Monthly Archives: July 2020

New legislation introduced to protect redundancy pay of furloughed workers

The Government has announced that from 31 July 2020 any furloughed worker that is made redundant will receive a payment based on their normal wage rather than the reduced rate of pay they may have received under the Coronavirus Job Retention Scheme (CJRS).

Reports of a small number of employers taking advantage of the Coronavirus crisis to pay a lower rate for redundancies has led the Government to introduce new laws that ensure that workers get the full rate of redundancy pay.

Workers that have more than two years of continuous service are typically entitled to a statutory redundancy payment that is based on length of service, age and pay; up to a statutory maximum of £16,140.

However, under the CJRS many of the 9.5 million workers that have been furloughed are currently being paid 80 per cent of their normal wage unless their employer has opted to top up their pay.

As well as ensuring redundancy pay is protected, the new rules also make sure that statutory notice pay, which covers the period before a worker’s employment ends is based on an employee’s normal wages rather than the lower wage rate they may have been paid under the CJRS.

This paid notice period typically varies from one to 12 weeks’ depending on an employee’s length of service.

Furloughed employees that successfully undertake an unfair dismissal claim will also have their basic award payment based on full pay rather than the CJRS’s reduced wage rate under the new legislation.

If you would like advice on redundancy or have questions about the furlough scheme then it is important that you seek professional advice. To find out how we can help, please contact us.

Government confirms Job Retention Bonus of £1,000

During the Summer Economic Update, the Chancellor Rishi Sunak announced his Plan for Jobs, which included a new incentive for users of the Coronavirus Job Retention Scheme (CJRS) to keep furloughed workers employed until January 2021.

The Job Retention Bonus (JRB) will encourage employers to bring back furloughed employees by allowing them to claim a £1,000 payment for every previously furloughed worker that is retained.

To qualify for the JRB, an employer must bring employees back to work in roles that pay above the Lower Earnings Limit of £520 per month on average, between the end of the CJRS and the end of January 2021.

If an employer keeps the employee in employment and meets the criteria of the scheme a JRB payment will be made from February 2021 for each eligible employee.

Further information about the JRB is expected from the Government on 31 July 2020.

Upcoming key dates for the Coronavirus Job Retention Scheme

In the next few weeks, employers may need to submit additional information or change the way they manage their Coronavirus Job Retention Scheme (CJRS) claims. To help you prepare, here are some key dates and actions you may need to take:

31 July 2020 – Submit your CJRS claim for periods ending on or before 30‌‌‌ ‌June 2020. This is the last date you can make these claims. You need to have claimed at any point on or before 31‌‌‌ ‌July to be able to claim for future months.

1‌‌‌ ‌August 2020 – The CJRS will no longer pay for employers’ National Insurance (NI) and pensions contributions for furloughed employees. Employers have to make these payments from their own resources after this date.

1‌‌‌ ‌September 2020 – Employers will have to start contributing to the wages of furloughed employees. Grants will be for 70 per cent of usual wages in September, but furloughed employees will continue to be entitled to receive at least 80 per cent of their usual wages and so employers are expected to make up the difference from their own resources.

Employers that are struggling to administer the changes to the CJRS should seek professional support to ensure they are compliant as HM Revenue & Customs is taking a tough, proactive approach to errors and fraudulent claims.

Paying for COVID-19: Government begins exploring tax take back

The Chancellor, Rishi Sunak, has commissioned the Office of Tax Simplification (OTS) to undertake a review into how Capital Gains Tax (CGT) is paid by small businesses and individuals.

It is estimated that the UK Government has already incurred hundreds of billions of pounds in costs in its economic fight against the Coronavirus and it is clear that it will need to recover this spending in some way.

The decision to commission a review of CGT has left many concerned of a ‘stealth wealth tax’, using CGT as a means of increasing the tax bill of small businesses and those with high-value assets.

The OTS investigation into CGT is said to be wide-ranging and will include a look at all of the allowances, exemptions and reliefs associated with CGT, the treatment of losses within the tax and its interaction with other levies, such as inheritance and income tax. This review will also look at whether current rules alter taxpayer’s behaviour and encourage inappropriate actions to be taken.

