Medical News Autumn 2020
Welcome to our Autumn 2020 Medical News
The Partners and staff at Humphrey & Co hope that all our clients and contacts are keeping well and staying safe. We would like to reassure you that Humphrey & Co continue to support you in this very unsettling time.
The Autumn Medical News focuses on the key measures outlined by the Chancellor in his recent Winter Economy Plan. The key measures outlined by the Chancellor have been updated with the latest increases in financial support for businesses and workers announced on 22 October 2020 and thereafter on 5 November 2020. As the situation is fast moving, information is constantly changing.
Pension contributions for high earners
Due to the ongoing COVID-19 crisis, the government has further extended the voluntary scheme pays deadline for the 2018/19 tax year by a further five months from 31 October 2020 to 31 March 2021.
Generally, an individual may invest £40,000 in their pension(s) each year and will be entitled to tax relief unless their “threshold income” (for ease think taxable income) exceeds £110,000 and their “adjusted income” (for ease think taxable income plus pension growth) exceeds £150,000 (for years 2016/17 to 2019/20). An individual’s pension annual allowance is abated by £1 for every £2 their adjusted income surpasses the £150,000 threshold. This continues until it reaches the minimum taper annual allowance of £10,000 (this is when adjusted income is equal or exceeds £210,000).
Any unused Annual Allowance from the last three tax years can also be carried forward and added to the current year’s Annual Allowance. However, it is now likely that many higher earners will have now fully utilised available unused annual allowances against previous tax years. Assuming NHS pension growth (plus any contributions to private pension schemes) remains below £40,000 and ‘threshold income’ remains below £150,000 then annual pension tax charges should be avoided.
From 6 April 2020, both the threshold income and adjusted income thresholds have been extended by £90,000 (to £200,000 and £240,000 respectively). This should remove a significant proportion of dentists from these annual tax charges. To combat penalising the highest earners, the maximum abatement is now £36,000, meaning those with an adjusted income of over £312,000 will have a pension annual allowance of just £4,000.
Should you be faced with an annual pension tax charge then it may be possible to elect for the scheme to pay this on your behalf. We strongly advise you take independent pension advice should this be relevant to you.
2019/20 NHS Annual Allowance Pension Savings Statements
NHS Pensions are currently in the process of issuing 2019/20 Annual Allowance Pension Saving Statements individually for the 1995/2008 and 2015 schemes.
GPS who are scheme members can expect to receive the 2019/20 tax year in July 2021, following submission of the 2019/20 certificate of pensionable profit/type 2 forms. This is due how the certification process timeline.
If you have not received these, you should request Pension Savings Statements by:-
- Calling NHS Pensions on 0300 330 1346 (it needs to be the person requesting the statement)
- Email to firstname.lastname@example.org and request a statement.
What do I need to do next?
It is important that the Pension savings statements for 2019/20 are forwarded immediately to Humphrey & Co upon receipt to ensure that we are able to review your tax position accordingly and advise whether any tax charge is due as the Self Assessment tax deadline of 31 January 2021 draws closer.
If you are in any doubt whether this may affect you we would urge you either speak to your IFA (Independent Financial Adviser).
For the 2019/20 tax year, NHS England have also agreed to fund the costs of scheme pay elections and as a result, this will not lead to a reduction in NHS Pension benefits for this year. NHS England will repay any reduction on retirement. The measure has been introduced with the aim of removing the disincentive to work extra hours as a result of the impact of tax legislation.
GP solo and freelance GP locum forms
NHS Pensions have now published the 2020/21 SOLO form and Freelance GP locum Forms A and B.
These are available to download on the following link:-
NHS Pensions have confirmed that although the 2020/21 freelance GP locum forms and guidance states that GP locum work that is more than 10 weeks old cannot be pensioned, the rule is being temporarily lifted during the current COVID-19 pandemic in order to allow GP locums more time to complete forms. The removal of the 10-week window was brought into effect from 1 April 2020 until further notice. For example, a freelance GP locum can declare work performed in April 2020 on their August 2020 Form B subject to the Form A being validated at the time.
Self Assessment – 2020/21 payments on account of tax
Payments on account of tax for 2020/21 are automatically calculated and are based on an individual’s tax liability for 2019/20. Given the current COVID-19 situation, income for 2020/21 may be significantly less than 2019/20 and there might be scope to reduce ‘on account’ tax payments for 2020/21.
If you would like a review of your position, please do contact us. We suggest that in order to have a better idea of your likely income for 2020/21, that you provide your income details in December.
Any claim to reduce your payments on account of tax for 2020/21 can then be submitted to HM Revenue & Customs in advance of the tax payment due on 31 January 2021.
