COVID-19 Update 3

The Chancellor announced on 24 September a whole new raft of measures and support schemes for businesses and individuals during the COVID-19 crisis. Some of this is very welcomed news but some not so much. As with so many things in life we all wish that more could be done by the government (removing the IR35 changes in the private sector expected from April 2021 for a start!) but alas we can only deal with what is in front of us. I have gone through the new measures below. For any questions please get in touch with us via [email protected].

VAT Payment Deferral extended

One of the measures introduced earlier was the deferral of VAT accumulated between 20th March 2020 until 30th June 2020 till 31 March 2021. However, now businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year. They will have the option of splitting it into smaller, interest-free payments over the course of 11 months.

VAT rate for hospitality and tourism sector

For those companies operating in the hospitality and tourism sector, only the VAT rate was reduced to 5%. This was originally due to end in January but this is now being extended to 31 March 2021.

Business Loans

The term of the Bounce Back Loan and Coronavirus Business Interruption Loan Scheme has been extended from six years to 10 years. This would mean monthly repayments are almost halved. Please note that if you intend to close your company all loans must be repaid first.

The deadline for applying for all government coronavirus loan schemes has been extended to the end of 2020.

There will be no adverse effect on credit ratings because of taking the loans.

Self-assessment

Those with self-assessment tax bills who need more time to pay will be given it as per the Chancellor.

Job Support Scheme (JSS)

The main announcement was the Job Support Scheme, the successor to the Job Retention Scheme (commonly known as the furlough scheme). Under this scheme, the government will cover up to 22% of pay for workers in “viable” jobs for the next six months. The government will subsidise the pay of employees who are working fewer hours than normal due to the COVID-19 crisis.

Simply, employees must work at least a third of their normal hours and their employer will pay two-thirds of their salary and the government will pay one third. The grant is capped at £697.92 with all small and medium-sized businesses eligible for the scheme. The scheme is expected to run from 1 November for six months.

In terms of eligibility and detail on the scheme, the government has produced a factsheet. It appears that this is geared towards small, medium-sized enterprises. Some of the main points to note are the following;

  • Employees must be on an employer’s PAYE payroll on or before 23 September 2020.
  • For the first three months of the scheme, the employee must work at least 33% of their usual hours
  • For every hour not worked by the employee, both the Government and employer will pay a third each of the usual hourly wage for that employee.
  • The Government contribution will be capped at £697.92 a month.
  • Grant payments will be made in arrears, reimbursing the employer for the Government’s contribution.
  • The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.
  • Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.
  • “Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance from the government shortly.

Job Retention Bonus

Rishi Sunak also clarified that employers retaining furloughed staff on shorter hours can claim both the Job Support Scheme and the Job Retention Bonus, which will be available in February next year. The bonus will be a one-off payment of £1,000 to UK employers, for every furloughed employee who remains continuously employed through to 31 January 2021. Employees must earn above the National Insurance lower earnings limit (£520 per month) on average between 31 October 2020 when the CJRS ends and the end of January 2021.

The bonus payments will be made from February 2021. Please get in touch with us in February about applying for this.

Update on Government schemes in response to COVID-19

Update on Government schemes in response to COVID-19

We are now well into the lockdown and we hope that you are keeping safe and well. Here, at Banner & Associates we are adjusting to working from home and although there are some differences to the way we service our clients. Remember if you want a phone call then please email the relevant person to arrange a time for a call.

I have outlined below some updates to the schemes that the Government has announced in relation to COVID-19.

Stay safe and best wishes to all.

Companies House 3-month extension to filing of accounts

You can get a 3-month extension to the filing date for your accounts from Companies House. The application for this extension must be done prior to the due date for the accounts.

This application can be done online using this link, https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts

If you do request an extension to the filing date for your accounts, please let us know. Remember this is just an extension and the accounts will still be due at some point.

Time to pay arrangement for COVID-19

The HMRC phone number for arranging a time to pay arrangement has now changed to 0800 024 1222. This should be phoned if you want an extension to corporation tax or PAYE/NI.

Please note that VAT payments are automatically deferred to 31 March 2021.

Self-assessment due on 31 July 2020 has also been automatically been moved to 31 January 2021. This would mean that on 31 January 2021 you will be paying not only the second payment on account that would have been paid on 31 July 2020 but also the tax due for the tax year ended 5 April 2020 and the first payment on account for the 2020/21 tax year. Although the payments on account can be reduced to £nil there are potential consequences of doing this being interest and a requirement to pay the 2020/21 tax bill early.

