July 2020
Technical and Client Update
In this issue
Summer Economic Update
“Flexible Furlough” started 1 July
Second self-employed income support grants to be paid in August
Key dates for Coronavirus Business Support Schemes
Tax payments due 31 July 2020 – do you really need to defer?
Avoid Pension scams
Protecting your business against fraud
Exam Success
Summer Economic Update
On 8th July, the Chancellor Rishi Sunak made a speech entitled “Summer Economic Update” where he unveiled further Government supports and he unveiled the Government’s plan for jobs which he described as the “Second phase in the Government’s economic response to the crisis.”
Here are the highlights and we will update you on the details in the next news update as the Government publishes the specifics of the support measures.
The “Plan for Jobs” PDF can be seen here: DOWNLOAD PDF
CORONAVIRUS JOB RETENTION SCHEME (CJRS) AND JOB RETENTION BONUS
The CJRS ends in October and the Chancellor looked to cushion expected redundancies with the announcement of a Job Retention Bonus (JRB). The new scheme will give employers £1,000 for each previously furloughed employee they retain and keep in employment until January 2021, as long as they are paid at least £520 a month. Further details of the scheme are expected later in July.
KICKSTART SCHEME AND MEASURES TO HELP PEOPLE FIND WORK
In order to support people finding jobs, the Chancellor announced the Kickstart Scheme, which will provide £2 billion to support the creation of “high quality” six-month work placements for 16 to 24-year-olds on Universal Credit and at risk of long-term unemployment.
The Government will provide employers that offer the placements funding equivalent to 100 per cent of the relevant level of the National Minimum Wage (NMW) for 25 hours a week. It will also cover the associated Employer NICs and minimum automatic enrolment pension contributions.
Rishi Sunak also outlined additional measures, including funding for traineeships and employers that hire new apprentices, as well as funding for several careers and job-finding programmes.
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. This funding is in addition to schemes already in place to support employers in taking on apprentices.
VALUE ADDED TAX REDUCED RATE FOR HOSPITALITY AND TOURISM SECTORS
The Chancellor outlined a VAT rate cut for the Hospitality and Tourism sectors from 20 per cent to 5 per cent. The measures relate specifically to food and non-alcoholic drinks and to accommodation and admission to attractions, with further details expected to be published later.
The VAT rate change comes into effect on Wednesday 15 July 2020 and will be in place temporarily until 12 January 2021.
EAT OUT TO HELP OUT
The “Eat Out to Help Out” scheme will provide a discount of 50 per cent of up to £10 a person on eat-in meals, including non-alcoholic drinks, at participating establishments on Mondays, Tuesdays and Wednesdays for the month of August.
Restaurants, cafes and pubs can sign-up for the scheme on a new website on Monday 13 July 2020.
STAMP DUTY LAND TAX HOLIDAY
There is a temporary cut in Stamp Duty Land Tax (SDLT) from 8 July by raising the nil-rate band from £125,000 to £500,000 until 31 March 2021. The Treasury estimates that, as a consequence, around nine in 10 people buying a main residence will pay no SDLT.
Further details can be found on SDLT changes here: https://www.gov.uk/guidance/stamp-duty-land-tax-temporary-reduced-rates
RESIDENTIAL RATES ON PURCHASES FROM 8 JULY 2020 TO 31 MARCH 2021
If you purchase a residential property between 8 July 2020 and 31 March 2021, you only start to pay SDLT on the amount that you pay for the property above £500,000. These rates apply whether you are buying your first home or have owned property before.
You can use the table to work out the SDLT due:
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | Zero |
| The next £425,000 (the portion from £500,001 to £925,000) | 5% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% |
| The remaining amount (the portion above £1.5 million) | 12% |
From 8 July 2020 to 31 March 2021 the special rules for first time buyers are replaced by the reduced rates for additional properties
Higher rates for additional properties
The 3% higher rate for purchases of additional dwellings applies on top of revised standard rates above for the period 8 July 2020 to 31 March 2021.
The following rates apply:
| Property or lease premium or transfer value | SDLT rate |
| Up to £500,000 | 3% |
| The next £425,000 (the portion from £500,001 to £925,000) | 8% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 13% |
| The remaining amount (the portion above £1.5 million) | 15% |
New leasehold sales and transfers
The nil rate band which applies to the ‘net present value’ of any rents payable for residential property is also increased to £500,000 from 8 July 2020 until 31 March 2021.
The following rates will apply:
| Net Present Value of any Rent | SDLT rate |
| Up to £500,000 | Zero |
| Over £500,000 | 1% |
Companies as well as individuals buying residential property worth less than £500,000 will also benefit from these changes, as will companies that buy residential property of any value where they meet the relief conditions from the corporate 15% SDLT charge.
