supply goods or services to other businesses have experienced being paid late or having payments frozen.
The FSB has called on policymakers to give the Small Business Commissioner additional powers to investigate and fine repeat late payment offenders.
Mike Cherry, National Chairman of the FSB, said:
‘Before the COVID-19 outbreak struck, many small firms were already under immense financial pressure because of late payments.
‘Cash is still very much king for small firms, and withholding it has pushed many to the brink at a time when they’re at their most vulnerable. Our endemic culture of treating small businesses as free credit lines against their will must be brought to an end.’
Internet link: FSB press release.
On 5 June 2020, HMRC announced a five-month delay to the introduction of the domestic VAT reverse charge for construction services, due to the impact of the COVID-19 pandemic on the sector.
The change will now apply from 1 March 2021 and will overhaul the way VAT is payable on building and construction invoices as part of moves to reduce fraud in the sector. Under the domestic reverse charge, the customer receiving the service must account for the VAT due on these supplies on their VAT return, instead of paying the VAT to the supplier..
The change was originally scheduled to come into effect from 1 October 2019, but was then deferred for 12 months, after industry bodies highlighted concerns about lack of preparation and the impact on businesses.
Now the start date has been put back from 1 October 2020 to 1 March 2021.
There will also be an amendment to the original legislation. Businesses are excluded from the reverse charge on relevant supplies where they are end users, or intermediary suppliers. If so they must inform their subcontractors, in writing, that they are end users or intermediary suppliers.
HMRC says the additional amendment is designed to make sure both parties are clear whether the supply is excluded from the reverse charge. It reflects recommended advice published in HMRC guidance and brings certainty for subcontractors as to the correct treatment for their supplies.
HMRC says it will continue to focus additional resources on identifying and tackling existing perpetrators of fraud in the construction supply chain. It will also work closely with the sector to raise awareness and provide additional guidance and support to make sure all businesses will be ready for the new implementation date.
Internet link: GOV.UK publications
The government is making changes to insolvency and company law as a result of the COVID-19 pandemic.
The Corporate Insolvency and Governance Bill outlines that struggling companies will be given extra time to consider rescue plans presented to them. As part of the changes, companies will have 20 business days to consider a rescue plan, which can be extended to 40 days at the discretion of creditors or the Court.
The Bill stipulates that a company will remain under the control of directors; however, the insolvency process must be overseen by a licensed insolvency practitioner.
Additionally, restructuring plans have been introduced in the Bill, which will bind creditors and allow the insolvency process to adjust as the COVID-19 pandemic changes.
Colin Haig, President of insolvency trade body R3 said:
‘This Bill represents the biggest change to the UK’s insolvency and restructuring framework for almost 20 years.
‘The measures contained in this Bill will support the profession’s efforts to help businesses navigate the enormous economic damage caused by the pandemic.’
Internet link: Parliament website
The UK government published its plans for a new import tariff regime following the end of the Brexit transition period.
Following its departure from the EU, the UK has the ability to set its own rules and charges.
The scheme includes the abolition of tariffs on imports worth over £30 billion, although economists say the impact on the cost of living will be small.
Some tariffs will be maintained on imported items such as beef and cars to protect British producers. Other items will have tariffs simplified, and expressed in pounds instead of euros.
Josh Hardie, Deputy Director General at the Confederation of British Industry (CBI), said:
‘The new tariff scheme will provide businesses with much-needed clarity on post-Brexit trade.Simplifying the system, scrapping tariffs under 2%, reducing duties on sustainable products are all things firms can work with.
‘Sticking closely to many existing tariff levels will give other countries incentive to agree trade deals with the UK.
‘However, businesses will need time to assess the detail, and ensuring there’s a system in place to address issues as they arise will be critical. Crucially, firms’ number one priority is for the government to strike a deal with the EU and ensuring continuity of existing trade deals.’
Internet link: GOV.UK publications
The Public Accounts Committee (PAC) has opened an inquiry into the UK’s management of £155 billion of tax relief.
