Newsletter – October 2021

Enews – October 2021

In this month’s Enews we consider the government’s decision to delay the introduction of Making Tax Digital for Income Tax Self Assessment until 2024; the introduction of the Health and Social Care Levy; and the announcement of the date for the Autumn Budget.

With guidance on the furlough scheme finishing, new proposals for flexible working and the end of the COVID-19 sick pay rebate, there is a lot to update you on.

Making Tax Digital for Income Tax Self Assessment delayed for a year

The government has delayed the introduction of Making Tax Digital (MTD) for Income Tax Self Assessment (MTD for ITSA) for a year, HMRC recently announced.

The government says it has made the move in recognition of the challenges faced by many UK businesses as the country emerges from the pandemic.

It will now introduce MTD for ITSA in the tax year beginning in April 2024, a year later than planned.

It says the later start for MTD for ITSA gives those required to join more time to prepare and for HMRC to deliver a robust service, with additional time for customer testing in the pilot.

Lucy Frazer, Financial Secretary to the Treasury, said:

‘The digital tax system we are building will be more efficient, make it easier for customers to get tax right, and bring wider benefits in increased productivity.

‘But we recognise that, as we emerge from the pandemic, it’s critical that everyone has enough time to prepare for the change, which is why we’re giving people an extra year to do so.

‘We remain firmly committed to MTD and building a tax system fit for the 21st century.’

Internet link: GOV.UK

National Insurance and dividend tax rises announced for social care reform

From April 2022, the government plans to create a new social care levy which will see UK-wide tax and National Insurance Contribution (NIC) increases.

There will be a 1.25% increase in NICs on earned income, with dividend tax rates also increasing by 1.25%. The money raised will be ringfenced for health and social care costs.

The Levy will be effectively introduced from April 2022, when NIC for working age employees, the self-employed and employers will increase by 1.25% and be added to the existing NHS allocation. The Levy will not apply to Class 2 or 3 NICs.

From April 2023, once HMRC’s systems are updated, the 1.25% Levy will be formally separated out and will also apply to individuals working above State Pension age and NIC rates will return to their 2021/22 levels.

Individuals who receive dividend income will also face a higher tax bill as all rates of dividend tax will increase by 1.25% from April 2022.

The dividend tax is applicable on dividend income above the frozen £2,000 dividend allowance and above the £12,570 personal allowance. Dividends on assets held in ISAs are excluded from the dividend tax.

From the 2022-23 tax year, basic rate dividend tax will be charged at 8.75% instead of 7.5% this year. Higher rate dividend taxpayers will be charged 33.75% instead of 32.5% and additional rate dividend taxpayers will pay 39.35% instead of 38.1% respectively.

Internet links: GOV.UK

Chancellor to deliver Autumn 2021 Budget on 27 October

HM Treasury has announced that Chancellor Rishi Sunak will deliver the Autumn 2021 Budget on Wednesday 27 October.

On 7 September the Chancellor launched Spending Review 2021, which will conclude on 27 October and will be presented alongside the Autumn Budget. The Spending Review will outline government departments’ resource and capital budgets from 2022/23 to 2024/25.

The Spending Review is also expected to set out how the government will deliver on its promises to the British public through leading the transition to net zero across the country; ensuring strong and innovative public services; levelling up across the UK to increase and spread opportunity; and delivering its Plan for Growth.

The Chancellor said:

‘Despite the worst economic recession in 300 years, we have not only got people back into work through the Plan for Jobs but continued to deliver on the priorities of the British people.

‘At the Spending Review . . . , I will set out how we will continue to invest in public services and drive growth while keeping the public finances on a sustainable path.’

Internet link: GOV.UK

Chancellor warned of redundancies as furlough scheme ends

The government’s Coronavirus Job Retention Scheme (CJRS) ended on 30 September after supporting millions of workers during the pandemic.

The government said the wages of more than 11 million people were subsidised for at least some of the scheme’s duration at a cost of around £70 billion.

Economists say there is likely to be a rise in unemployment due to new redundancies, despite the fact that some may be able to find work in recovering sectors such as travel and hospitality.