On 1 April 2021, the reduced rates shown in the above tables will revert to the rates of SDLT that were in place prior to 8 July 2020.
As outlined above we will keep you up to date with these and other measures as the Government releases further details. Please talk to us if you need any help during this time.
“Flexible Furlough” started 1 July
The new CJRS “Flexible furlough” grant scheme started on 1 July, which allows employers to gradually bring their furloughed employees back to work part-time. The new scheme will be in place until the end of October and the Government will gradually reduce the amount of grant towards employees’ furlough pay to 70% in September and 60% in October.
The grant paid by the Government via HMRC will remain at 80% of the employee’s normal pay for July and August but they will stop reimbursing NICs and pension contributions from 1 August 2020.
Further details on the operation of the new scheme were announced on 12 June 2020 which are summarised below.
KEY CONDITIONS FOR NEW “FLEXIBLE FURLOUGH”
Only those employees who have been furloughed and included in a claim under the original CJRS scheme may be included in a claim for the new flexible furlough.
That means they must have been furloughed on or before 10 June to allow a full 21 days prior to the end of the original scheme.
A further restriction is that the maximum number of employees that can be included in a flexible furlough claim cannot exceed the maximum number included in a claim under the original scheme. Thus if the employer has 8 employees split into teams of 4 and furloughed team A for three weeks and then team B for 3 weeks the maximum number of employees that can be included in a flexible furlough claim will be limited to 4.
Unlike the original CJRS furlough scheme there is no minimum furlough period as the intention is to allow employers the flexibility to gradually bring employees back to work. The hours/days worked will need to be agreed between employee and employer which is likely to involve amending the employees’ contracts.
Employees will be entitled to their normal contractual pay for the hours that they work and must be paid at least 80% of their normal pay for the hours that they are furloughed, even when HMRC are only reimbursing 70% or 60%.
Employers will need to notify HMRC of the employee’s usual hours and the hours worked in the claim period. The furloughed hours will be the difference. This will be complicated where the employee’s hours vary. There is currently a lack of clarity in the HMRC guidance on the calculation of “usual hours” and we will of course be available to assist you in making your claim. We will also be able to make the claims on your behalf.
Each claim made by an employer must be for a week or more and no claim period can straddle a calendar month end.
Like the original furlough scheme claims cannot be made more than 14 days in advance.
The first claims under flexible furlough can be made from 1 July and the deadline for claims under the original CJRS for the period to 30 June is 31 July 2020.
CORRECTING ERRORS IN EARLIER FURLOUGH CLAIMS
You can now tell HMRC about an over claimed amount as part of your next claim. You will be asked when making your claim whether you need to adjust the amount down to take account of a previous error. Your new claim amount will be reduced to reflect this. You should keep a record of this adjustment for 6 years.
If you have made an error that has resulted in an under claimed amount, you should contact HMRC to amend your claim. As you are increasing the amount of your claim HMRC will need to conduct additional checks.
The table below shows Government contribution, required employer contribution and amount employee receives where the employee is furloughed 100% of the time.
Wage caps are proportional to the hours not worked.
| July | August | September | October | |
| Government contribution: employer NICs and pension contributions | Yes | No | No | No |
| Government contribution: wages | 80% up to £2,500 | 80% up to £2,500 | 70% up to £2,187.50 | 60% up to £1,875 |
| Employer contribution: employer NICs and pension contributions | No | Yes | Yes | Yes |
| Employer contribution: wages | - | - | 10% up to £312.50 | 20% up to £625 |
| Employee receives | 80% up to £2,500 per month | 80% up to £2,500 per month | 80% up to £2,500 per month | 80% up to £2,500 per month |
Second self-employed income support grants to be paid in August
On 29 May the Chancellor announced that the grant scheme to support the self-employed would also be extended with a further payment based on 70% of average profits for the 3 years ended 2018/19, limited to £6,570 rather than £7,500.
The eligibility criteria remain broadly the same as the first grant claim. Self-employed profits in 2018/19 must not exceed £50,000 and must be more than 50% of your total income.
If that test is not met, then the same £50,000 and 50% tests are applied to average profits and total income over the three years (or shorter period) to 5 April 2019.
Self-employed traders need not have claimed a grant under the old scheme to qualify for the August payment and are required to confirm that their business continues to be adversely affected by Covid-19. The deadline for making a claim for a grant under the original SEISS scheme was 13 July 2020.
How different circumstances affect the Self-Employment Income Support Scheme
The Government has updated the guidance for self-employed or member of a partnership to explain how certain circumstances can affect your eligibility for the scheme. Please click here for further information.
