Covid 19 – Government Assistance

So it has now been a number of  weeks since the introduction of the Governments  Financial assistance package with many changes along the way

The main areas of assistance and the updates are:-

Job retention scheme

If staff are unable to work due to the virus and lockdown, 80% of their salary cost, up to a maximum of £2500 per month, can be claimed back. The system introduced by HMRC went live on the 20th April 2020 and payments are now being received by applicants.

For staff to qualify, they originally had to be on the payroll at 28th February 2020. This has been extended to RTI submissions made to HMRC on 19th March 2020. The scheme is in place until 30th June 2020.

Business Support Grants

Most local authorities have now opened access to these although all seem to be slightly different when applying

If you qualify for Small Business Rates Relief or Rural Rates Relief, whereby your rateable value is below £15,000, you could be entitled to a grant of £10,000.

For business’s in the Retail, Hospitality and Leisure sectors with rateable values between £15,000 and £51,000 an enhanced grant of £25,000 is available.

Please check your local authority website for further information and to if you are eligibile for Business rates relief.

Deferral of Taxes – VAT

HMRC announced the availability of deferring Payments for VAT.

For VAT, you can only defer quarterly and monthly VAT returns’ payments for the periods ending in February, March and April payments on account due between 20 March 2020 and 30 June 2020 and annual accounting advance payments due between 20 March 2020 and 30 June 2020. The deferred payments must be caught up by 31 March 2021.

If you pay your VAT by Direct debit, this should be cancelled and a new mandate applied for when submission return to normal.

  • Self Assessment

For personal tax payments made under self-assessment you are able to defer your July 2020 payment, however this must be paid by 31 January 2021.

Coronavirus Business Interruption Loan Scheme

The loan scheme, which has some 40 accredited lenders, has been much publicised with much pressure from the government for the banks to lend to those who qualify for loans of up to £5m. The loans can be for up to 6 years with interest being paid for up to 12 months by the government and with an 80% guarantee by them too. These loans are restricted to multiples of payroll costs and require cashflows and forecasts for the application.

New – Bounce Back Loan

Announced by the Chancellor this week, a new loan scheme for small and medium sized businesses which is to be launched on the 4 May.  We look forward to seeing more details. Initially  it seems the loans can be from £2,000 to £50,000 , payable over 6 years with no capital repayments, interest or fees in the first year and the government are to work with lenders to make these low interest loans.  The bounce back loan is 100% guaranteed by the GOV! – Watch this space!!

Still to come – Self Employed Income support scheme

Initially announced for roll out in June, HMRC are aiming to contact the self-employed mid May 2020 and will make payments by early June 2020. This scheme is similar to the job retention scheme where those who are self employed and have submitted a Tax Return for the year ended 5 April 2019 and who’s income is more than 50% from self-employment and less than £50,00 per year. Payments are to be based on 80% of average earnings to a maximum of £2500 per month and to run for a 3 month periods.

Coronavirus Job Scheme

Last night HMRC issued further guidance regarding the Coronavirus Job Scheme, please see below for updated details.

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. We expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

Who can claim

Any UK organisation with employees can apply, including:

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities

You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme.

Public sector organisations

The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.

Where employers receive public funding for staff costs, and that funding is continuing, we expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.

In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

This scheme is only for employees on agency contracts who are not working.

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.

Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.

If your employee is on unpaid leave

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.

If your employee is on Statutory Sick Pay

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough.

If your employee has more than one job

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

If your employee does volunteer work or training

A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Work out what you can claim

Employers need to make a claim for wage costs through this scheme.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

We will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Employer National Insurance and Pension Contributions

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

You can claim a grant from HMRC to cover wages for a furloughed employee, equal to the lower of 80% of an employee’s regular salary or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on paying those wages.

You can choose to provide top-up salary in addition to the grant. Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).