The Federation of Small Businesses (FSB) said the end of the furlough scheme, the scrapping of the small employer sick pay rebate and the closure of the government’s apprenticeship incentive scheme will only add pressure on companies.

Mike Cherry, the FSB’s National Chair, said:

‘It’s potentially a dangerous moment. As the weather turns colder, so too will the operating environment for many firms. With recent economic growth numbers having fallen below expectations, the upcoming festive season may not provide as much of a boost as hoped to many small businesses’ bottom lines.’

Internet link: GOV.UK FSB website

COVID-19 sick pay rebate scheme closed in September

The government’s scheme that enables small businesses to recoup statutory sick pay costs caused by COVID-19 closed at the end of September.

Legislation ending the Coronavirus Statutory Sick Pay Rebate Scheme (SSPRS) was laid before parliament on 9 September.

Before the COVID-19 pandemic, employers were obliged to pay Statutory Sick Pay (SSP) to eligible employees unable to work because of sickness. It is paid at a flat rate of £96.35 (at the current rate) for up to 28 weeks. The full cost of SSP is met by the employer.

To support employers during the pandemic, the government legislated to allow certain small and medium size employers to reclaim some, or all, of their SSP costs from HMRC via the SSPRS.

Under the new regulations, employers will not be able to reclaim SSP from 30 September 2021 and any claims relating to periods prior to that date must have been filed by 31 December 2021.

The Institute of Chartered Accountants in England and Wales (ICAEW) said:

‘It would appear that the suspension of the requirement to wait for three days before SSP is paid has not yet been repealed. The three-day rule was suspended temporarily during the peak of the COVID-19 crisis to encourage people to stay at home as soon as they felt ill.’

Internet link: ICAEW website GOV.UK

£800 million Reinsurance Scheme opens for live events

The government has opened a £800 million Reinsurance Scheme to cover live events against cancellations stemming from the COVID-19 pandemic.

The live events sector is worth more than £70 billion annually to the UK economy and supports more than 700,000 jobs, including small businesses and the self-employed.

The UK Live Events Reinsurance Scheme will support live events across the country – such as concerts and festivals, conferences and business events – that are at risk of being cancelled or delayed due to an inability to obtain COVID-19 cancellation insurance.

The government has partnered with Lloyd’s Market Association to deliver the scheme as part of its Plan for Jobs.

The scheme will see the government act as a ‘reinsurer’, stepping in with a guarantee to make sure insurers can offer the products events companies need. The scheme is available from 22 September 2021 and will run until the end of September 2022.

Chancellor Rishi Sunak said:

‘The events sector supports hundreds of thousands of jobs across the country and as the economy re-opens, we’re helping events providers and businesses plan with confidence right through to next year.’

Internet links: GOV.UK

Government announces plans to make requesting flexible working a day one right

UK workers could get more choice over when and where they work under new proposals to make the right to request flexible working a day one entitlement.

The government will also introduce a day one right to one week’s unpaid leave for carers balancing a job with caring responsibilities. The government says the plans will make for more productive businesses, whilst accommodating both employee and employer needs.

The proposals consider whether limiting an employee’s application for flexible working to one per year continues to represent the best balance between individual and business needs.

The consultation also looks at cutting the current three-month period an employer has to consider any request.

If an employer cannot accommodate a request, as can be the case, they would need to think about what alternatives they could offer.

Matthew Fell, Chief Policy Director at the Confederation of British Industry (CBI), said:

‘Businesses have learnt a huge amount about the pros and cons of flexible working during the pandemic, with many firms expecting to receive more formal and informal requests in the future. Employers support giving employees the right to request flexible working from day one in the job.

‘Companies want to work with the government to ensure that they can say ‘no’ when they have properly considered requests but for good reason can’t accept them.

Internet link: GOV.UK CBI website

British Business Bank provided £80.5 billion of COVID-19 support

COVID-19 emergency finance schemes offered £80.5 billion of finance to almost 1.7 million businesses through the British Business Bank (BBB) during the last financial year.

This support, which is not included under the Bank’s core programmes, was evenly distributed across the nations and regions of the UK.

