Monthly Archives: January 2021

Calculating Coronavirus Job Retention Scheme claims for annually paid directors

Small company directors that were not able to claim under the Coronavirus Job Retention Scheme (CJRS) because they paid themselves an annual salary in March 2020 may now be eligible to claim under the scheme.

Many directors missed the cut-off date on 19 March 2020 to be eligible for the first and second iterations of the furlough scheme. However, if those directors paid themselves a salary between 20 March and 30 October 2020, then they can claim furlough pay under the third iteration of the CJRS (November 2020).  Issues may arise in how to calculate these claims based on a single annual payment of salary because of the monthly pay cap of £2,500.

HMRC has now published two examples on their website illustrating how furlough claims should be calculated for annually paid directors, with both of these stating that they should be based on “day counts”.

It should also be noted that HMRC views directors as ‘fixed-rate’ employees, even though the pattern of payment may vary. Official guidance states that an individual is classified as a fixed-rate employee if they are ‘entitled under their contract to be paid an annual salary’.

If a director has changed their pay pattern to monthly payments for the 2020/21 tax year then they will be eligible for the CJRS from November 2020, which will be calculated as though the director is a fixed-rate employee.

Official eligibility criteria states that if the director received their annual salary payment in December 2019 then they will be eligible for the CJRS in April 2020, and then again in November 2020.

However, to qualify for the third iteration of the furlough scheme (from November 2020), the April 2020 claim must be paid to the director as salary, which is then reported in a Real Time Information (RTI) return made between 20 March and 30 October 2020.

Crucially, a CJRS claim should not be made until a payroll run is imminent. HMRC gives the example of a director not due to be paid until 30 March 2021 and says that if the employer makes a CJRS claim in an earlier pay period, they will need to pay the director and run payroll earlier than usual.

For help and advice on matters relating to the Coronavirus Job Retention Scheme, please contact our expert team today.

HMRC waives penalties for Self-Assessment returns filed by 28 February – but payment deadline remains

HM Revenue & Customs (HMRC) has announced that any Self-Assessment taxpayers who miss the 31 January 2021 tax return deadline will not receive late filing penalties if they file online by 28 February 2021, although the 31 January 2021 payment deadline remains.

Taxpayers who do not pay any outstanding balance on their 2019-20 tax bill by 31 January 2021 will be charged interest from 1 February 2021.

Anyone who cannot afford to pay their Self-Assessment tax bill of up to £30,000 for 2019-20 can apply online for a 12-month payment plan, although this is subject to interest.

Meanwhile, anyone with a larger tax bill that they cannot pay or who needs longer to pay should seek advice or contact HMRC to discuss a repayment plan.

HMRC has also said that Self-Assessment taxpayers who may need to claim contributory benefits should ensure they pay their Class 2 National Insurance Contributions (NICs) by 31 January 2021 to ensure their claims are unaffected. Contributory benefits include the State Pension, Job Seekers Allowance, Employment Support Allowance or Bereavement Support Payment.

Please contact us today if you need Self-Assessment advice.

Only a few days are left to submit applications for the third SEISS grant

Any applications for the latest round of the Self Employment Income Support Scheme (SEISS) must be submitted by the deadline on 29 January 2021.

This grant offers a taxable support payment equal to 80 per cent of the average of three months’ trading profits (up to a maximum of £7,500) to eligible individuals.

If you believe that you are eligible for this grant, you should apply immediately.

Many of those who have previously used the scheme may still be eligible, as long as they are a self-employed individual or a member of a partnership, have trading profits of no more than £50,000 per year and meet the following criteria:

You must have traded in both tax years:

  • 2018/2019 and submitted your Self-Assessment tax return on or before 23 April 2020 for that year
  • 2019/2020.

You must also either:

  • Be currently trading but are impacted by reduced demand due to Coronavirus; or
  • Have been trading but are temporarily unable to do so due to Coronavirus.

You must also declare that:

  • You intend to continue trading; and
  • You reasonably believe there will be a significant reduction in your trading profits.

Further clarification on what constitutes reduced demand or a significant reduction in trading profits can be found on the GOV.UK website here.

You cannot claim the grant if you trade through a limited company as a director or you operate through a trust.

To confirm your eligibility and to make an application, please use the link below:

Click here to apply for the SEISS grant

Those who have used the scheme previously or intend to apply for the latest grant should be aware that all SEISS grants are taxable in the 2020/21 tax year.

