You can flexibly furlough employees from 1 July

Last updated: 26 June 2020, 09:00

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You can flexibly furlough employees from 1 July. A just-published Treasury Direction sets out the framework.

From 1 July, a flexible furlough scheme is being introduced which means that you can bring back to work employees who have been furloughed before this date for at least three weeks (or who have not been previously furloughed but are returning from statutory maternity and paternity leave) for any amount of time and any shift pattern while still being able to claim a grant for any of the usual hours that they are not working.

Some contribution towards the cost of the scheme will begin from 1 August and the amount of contribution will increase in September and in October until the scheme ends on 31 October.

COVID-19: Self-employed to receive second grant worth 70% of earnings

Last updated: 2 June 2020, 09:00

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COVID-19: Self-employed to receive second grant worth 70% of earnings

The government has announced that the self-employed will receive another grant to cover June, July and August if their business has been affected by coronavirus. Are your clients eligible and how can you help them?

Who can get the grant? 
Self-employed individuals or members of a partnership are eligible for a grant representing up to 70% of their average profits if they meet the following criteria:

  • they submitted a tax return for 2018/19
  • their business traded during 2019/20
  • their business is continuing to trade, or would be except for coronavirus
  • they intend to continue trading in 2020/21
  • they have lost trading/partnership trading profits due to coronavirus
  • their trading profits were less than £50,000 and represented more than half of their total taxable income.

How much will they be paid? 
Individuals will get a taxable grant which will be 70% of the average profits from the tax years 2016/17 to 2018/19. If they became self-employed during those years, HMRC will use the average for the years they submitted tax returns for. The maximum amount is £2,250 per month for three months, so to get the full amount your client would need to have average profits of £38,570 per annum. Applications for this second and final grant will open in August.

Can the self employed  apply if they haven’t claimed the first grant? 
Absolutely, individuals can continue to apply for the first grant until 13 July 2020. They don’t need to have claimed the first grant to receive the second grant, for example, if their business has only recently been affected by coronavirus.

If you were eligible for the first grant, HMRC should have contacted you already. You can check your eligibility here

COVID-19: Coronavirus Job Retention Scheme (CJRS)

Last updated: 1 June 2020, 09:00

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COVID-19: Coronavirus Job Retention Scheme (CJRS)

The Chancellor has just announced major changes to the Coronavirus Job Retention Scheme (CJRS). There’s good news and bad – how might you be affected?

Employer contribution.
Under the CJRS currently, you can claim 80% of a furloughed employee’s salary up to £2,500 per month plus employers’ NI and the minimum auto-enrolment pension contribution. From August you will need to start contributing towards the cost of furloughing. This will be on a sliding scale as follows:

  • From August, you will have to pay the employers’ NI and the minimum auto-enrolment pension contribution
  • From September, you will also have to contribute 10% of furlough pay. This means that you will only be able to claim 70% of furlough pay and you must make up the difference so that your furloughed employees continue to receive the 80% minimum.
  • From October, this contribution increases to 20% of furlough pay. This means that you will only be able to claim 60% of furlough pay and you must make up the difference so that your furloughed employees continue to receive the 80% minimum.

Flexible furloughing from July.
From July, you can ask furloughed employees to work on a part-time basis while remaining on furlough for the rest of the time. This is new, before this date furloughed employees were prohibited from doing any work for you.

Access to the CJRS.
From July, the CJRS will only be available to employers that have previously used it in respect of employees they have previously furloughed. The CJRS will therefore close to new entrants from 30 June. From this point onwards, you will only be able to furlough employees that you have furloughed for a full three-week period prior to 30 June. This means that the final date by which you can furlough an employee for the first time will be 10 June, in order for the three-week furlough period to be completed by 30 June.

End date.
The Chancellor has confirmed that the CJRS will close on 31 October

COVID-19: Company Directors & Shareholders

Last updated: 27 March 2020, 14:00

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COVID-19: Company Directors & Shareholders

Many small companies are run by just one or two directors and have no other employees.

What government financial support is available to director/shareholders during the Coronavirus crisis?

  • A director or company officer is an employee for PAYE purposes.
  • A director cannot claim the by virtue of holding the office of a director.
  • Although it may be possible for a company to furlough a director under the COVID-19 Job Retention Scheme there are potential issues for small companies to consider.
  • Company law dictates that director should be engaged under the terms of a service contract with their company.
  • A service contract does not automatically create an employment contract.
  • Many director/shareholders are remunerated in the most cost efficient method for their company: a mixture of low salary topped up by dividends.

If the director’s company is adversely affected by COVID-19, the director has the following options, depending on the circumstances:

Potential insolvency

  • If the company becomes insolvent: the director must immediately take advice from a qualified insolvency practitioner.
  • As a director you should not allow the company to continue to trade on whilst you are knowingly insolvent: you potentially become liable for your company’s debts, including amounts due to HMRC.

Furloughing

Furloughing for normally employee type duties:

  • If, as a director you were on the payroll, engaged under an existing written or verbal employment contract on 19 March 2020, and your services, in performing the duties expected of you as an employee or director are not required due to the affects of the ongoing crisis, the company may furlough you.