In addition, the BBB supported £8.5 billion through its normal core finance programmes, although this was below its target of £9.085 billion due to displacement of existing programmes by COVID-19 emergency finance schemes.

The Bank was independently assessed as having deployed its expertise to the government effectively, ranging from advice on COVID-19 scheme development and delivery to fulfilling priorities on research and market engagement.

Catherine Lewis La Torre, CEO of the BBB, said:

‘Throughout 2020/21, in response to the pandemic, the BBB performed a role vital to the UK government, finance markets and the economy as a whole.

‘Our financial support to smaller businesses has increased by more than £80 billion during the last financial year, and now stands at nearly £89 billion.

‘We look forward to using our unique position in the market to support businesses further as they recover and return to growth once more, thereby rebuilding the foundations of the UK’s future prosperity.’

Internet link: British Business Bank website

 

Newsletter – July 2021

Enews – July 2021

In this month’s Enews we consider the winding down of the furlough scheme, the apprenticeship cash boost, changes to property taxes and HMRC’s investigations into COVID support schemes. With the introduction of the one stop shop for VAT on EU trade, an update on Tax-Free Childcare, tax credits renewals and claiming tax relief for working from home, there is a lot to update you on.

Article Index

  • Furlough scheme starts to wind down
  • Apprenticeship cash boost
  • Property tax changes
  • HMRC launches 13,000 investigations into COVID-19 support schemes
  • Schemes create one stop shop for VAT on EU trade
  • Over 280,000 families now using Tax-Free Childcare
  • 440,000 tax credit claimants still to renew their claims
  • 800,000 claim tax relief for working from home

Furlough scheme starts to wind down

The government’s Coronavirus Job Retention Scheme (CJRS) begins winding down from 1 July.

The latest data from the Institute for Fiscal Studies (IFS) shows that at the end of April 3.4 million jobs were still on furlough so the change to the furlough scheme will affect thousands of employers across the country.

Since last March, the government has paid 80% of the salaries of employees (up to a maximum government contribution of £2,500 per month) – with the employers only having to pay employer National Insurance and pension contributions.

From 1 July the government will only pay 70% of the furloughed employee’s salary, so the employer has to pay 10% of the salary themselves. In August and September, employers will have to pay 20%, with the government picking up 60%. Furloughed employees will continue to receive 80% of their wages including the employer contribution.

However, according to the IFS, the bill for employers keeping a member of staff on the scheme will rise significantly, putting jobs at risk. For a furloughed employee previously earning £20,000 per year, the cost to an employer of keeping them will rise from £155 per month in June to £322 in July, and £489 per month in August and September, after which the scheme is due to end.

Further details of changes to the CJRS can be found at GOV.UK CJRS.

Internet link: IFS publication

Apprenticeship cash boost

The government has confirmed that employers of all sizes in England can now apply for £3,000 in extra funding to help them take on new apprentices.

The boost to the apprenticeship incentive scheme was confirmed by Chancellor Rishi Sunak in the Budget in March.

The claims portal opened on 1 June and businesses can apply for £3,000 for each new apprentice hired as a new employee from 1 April until 30 September.

The cash incentive is designed to help more employers invest in the skilled workforce they need for the future as part of the government’s Plan for Jobs.

The government says the scheme builds on action already underway to protect, support and create more jobs while bringing the UK’s skills and education system closer to the employer market.

The Chancellor commented:

‘Young people have been hit especially hard by the crisis – which is why our Plan for Jobs, launched last year, is focused on helping them get the skills they need to get the jobs they want.

By boosting the cash incentives for our apprenticeship scheme we’re improving opportunities for young people to stay in and find work – this could not be more important in our economy’s recovery.’

Find out more and apply at www.gov.uk/guidance/incentive-payments-for-hiring-a-new-apprentice.

Internet link: GOV.UK news

Property tax changes

From 1 July 2021 there are changes to the Stamp Duty Land Tax (SDLT) and Land Transaction Tax (LTT) bands for residential property.