Many fear that the extensive free rein given to the OTS may be a precursor for big changes in a Budget later this year.

One suggestion is that the Chancellor may be seeking an equalisation of CGT and income tax rates. At present, the highest rate of CGT for most assets, apart from property, is 20 per cent, whereas the top rate of income tax is 45 per cent.

As an alternative, some have suggested that the Chancellor could seek a flat rate of CGT rather than the five rates that currently exist (0, 10, 18, 20 or 28 per cent).

The review may also look to close loopholes and ambiguities in existing reliefs to ensure that taxpayers do not get an advantage from structuring their estate and disposals around CGT.

Another area of potential reform is the capital gains uplift, which currently applies when a person inherits assets, which allows assets to be acquired at the market value on the date of death, rather than the amount originally paid.

This could tie in with the Government’s previous review of Inheritance Tax (IHT), during which the OTS recommended the uplift be removed in cases where IHT exemptions or reliefs apply.

IHT continues to be an area of contention and one that has been explored numerous times. However, it may also be in the spotlight as the Government seeks to recover the multi-billion-pound cost of COVID-19.

As part of the OTS investigation, Rishi Sunak has also tasked the OTS with looking at how CGT is paid by small businesses. This will include “the position of unincorporated businesses and standalone owner-managed trading or investment companies”.

It is important that all taxpayers continue to monitor the Government’s plans for taxation and seek advice if any future changes affect their financial affairs or the passing of wealth to future generations.

Government confirms the next steps for the digitisation of taxation

The Treasury has released new details on the next steps it intends to take as part of its long-term tax digitisation plan.

Its timeline for a modernised digital tax system will see HM Revenue & Customs’ (HMRC) Making Tax Digital (MTD) programme gradually extended over the next few years to cover most businesses.

Under the current MTD rules, businesses above the VAT threshold of £85,000 are required to keep digital records and provide VAT returns through MTD-compliant software.

However, under the new plan, the programme will be extended to all VAT-registered businesses with turnovers below the VAT threshold (£85,000) from April 2022.

It will then be extended further from April 2023 to all taxpayers who file income tax self-assessment tax returns for business or property income above £10,000 annually.

The Treasury said that the extension of MTD will only affect the way that tax is reported and not the amount that is collected.

Financial Secretary to the Treasury, Jesse Norman, said: “We are setting out our next steps on Making Tax Digital today, as we bring the UK’s tax system into the 21st century.

“Making Tax Digital will make it easier for businesses to keep on top of their tax affairs. But it also has huge potential to improve the productivity of our economy, and its resilience in times of crisis.”

In a Written Ministerial Statement to Parliament on MTD the Treasury also said that “the Government remains committed to extending Making Tax Digital to other taxes”.

It is hoped that the long deadline to comply with the extension of MTD will give businesses, landlords and agents time to prepare and allow for the development of new products, including free software for businesses with the simplest tax affairs.

Coronavirus apprenticeships guidance updated

Updated guidance from the Department for Education on apprenticeships during the Coronavirus crisis has been published and contains a number of announcements relating to employment arrangements for apprentices.

These updates include confirmation that:

  • Apprentices aged 19 and older can begin to resume on-site training;
  • Apprentices who are made redundant but continue their study element can claim Universal Credit if they meet all eligibility criteria;
  • A dedicated service for redundant apprentices will be launched shortly; and
  • Temporary flexibility suspending the requirement that level two apprentices study and attempt level two functional skills assessment has been extended until 31 December 2020.

Full details of these updates can be read here.

The announcements come shortly after the Chancellor announced additional funding for apprenticeships at the Summer Economic Update on Wednesday 8 July 2020.

The apprenticeships funding will provide £2,000 to employers in England for every apprentice hired under the age of 25 and £1,500 for each newly-hired apprentice aged 25 or older.

The new funding is in addition to schemes already in place to support employers in taking on apprentices.