National Living Wage/National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

What you’ll need to make a claim

Employers should discuss with their staff and make any changes to the employment contract by agreement. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

To claim, you will need:

  • your ePAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 weeks)
  • your bank account number and sort code
  • your contact name
  • your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

Claim

You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

What to do after you’ve claimed

Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

When the government ends the scheme

When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Employees that have been furloughed

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Measures for the self employed

The Chancellor has finally announced the Support Plan for the self employed

It is available for those whose profits are less than £50,000 as reported on their 2019 Tax Return and, as an average, profits have been less that £50,000 for the last 3 years or if fewer years available an average on those years

The Grant is to support 80% of earnings up to a maximum of £2500 per month initially for 3 months

The Grant is taxable and available to those where income is derived more than 50% from self employment

Availability  –  expected June , but hopefully earlier

To be eligible you must have submitted a Tax Return for the year ended 05/04/2019 which was due for filing by 31/01/2020

If you haven’t filed your 2019 return then HMRC are now allowing you to do so in the next 4 weeks to enable those who have not submitted these to qualify for the Grant

HMRC will contact those eligible directly in due course

www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals

Initially these measures do not give any further assistance to those Owner Managers who run their own Limited Company’s and therefore they will need to look at the measures for business previously released

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

COVID-19 Update

Please see a few updates following our email sent on Monday 23rd March.

Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. A furloughed worker is someone that is not working and will require reporting. HMRC are working urgently to set up a system for reimbursement and as soon as the system is announced we will be in touch, however we have received some more information today as follows:

Rules as outlined in official statements released at 23 March 2020

  1. Furloughed members of staff must not work for the employer during the period of furlough.
  2. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
  3. It is available to employees on the payroll at 29 February 2020.
  4. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
  5. The scheme pays a grant (not a loan) to the employer.
  6. The grant will be paid to the employer through a new online system which is being built for this purpose.
  7. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
  8. Scheme will be administered by HMRC:
    • Relevant employees must be designated as furloughed employees.
    • Employers will submit information to HMRC through a new online portal.
    • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
  9. Maximum grant will be calculated per employee and is the lower of:
    • 80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
    • £2,500 per month.

Illustration

X Ltd employs Mr A at an annual salary of £24,000, so £2,000 per month. Mr A has opted out of auto enrolment.

Each month, Mr A currently receives net pay of £1,665 which is after deducting PAYE of £191 and employees NIC of £144. On this salary, the employer pays employers’ NIC of £174.

The available grant for the employer is the lower of

(a) 80% of (£2,000 + £174), and 

(b) £2,500

So a grant of £1,739.

The cash required by X Ltd to furlough based on maintaining the existing salary is £435 per month. It is a matter for employment law whether the employer is required to pay this top up. Discussions with employees may have agreed that the employee has agreed to a different arrangement during their furlough.

Statutory Sick Pay this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19

employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020

Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website

eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force

VAT holiday

No business will have to pay over VAT from now to June, and they’ll have until the end of the financial year to repay those bills. That should help companies struggling with a cash flow crisis albeit the requirement to submit a return still appears to be a requirement. HMRC have updated their guidance for those who pay by Direct Debit. Customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return. We must reiterate this is only a deferment.

Business Rates

Businesses that pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief, may be eligible for a one-off grant of £10,000 to help meet their ongoing business costs.

If you are eligible, your local authority will write to you. You do not need to do anything to apply. No change to the guidance.

Support for retail, hospitality and leisure businesses that pay business rates

A business rates holiday has been introduced for the 2020 – 2021 tax year.

Eligible businesses are those who have properties mainly used:

  • As shops, restaurant, cafes, drinking establishments, cinemas and live music venues
  • For assembly and leisure
  • As hotels, guest and boarding premises and self-catering accommodation

If you are eligible, you do not need to do anything. This will be applied to your next council tax bill in April 2020 No change to the guidance.

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.

Businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000

Businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000

You do not need to do anything; your local authority will write to you if you are eligible for this grant. No change to the guidance.

Business loan scheme

The government is also extending its coronavirus business interruption loan scheme, to be interest free for 12 months. More guidance has been issued albeit not all banks are in the scheme. There are requirements to evidence the impact on your business through cashflows for the loan along with additional criteria. Please contact us if you need help with this.

Deferring self-assessment deadline for taxes

The deadline for self-assessment of taxes will be extended to January 2021, meaning that self-employed people will have longer to pay their taxes.  You will not be required to make your July 2020 payment now until January 2021. This remains in place but reiterate this is only a deferment.

Support for the self employed

There has been a lot of speculation regarding a scheme to help the self-employed based on 80% of the average income of the last 3 years Tax returns submitted. Nothing as yet has been announced but please be assured as soon as it is we will be in touch.

If you run a business or are self-employed and are concerned about paying your tax due to coronavirus, you can call HMRC’s helpline for help and advice: 0800 0159 559.

I hope the above gives you a better understanding of the measures the government are taking to try and cover concerns for employers, employees and individuals at this difficult time.

Coronavirus (COVID-19)

As the government continues to put measures in place to help protect individuals and businesses of all sizes, we will update you accordingly.

Paying wages
To protect jobs, the chancellor has announced that the government will step in and help pay wages, for the first time in UK history. It’s called the coronavirus job retention scheme.

Companies and organisations will be able to apply for a grant from HMRC to cover the wages of people who are not working due to coronavirus shutdowns, but who haven’t been laid off.

It will cover 80% of the salaries of the retained workers, up to £2,500 per month.

It is hoped that workers across the company can retain their jobs, even if their bosses can’t afford to pay them.  It has not yet been announced how this will work but we will be in touch as soon as we are able to provide you with more information.

VAT holiday

No business will pay VAT from now to June, and they’ll have until the end of the financial year to repay those bills. That should help companies struggling with a cash flow crisis.

The chancellor said this will injection £30bn into the economy.  HMRC are automating this process so you shouldn’t have to do anything apart from continue to process your returns as normal.

Business Rates

Businesses that pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief, may be eligible for a one-off grant of £10,000 to help meet their ongoing business costs.

If you are eligible, your local authority will write to you. You do not need to do anything to apply.

Support for retail, hospitality and leisure businesses that pay business rates

A business rates holiday has been introduced for the 2020 – 2021 tax year.

Eligible businesses are those who have properties mainly used:

  • As shops, restaurant, cafes, drinking establishments, cinemas and live music venues
  • For assembly and leisure
  • As hotels, guest and boarding premises and self-catering accommodation

If you are eligible, you do not need to do anything. This will be applied to your next council tax bill in April 2020

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.

Businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000

Businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000

You do not need to do anything; your local authority will write to you if you are eligible for this grant.

Business loan scheme

The government is also extending its coronavirus business interruption loan scheme, to be interest free for 12 months (up from 6 months). Details of how the scheme will work are hopefully being released this week.

Deferring self-assessment deadline for taxes

The deadline for self-assessment of taxes will be extended to January 2021, meaning that self-employed people will have longer to pay their taxes.  You will not be required to make your July 2020 payment now until January 2021.

I hope you find this helpful, please feel free to contact me if you have any questions and I will do my best to answer, however this is very new news so the logistics of how these holidays, etc will be given/claimed is not yet clear. 

Here are a few links that you may also find helpful.  We will continue to send through updated information as and when we have it.

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-job-retention-scheme

Kind regards and stay safe!

Review confirms off-payroll working rules to go ahead from April 2020

The government has confirmed that reforms to off-payroll working rules for the private sector will go ahead from 6 April 2020.

The off-payroll rules have applied to the public sector since 2017 and the government has carried out a review of the roll-out to the private sector. The review has now concluded, and the changes will go ahead alongside the implementation of measures to support affected businesses and individuals.

From 6 April 2020, the new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector. These reforms will shift the responsibility for assessing employment status to medium and large organisations engaging workers via an intermediary, typically a Personal Service Company (PSC).

HMRC said it will take a ‘light touch approach’ and businesses will not have to pay penalties for inaccuracies in the first year, except in cases of deliberate non-compliance.

The government will also introduce a legal obligation on organisations to respond to requested information about their size from the agency or worker, to make it clearer who is responsible for determining the worker’s tax status.

Commenting on the changes, Jesse Norman, Financial Secretary to the Treasury, said:

‘It is only right that the off-payroll rules are applied consistently across all sectors. Two people sitting side by side doing the same work for the same employer should be taxed in the same way.

‘Following a review, the government is announcing a package of measures to help individuals and businesses implement these changes smoothly.’

HMRC has now published draft secondary legislation for the off-payroll working rules that are due to come into force in April this year.

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors’ net income cut significantly. HMRC also shifted the responsibility for compliance from individual contractors to public bodies or recruitment agencies.

From 6 April 2020, the new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector. These reforms will shift the responsibility for assessing employment status to the medium and large organisations engaging the individual worker via and intermediary.

The new draft legislation is open for consultation until 19 February 2020.

Jesse Norman, the Financial Secretary to the Treasury, said:

‘We recognise that concerns have been raised about the forthcoming reforms to the off-payroll working rules. The purpose of this consultation is to make sure that the implementation of these changes in April is as smooth as possible.’

For all of your payroll needs, contact us on 01604 662670.

Brexit – transition period

The leaders of the UK and European Union signed the Withdrawal Agreement, and the UK left the EU on 31 January 2020. However the UK is now in the transition or implementation period during which time it is ‘business as usual’ as the UK is covered by EU rules until the end of the year. By 2021 the UK aims to have agreed a deal on future arrangements with the EU and the rest of the world.

HMRC has contacted businesses in the UK who may import and export between the UK and the EU to explain what they can do to prepare for changes to customs arrangements after the UK has left the EU.

No change during the implementation period

Between 1 February and 31 December 2020, there will be an implementation period. HMRC has confirmed that there will be no changes to the terms of trade with the EU or the rest of the world during this time.

From 1 January 2021, the way businesses trade with the EU will change and HMRC is reminding businesses that they should prepare for life outside the EU, including ensuring they are ready for customs arrangements.

HMRC is advising businesses to:

  • make sure they have a UK Economic Operator Registration and Identification (EORI) number
  • prepare to make customs declarations.

HMRC has posted letters to 220,000 VAT registered businesses advising them on the current position.

We will advise you on the progress of negotiations and what these will mean for your business.

Making sure gifts to employees are tax-free

Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

  • the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

No more than £50 

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers.

Further details on how the exemption works, including family member situations, are contained in the HMRC manual.

However if you are unsure please do get in touch before assuming the gift you are about to provide is covered by the exemption.

HMRC countdown: file your tax return

With less than 100 days until the self assessment tax return deadline of 31 January 2020, HMRC is urging taxpayers to complete their tax returns early, in order to avoid the last minute rush.

HMRC report that last year more than 2,000 people submitted their tax returns on Christmas Day. Taxpayers should consider submitting their returns early to avoid the stress of a last minute rush.

Angela MacDonald, HMRC’s Director General for Customer Services, said:

‘The deadline for completing Self Assessment tax returns is only 100 days away, yet, so many of us wait until January to start the process. Avoid the last minute rush by completing your tax returns on time and then enjoy the upcoming festive period.

We want to help people get their tax returns right – starting the process early and giving yourself time to gather all the information you need will help avoid that stressful, late rush to file.’

Not all taxpayers need to complete a tax return as tax is automatically deducted from the majority of UK taxpayers’ wages, pensions or savings. For people or businesses where tax is not automatically deducted, or when they may have earned additional untaxed income, they are required to complete a Self Assessment tax return each year.

HMRC is also reminding people who are liable for the High Income Child Benefit Charge that they may need to file a tax return before the deadline. Those with income over £50,000 who receive child benefit, or those whose partner gets it, are liable for the charge. Taxpayers can check their annual income via their P60 or Personal Tax Account, and use HMRC’s child benefit tax calculator.

The deadline for filing paper tax returns was 31 October 2019 and the deadline for online tax returns and paying any tax owed is 31 January 2020. If taxpayers miss the deadline, they face a minimum £100 penalty for late submission.

Contact us for help with your self assessment tax return.

HMRC collects record amounts of IHT

The government has announced that HMRC collected a record sum of £5.4 billion in inheritance tax (IHT) during the 2018/19 tax year.

The increase comes on the back of a 15% rise in the number of estates liable for IHT. Between 2015/16 and 2016/17, the number of estates paying IHT rose by 3,600 to 28,100.

Rising asset values, particularly in regard to properties in London and the South East of England, have been a key factor behind the increased number of estates falling into the IHT net. The freezing of the tax-free nil-rate band threshold also played a key role.

The residence nil-rate band (RNRB) gives an additional allowance to people leaving their family home to direct descendants, such as children or grandchildren. The amount of relief is £150,000 for 2019/20, rising to £175,000 for 2020/21.

Despite the increase in estates paying IHT, the tax only applies to 4.6% of deaths in the UK. The average amount of tax paid was £179,000.

Please contact us for advice on estate and IHT planning.

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