This means that no element of the SEISS grants should be reported on a 2019/20 Self-Assessment tax return, which should be filed by 31 January 2021.

Funding via a fourth grant should be available soon, which will cover the period from February to April 2021. The details of this fourth grant, including its launch date and the amount of financial support available through it, are yet to be confirmed.

Claims for the SEISS have to made by the taxpayer themselves and cannot be made by agents, such as accountants.

However, if you need support preparing a claim for the SEISS, we can assist you.

Requests for exemption from publication of furlough claims must be submitted by Monday 25 January

HM Revenue & Customs (HMRC) has confirmed that the final deadline for employers to request an exemption from the publication of furlough claims will be this coming Monday 25 January 2021.

Shortly after it was announced in the autumn that the Coronavirus Job Retention Scheme (CJRS) would be extended and reset to resemble the original scheme launched in March 2020, HMRC said it would begin publishing claims from December 2020 onwards.

The information to be published on a monthly basis includes:

  • Employer names
  • A banded indication of the value of the claim
  • Company numbers (companies and Limited Liability Partnerships only)

The bands used to indicate the value of claims will be:

  • £1 to £10,000
  • £10,001 to £25,000
  • £25,001 to £50,000
  • £50,001 to £100,000
  • £100,001 to £250,000
  • £250,001 to £500,000
  • £500,001 to £1,000,000
  • £1,000,001 to £2,500,000
  • £2,500,001 to £5,000,000
  • £5,000,001 to £10,000,000
  • £10,000,001 to £25,000,000
  • £25,000,001 to £50,000,000
  • £50,000,001 to £100,000,000
  • £100,000,001 and above

HMRC has confirmed that this applies to all employers claiming from the scheme, including individuals, ordinary partnerships and trusts, unless they can demonstrate that doing so would lead to a “serious risk of violence or intimidation”.

HMRC requires evidence of such threats, which could include:

  • A police incident number;
  • Documentary evidence of a threat or attack; or
  • Evidence of possible disruption or targeting.

To submit a request to HMRC not to publish your claim details, please follow the instructions on GOV.UK here by Monday 25 January. Details of claims will be published by HMRC on Tuesday 26 January.

Insurance industry to pay out on COVID-19 business interruption claims

More than 370,000 small businesses in England and Wales could be due a payout on their business interruption insurance after the Supreme Court ruled in favour of payments being made on previously refused claims and policies.

A number of insurers have lost an appeal against an earlier ruling, brought in a test case by the Financial Conduct Authority (FCA), which required them to payout on existing business interruption insurance policies as a result of the pandemic.

In the first lockdown of spring 2020, many small businesses made claims through their business interruption insurance schemes for loss of earnings when they had to close as a result of the Government’s restrictions.

However, they were soon told by their insurers that they were not eligible for a payout because only specialist policies had cover for such unprecedented events.

Following an outcry from the small business community, many of whom had paid thousands of pounds for insurance coverage, the FCA launched a test case which looked at a selection of policy wordings to establish the parameters for what would be considered a valid claim.

Last year an initial case at the High Court found that some insurers should have paid out for losses caused by the lockdown. Judges ruled that disease clauses found in many business interruption insurance policies should have meant they were covered and been compensated for the loss of income due to the Coronavirus restrictions.

An appeal was then brought and the test case was fast-tracked to the Supreme Court – the highest court in England and Wales – who conducted a four-day hearing last year, before delivering a final ruling.

This latest ruling provides authoritative guidance for these policies, and similar ones that were not part of the case, which will be used by the FCA, the insurance sector, and the Financial Ombudsman to assess claims and make judgements.

This impacts on all eligible policies held at the time of the first lockdown, whether an initial claim was made and rejected or not.

The ruling covers a wide range of matters including disease clauses, whether businesses were denied access to the properties they owned by restrictions and the timing of lost earnings.

Giving the court’s ruling Lord Hamblen said the court accepted the arguments from representatives of policyholders and dismissed the appeals from insurers finding in policyholders’ favour.

Although the initial case only tested a small number of policies from eight different insurers, the FCA has said that the findings could affect up to 700 different policies held by various insurers and lead to payments for more than 370,000 small businesses that hold policies.

Insurers, such as Hiscox, Arch, Argenta, MS Amlin, QBE and RSA, that were involved in the case will now process claims. However, as many as 60 insurers who sold similar products may now also pay out on eligible policies.