Making tax digital for VAT
Making Tax Digital (MTD) was launched by HM Revenue & Customs back in April 2019 with the intention to make the tax system more effective, efficient and easier for taxpayers.
The first phase saw the introduction of Making Tax Digital for VAT, affecting VAT-registered businesses with a taxable turnover above the VAT threshold (currently £85,000) and requiring them to maintain their accounting records in a digital format and use MTD-compatible software to submit their VAT Returns. The aim is to provide ‘real time information’ to HM Revenue & Customs.
HMRC has since announced that this will extend further to all VAT-registered businesses, regardless of turnover from April 2022.
This means all VAT registered businesses have until their first VAT return period commencing on or after 1 April 2022 to have all requirements in place.
For the majority of our doctors and consultants, Making Tax Digital for VAT does not apply as supplies of healthcare by health professionals and health institutions are exempt from VAT.
In order to for the service to be exempt, there are two conditions that must both be met
- Services must be within the profession in which the person is registered to practice and;
- Where the primary purpose of the service is to protect, maintain or restore the health of the person concerned.
Other services such as issuing medical reports and certificates must be assessed on their primary purpose.
If the primary purpose is to provide a third party with a necessary element for taking a decision could be considered taxable. Services will include the writing of articles and services directly supervised by a pharmacist. Please do contact us should you require assistance with determining the VAT treatment
For more information regarding this area, please visit:-
Making tax digital for Income Tax
Further expansion of Making Tax Digital is on the horizon which will also see a significant change to the administration of taxes. Health professionals including doctors, GPs and consultants will be impacted.
From April 2023, Making Tax Digital will apply to taxpayers who file Self-Assessment Tax Returns for business or property income over £10,000 per annum.
In the lead up to April 2023 and for those health professionals who are not required to file quarterly VAT Returns, Humphrey & Co are gearing up to support your business and ensure it will be digitally ready.
We shall provide further details to you as and when we receive further information from the government.
In the meantime, health professionals who continue to run their business income and expenses through their personal bank account will benefit from having a separate bank account solely for their business income and expenses.
Electric company cars
The low Benefit in Kind (BIK) on new and fully electric cars (or good hybrids) means that anyone operating via a limited company may consider leasing or purchasing a relevant vehicle. Of course the tax legislation is complex and you should speak with your usual contact at Humphrey & Co for more details. We will provide a more thorough article on this topic in the subsequent ENews.
Christmas (virtual) parties and gifts and tax implications
For the 2020 festive season traditional office parties may not be an option, but organisations still wanting to boost morale after a difficult year will be considering how they can do things differently.
So if you are planning a virtual party, perhaps an online Christmas quiz with food delivery vouchers, what are the tax exemptions for employers?
As an employer providing social functions and parties for your employees, you have certain National Insurance and reporting obligations.
What you need to report and pay depends on:
- if it’s an annual event
- if it’s open to all of your employees
- if it costs more than £150 per head
- how many events you provide during the tax year
- whether the employee is a director, and how much they earn
You might not have to report anything to HM Revenue and Customs (HMRC) or pay tax and National Insurance. To be exempt, the party or similar social function must be all the following:
- £150 or less per head
- annual, such as a Christmas party or summer barbecue
- open to all your employees
Separate locations and departments
If your business has more than one location, an annual event that’s open to all of your staff based at one location still counts as exempt. You can also put on separate parties for different departments, as long as all of your employees can attend one of them.
Employers planning a virtual event should consider its organisation carefully. It is possible that employers may need to demonstrate attendance at an online event for it to qualify under the annual function exemption, so will need to ensure that there is a way to collect that data.
Furthermore, a structured social event incorporating the traditional elements of a Christmas party is more likely to be able to meet the requirements for the exemption. For example, if food, drink and entertainment are provided.
Trivial benefits rule
A simpler alternative in the current circumstances may be for employers to provide staff with a gift to enjoy the festivities.
You don’t have to pay tax on a benefit for your employee if all of the following apply:
- it cost you £50 or less to provide
- it isn’t cash or a voucher that can be exchanged for cash
- it isn’t a reward for their work or performance
- it isn’t in the terms of their contract
This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HM Revenue and Customs (HMRC) know.
You have to pay tax on any benefits that don’t meet all these criteria.
Employers could provide a hamper or a voucher for food and drink, for example. In this instance the trivial benefits exemption should apply, but in the absence of the elements of a Christmas party, the annual functions exemption will not be available.
The two exemptions can work alongside each other, so employees can be invited to a Christmas party, allowable under the annual function exemption and also be given £50 of, say, gift vouchers, covered by the trivial benefits exemption.