SDLT is payable by the purchaser in a land transaction occurring in England and Northern Ireland. The following rates and thresholds apply for SDLT from 1 July 2021 to 30 September 2021:

Residential property Band % Rates
£0 – £250,000 0
£250,001 – £925,000 5
£925,001 – £1,500,000 10
£1,500,001 and over 12

LTT is payable by the purchaser in a land transaction occurring in Wales. From 1 July 2021 the rates for residential property are:

Residential property Band % Rate
Up to £180,000 0
£180,001 – £250,000 3.5
£250,001 – £400,000 5
£400,001 – £750,000 7.5
£750,001 – £1,500,000 10
Over £1,500,000 12

There are no changes to the rates and bands for Land and Property Transaction Tax which apply in Scotland.

Internet links: SDLT rates LTT rates

HMRC launches 13,000 investigations into COVID-19 support schemes

HMRC has launched nearly 13,000 investigations into alleged abuse of the government’s coronavirus (COVID-19) financial support schemes.

A freedom of information request revealed that, up to the end of March 2021, HMRC opened 12,828 investigations into alleged cases of fraud. 7,384 of these investigations related to abuse of the COVID-19 support schemes.

5,020 investigations were launched into the alleged misuse of the Self-employment Income Support Scheme (SEISS).

Commenting on the matter, a spokesperson for HMRC said:

‘It is vital we support businesses to recover by ensuring a level playing field, so the majority are not undercut by the few who tried to cheat the system.

‘We are taking tough action to tackle fraudulent behaviour. We have now opened more than 12,000 inquiries into claimants we suspect may have kept more than they were entitled to. We have also begun a handful of criminal investigations.’

Internet link: CityAM news

Schemes create one stop shop for VAT on EU trade

Three schemes were launched on 1 July to deal with VAT on business-to-consumer supplies of goods and services to EU customers.

They are known as the ‘Union’, ‘non-Union’ and ‘import’ schemes. The schemes are designed to facilitate the collection of VAT by one EU member state, which is then passed on to the member state in which the supply is deemed to take place.

The ‘Union scheme’ covers intra-EU supplies of goods and services for businesses with their place of business or a fixed establishment within the EU.

The Union scheme will also allow a UK business to hold stock within the EU (for example, the Netherlands) and pay VAT for all EU sales to the relevant tax authorities.

The ‘non-Union scheme’ covers supplies of services to EU customers by businesses with no establishment within the EU.

The ‘import scheme’ covers the distance sale of goods below €150 fulfilled from stock held outside the EU.

If businesses register for VAT using one of these schemes, they will complete one return for all EU sales, rather than being required to register for VAT in all member states in which their customers are based. These schemes will allow businesses to declare sales across all EU member states.

Internet link: Guide to the one stop shop

Over 280,000 families now using Tax-Free Childcare

More than 282,000 working families used a Tax-Free Childcare (TFC) account during March 2021, according to figures from HMRC.

HMRC stated that it is the highest recorded number of families in any one month since the scheme was launched in April 2017. These families received a share of more than £33 million in government top-up payments for their childcare.

The TFC scheme can be used to help pay for accredited holiday clubs, childminders or sports activities – enabling parents and carers to save money on the costs of childcare.

The TFC initiative is available for children aged up to 11, or 17 if the child has a disability. For every £8 deposited into an account, families will receive an additional £2 in government top-up, capped at £500 every three months, or £1,000 if the child is disabled.

Myrtle Lloyd, Director General for Customer Services at HMRC, said:

‘We want to help kids stay active this summer, whether they are going to summer holiday clubs or a childminder. A childcare top-up will go a long way towards helping parents plan and pay for summer activities to keep their kids happy and healthy.’

More details and registration for TFC can be found at www.gov.uk/tax-free-childcare

Internet link: GOV.UK TFC statistics

440,000 tax credit claimants still to renew their claims

HMRC is reminding tax credit claimants that they have until 31 July 2021 to renew their claims.

According to HMRC, 440,000 claimants have yet to renew their claims. More than 2.5 million annual tax credits packs were posted to claimants between late April and early July 2021.