The inquiry follows the February publication of a National Audit Office (NAO) report that identified over 300 such tax interventions, totalling £155 billion per year.
The NAO raised concerns about the effectiveness of management of tax expenditures by the Treasury and HMRC.
It found that there is no formal framework governing the administration or oversight of tax expenditures.
The NAO said that although the Treasury and HMRC have begun steps to increase their oversight of tax expenditures and more actively consider their value for money, these will not be enough on their own to address concerns.
Commenting on the inquiry, John Cullinane, Tax Policy Director at the Chartered Institute of Taxation, said:
‘We greatly welcome the PAC taking up this important issue.
‘Governance of tax reliefs in the UK is not systematic or proportionate to their value or the risks they carry. There is a mismatch between the significant effort in government and to an extent Parliament that rightly goes into new tax measures, and the relative lack of attention to how effective those measures prove over time. This is particularly the case with tax expenditures.
‘Unless HMRC and the Treasury actively monitor the use and impact of tax reliefs, and act promptly to analyse increases in their costs, we cannot assume that these reliefs will be value for money.’
Internet link: Parliament website
Legislation has been enacted to change reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. Also introduced is a requirement to make a payment on account of the associated capital gains tax (CGT) liability. For disposals made on or after 6 April 2020:
- a standalone tax return is required if there is a disposal of UK land on which a residential property gain accrues
- CGT is required to be computed on the reported gain in the tax return
- the return needs to be filed and the CGT paid within 30 days of the completion date of the property disposal.
The new requirements do not apply if a chargeable gain does not arise, for example where the gains are covered by Private Residence Relief.
Internet link: GOV.UK publications
As part of its drive to encourage green motoring, the government has introduced a new emissions test, as well as new car benefit percentages. The scale of charges for working out the taxable benefit for an employee who has use of an employer provided car is computed by reference to bands of CO2 emissions multiplied by the original list price of the vehicle. The maximum charge is capped at 37% of the list price of the car.
In 2017, the government announced that cars registered from April 2020 will be taxed based on the Worldwide harmonised Light vehicles Test Procedure (WLTP). Legislation has now been passed to amend the previously planned benefit percentages for 2020/21 through to 2022/23.
- All zero emission cars will attract a reduced percentage of 0% in 2020/21 and 1% in 2021/22, before returning to the planned 2% rate in 2022/23.
- For cars registered before 6 April 2020, the current test procedure will continue to apply and there are no further changes to percentages previously set for 2020/21. These rates will be frozen at the 2020/21 level for 2021/22 and 2022/23.
- For cars first registered from 6 April 2020, most rates will reduce by 2% in 2020/21 before returning to planned rates over the following two years, increasing by 1% in 2021/22 and 1% in 2022/23.
The WLTP aims to be more representative of real-world driving conditions, compared to the current test known as the New European Driving Cycle. The government estimates that reported CO2 values may be, on average, about 2 – 25% higher under the WLTP when compared to the current test.
Contact us for advice on car benefits.
Internet link: GOV.UK publications
From 1 April the spending limit for contactless card payments rose from £30 to £45.
The decision to increase the payment limit was reached following consultation between the retail sector and the finance and payments industry, and echoes similar increases in other European countries.
UK Finance stated that the change had been under consideration before the outbreak of COVID-19, but has been brought forward in order to support consumers during the pandemic.
Commenting on the increase, Stephen Jones, CEO of UK Finance, said:
‘The payments industry has been working closely with retailers to be able to increase the contactless payment limit to help customers with their shopping at this critical time for the country.
‘This will give more people the choice to opt for the speed and convenience of purchasing goods using their contactless card, helping to cut queues at the checkout.’
UK Finance said that, given the pace at which the change is being rolled out, the new payment limit will take ‘some time’ to be introduced across all retailers.
Consumers spending more than £45 will be able to make use of many other ways to pay, including Chip and PIN, cash and mobile payments.
Internet link: UK Finance press release