Can you furlough a sole director?

  • In deciding whether to furlough a director in respect of their duties as a company officer, it is assumed that the director will not be furloughed in respect of their duties as an officer of the company. This is because a company cannot operate without its director and all directors have ongoing fiduciary duties to their companies.
  • We (this website) take a view that most companies will need to have someone on hand, to handle on-going administration, such as post, bookkeeping, tax filings and banking. We see no reason why a company cannot go into a ‘COVID-19 hibernation’ meaning that the director would have no day to day duties during that period but we are uneasy recommending that a sole director is laid off completely. Perhaps part-furloughing is possible and duties in working as a company officer could be agreed at say 1 day per week. Duties as an employee would then by furloughed. This would be evidenced by two contracts: a service contract and an employment contact.
  • HMRC states that ‘If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.’
  • HMRC statement is at odds with the idea that a company could go into a period of hibernation. However, it is for the employer to agree the terms of any modification to an employment contact and for the directors to act in the best interests of the company.

Salary or dividends?

  • There is no scheme in place for the government to provide financial support to shareholders where the amount of their dividend is affected by the COVID-19 crisis.
  • If a company can no longer afford to pay dividends, it may be insolvent, directors should take appropriate advice.
  • If the company decides to change the terms of the contract in order to pay a salary instead of a dividend, this must be agreed contractually between the company and its director. As suggested above, we would normally expect to see a service contact which details the duties of a director as a company officer and an employment contract which covers duties as an employee.

Above all it needs to be remembered that a furloughed employee is not allowed to work for the employer during the furlough period. Depending on the type of business, a company director may well need to work in some capacity during even a period of closure of the business.

Additional support for small companies

  • Employee job retention scheme: if you have other employees
  • Grant funding: if you have a business premises
  • Small business rate relief: if you have a business premises
  • VAT payment deferral
  • Emergency bank loans
  • Extension of Companies House filing deadline.

Self Employment Income Support Scheme

Last updated: 26 March 2020, 17:00

Here’s a quick summary of practical help for Self Employed notified by the Chancellor.

If we can be of any assistance, please don’t hesitate to call us.

Self Employment Income Support Scheme

  1. Direct cash grant of 80% of their profits, up to £2,500 per month
  2. The self-employed receive up to £2,500 per month in grants for at least 3 months.
  3. Apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account.
  4. The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
  5. To qualify, more than half of their income in these periods must come from self-employment.
  6. Only those who are already in self-employment and meet the above conditions will be eligible to apply.
  7. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.
  8. Grants will be paid in a single lump sum instalment covering all 3 months and will start to be paid at the beginning of June.
  9. Individuals should not contact HMRC, HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
  10. Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

COVID-19: UK practical business advice

Last updated: 23 March 2020, 10:47.


Here’s a quick summary of practical help notified by the Chancellor.

You can read the latest advice and guidance from government for businesses on its coronavirus pages.

Most recent changes to the Coronavirus Job Retention Scheme

  • Coronavirus Job Retention Scheme now extended ot the end on June
  • Cut-off date for Coronavirus Job Retention Scheme extended to 19 March 2020
  • To qualify and to protect against fraudulent claims, individuals originally had to be employed on February 28 2020.
  • Employers can claim for furloughed employees that were employed and on their PAYE payroll on or before 19 March 2020. This means that the employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before 19 March 2020.

Coronavirus Job Retention Scheme

Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will be open currently until the end of June, and can include workers who were in employment (and HMRC were aware of their employment via an RTI submission) on 19th March 2020

To claim under the scheme employers will need to:

  • designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.

VAT payments

The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.

The deferral applies automatically and businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.

Income Tax payments

Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

Eligibility is limited to the self-employed ie, the deferral does not apply to those that are in self assessment but are not self-employed. The Tax Faculty has sought clarification from HMRC but our current understanding is that the deferral applies to any taxpayer who was self-employed in the 2018/19 tax year on which the payment on account is based.

Universal credit

Self-employed people can now access full universal credit at a rate equivalent to statutory sick pay.

HMRC Time to Pay

HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559.

Business Rates holidays and cash grants

  • No rates payable for the 2020-2021 tax year for any business in the retail, hospitality or leisure sectors.
  • In those sectors, if your rateable value is between £15K and £51k, you’ll also receive a cash grant of up to £25,000 per property.
  • Any business which gets small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000 (increased from £3,000 announced in the 11 March Budget).
  • The rates holiday and cash grants will be administered by local authorities and should be delivered automatically, without businesses needing to claim.

Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) provides support for businesses to access funding if certain eligibility criteria are met.

COVID-19 corporate financing facility

  • To support larger firms, the Bank of England has announced a new COVID-19 Corporate Financing Facility to provide a quick and cost-effective way to raise working capital via the purchase of short-term debt.
  • This will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms.
  • The Government will very soon be announcing further information on this facility.

Mortgage and rent holiday

Mortgage borrowers can apply for a three- month payment holiday from their lender. Both residential and buy-to-let mortgages are eligible for the holiday. It is important to remember that borrowers still owe the amounts that they don’t pay as a result of the payment holiday. Interest will continue to be charged on the amount they owe.

Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.

Insurance claims

Businesses that have cover for both pandemics and government-ordered closure should be covered. The government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres, etc., is sufficient to make a claim as long as all other terms and conditions are met. Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers.

Statutory Sick Pay (SSP)

  • If you’re a director of a limited company with less than 250 employees, you can pay yourself two  weeks of SSP if you need to self-isolate subject to meeting the minimum payroll requirement for SSP.
  • The government will refund £94 per week, maximum £188, to your company.
  • It will also refund SSP for staff of businesses with less than 250 employees  for up to two weeks.

Start your tax year end planning early

The start of the new year is traditionally the time when tax year end planning comes to the fore in the financial planning calendar.

There will be (perhaps material) exceptions, but for many, planning those important conversations with the likes of accountants and financial advisers in the three months leading up to the 5th April is becoming ever more important. This will also give sufficient time for action, and will be close enough to the “closing date” to give the conversations the feeling of urgency that you may need.

Of course, the end of the tax year also brings excellent tax-efficient investment opportunities to further help your situation. The 5th April is the last day in which you can make use of your £20,000 ISA allowance for example. This is important if you are looking for a tax-free investment vehicle in which to house a wide variety of different funds, stocks and shares to order to obtain growth.

But does the General Election on 12 December create a responsibility to ensure that tax year end planning conversations are had before that? Well, I don’t have the manifestos yet, but I can be pretty sure that tax under a Labour Government or Labour led coalition of some sort (formal or informal) would be very different to that we are currently living with – on all fronts – income tax, capital gains tax, inheritance tax and corporation tax. From the little I have (largely from papers released at their conferences) the Lib Dems also have some fairly radical ideas on the taxation of income, capital gains and inheritance. Even the Conservatives may decide to make some tax changes – though not so radical.

I reiterate that I do not have the manifestos, but I do know from what’s been said so far in the campaign that both Labour and Conservatives have ambitious spending plans. The point is that whoever gets into power and especially if we have a Labour Government the reliefs and exemptions currently available are unlikely to get materially better than they are currently.

So, in light of all this, it’s becoming ever more important to run a ‘tax year end health check’ ahead of the election to at least ensure that consideration is given to identifying the reliefs and exemptions available to you, and to discuss the relevance and appropriateness of acting to improve your “tax health” – sooner rather than later. If the only reason action hasn’t been taken to date is just not having “got around to it” then the added incentive that some of the reliefs and exemptions available now might not be after the first Budget – which would probably be in January – maybe the encouragement you need to bring forward action that might otherwise have taken place later in this tax year.

Rent a room relief

Rent a relief was introduced back in 1992 to increase the supply of housing across the country, encouraging lettings of rooms to students or people working away from home during the week.

Rent a room relief currently allows that you can earn up to £7,500 or £3,750 if let jointly, tax free when letting out a room in your only, or main residence.

With the increase of Airbnb rentals and similar this has meant that people renting out under these platforms are making use of this relief. The government have realised that they are losing out on tax revenue through a relief being used for something it was not intended for.

They did propose to add an additional rule to this relief to ‘fix’ this problem and this was included and consulted upon in the draft legislation destined for the Finance Act 2019.

The additional rule was that a ‘shared occupancy’ test, where during the letting term there would have to be a period of shared occupancy with the owner of the house. This was widely challenged as being very difficult to prove. So to maintain the simplicity of the system this was not legislated on and whole house lets through Airbnb and similar are still ok for now!

IR35 Changes coming into force 6th April 2020

If you intend to borrow from your company, can you avoid the tax charge?

HMRC will refer to you as the worker if you are the person actually doing the job, your company or partnership that bills for the work you do is an intermediary and the business etc that you are working for is the client. From the 6th April, the client must decide if the new regime applies to them.

If it does they must review the terms and conditions on which you provide your services and decide whether if you worked direct rather than through your company you would be an employee instead of a freelance contractor

If the client decides you would be an employee, it will need to deduct tax and national insurance for all future payments it makes to your company. It must inform you of this decision, but it doesn’t have to until it pays you, this may mean the first you know if this is when you are paid less than you billed the client

Tip

Ask your client to review the contract well before that date, HMRC has a check employment status for tax (CEST) online tool. Beware however this is being overhauled as the current version can produce the wrong answer. You can challenge your client’s assessment and it has 45 days to explain how it arrived at its decision

Changes to property relief on capital gains income from April 2020

Currently proposed, not yet bottomed out but likely to come into force from April 2020.

Reduced relief on the final exemption period of deemed occupancy from 18 months to 9 months along with changes to the letting’s relief.

New shared occupation conditions will need to be met to qualify. Currently can claim the lower of your private residence relief, gain in the letting period or £40k but you will now only get this this lettings relief if you are in occupation and sharing the occupancy of your residence, so in layman’s terms you need to still be living there. This means that going forward it will be very hard for people to get this relief and for most people it will be £0. So on a property sale there will be cliff edge effect if you sell your property after April 2020 compared if you sell if you sell in the current tax year, see table below: