Monthly Archives: May 2021

HMRC unveils penalty regime for VAT deferral scheme

Companies that signed up to the VAT deferral scheme have been warned they face a five per cent penalty if they do not make payment arrangements by 30 June this year.

Over half a million businesses deferred VAT payments last year. HM Revenue & Customs (HMRC) has confirmed that companies will be liable for the penalty or interest if they do not pay in full or make an arrangement to pay the deferred VAT by that date.

At the start of the COVID-19 pandemic, the Government announced a three-month deferral of VAT payments for the first tax quarter of 2020, and payments for outstanding VAT are now due.

Companies that deferred VAT payments due between 20 March 2020 and 30 June 2020 can either pay the deferred VAT, join the VAT Deferral New Payment Scheme or make other arrangements with HMRC by 30 June 2021. The online VAT Deferral New Payment Scheme opened on 23 February 2021 and is available until 21 June 2021.

The VAT Deferral Payment Scheme allows taxpayers to schedule payments monthly. The scheme lets you pay your deferred VAT in equal instalments, interest-free and choose the number of instalments by direct debit, from two to 11 (depending on when you join).

For example, if you join by 19 May 2021, you will make nine instalments and if you join by 21 June 2021, you will make eight instalments.

You cannot include extra payments after you’ve joined the scheme.

To take part, HMRC says you must:

  • Join the scheme yourself, your agent cannot do this for you
  • Still have deferred VAT to pay
  • Be up to date with your VAT returns
  • Join by 21 June 2021
  • Pay the first instalment when you join
  • Pay your instalments by Direct Debit (if you want to use the scheme but cannot pay by Direct Debit, there’s an alternative entry route for you)

The new payment scheme is part of a wider Government package of support, now worth more than £400 billion, which is helping to protect millions of jobs and businesses during the pandemic.

Half a million businesses made use of the VAT deferral last year, which helped to inject an estimated £34 billion into the UK economy. The new payment scheme will continue to help the economy recover by enabling businesses, impacted by the pandemic, to manage their cash flow at a critical time.

Eligible businesses that are unable to use the online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme or make alternative arrangements to pay until 30 June 2021.

Link: Penalty rates for deferred VAT scheme set at 5 per cent 

COVID forces businesses to change direction

The devastating effects of the pandemic have meant small businesses in the UK have changed the direction of their organisations to survive the impact of the Coronavirus pandemic and lockdown restrictions.

More than a year on from the start of the first official national lockdown and with the country currently slowly exiting the latest one, the impact of the pandemic has been laid bare by a survey on how the events of the past year have affected small business owners.

According to research by UK-based payments provider, SumUp, 51 per cent of small businesses have changed their operations in some way over the past year, including introducing remote payment options, gift cards and online stores.

Additionally, five per cent of small businesses in the UK have “completely pivoted” their business in the last 12 months, as a consequence of the pandemic.

While 98 per cent of small business owners said that they have been in some way affected by COVID-19, almost three quarters (71 per cent) said they have been forced to temporarily shut during the last 12 months. Over a fifth (22 per cent) also reported a sharp drop in sales during the Coronavirus crisis.

Of the 2,800 businesses surveyed, 66 per cent of small business owners said they have applied for financial support from the Government, but 11 per cent of applicants said they have not received any financial support. Meanwhile, 73 per cent feel that they did not receive enough financial support to cover their losses.

Looking ahead, 35 per cent of respondents feel that they need more financial support in the coming months, 10 per cent said they need more information or education on strategies to cope, eight per cent said they need support in the digitisation of their business.

Or Perlman, UK country lead at SumUp, said: “Many business owners are experiencing an incredibly difficult and frustrating time, where they feel the support from their local customers is not mirrored by the Government.”

Perlman said that by “adapting to these difficult circumstances, which have ranged anywhere from moving the business premises to adopting an e-commerce model, introducing new safety measures, to completely changing their business” – small businesses are continuing to endure the crisis while the changes allow them to keep things ticking over until they can fully reopen again.

On the changes, 62 per cent of small businesses owners said they feel that offering cashless payments has helped to improve their business.

It comes as a separate study by Merchant Machine, showed that coins and banknotes could disappear from the UK by 2026, as the Coronavirus pandemic has accelerated “the journey to a cashless society.”

