Monthly Archives: October 2020

Government extends further support to businesses affected by COVID-19

Under increasing pressure from business groups, local authority leaders and the public, the Government has decided to extend several of its existing support measures to help businesses across the UK – regardless of whether they are forced to close or remain open.

Speaking to Parliament, the Chancellor Rishi Sunak announced three new steps that he claimed would help businesses and communities through the “difficult days and weeks ahead”.

Recognising that “even businesses who stay open have profound challenges” he has committed additional support to “reach many more people and protect many more jobs”.

Job Support Scheme (JSS) Extension 

The new JSS is due to come into effect on 1 November 2020, once the previous furlough scheme comes to an end this month.

Originally it required employers to pay around a third of their employees’ wages for hours not worked and required employees to work at least 33 per cent of their normal hours.

In recognition of the difficulties businesses are facing, particularly in some adversely affected sectors, the JSS will now only require employers to make a five per cent financial contribution towards unworked hours, while the Government will contribute 61.67 per cent (capped at £1,541.75).

The latest change will also see the minimum hours requirements for employees cut to just 20 per cent of their regular working time.

As an example, under the new scheme if an employee is usually paid £600 for working 40 hours in a week, but their hours are cut by their employer to 20 per cent of their normal time (8 hours), they will be paid £120 for their time worked, plus £24 in employer contributions and £296 in Government support for the time not worked. This would mean that they still receive weekly gross pay of £440.

The Chancellor confirmed that the extended version of the JSS can still be used alongside the £1,000 Job Retention Bonus and did not affect the other elements of the JSS for businesses legally required to close, which cover around two-thirds of an employee’s wage.

Self Employed Income Support Scheme increased

In his earlier Winter Economy Plan, the Chancellor had confirmed that the Self-Employed Income Support Scheme (SEISS) would be extended into 2021 with the payment of two new taxable grants.

He has now confirmed that the first of the extended grants, which will cover the three months from November to January will increase from 20 per cent of previous trading profits, capped at £1,875 to 40 per cent of previous trading profits capped at £3,750.

The second of the new SEISS grants will cover three months from the start of February until the end of April 2021. The level of the second grant will be set by the Government in due course.

Business Grants

The Government is providing additional funding to allow Local Authorities (LAs) to support businesses in high-alert (tier 2) level areas, which are not legally closed but that have been severely impacted by the restrictions on socialising.

The cash grants, worth up to £2,100 per month, are primarily aimed at businesses in the hospitality, accommodation and leisure sector.

The amount of funding received by each LA will, therefore, be based on the number of hospitality, hotel, B&B, and leisure businesses in each area.

As a guide, LAs will receive a funding amount that will be the equivalent of:

  • £934 per month for premises with a rateable value of £15,000 or under;
  • £1,400 per month for premises with a rateable value of between £15,000-£51,000; and
  • £2,100 per month for premises with a rateable value of £51,000 or more.

It will be down to the discretion of each LA to determine which businesses are eligible for grant funding and what level of funding to allocate to each business.

LAs will also receive an additional five per cent top-up to cover other businesses that might be affected by the local restrictions, but which do not fit into these categories.

Businesses in Very High alert level areas will qualify for greater support of up to £3,000/month whether closed or open.

These new grants will be available retrospectively for areas who have already been subject to previous local restrictions and backdated, in some cases, to August.

Speak to us

While we await further details of these schemes in the days and weeks to come, you must prepare your business for these changes.

If you would like support implementing these new measures or have questions about how they may affect your business, please contact our experienced team

Chancellor expands Job Support Scheme and grants to businesses facing new COVID-19 restrictions

The Chancellor has announced that the Government will expand the new Job Support Scheme (JSS) to assist jobs and businesses required to close their doors as a result of tougher Coronavirus restrictions.

The announcement was made ahead of new plans to introduce a tier-based system for lockdowns across the country, which could force some businesses to close their doors once again.

The expanded Job Support Scheme

Under the expanded JSS, firms whose premises are legally required to shut for some period over winter as part of local or national restrictions will receive grants to pay the wages of staff who cannot work.

These grants will cover around two-thirds of each employees’ salary (67 per cent), up to a maximum of £2,100 a month.

Employers will not be required to contribute towards wages and will only be asked to pay National Insurance contributions (NICs) and auto-enrolment pension contributions.

The Government has estimated that around half of potential claims are not likely to incur employer NICs or pension contributions at all.

Businesses can only claim a grant where they are subject to a restriction that prevents them from opening and employees must not work for a minimum of seven consecutive days to be eligible.