Huw Evans, Director General of the Association of British Insurers, has said that all valid claims will be settled and that the process of settling some claims was already underway.

Most eligible policyholders should be contacted by their insurer following the ruling, but businesses are being encouraged to check whether they can make a claim.

As for new claims relating to the latest lockdowns, the insurance industry has said that most policies for new and renewing customers have already been amended and that losses from the latest lockdown measures would be clearly stated as part of the cover.

If you require assistance with any issues related to the COVID-19 pandemic, please contact us.

HM Revenue & Customs increases the threshold for Self-Assessment online payment plan service to £30,000

HM Revenue & Customs (HMRC) has increased the threshold for Self-Assessment taxpayers to use its online self-service Time to Pay payment plan service from £10,000 in tax liabilities to £30,000.

The move means that more taxpayers will be able to spread the cost of their tax bills by paying in monthly instalments, without having to call HMRC.

The Chancellor announced in his Winter Economy Plan that taxpayers will be able to arrange a payment plan of up to 12 monthly instalments to cover tax payments deferred from July 2020.

HMRC now says that this also covers outstanding tax owed for 2019-20 and the first payment on account for the current tax year.

Taxpayers must set up a payment plan no later than 60 days after the due date of the tax debt to qualify for the payment plan, which, for tax payments due on 31 January 2021 is 1 April 2021.

However, setting up a payment plan more than 30 days after the due date of the tax debt will lead to late payment penalties. This means payment plans in respect of tax due on 31 January 2021 would need to be set up by 2 March 2021.

Unlike the previous Self-Assessment deferral of the second payment on account that was due on 31 July 2020, the new payment plans will be subject to interest from 1 February 2021.

To qualify for a payment plan using the online self-service Time-to-Pay system, taxpayers must:

  • Have no outstanding tax returns;
  • Have no other tax debts;
  • Have no other HMRC payment plans set up; and
  • Have a debt of between £32 and £30,000.

HMRC has also warned taxpayers against scammers claiming to be from HMRC and offering to set up payment plans. Currently, payment plans can only be set up by individual taxpayers.

HMRC says that taxpayers may have the option of using the online self-serve Time to Pay facility on GOV.UK once they have completed their 2019-20 Self-Assessment tax return.

Those with Self-Assessment debts of more than £30,000 or who need more than 12 months to pay the tax they owe may be able to set up a Time to Pay arrangement via the Self-Assessment Payment Helpline on 0300 200 3822.

Link: If you cannot pay your tax bill on time

Independent commission argues against annual wealth tax but advocates a one-off charge

An independent commission established last spring by the London School of Economics, the University of Warwick and the Economic and Social Research Council to analyse proposals for a wealth tax has rejected an annual tax but has advocated a one-off charge.

The commission comprises senior academics from the universities involved as well as tax barrister, Emma Chamberlain.

While Chancellor, Rishi Sunak, has previously rejected the idea of a wealth tax, the commission’s independence means that the idea may gain traction in the coming years.

In rejecting the idea of an annual wealth tax, the commission argues that such a levy would “have higher administrative costs relative to revenue than a one-off tax, which means that it is currently not feasible” considering the lower tax thresholds.

It goes on to note that “at very high levels of wealth, the extent of these responses remains uncertain. Some responses could be mitigated by careful design, but others would be more difficult to resolve.”

Instead, the commission argues for substantial reforms of existing taxes on wealth instead of “minor tinkering”. They suggest this approach would be more efficient economically and less costly to administer.

In contrast, the commission advocated a one-off charge to help repair the public finances following the pandemic, arguing:

A well-designed one-off wealth tax would raise a total of £260 billion at a rate of five per cent over £500,000 per individual or £80 billion at a rate of five per cent of £2 million per individual, payable at one per cent per year over five years.

The report goes on to say that such a measure should not be pre-announced in order to prevent forestalling but that deferrals should be permitted where taxpayers are constrained in their liquidity.

The commission says that such a charge would be preferable to increasing taxes on work or spending.

Link: The Wealth Tax Commission

Could the Government be about to launch a new permanent state-backed small business loan scheme?

According to reports in the Financial Times, the Government is considering launching a new loan scheme, where businesses could borrow anything up to £10 million through an 80 per cent state-guaranteed bank loan.