Lastly, if a business provides a bottle of wine in a nice gift bag as a Christmas gift, the value of the gift bag should be included in the value of the gift when deciding whether the total value exceeds the trivial benefits limit.
Identify HMRC related scam phone calls, emails and text messages
Please beware of emails and messages pertaining to be from HMRC. Take extra caution at this time and do not click on links or share personal details. Please talk to us if you want to confirm whether any correspondence is genuine.
HMRC have issued a checklist to decide if a suspicious contact is a scam and not a genuine phone call, text message (SMS) or email. For further details please click here.
Update on government financial supports
COVID 19 Support fund for general practice
Additional government funding has been made available to assist GP practices with additional costs of the COVID-19 response. From 4 August 2020, practices are able to submit claims to their CCG in relation to specific and net additional costs incurred. This includes costs during the Easter holiday and bank holiday of 8 May. Practices can also claim for additional costs incurred in delivering additional services to care homes to 30 September 2020.
NHS England previously advised that during the initial peak, practices should offer full pay to any staff taking COVID-19 related sick leave or staff who are shielding. They have now confirmed that where it was required to maintain necessary clinical capacity and staff could not work at home, the costs of clinical and non-clinical cover will be reimbursed where practices have offered full pay to staff absent for COVID-19 related reasons between 23 March to 31 July 2020.
From 1 August 2020, usual contractual provisions apply. Where practices have unavoidably required additional clinical and non-clinical capacity as a result of COVID-19, and where agreed by the commissioner, these will also be reimbursed.
Further information can be accessed on the following:-
General practice covid capacity expansion fund
NHS England has announced a new General Practice Covid Capacity Expansion fund, with the purpose of expanding general practice capacity up until the end of March 2021. The intention is to support GPs until the end of this period and allow surgeries to increase hours of staff or employ staff returning to assist with the COVID response and deal with the backlog of care and improve services. £150 million has been allocated through regional integrated care systems to CCGS for general practice. The fund is ringfenced exclusively for use in general practice. It will be for ICSs and CCGS to determine how best it is spent within general practice
Accessing the fund will be conditional on practices and PCNS continuing to complete national appointment and workforce data in line with existing contractual requirements. Where an individual practice is not yet accurately recording activity that is broadly back at its own pre COVD levels, it is expected to do so as part of accessing the fund.
Full details can be found here
Coronavirus Job Retention Scheme (CJRS)
Workers across the United Kingdom will benefit from increased support with a five-month extension of the furlough scheme into Spring 2021, the Chancellor announced on 5 November. The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March, for claim periods running to January 2021 employees will receive 80% of their current salary for hours not worked.
The furlough scheme was initially extended until 2 December. But the government is now going further so that support can be put in place for long enough to help businesses recover and get back on their feet – as well as giving them the certainty they need in coming months. Evidence from the first lockdown showed that the economic effects are much longer lasting for businesses than the duration of restrictions.
Please note that the scheme is unlikely to apply to medical practices as the government and NHS England have outlined that it does not expect the scheme to be used by many public sector organisations as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the Coronavirus outbreak. This also applies to non-public sector employers who receive public funding for staff costs.
Organisations who are receiving public funding to provide services necessary to respond to COVID-19 are not expected to furlough staff. Where employers receive public funding for staff costs, and that funding is continuing, the government expects employers to use that money to continue to pay staff in the usual fashion, and correspondingly not furlough them. NHS England have also confirmed that it does not expect practices to furlough their employees in line with government guidelines
For organisations who do meet the criteria, eligible employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month.
- Employer flexibility: Businesses will have flexibility to use the scheme for employees for any amount of time and shift pattern, including furloughing them full-time.
- Employer contribution: There will be NO employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and Employer pension contributions for hours not worked. For an average claim, this accounts for just 5% of total employment costs or £70 per employee per month. HMRC will review the policy in January to decide whether economic circumstances are improving enough to ask employers to contribute more.
- Payment: The extended CJRS will operate as the previous Scheme did, with businesses being able to claim either shortly before, during or after running payroll. Claims can be made from 8am Wednesday 11 November. Claims made for November must be submitted to HMRC by no-later than 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month, to ensure prompt claims following the end of the month which is the subject of the claim.
- Employee eligibility: Neither the employer nor the employee needs to have previously claimed or have been claimed for under CJRS to make a claim under the extended CJRS (if other eligibility criteria are met). An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
- Employees that are re-employed: Employees that were employed and on the payroll on 23 September 2020 (the day before the Job Support Scheme announcement) who were made redundant or stopped working afterwards can be re-employed and claimed for. The employer must have made an RTI submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Full guidance can be found here.
The Job Support Scheme is postponed.