The new scheme will open on 1 November alongside the other JSS measures announced last month in the Winter Economy Plan. It will be available for up to six months for businesses affected, with a review point in January.

All grant payments will be made in arrears through a dedicated HM Revenue & Customs service, which will be available from early December.

Lockdown grants

As well as expanding the JSS, the Government will also increase the value of cash grants offered to businesses in England forced into lockdown to support them with fixed costs.

Linked to the rateable value of business premises, the increased grants will see payments of up to £3,000 per month, payable every two weeks, instead of up to £1,500 every three weeks.

Under this reformed grant scheme:

  • Small businesses with a rateable value of or below £15,000 can now claim £1,300 per month;
  • medium-sized businesses with a rateable value between £15,000 and £51,000 can claim £2,000 per month; and
  • larger businesses can claim £3,000.

The Government is also extending this scheme to include businesses that are forced to close on a national basis, such as nightclubs.

Here to help 

Much of these new measures will rely on the Government’s new tiered system for restrictions and may vary over time from one region to the next.

With this being the case, it is important to consider how this affects your business and seek advice at the earliest opportunity. To find out how we can assist you, please contact us.

HM Revenue & Customs publishes further details of the Job Support Scheme

HM Revenue & Customs (HMRC) has published further details of the Job Support Scheme (JSS), announced by the Chancellor during his Winter Economy Statement in Parliament on 24 September.

The JSS is intended to support businesses facing reduced demand over the winter as a result of the Coronavirus crisis, helping to keep employees in ‘viable’ jobs on short-time working.

The scheme will launch on 1 November 2020 – the day after the Coronavirus Job Retention Scheme (CJRS) closes – and will run for six months until the end of April 2021.

It will be open to all SMEs, but will only be available to large businesses that can show that they have been adversely affected by the Coronavirus crisis through reduced revenues. Large businesses will be expected not to make capital distributions, including dividends or share buybacks, while using the JSS.

Employees claimed for through the JSS must have been on an employer’s PAYE payroll on 23 September 2020, meaning their employer must have included them on an RTI submission on or before that date.

They cannot be on notice of redundancy or be made redundant while in receipt of the JSS.

Employees must work at least 33 per cent of their usual hours and be paid in full for those hours by their employer.

The employer must also then pay one-third of the hours not worked – an amount which will be matched by the Government up to a cap of £697.92 a month.

Employees will then forego pay for one-third of the usual hours that they are not working. This means they will be paid at least 77 per cent of their usual wages, even if they are only working 33 per cent of their usual hours.

Employers meanwhile, would pay a total of 55 per cent of an employee’s usual wages in return for 33 per cent of their usual hours.

Therefore, it could cost an employer less to dismiss two staff and keep one working full-time, rather than having three staff on short-time working through the JSS. The scheme has similar implications, even where employees are working a much larger proportion of their usual hours.

HMRC has published a table, setting out how the scheme will work at different levels of short-time working:

Hours Employee Worked 33 per cent 40 per cent 50 per cent 60 per cent 70 per cent
Hours Employee Not Working  

67 per cent

 

60 per cent

 

50 per cent

 

40 per cent

 

30 per cent

Employee Earnings  

78 per cent

 

80 per cent

 

83 per cent

 

87 per cent

 

90 per cent

Gov’t Grant  

 

22 per cent

 

 

20 per cent

 

 

17 per cent

 

 

13 per cent

 

 

10 per cent

Employer Cost  

 

55 per cent

 

 

60 per cent

 

 

67 per cent

 

 

73 per cent

 

 

80 per cent

Employers will need to agree short-time working arrangements with staff affected and make any necessary changes to contracts of employment, with documents made available to HMRC on request.

HMRC says that it intends to notify employees directly with full details of the claims made in respect of them.

Link: Job Support Scheme Factsheet

Annual Investment Allowance – Time is running out

Since 1 January 2019, the Annual Investment Allowance (AIA) for capital allowances has been £1 million – helping businesses to invest tax efficiently.

However, from 1 January 2021, the AIA will fall back to just £200,000, reducing the amount of tax that can potentially be saved.

By using the AIA, businesses can claim against most qualifying plant and machinery expenditure allowing them to deduct the full value of the investment from their profits, thus reducing their tax bill.

That means if a business has any plans that involve significant capital expenditure, they should consider accelerating these claims in 2020 to take advantage of the higher allowance available this year.

Where a business has a 31 December year-end then they can take full advantage of the £1 million allowance this year, as only qualifying capital expenditure after the year-end will be subject to the AIA of £200,000.