HM Revenue & Customs updates Self-Employment Income Support Scheme guidance

Ahead of the second round of funding for the Self-Employment Income Support Scheme (SEISS) opening for applications on 17 August, HM Revenue & Customs (HMRC) has updated its guidance documents relating to the scheme.

The first round of applications for SEISS grants closed on Monday 13 July 2020 and had allowed self-employed individuals to claim grants worth up to 80 per cent of their usual trading profits over three months, capped at £7,500.

The second round of SEISS grants will be worth up to 70 per cent of usual trading profits over three months, capped at £6,570.

The eligibility criteria remain substantially the same as for the first round of funding, with applicants required to have annual trading profits of no more than £50,000, at least equal to their income from non-trading sources.

Self-employed individuals will need to have been adversely affected by the Coronavirus outbreak on or after 14 July 2020, because, for example:

  • They are unable to work because they:
    • are shielding
    • are self-isolating
    • are on sick leave because of coronavirus
    • have caring responsibilities because of coronavirus
  • They have had to scale down, temporarily stop trading or incurred additional costs because:
    • their supply chain has been interrupted
    • they have fewer or no customers or clients
    • their staff are unable to come in to work
    • one or more of their contracts have been cancelled
    • they had to buy protective equipment so you could trade following social distancing rules

As with the first round of the scheme, HMRC says it will contact self-employed individuals that it believes will be eligible. However, it has warned people to be alert to the possibility of fraudulent texts, calls or emails purporting to be from HMRC and asking them to click a link or provide personal information.

HMRC has also launched a new service for people who were in receipt of the first grant but believe either that they were overpaid or that they were not, in fact, eligible to make repayments. Repayments can be made online here.

Reminder: Deferral of second payment on account

Those facing financial difficulty as a result of COVID-19 are being reminded that they can defer their second 2019/20 self-assessment payment on account, normally due at the end of July, until 31 January 2021.

To benefit from this deferral, taxpayers do not need to contact HMRC. Simply by not paying their tax bill due by 31 July 2020 they will opt into the deferral scheme.

Therefore, the only action taxpayers may need to take is to cancel their direct debit if they have one set up for their payments on account.

Where no payment is received, HMRC will update its systems to show the payment as deferred. HMRC has confirmed no interest or penalties will be incurred, providing the outstanding amount deferred is paid in full by 31 January 2021.

HMRC is reminding those using the deferral that not only will the amount be due on 31 January 2021, but they will also need to pay any 2019/20 balancing payment and first 2020/21 payment on account at the same time.

Those who believe they may struggle to pay these three separate payments in full in one go can contact HMRC about paying these combined amounts in instalments.

Those wishing to make a payment as normal have been advised that they can do so as normal as well if they do not believe they require the deferral.

HM Revenue & Customs confirms first arrest in connection with furlough fraud

HM Revenue & Customs (HMRC) has revealed that a 57-year-old man from Solihull in the West Midlands was arrested on 8 July on suspicion of a £495,000 furlough fraud relating to claims from the Coronavirus Job Retention Scheme (CJRS).

HMRC says he is the first person to have been arrested in connection with fraudulent claims from the scheme.

As of 12 July, more than £28.7 billion had been claimed from the scheme by 1.2 million employers in respect of 9.4 million jobs.

HMRC says that the CJRS has four lines of defence against fraud, which it describes as:

  • Employees have to have been on a payroll on or before 19 March – preventing the use of fake employees
  • Claims are only accepted from employers known – and authenticated – by HMRC
  • All claims are assessed by a specialist team within a 72-hour window
  • Proportionate and reasonable interventions with customers after money has been paid.

Richard Las, the Acting Director at HMRC’s Fraud Investigation Service, said: “The CJRS is part of the collective national effort to protect jobs. The vast majority of employers will have used the CJRS responsibly, but we will not hesitate to act on reports of abuse of the scheme.

“This is taxpayers’ money and any claim that proves to be fraudulent limits our ability to support people and deprives public services of essential funding.”

He called on people to report suspected furlough fraud via HMRC’s online fraud reporting page here.