Claimants will have either received an ‘auto-renewal’ reminder or a ‘reply required’ notice. All ‘reply required’ claimants must renew their claims or contact HMRC to notify them of any change in circumstances ahead of the deadline to continue receiving tax credits payments.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

‘We know how important tax credits are to our customers, so we’ve made it quicker and easier to renew claims online. There’s no need to wait for the 31 July deadline – do it now by searching ‘tax credits’ on GOV.UK.’

To renew your tax credits claim visit www.gov.uk/renewing-your-tax-credits-claim.

Internet links: GOV.UK press release

800,000 claim tax relief for working from home

HMRC has confirmed that almost 800,000 employees who have been working from home during the pandemic have already claimed tax relief on household related costs.

The saving is worth up to £125 per year for each employee, and eligible workers can claim the full year’s entitlement if they have been told to work from home by their employer, even if it has been for just one day during the tax year.

Employees who have either returned to working in an office since early April or are preparing for their return can still claim the working from home tax relief and benefit from the full year’s relief for 2021/22.

Employees can apply directly themselves and receive the full tax relief that is due. Once their application has been approved, their tax code will be automatically adjusted for the 2021/22 tax year, and they will receive the tax relief directly through their salary.

Myrtle Lloyd, HMRC’s Director General for Customer Services, said:

‘More people are getting back to office working now, but it’s not too late to apply for tax relief on household expenses if they’ve been working from home during the pandemic.’

Check eligibility and apply online at www.gov.uk/tax-relief-for-employees/working-at-home.

Internet link: GOV.UK news

Newsletter – June 2020

Enews – June 2020

In this month’s Enews, we report on the progress of the government’s schemes to help businesses during the COVID-19 pandemic. Chancellor Rishi Sunak announced important changes to the Coronavirus Job Retention Scheme, which will run until the end of October while HMRC has once again delayed the introduction of the VAT reverse charge. We look at the latest guidance and also analyse the impact of COVID-19 on tax policy and the wider economy. As the COVID-19 pandemic continues to dominate the economy, there are lots of issues to update you on.

Chancellor announces changes to Job Retention Scheme

Chancellor Rishi Sunak has announced changes to the government’s Coronavirus Job Retention Scheme (JRS), which will be slowly wound down between July and October.

The changes mean businesses will be able to bring furloughed employees back on a part-time basis from 1 July.

Furloughed staff will continue to get 80% of their salary until the scheme finishes at the end of October. However, employers will be expected to gradually contribute more towards furloughed employees’ salaries.

The taxpayer contribution will remain at 80% during August but employers will have to pay national insurance and employer pension contributions.

In September, employers will be asked to start paying 10% towards people’s wages, which will rise to 20% in October.

JRS closes to new entrants from 30 June, but more critically, 10 June is the last date by which an employee can be put on furlough for the first time.

Dame Carolyn Fairbairn, Director-General at the Confederation of British Industry, said:

‘Introducing part-time furloughing as more stores and factories start to open will help employees to return to work gradually and safely. Many more businesses will feel supported during this vital restart phase.

‘Firms understand the scheme must close to new entrants at some point and that those using it in future will need to make a contribution to help manage the costs.

‘However, previously viable firms not able to open until later, particularly in leisure, hospitality and the creative industries, may need further assistance in the coming months.’

Internet link: GOV.UK publications

COVID-19: delay to VAT reverse charge on construction services

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

Loan size increased to £200 million under large business interruption scheme

Several changes to the CLBILS scheme have taken effect from 26 May. The government has extended the maximum loan size available through the Coronavirus Large Business Interruption Loan Scheme (CLBILS) from £50 million to £200 million.

However, companies borrowing more than £50 million through the CLBILS will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan. This will include a ban on dividend payments and cash bonuses, except where they were previously agreed.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:

‘It is good to see the government continue to listen to business concerns and make improvements to existing schemes.

‘These important changes could make a real difference to larger firms in particular, and alongside the other lending support schemes will help ensure that more businesses of all sizes get access to the finance they need to help weather this unprecedented economic storm.’

Internet link: British Business Bank website

Future Fund launches to give start-ups coronavirus support

On 20 May 2020, the government launched its Future Fund package, which aims to support start-up businesses not eligible for other COVID-19 rescue measures.