However, for businesses whose year-end falls after 31 December 2020, the position is more complex as the AIA limit is determined by the amount of time within the accounting period that falls in the year 2020.

For example, if a business has a year-end on 31 March 2021, they will only be apportioned nine months of the old allowance and three months of the new allowance, which would result in them being able to claim up to £800,000 in AIA (£750,000 from 2020 and £50,000 from 2021).

Businesses can also take advantage of tax planning opportunities by entering into an unconditional contract on or before 31 December to purchase the qualifying expenditure, and benefit from the relief on offer this year.

Link: Claim capital allowances

Accounting for mobile phone use

During the last few months, to assist workers with working from home, many businesses have supplied a work mobile phone, but how should they account for this benefit?

Typically, the provision of equipment, such as a mobile, could be considered a benefit in kind for tax purposes, however, an employee can benefit from an employer-provided mobile phone without suffering a tax charge where certain conditions are met.

Under the rules, to avoid a tax charge via benefit in kind, the ownership must not be transferred to the employee, as the exemption applies only if the employer makes a mobile phone it owns available for use by the employee.

This exemption only covers the supply of a single mobile phone to each employee, the line rental and the cost of any private calls made on the phone, which are paid for by the employer.

Where the mobile phone (or sim card) is registered in a company name, all the costs can be claimed, with the proviso that ‘personal use’ must be ‘reasonable and not excessive’. Meanwhile, the phone itself counts as a company asset.

In some cases, a home-working employee may have been allowed to or decided to use their own personal device to make business calls.

Where a phone contract is personal, i.e. not registered to the company, then there are two main ways to treat the expense:

  • Where a company pays for the bills and the phone, it is counted as a ‘benefit in kind’ and the costs have to be reported via the P11D form and there will be National Insurance contributions (NICs) to pay.
  • Where an employee pays for the phone and bills, deductions have to made on PAYE and Class 1 NICs on the value of the monthly contract, plus any personal calls that may add costs over the normal monthly tariff.

In both of these scenarios, VAT can only be claimed on the business costs.

Businesses should also consider the potential security risks of a person using their own devices, such as the accessibility of sensitive data by other persons, and should have an agreed policy on phone use, which could be part of a home working agreement.

Link: Expenses and benefits: mobile phones

Time to prepare (once again) for the VAT reverse charge

In just a few months, more than 150,000 businesses connected to the construction industry will have to make a fundamental change to how they manage their VAT affairs.

Although the world has been in lockdown, and with it, parts of the construction sector, the Government still intends to launch the VAT domestic reverse charge for specified types of construction work from 1 March 2021. This is the third launch date for the scheme, with two previous launches having been postponed.

The reverse charge is designed to prevent missing trader fraud, which is estimated to cause £100 million to be lost a year in VAT payments.

This fraud is most commonly found among sub-contractors who provide services to developers or large contractors working in the construction industry.

As a group, sub-contractors typically have minimal VAT costs to recover, with their workers’ wages representing their main outgoing, which is not subject to VAT.

However, they are required to charge VAT on the service of supplying their workers, which has led to some unscrupulous sub-contractors attempting to evade VAT by ‘going missing’.

They typically achieve this by not filing accounts and dissolving a company, only to reappear sometime later under a new company registration.

The reverse charge applies to business-to-business supplies in circumstances where both businesses are registered for VAT, there is an onward supply of construction and the parties are subject to the Construction Industry Scheme (CIS).

Under the VAT reverse charge, the responsibility of accounting for VAT falls on the recipient (other than the end-user) of construction services, or goods related to construction, instead of paying it to the supplier of the service, which may be a sub-contractor.

They can then recover the VAT, subject to the normal rules of recovery, as input tax. The amount would still be treated as input tax on the same VAT return and, assuming that it was using the services in making taxable supplies itself, it would be able to recover it in full.

The reverse charge does not apply where:

  • Services are supplied to the end-user, such as the property owner, or directly to a main contractor that sells a newly completed building to the customer;
  • The recipient makes onward supplies of those construction services to a connected company;
  • The supplier and recipient are landlord and tenant or vice versa; or
  • The supplies are zero-rated.

The reverse charge will only apply to the supply of specific construction services, details of these can be found by clicking here. The reverse charge will also apply both to labour and materials related to the services used.

To prepare for these changes, businesses should:

  • make sure their accounting systems and software can deal with the reverse charge
  • consider whether the change will impact their cash flow
  • make sure all staff who are responsible for VAT accounting are familiar with the reverse charge and how it works.