Self-employed scheme

If you are a Director of a limited company then you do not qualify for the Coronavirus Self-employed Support Scheme you in fact qualify for the Job Retention Scheme.

Also, there are some scammers out there pretending to be HMRC and contacting individuals saying that they qualify for the Coronavirus Self-employed Support Scheme. If you receive a call from HMRC asking for personal information, then hang up immediately!

Job Retention Scheme

There is a lot more information now on the Job Retention Scheme and I am going to go through it all below. Please note that the HMRC portal through which this can be claimed is still under development and is expected to be completed by 20 April 2020. Thereafter the grants will be paid and the timing of when the grants will be paid is still unclear at this time.

  • Employees and Directors can be put on furlough rather than being made redundant. This is available to Directors of Personal Service Companies too, but it is only for your salary NOT dividend.
  • While on furlough the employees must do no work at all! Furlough in this instance is an alternative to redundancy and means a leave of absence from work.
  • Directors are permitted to carry out statutory duties only but not allowed to work or even look for work. Training is permitted though.
  • There is a minimum furlough period of three weeks and currently a maximum of three months, though this could change. Employers can apply furlough for any period within these parameters.
  • Furlough pay granted by Government is 80% of the normal pay as at 28 February 2020.
  • Employees must be on the payroll at 28 February for furlough pay to be available.
  • The maximum amount of furlough pay is £2,500. Employer NIC and mandatory Auto enrolment contributions will be paid in addition. Please note that for most of our clients no Employer NIC or Auto-enrolment apply. This is because if you have more than one employee then we will be claiming the Employment allowance. Auto-enrolment is not mandatory for Directors.
  • Claims will be made through a special portal, which is expected to be available by 20 April 2020.
  • If we are your agent with HMRC for PAYE then we will be able to do this on your behalf. In some instances, we may not be your agent and in which case you as the Employer will have to make the application yourself as this would be quicker than us becoming your agent and then doing the application. 
  • The payments will be taxable on the Employer.
  • Being furlough does not exclude you from continuing to take dividend and you are not excluded from it if you are in receipt of rental income.
  • This is a government grant and not a loan so will not need to re-paid. However, HMRC retains the right to retrospectively audit all claims.

Another point to note that as for most of our clients the monthly salary is equal to the personal allowance, it would make sense that we would continue processing the monthly salary at this amount and then if you are ‘furlough’ we can claim a grant for 80% of this and your company pays you the remaining 20%.

If you are going to be ‘furlough’ it is necessary, that you can demonstrate this and that there is a letter in place confirming your status as being furlough and the same for any other employees. I did a search on google and there are many free furlough templates available. This is essential as per my last point HMRC retains the right to audit claims retrospectively.

Please email Ron at [email protected] if you are going to furlough and from when you wish to claim the Job Retention Scheme grant (1 March 2020 or later) and if for all employees or just you as the Director. Also please ensure you have the evidence of the furlough letter and something to confirm that you are not working. You do not need to send this to us but you must have it in place.

As always, we will help you with the applications and make them on behalf of clients where we are your agent. Please note this is additional work to our usual workload and we will get it done for you but we ask for your patience and understanding. These are unprecedented times that are unimaginable. We are all working hard from home and some of our staff have been sick with suspected COVID-19 including myself. Please be patient we are all in this together!

COVID-19 Government schemes to help

COVID-19 Government schemes to help

I have compiled this document to help people understand what schemes are available to you from the government.  

These are desperate, strange times that we live in. It goes without saying that your priority is for your health and the health of your family and others. Therefore, stay at home and work from home where possible. We at Banner & Associates are doing this and our staff are working from home. We will still be servicing you our clients as best we can, and any necessary phone calls can be arranged via email to the relevant team member. 

Stay safe. 

 

Job Retention Schemes

If you cannot cover staff costs due to COVID-19 then the government will help via the Coronavirus Job Retention Scheme. This is available to a furloughed employee (someone who would have been laid off as a result of COVID-19). This would mean that the employee is kept on the payroll and will allow the employer to claim 80% of their wage up to £2,500 from the government. Your employer could choose to fund the difference but there is no legal obligation to do so. 

Example

You have one employee earning £2,000 a month, so you will be able to claim 80% of this which is £1,600.  If you have a second employee earning £3,500 per month then 80% would be £2,800 however this would be capped at £2,500.