Key dates for Coronavirus Business Support Schemes
For good cash-flow planning it’s important to know when applications for schemes open and close and the postponed payment dates for deferred taxes.
A summary of the key dates are listed below for the following:
Coronavirus Job Retention Scheme (CJRS)
Self-Employment Income Support Scheme (SEISS)
Coronavirus Business Interruption Loan Scheme (CBILS)
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
Bounce Back Loan Scheme (BBLS)
Plus VAT and income tax payments.
Date | Scheme | Action |
30 June 2020 | CJRS | The furlough period for the first CJRS ends. Separate claims must be issued for the months of July to October. |
VAT | The VAT payment holiday ends.
| |
1 July 2020 | CJRS | Start date for the revised furlough scheme, the following restrictions apply:
The scheme will cover 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICs) and minimum auto-enrolment pension contributions for the hours the employee does not work. |
CJRS | Flexible Furloughing
| |
8 July 2020 | Economic Update | The Chancellor, Rishi Sunak, delivered an economic update. This set out the next stage in the UK’s plan to ‘secure the recovery’. |
Stamp Duty | From today until 31 March 2021, buyers will pay no Stamp Duty on the first £500k when they move home. | |
13 July 2020 | SEISS | Deadline for applications for the first SEISS grant to be submitted to HMRC. |
14 July 2020 | SEISS |
|
| 15 July 2020 | VAT | The Government will cut the rate of VAT applied on tourism and hospitality related activities from 20% to 5% for six months. |
31 July 2020 | CJRS | Employers have until this date to make any claims to HMRC in respect of the furlough period to 30 June. |
Self Assessment (SA) Payment on Account (POA) |
| |
1 August 2020 | CJRS |
|
Date TBA August 2020 | SEISS |
|
1 September 2020 | CJRS |
|
1 October 2020 | CJRS |
|
31 October 2020 | CJRS | CJRS ends for all furloughed employees. |
Mortgage | If you have not taken a mortgage payment holiday you have until this date to apply. | |
4 November 2020 | CBILS, CLBILS & BBLS | The application window for these loans is open until this date, but the government have the option to extend beyond this date. |
30 November 2020 | CJRS | All CJRS claims for the period July-October must be submitted to HMRC. |
12 January 2021 | VAT | The 6 month period when the rate of VAT applied on tourism and hospitality related activities was cut from 20% to 5% comes to an end. |
31 January 2021 | Self Assessment |
|
CJRS | Employers will receive a £1,000 bonus for each furloughed employee who is still employed as of 31 January 2021. | |
1 March 2021 | VAT | Due to the coronavirus pandemic the domestic reverse charge for VAT relating to certain construction services was postponed, it comes into effect on this date. |
31 March 2021 | VAT | If you deferred March – June 2020 VAT payment, it must be paid by this date. |
Stamp Duty | No Stamp Duty on the first £500k ends today. | |
March/April 2021 | CBILS & CLBILS | You will need to start repayments of the loan and interest 12 months from the date you took out the loan. |
May 2021 | BBLS | You will need to start repayments of the loan and interest 12 months from the date you took out the loan. |
Tax payments due 31 July 2020 – do you really need to defer?
In response to the Coronavirus outbreak, HMRC announced that taxpayers required to make a second payment on account towards their 2019/20 income tax liability by 31 July 2020 can defer their payment until 31 January 2021. The deferral is automatic, so there is no need to inform HMRC and no interest or penalties will be charged during the deferral period.
However, it must be appreciated that this is a measure to assist those suffering financial hardship due to the Coronavirus pandemic. HMRC expect taxpayers who have not suffered financial hardship and have sufficient funds available to make the payment on time and this remains the case despite the fact that the statements they are currently issuing show a due date of 31 January 2021 for the second payment on account.
Reporting of capital gains on UK property –the practicalities
The change in reporting requirements for the sale of UK residential property by UK residents from 6 April 2020 requires the taxpayer, or their agent, to report the gain to HMRC online within 30 days of the completion of the property sale. A payment of the capital gains tax is also required within this 30 day window.
For non-UK residents the requirement to report within 30 days is the same but the reporting is for all UK property sales, not just residential, and a report is required even if there is no capital gains tax payable.
The reporting can be done by the taxpayer or their accountant, on their behalf. Either way it is necessary for the taxpayer to use their Government Gateway account to report the gain or to authorise their accountant to report the gain on their behalf. Therefore if a Government Gateway account does not exist for that taxpayer it is important to create one online; ideally in advance of the completion of the sale of the property so there is sufficient time for us as accountants, if requested, to be authorised to report on behalf of clients.