The rules surrounding the VAT reverse charge are nuanced and they may be applied differently depending on the nature of a business and its place within the supply chain, so you must seek help if you are unsure of your position after 1 March 2021.

Link: The VAT Reverse Charge

Is the Government considering a National Living Wage freeze?

New reports have suggested that the Treasury may be considering postponing a planned increase to the National Living Wage (NLW) rates next year.

Under plans outlined last December by then Chancellor, Sajid Javid, the legal minimum wage paid to workers over the age of 25 was due to rise by 6.2 per cent from £8.72 per hour to £9.21 per hour in April 2021.

However, the Sunday Telegraph has reported that ministers and officials have discussed applying an “emergency brake” to the NLW increase in response to the COVID-19 crisis and mounting unemployment.

The Telegraph reported that the current Chancellor, Rishi Sunak, could be due to announce such a change in a future Budget on advice from the Low Pay Commission, which believes that many organisations would not be able to afford the increase in wages for low earners.

Speaking in the Telegraph, Low Pay Commission Chair, Bryan Sanderson, said that it had listened to the views of employers and trade unions carefully, and was considering whether the emergency brake was required.

He said: “There are not many winners in today’s uncertain world. Our contribution to help steer a path through the complexity will be to provide a recommendation founded on rigorous research and competent analysis, which has the support of academics and both sides of industry.”

Although the Government is yet to confirm these claims, it is clear that the Chancellor will have to take action to limit the economic impact of COVID-19 and rising unemployment in his next Budget, which will not take place now until next year.

Link: National living wage could be frozen next year

Companies House reforms to combat fraud and assist businesses

Companies House, the UK’s register of company information, is to be reformed under new plans designed to prevent fraud and money laundering.

As part of the reforms, directors will have to have their identity verified by Companies House before they can be appointed.

The amendment will increase the accuracy of data that Companies House holds, ensuring that businesses have greater assurance when they are entering into transactions with other companies.

The move will also assist law enforcement agencies, such as the National Crime Agency, to trace the activity of suspected fraud or money laundering.

Companies House is understood to be developing a 24/7 digital verification process to reduce the administrative burden on businesses and prevent delays to incorporation and filings.

The Government has said that these reforms won’t impact the typical speed at which a company or organisation is formed and other filings are completed – with most companies able to be incorporated easily within 24 hours.

The changes are a result of the Government’s 2019 consultation on Corporate Transparency and Register Reform. As part of this, Companies House will be given additional powers to query and reject information, improve the quality of data on the register and provide greater protections to users’ personal data, to help protect them from fraud and other harms.

It is not yet clear when this new system will be in place but we will aim to keep you up to date, as and when new guidance is issued.

Link: Reforms to Companies House to clamp down on fraud and give businesses greater confidence in transactions

Price of plastic bags in England to double to 10p

The price of plastic bags in larger retailers in England will double from 5p to 10p from April next year.

The 5p charge was first introduced in 2015 and the Department for Environment, Food and Rural Affairs (DEFRA) says that plastic bag use has fallen from 140 a year per adult in 2014 to four now.

George Eustace, the Environment Secretary, said: “We have all seen the devastating impact plastic bags have on the oceans and on precious marine wildlife, which is why we are taking bold and ambitious action to tackle this issue head-on.

“The UK is already a world-leader in this global effort, and our carrier bag charge has been hugely successful in taking billions of harmful plastic bags out of circulation. But we want to go further by extending this to all retailers so we can continue to cut unnecessary waste and build back greener.

“I hope our pioneering track record on single-use plastics will inspire many more countries to follow suit, so we can take on plastic waste together and implement lasting change.”

Link: War on plastic waste stepped up with extension of plastic bag charge

New Coronavirus regulations place self-isolation obligations on employers

The Health Protection (Coronavirus, Restrictions) (Self-Isolation) Regulations 2020 came into effect on 28 September 2020 and place new obligations on employers in relation to self-isolation.

Regulation 7 creates a new offence of knowingly permitting a worker, including agency workers, to attend a place other than where they are self-isolating.

This affects workers who are self-isolating because they live with a person who has tested positive for Coronavirus, as well as workers who have themselves tested positive.

Workers are also obliged to inform the employer if they are self-isolating and employers who stop a worker from working outside their home.

Employers that knowingly permit a worker to attend a place other than where they are self-isolating risk fines beginning at £1,000.

Link: The Health Protection (Coronavirus, Restrictions) (Self-Isolation) Regulations 2020