Points to note;

  • The scheme is expected to start from the 1st April 2020 and last for 3 months. You can backdate claims from the 1st March 2020.
  • All UK businesses regardless of size will be eligible for this scheme.
  • You will need to designate any of your affected employees as furloughed workers and then you will need to notify your employee of this.  Then, you will need to make the claim through HMRC’s portal. We expect the reimbursement portal to be available from 1st April 2020.  

Statutory Sick Pay (SSP)

Statutory sick pay is currently £94.25 per week. If you have had employees on sick due to COVID-19 then you will be refunded the first 2 weeks of statutory sick pay paid to your employee.

The relief will be available to UK businesses with fewer than 250 employees as at 28th Feb 2020. As an employer, you should maintain records of staff absences and payments of SSP made.  

This rebate of SSP is still being developed and as more information is given by the government, I will share this with you. 

Deferring VAT

Any VAT liabilities accumulated between 20th March 2020 until 30th June 2020 will not need to be paid over to HMRC until the 5th April 2021.  

Please note that this is a deferral and not a relief. So eventually, this VAT liability will need to be paid to HMRC.  

No penalties or interest for late payment will be charged in the deferral period.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.

 

Deferrals of other taxes

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

If you already have an outstanding tax liability with HMRC and you have or may miss your next tax payment due to COVID-19, then please call HMRC on 0800 0159 559.  These arrangements are agreed on a case by case basis and are tailored to individual circumstances and liabilities.  

 

Business rates

There will be a business rates holiday of 12 months for all retail, hospitality, leisure and nursery businesses in England.

There is no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They will do this as soon as possible.

 

Mortgage Payment Holiday

Your mortgage payment may be one of your highest expenses. On the 17th March 2020 it was announced that homeowners including landlords of buy to let mortgages affected by COVID-19 can apply for a mortgage payment holiday of up to 3 months. 

Many banks will have different approaches, speak to your bank to discuss your concerns.  

On the 18th March 2020, the government confirmed it would offer interest free payment holidays to borrowers struggling to pay back their help to buy loans.  

Please get in touch with your bank for more details, alternatively you may be able to apply online to speed up the process. Please note that some lenders may recalculate your monthly mortgage payments after 3 months and this may result in higher capital & interest payments.  

 

The Coronavirus Business Interruption Loan Scheme (CBILS)

A temporary loan scheme should be available from 23rd March 2020 to support small and medium sized businesses.

CBILS: KEY FEATURES

Up to £5m facility: The maximum value of a facility provided under the scheme will be £5m, available on repayment terms of up to six years.

80% guarantee: The scheme provides the lender with a government-backed, partial guarantee (80%) against the outstanding facility balance, subject to an overall cap per lender.

No guarantee fee for SMEs to access the scheme: No fee for smaller businesses. Lenders will pay a fee to access the scheme.

Interest and fees paid by Government for 12 months: The Government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.

Finance terms: Finance terms are up to six years for term loans and asset finance facilities. For overdrafts and invoice finance facilities, terms will be up to three years.

Security: At the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. For facilities above £250,000, the lender must establish a lack or absence of security prior to businesses using CBILS. If the lender can offer finance on normal commercial terms without the need to make use of the scheme, they will do so.

The borrower always remains 100% liable for the debt.

Stay safe.

IR35 – Off-payroll working in the public sector

The draft legislation was released on 11 July 2019 for the off-payroll working rules coming into effect for the private sector on 6 April 2020. There was nothing especially new in the legislation with the reform in the private sector mirroring those already in force in the public sector with some small tweaks. The draft legislation will apply to both sectors bringing the policies in line as the ‘off-payroll working rules’ which will pass the responsibility of applying IR35 to the engager.

In my blogpost from 27 March 2019 the draft legislation confirms that the off-payroll working rules will not apply to small and medium sized enterprises. For most of you this makes no difference as you are engaged by big multi-national corporates but something to note.

Status Determination Statement

There was a new term introduced into the draft legislation for IR35 decisions referred to as a ‘status determination statement’.

A status determination statement must be provided to both the contractor and party paying the contractor. It must include both a decision and the reasoning behind the decision. Failure to do so will be a failure by the client to fulfil their obligations, and thus the liability will sit with them until a suitable status determination statement is provided.

This is good news for you as you will now have visibility of the IR35 status determination by their engager. It is hoped that this will also reduce the incentive for blanket decisions by the engager. Although, HSBC maintains its blanket approach asking all contractors to become permanent employees or leave.

Clients must implement a disagreement process

The draft legislation confirmed a client-led disagreement process. Clients will have 45 days to consider and respond to any disagreements of a status decision brought to them by the contractor or fee-payer, with reasoning behind their decision.