The Future Fund offers government loans of between £125,000 and £5 million to UK-incorporated companies, provided private investors at least match the funding supplied by the state.

The package is aimed at supporting innovative early stage companies not eligible for existing COVID-19 support.

The Future Fund is administered by the government-backed British Business Bank (BBB). The loans can be repaid or converted into shares in the Investee Company in a variety of circumstances, including fundraisings, exit events and upon the maturity of the loans.

The fund is currently due to run until at least the end of September.

Internet links: Investor information and company information

Coronavirus Statutory Sick Pay Rebate Scheme goes live

On 26 May 2020, HMRC opened up its Statutory Sick Pay (SSP) rebate claim service.

Eligible employers are able to recoup up to two weeks’ worth of SSP payments made to employees off work for COVID-19-related reasons since 13 March 2020 (16 March 2020 if the employee was shielding). This is an ongoing scheme for which an end date has not yet been announced.

The scheme is potentially worth up to £191.70 per employee that an employer has made SSP payments to for COVID-19-related reasons.

For the purposes of making a claim, it does not matter whether the employee was displaying symptoms themselves or was living with someone who was displaying symptoms. It also does not matter whether the employer topped up their earnings (although only the SSP element is eligible for the rebate).

A rebate cannot, however, be claimed in relation to employees who were furloughed at the time of illness or absence, and for whom the separate Coronavirus Job Retention Scheme grant was claimed.

Employers will be eligible for an SSP rebate if they had a Pay as You Earn (PAYE) scheme as of 28 February 2020, and (along with any connected employer) employed fewer than 250 employees as at that date. Employers must also be within their State Aid limits under the EU Commission temporary framework.

Internet link: GOV.UK publications

Changes to insolvency and company law going through Parliament

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

UK sets out post-Brexit tariff regime

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

MPs open inquiry into £155 billion of tax reliefs

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

Newsletter – April 2020

Enews April 2020

In this month’s Enews we report on legislation that has been introduced to alter reporting obligations for residential property gains chargeable on UK resident individuals, trustees and personal representatives. We also analyse the support package announced by Chancellor Rishi Sunak to help businesses and the self-employed during the COVID-19 pandemic; regulators’ request for a delay in corporate reporting; and the delay to the introduction of the off-payroll rules to the private sector. With the government announcing many measures to combat the COVID-19 outbreak, there are lots of issues to update you on.

Chancellor’s business support packages for coronavirus pandemic

Chancellor unveils help for self-employed workers

Regulators request delay in corporate reporting

HMRC urges businesses using VAT deferral to cancel direct debits

Get ready for 30-day returns and payments for residential property gains

New tests and new car benefit percentages

HMRC delays introduction of off-payroll rules to private sector

Rise in contactless card payment limit

Chancellor’s business support packages for coronavirus pandemic

On 17 March, Chancellor Rishi Sunak unveiled a £330 billion package of support for the UK economy as it combats the COVID-19 pandemic. The measures dwarf the £12 billion made available in the 2020 Budget. The package includes an increase in government-backed loans, higher cash grants, widened business rates relief for some sectors and mortgage holidays for struggling homeowners. The government has extended the Coronavirus Business Interruption Loan Scheme announced in the Budget from £1.2 million to £5 million, with no interest due for the first 12 months. On 3 April, the Chancellor announced changes to the loan scheme in order to make it easier for small businesses to access loans. The current Business Interruption Loan Scheme has been extended so more small businesses benefit. Lenders will be banned from requesting personal guarantees on loans under £250,000. Additionally, a new scheme has been announced to bolster support for larger firms not currently eligible for loans.

Changes to business rates as a result of the COVID-19 pandemic have been put into place as well as some grants. The latest information for businesses located in England can be found here. Information for businesses in the devolved nations can be found here: Wales, Scotland, Northern Ireland.

Commenting on the measures, Dame Carolyn Fairbairn, Director General of the Confederation of British Industry (CBI), said:

‘This is a landmark package of measures for business, people and jobs. The Chancellor’s offer of substantial payroll support, fast access to cash and tax deferral will support the livelihoods of millions.’