New COVID-19 measures meant that retailers and shoppers across the country have been opting for card payments or e-wallets over cash during the pandemic, to limit contact and curb transmissions of the virus. As a result, cash usage fell by 38.1 per cent between 2000-2020, with the UK predicted to be cashless by 2026.

Link: UK small businesses pivot to survive COVID-19 lockdowns 


Workers can continue to claim home working tax allowance in the new tax year

One unexpected bonus for staff forced to work from home because of the pandemic has been a £6 per week tax break.

People will have seen their household bills naturally go up over the last year, from increased working at home and the Government has recognised this.

These working life changes are driven by the pandemic, which has seen many firms having to close workplaces, sometimes several times, meaning millions of UK staff have been required to work from home temporarily, even if just for part of the week.

HM Revenue & Customs (HMRC) has confirmed that claims from employees working at home due to Coronavirus measures, if their usual workplace is closed, count for this relief and that staff can now claim the Government’s working from home allowance for the 2021/22 tax year.

This gives workers the £6 per week allowance to cover home working costs and can be applied for at any time after the new tax year started in April.

HMRC has confirmed that employed workers can now claim the working from home allowance, even where they have worked at home for just one day because of the Coronavirus restrictions.

If they have not claimed for last year as well, then two claims are allowable.

The £6 per week working from home allowance is worth £62 for basic rate (20 per cent) taxpayers; £125 for higher rate (40 per cent) taxpayers and £140 for additional rate (45 per cent) taxpayers for the 2021/22 tax year.

HMRC relaxed the rules last year on who is eligible to claim the working from home allowance.

Before the Coronavirus pandemic, a worker could only claim the allowance in limited circumstances, where their employer required them to work at home and for that specific period only.

HMRC’s microservice site was already up and running so it makes sense for them to extend the system for this tax year.

HMRC is also likely to be wary of people making standalone claims for working at home this tax year, and the additional time and cost it would take to process these, so it makes sense from their perspective to simply let the system run for another year.

Those that have not claimed their allowance for the 2020/21 tax year can do this at the same time as claiming the current tax year.

Check your eligibility on the HMRC microservice website, where you’ll be asked to check if you can claim.

Link: Employed workers can claim working from home allowance for new tax year

Reimbursed expenses – What you need to know

In most cases, expenses an employee incurs at work are paid for by their employer, but some, like travel and accommodation expenses, are reimbursed later by the employer.

Since 2016, the system for reimbursed expenses has been simplified, which means that HM Revenue & Customs (HMRC) will usually accept that business expenses that are reimbursed by an employer are not taxable benefits for the employee and do not need to be shown on a P11D, provided it is not made as part of a salary sacrifice scheme.

However, HMRC has to be satisfied that the expense is allowable for tax purposes, otherwise, the reimbursement from an employer is treated as additional taxable income. To be allowable the expense has to be either:

  • An amount at least equal to the payment that could be claimed as a deduction; or
  • The expense is an approved flat rate payment.

To claim a deduction an employer must:

  • Always retain evidence that an expense payment is covered by an equivalent deduction in case of future HMRC enquiries; and
  • Be able to prove that the payment is not part of an arrangement to avoid tax, or else the exemption does not apply.

An exempt flat rate payment must be calculated in a manner approved by HMRC. This approval can be achieved by using benchmark rates.

Under changes to the rules, employers are no longer required to check receipts when making benchmark subsistence payments where an employee is making qualifying travel.

If this is not the case, then an employer must seek HMRC approval for the deduction, which can be granted for five years.

However, the following conditions must be met:

  • The employer must have a system in place to check that the employee is, in fact, incurring the stated expense and that a deduction would be available for it; and
  • Neither the employer nor the individual operating this system knows, or has reason to suspect, that the employee has not incurred the expense or that a deduction should not be claimed.

Employers need to be aware that approval can be revoked at any time by HMRC if it believes there is cause to do so. There is no appeal process for this and revocation can be backdated.

The rules around expenses are often complex, which is why businesses are encouraged to seek advice to make sure they make accurate claims and payments.

Links: Expenses and benefits for employers

HMRC to tackle SEISS abuse with new penalty regime

With the fourth round of the Self-Employment Income Support Scheme (SEISS) now well underway, HM Revenue & Customs has announced tough new fines for those that abuse the financial support on offer.