For further information please get in touch with your usual Humphrey & Co contact.
Please note the late filing penalty for late submission of property reporting to HMRC since 6 April was waived for all transaction up to 30 June due to Coronavirus. Therefore from 1 July all such property disposals must be reported within 30 days to avoid a late filing penalty.
Avoid Pension scams
In these tough times savers might increasingly look to transfer their pension, prompted by the instability of their employer or the financial markets.
Savers could be increasingly targeted by scammers attempting to lure them to 'safe havens'.
Fraudsters promise high returns and low risk, but in reality, pension savers that are scammed can be left with nothing.
When savers realise they have been scammed, it can be devastating – many lose their life savings. Once the money is gone, it is almost impossible to get it back.
How pension scams work
Anyone can be the victim of a pension scam, no matter how savvy they think they are. It is important that everyone can spot the warning signs.
Scammers try to persuade pension savers to transfer their entire pension savings, or to release funds from it, by making attractive sounding promises they have no intention of keeping.
The pension money is often invested in unusual, high risk investments like:
- overseas property and hotels
- renewable energy bonds
- forestry
- parking
- storage units
Or it can be simply stolen outright.
Warning signs of a pension scam
Scammers often cold call people via phone, email or text – this is illegal, and a likely sign of a scam. They often advertise online and can have websites that look official or government backed.
Other common signs of pension scams:
- phrases like ‘free pension review’, ‘pension liberation’, 'loan’, ‘loophole’, ‘savings advance’, ‘one-off investment’, ‘cashback’
- higher returns – guarantees they can get better returns on pension savings
- help to release cash from a pension before the age of 55, with no mention of the HMRC tax bill that can arise
- high pressure sales tactics – time limited offers to get the best deal; using couriers to send documents, who wait until they are signed
- unusual high-risk investments, which tend to be overseas, unregulated, with no consumer protections
- complicated investment structures
- long-term pension investments
If you are an employer or trustee of a pension scheme you can support the ScamSmart campaign by downloading the Pensions Regulator awareness toolkit and help by:
- Sharing The Pensions Regulator social posts
- Promoting articles in your blogs, intranets or newsletters
- Sending The Pensions Regulator leaflets and posters to your audience
However you choose to support is hugely appreciated by the Regulator and goes a long way in helping to protect consumers from harm to their pension pots.
Protecting your business against fraud
In these uncertain times, businesses are combatting an increased amount of fraud.
Throughout recent months, there have been widespread reports of an uptick in fraudulent websites, charity scams and fake emails purporting to be from banks, etc. This increase in fraudulent activity is being driven by opportunists who are attempting to take advantage of the confusion and change of circumstances resulting from the current global pandemic.
In order to protect against fraud, businesses should carry out a risk assessment. This should include an assessment of any IT risk that could arise through remote working. Cyber security measures should be put in place including firewalls, anti-malware and anti-virus software. This software should be kept up to date.
All staff should be trained on how to spot fraudulent emails and should be provided with clear guidelines on what to do if they spot a fraudulent email. For example – check email addresses to see if they look suspicious, report the suspicious email to the IT manager, delete the email, etc.
On the financial side of things, regular internal and external audits should be undertaken. Two signatures / authorisations should be required to sign off on payments from the business. Access to the firm’s bank accounts, online banking facilities and payment systems should be restricted to a limited number of people. An authorisation / approval process should be put in place for all payments over a certain amount.
Computers, company mobiles, phones and devices should all be password protected. All staff should be trained on how to create a secure password and a process should be put in place which means that all passwords are updated on a regular basis.
Even if you implement these measures, your business could still be the victim of fraud or cyber crime. Make sure that you have appropriate insurance policies in place so that your business is protected against any losses incurred from crimes such as fraud.
Exam Success
We are pleased to announce that Ben Packer has passed his exams to qualify as a Chartered Accountant (ACA).
Ben joined Humphrey & Co as an apprentice in 2014 qualifying as an Accounting Technician (AAT) in 2016 and a Tax Technician (ATT) in 2017. Ben then went on to study towards his Chartered Accountancy qualification (ACA) which he has successfully achieved. Ben is part of the Dental and Medical Team working for Partner Greg Penfold.
“I am proud of everything I have achieved so far at Humphrey & Co and can’t thank them enough for the support given to me over the years. I look forward to using the knowledge I have gained to provide the best possible service in assisting our clients with their accounting and tax needs.” said Ben.
Senior Partner Anthony Smith comments “Ben has worked hard to achieve his latest qualification and we look forward to working with him as he progresses and applies his new skills. Securing such a prestigious qualification is a partnership between both employer and employee, and we are committed to our internal training programme for all staff.”