There are concerns regarding the client-led process in responding to the consultation – clients will essentially be able to withhold their original decision with no further avenue for contractors to dispute it, providing contractors with nothing more than take-it-or-leave-it ultimatums.

Currently, a contractor can challenge HMRC regarding their IR35 status; an appeal can be heard by Alternative Dispute Resolution (ADR) and/or judge at a tribunal hearing. With the client-led process, clients with no previous IR35 experience or in applying case law, and which are unlikely to remain impartial in the process, are the only route contractors will be able to address any concerns.

What to do?

Firstly, it is highly unlikely that there will be a u-turn on the legislation, therefore, it is imperative that you are aware of it and its implications. It is also worthwhile to have a check of your IR35 status currently in anticipation of the new legislation. You can also sort legal advise about your IR35 status.

Some of you may have used or know of CEST (Check employment status for tax) which is a HMRC online tool to determine IR35 status. Be cautious using this as it appears that CEST fails to reflect many previous tax tribunal decisions on whether a worker is genuinely self-employed or a disguised employee and as such subject to PAYE and NIC. Worse still when the information regarding the TV presenter Lorraine Kelly was put into CEST it said that she was really an employee, contrary to the clear decision of the tax tribunal.

I am attending a seminar next week on IR35 and will report back to you my findings.

Off-payroll working in the private sector

It was announced in the Autumn Statement 2018 that the changes to IR35 that came into effect in April 2017 for the public sector will be extended to the private sector from April 2020. Responsibility for operating the off-payroll rules will be transferred from the individual to the organisation, agency or third party engaging the worker. Only medium and large organisations will be subject to this change.

On 5th March 2019, HMRC published the consultation document ‘Off-payroll working rules from April 2020’. The consultation seeks to refine the operation of the off-payroll rules prior to implementation into the private sector from April 2020.

KEY POINTS FROM THE CONSULTATION

No groundbreaking changes were present in the consultation which will remain open to responses until 28th May 2019.

It appears that the reform will mirror that currently implemented in the public sector, with a few potential tweaks:

  • The rules will not apply to small businesses; HMRC have confirmed in more detail that a company will qualify as small where the company, in a year, satisfies two or more of the following requirements:
  • Annual turnover not more than £10.2 million
  • Balance sheet total not more than £5.1 million
  • Number of employees not more than 50

However, this may be of little consequence as the vast majority of contractors work for larger corporates where the requirements above are not met.

  • Sharing of information requirements; Clients will be required to pass information of the determination to the agency, as well as directly to the contractor, and include the reasoning for that determination on request. The information is then required to cascade down the labour supply chain to the fee-payer.

This will be welcomed by contractors looking for transparency over status decisions but may pose an increased administrative burden on clients.

  • Provision for the transfer of liability; HMRC has placed the onus for ensuring compliance with the rules on the first agency (i.e. the agency/intermediary closest in the labour supply chain to the client, which in most cases will also be the fee-payer). Providing that each party or parties in the chain fulfil their responsibilities, the liability will rest with the agency or intermediary closest to the client. This is even though this party will not be the one that has made the IR35 decision. Therefore, its vital recruiters ensure they are able to contribute to accurate assessments.
  • Introduction of a “client-led disagreement process”; HMRC proposes that clients have a process for dealing with status disagreements with its off-payroll workers. There will likely be minimum requirements to this such as the consideration of evidence put forward by the worker, however the organisations will be able to tailor the process to their business processes.

Agency reporting requirements

As we all know, HMRC is continually changing legislation in an effort to reduce tax avoidance but also to basically stop people from contracting and instead take on a PAYE role. From 5 April 2015 onwards employment intermediaries including recruitment agencies must send quarterly reports to HMRC detailing workers that aren’t counted as employees – either because they are under PAYE elsewhere (e.g. at an umbrella company) or because the agency doesn’t control or supervise those workers.

Your agency will be getting in touch with you and asking for the following details which are the reporting requirements; full name (with title), date of birth, gender, address, national insurance number (or passport number if they don’t have an NI number) and unique taxpayer reference (if they are self-employed or a member of a partnership).

Note, that contractors who subcontract other contractors to complete projects where the subcontractor is required to work on the client’s site will also be classed as an employment intermediary. Limited company contractors subcontracting in this way are classed as intermediaries and will be required to implement the reporting requirements.

The reporting requirements are not onerous but we do not know yet what the impact will be and how HMRC plans to use this data.