The new penalty regime is aimed at those who have overclaimed the SEISS grant, which includes any amount of grant that a self-employed individual was not entitled to receive or was more than the amount HMRC said the applicant was entitled at the time of a claim.

Claimants who receive an overpayment must notify HMRC within 90 days of receipt of an SEISS grant or face a penalty of up to 100 per cent on the amount of the SEISS grant overpaid.

Although overpayments must be reported to HMRC within a short period, individuals are being offered a longer window for repayment, as no fines will be enforced as long as overpayments are settled by the end of January 2022.

When calculating fines, HMRC has said it will take into account whether the taxpayer knew they were entitled to the SEISS grant when they received it, and when it became repayable or chargeable to tax because the individual’s circumstances changed.

The guidance states: “If you knew you were not entitled to your grant and did not tell us in the notification period, the law treats your failure as deliberate and concealed. This means we can charge a penalty of up to 100 per cent on the amount of the SEISS grant that you were not entitled to receive or keep.

“If you did not know you were not entitled to your grant when you received it, we will only charge you a penalty if you have not repaid the grant by 31 January 2022.”

As well as issuing new guidance on SEISS overpayments, HMRC has also issued a warning to claimants to be careful of a growing number of scams.

It is understood that fraudsters are trying to dupe self-employed individuals into making spurious claims, using emails and text messages. Although appearing quite legitimate, they frequently feature spelling mistakes and grammatical errors.

HMRC has said that taxpayers should not click any links before checking the veracity of a message they receive purporting to be from the tax authority. Any phishing emails or texts should be notified to HMRC so they can investigate the scam.

Link: Self-Employment Income Support Scheme – receiving grants you were not entitled to

New Debt Respite Scheme launched

A new Debt Respite Scheme, designed to give a debtor with problem debt the right to legal protection from their creditors, is now available.

The new scheme consists of two new two types of ‘breathing space’:

  • A standard breathing space – Available to anyone with problem debt, which offers legal protection from creditor action for up to 60 days, including pausing most enforcement action and contact from creditors and freezing most interest and charges on debts.
  • Mental health crisis breathing space – Only available to someone who is receiving mental health crisis treatment. It will last as long as the person’s mental health crisis treatment, plus 30 days and offers some stronger protections.

Debtors can only access a standard breathing space by seeking debt advice from a qualified debt adviser.

Although all applications must be considered, some advisers might decide a breathing space is not appropriate for a debtor in certain circumstances.

To help businesses understand the impact that this change may have on them and their debtors or creditors, it is highly recommended that they read the Government’s latest, detailed guidance by clicking here.

Link: Debt Respite Scheme (Breathing Space) guidance for creditors

National Insurance relief launches for employers that hire veterans

Employers that hire veterans in their first employment after leaving the armed forces are now entitled to National Insurance (NI) relief up to the upper secondary threshold for one year.

The relief, announced at the 2020 Budget, came into effect in April and applies to all veterans of the regular armed forces who have completed at least one day of basic training.

It applies irrespective of how long ago a veteran left the armed forces, as long as they have not been in civilian employment since, or their first civilian employment was within the last year.

Employers that take on a veteran whose first civilian employment was within the last 12 months can benefit from the relief until the first anniversary of the veteran’s first civilian employment.

That means an employer that takes on a veteran seven months after their first civilian employment commenced with another employer can benefit from the relief for the remaining five months of the year.

Meanwhile, those that have taken on veterans whose first civilian employment was in the 12 months before 6 April 2021 can claim relief from 6 April 2021 until the first anniversary of that first employment.

For example, an employer of a veteran whose first civilian employment commenced on 6 October 2020, six months before the policy took effect, would be able to claim the remaining six months of relief from 6 April 2021 onwards.

Employers claiming the relief must check and keep records showing a veteran qualifies by having been a member of the regular armed forces and the start date of their first civilian employment. HM Revenue & Customs (HMRC) has published a list of documents employers can request to meet these requirements.

In the first year of the scheme, employers will have to pay the NI contributions and claim them back from April 2022. In subsequent years, employers will be able to claim relief through PAYE.

Link: National Insurance contributions relief for employers who hire veterans