Internet link: GOV.UK publications

Chancellor unveils help for self-employed workers

On 26 March, Chancellor Rishi Sunak announced a scheme to help self-employed workers who have been hit by the COVID-19 crisis.

Under the scheme, the government will pay self-employed people a taxable grant based on an average of their earnings over the past three years. The grant will cover up to 80% of earnings, up to a limit of £2,500 a month.

To be eligible, self-employed workers must have filed a tax return for the 2018/19 tax year and have average trading profits under £50,000 for the past three years. Directors of their own companies who are paid through Pay as You Earn (PAYE) are able to get support using the Coronavirus Job Retention Scheme.

The self-employed scheme will be available from June this year and will run for three months, but may be extended if necessary. In the meantime, the Chancellor said people can access Universal Credit, business loans or keep on working. HMRC will contact self-employed workers if eligible for the scheme and invite them to apply online.

Internet link: GOV.UK publications

Regulators request delay in corporate reporting

Financial regulators have requested a moratorium on corporate financial reports for at least two weeks. The Financial Conduct Authority (FCA) has been communicating with the Financial Reporting Council (FRC) and the Prudential Regulation Authority (PRA) about a package of measures to ‘reinforce trust in the reporting system’.

These will be aimed at ensuring companies and their auditors take the necessary time to prepare appropriate disclosures and address current practical challenges. The FCA says that it is vital that investors can rely on trustworthy information from companies.

However, the FCA added that recent unprecedented events mean that the basis on which companies are reporting and planning is changing rapidly. Consequently, the regulators say companies must give due consideration to the fast-moving coronavirus crisis, and previous timetables may not give them necessary time to do this.

In a statement on 26 March, the FRC said it ‘encourages listed companies and their auditors to consider carefully whether they should delay other corporate reports for the next two weeks, such as interim financial statements and final audited financial statements, except where necessary to meet a legal or regulatory requirement’.

Internet link: FCA press release

HMRC urges businesses using VAT deferral to cancel direct debits

Businesses that have been affected by the COVID-19 pandemic and are seeking to make use of the VAT deferral have been urged to cancel their direct debits ‘as soon as they can’.

Businesses are advised to contact their bank to cancel their direct debits as soon as possible. UK VAT-registered businesses with a VAT payment due between 20 March 2020 and 30 June 2020 have the option to either defer the payment until a later date or pay the VAT due as normal.

A spokesperson for HMRC said:

‘For those customers who are unable to pay VAT due between 20 March and the end of June 2020, you have the option to defer that payment until 31 March 2021.

‘You will not need to apply for deferral as eligibility is automatic. Customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do this in sufficient time.’

The deferral does not cover VAT MOSS payments, and HMRC will not charge interest or penalties on any amount deferred. Businesses are still required to submit their VAT returns to HMRC on time.

Internet link: GOV.UK publications

Get ready for 30-day returns and payments for residential property gains

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

New tests and new car benefit percentages

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

HMRC delays introduction of off-payroll rules to private sector

HMRC has delayed the introduction of off-payroll rules to the private sector as part of its measures to support businesses through the COVID-19 pandemic.

The reforms 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. Steve Barclay, Chief Secretary to the Treasury, stressed that the introduction of the rules has simply been delayed, rather than cancelled. The rules will now take effect on 6 April 2021.

In a statement, HMRC said:

‘This is part of additional support for businesses and individuals to deal with the economic impacts of COVID-19.

‘This means that the different rules that exist for inside and outside the public sector will continue to apply until 6 April 2021.’

The introduction 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. The changes were due to go ahead alongside the implementation of measures to support affected businesses and individuals.

Commenting on the delay, Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), said:

‘The government has done the sensible thing by delaying the changes to IR35 in the private sector.

‘This is a sensible step to limit the damage to self-employed businesses in this grave and unprecedented situation, but we also urge the government to do more. It must create an emergency Income Protection Fund to keep the UK’s crucial self-employed businesses afloat.’

Internet link: GOV.UK publications

Rise in contactless card payment limit

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