The new scheme, which could be a successor to the existing Coronavirus Business Interruption Loan Scheme (CBILS), would provide a permanent state-backed small business loan to eligible companies.

Under the plans, the Government would guarantee loans to small businesses ranging from a few thousand pounds up to £10 million over a six-year lending period.

This would effectively extend the CBILS, but with a lower threshold once applications for the existing loan scheme ends on 31 March this year.

The Financial Times reports that participating banks could set their own interest rate for their loans, capped at around 15 per cent. Research by GrowthBusiness found that lenders are charging anything between three per cent and 15 per cent for current CBILS loans.

As yet, no official announcement has been made on such a scheme, but it is understood that the Chancellor is looking to announce a range of options to support jobs and businesses in his upcoming Budget on 3 March 2021.

Douglas Grant, Director of CBILS lender Conister, said: “We fully support the UK Government’s plans to launch a permanent replacement for the £65 billion Covid loans programme to support SMEs.

“This more permanent financial support from the Government will be welcome news to those resilient SMEs that have already shown extraordinary levels of adaptability and strength in the face of changing consumer behaviour.”

Link: Government plans permanent state-backed small business loan scheme

HMRC issues new warning over lockdown fraudsters

Within hours of the Prime Minister announcing a new national lockdown in England, HM Revenue & Customs (HMRC) has issued new warnings after it received reports that fraudsters were attempting to dupe taxpayers by pretending to be the tax authority.

Throughout the last year, criminals attempted to scam businesses and individuals out of money by sending fake HMRC correspondences related to COVID-19.

According to the latest reports, a number of scam text messages are now being sent out, informing people they are entitled to receive a grant from the Government as a result of the latest national lockdown.

One such scam message reads: “HMRC: The third lockdown has been announced. Our records show you have been issued a grant of £240 to help during this period.”

Taxpayers who receive the text are then redirected to a website designed to mimic GOV.UK, which asks them to enter the personal and financial details to receive a grant.

As part of the scam, individuals are asked to provide their card details, information it states is necessary “to confirm and deposit the calculated amount”.

Although the Government has announced £4.6 billion of grant funding for businesses during the latest lockdown, this funding is not applied for online in this way.

In response to the latest reports, HMRC has said it will never send any texts to people regarding a tax refund, rebate or grant. People can, therefore, safely assume such correspondence is a scam.

Instead, those who think they may be eligible for grant funding or other COVID-19 financial support should seek professional advice so that they can make the necessary applications.

Link: Avoid and report internet scams and phishing

FSB proposes move to turn Covid emergency debt into shared ownership schemes

The Federation of Small Businesses (FSB) is calling on the Government to introduce new measures to help companies struggling with COVID-related debt, including employee shared ownership.

The FSB has said that businesses are facing “unmanageable” levels of Coronavirus debt – with four out of 10 small businesses describing their indebtedness in this way.

Already nearly half of those surveyed in the FSB’s latest study had used personal finance products, such as personal credit cards, overdrafts and loans, to keep their businesses going.

Instead, the small business organisation is suggesting that a system of shared ownership is introduced under which emergency debt could be assigned to an employee ownership trust in return for the trust getting preference shares in the business of the same value, plus an option to acquire 10 per cent of the business when there is a future change of control.

Preference shares, also referred to as preferred stock, are shares of a company’s stock with dividends that are paid out to shareholders before common stock dividends are issued.

This move would take the debt off the company’s balance sheet, according to the FSB and help businesses manage their debts.

As well as suggesting the new system of ownership, the FSB has also called for the Government to turn Coronavirus emergency loan repayments into tax owing – effectively nationalising a portion of small business debt.

Another proposal is to extend the existing Bounce Back Loan Scheme Pay As You Grow model – which allows borrowers to extend the length of the loans, make interest-only payments and request repayment holidays – to all commercial small business lending.

Martin McTeague, National Vice-Chair of the FSB, said: “Implementing a model whereby firms start repaying debt when they’re making a profit again could mark a positive way forward, as could getting employees more involved in the ownership and running of firms.

“Hundreds of thousands of viable small businesses have taken on sizeable debts to see them through to the other side of the COVID crisis. With emergency loan repayments fast approaching, and festive trade hugely disrupted, we need the Government to intervene swiftly to avoid a small business credit crunch in the spring.”

Link: Turn Covid emergency debt into shared ownership, urges small business