Job Retention Bonus (JRB)
The JRB will not be paid in February and HMRC will redeploy a retention incentive at the appropriate time. The purpose of the JRB was to encourage employers to keep people in work until the end of January. However, as the CJRS is being extended to the end of March, the policy intent of the JRB falls away. As with the Job Retention Scheme, this is unlikely to apply to medical practices and other publicly funded organisations.
Government increases support for self-employed across the UK
HMRC recently announced an extension of the Self-Employment Income Support Scheme to support self-employed individuals (including GP locums and private doctors) who are experiencing reduced demand or cannot trade due to the effect of Coronavirus. They have since doubled the support from 40% to 80% of trading profits for November, which increased the overall level of the grant to 55% of trading profits.
On 5 November, the Government announced that they are increasing the overall level of the grant to 80% of trading profits covering November to January for all parts of the UK. This provides equivalent support to the self-employed as provided to employees through the government contribution in the CJRS. It is calculated based on 80% of 3 months’ average trading profits, paid out in a single instalment and capped at £7,500.
This is £7.3 billion of support to the self-employed through November to January alone, with a further grant to follow covering February to April. This comes on top of £13.7 billion of support for self-employed people so far, one of the most comprehensive and generous support packages for the self-employed anywhere in the world.
HMRC will pay this more generous grant sooner than planned and in good time for Christmas – the window for claiming a grant will open on 30 November, two weeks earlier than previously announced.
The Government has already announced that there will be a fourth SEISS grant covering February to April. The Government will set out further details, including the level, of the fourth grant in due course.
The grants are taxable income and also subject to National Insurance contributions.
To be eligible for the further grants, taxpayers must meet the following: -
- Have submitted a 2018/19 Tax Return within the permitted time frame.
- Have traded in the tax year 2019/20.
- Intend to continue to trade in the tax year 2020/21.
- Have trading profits that do not exceed £50,000 in 2018/19 or an average of 2016/17, 2017/18 and 2018/19.
- Have the majority of income being derived by self-employment.
- Carry on a trade which has been affected by reduced demand due to Coronavirus since 1 November.
Previously, in order to be eligible for the first and second grant, the business had to be ‘adversely affected’ which included being unable to work because the taxpayer is shielding, self-isolating or is on sick leave or has care responsibilities because of Coronavirus. It also included scaling down, temporarily stopped trading or incurring additional costs because:-
- the supply chain has been interrupted
- the business has fewer or no customers
- staff are unable to work
- one or more of contracts have been cancelled, or
- protective equipment was purchased to comply with social distancing rules.
To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:
- have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
- declare that they intend to continue to trade and either:
- are currently actively trading but are impacted by reduced demand due to Coronavirus
- were previously trading but are temporarily unable to do so due to Coronavirus
Government loan schemes
More businesses will also be able to benefit from government loan schemes which have been extended to the end of January 2021, while firms can ‘top up’ existing Bounce Back Loans should they need additional finance. Please note that these are not available to GP practices as they are publicly funded, however individual GPs of a practice may be eligible if they have self-employment income or a limited company.
Mortgage and consumer credit payment holiday extension
Mortgage payment holidays will no longer end on 31 October. Borrowers who have been impacted by Coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.
Payment holidays will also continue to be available for consumer credit products such as personal loans and car finance. As with mortgages, borrowers impacted by coronavirus who have not yet taken a payment holiday on that product can ask for one of up to 6 months and those that currently have a payment holiday will be eligible to top up to six months without this being recorded on their credit file. Borrowers with high-cost short-term credit products such as payday loans will continue to be entitled to a maximum month payment holiday. The FCA published draft guidance on this on 4 November.
However, it must be appreciated that the payment holidays are a measure to assist those suffering financial hardship due to the Coronavirus pandemic. Providers expect that if you have not suffered financial hardship and have sufficient funds available, to make their payments on time.
Self Assessment – time to pay extension
Approximately 11 million Self Assessment taxpayers will be able to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility, to help those who are unable to make the 2019/20 Self-Assessment tax payment deadline by 31 January 2021.
Specifically, taxpayers with liabilities of up to £30,000 can make use of HMRC’s ‘self-serve time to pay’ facility to secure a payment plan over an additional 12 months. This means that liabilities ordinarily due by 31 January 2021 can be deferred up until 31 January 2022. This also means that payments due by 31 July 2020 that were previously deferred until 31 January 2021 can be further deferred up to 31 January 2022.
The self-serve time to pay scheme will be available through HMRC’s website and eligible taxpayers will receive automatic and immediate approval.
Customers who wish to set up their own self-serve Time to Pay arrangements must meet the following requirements:
- they need to have no:
- outstanding tax returns
- other tax debts
- other HMRC payment plans set up
- the debt needs to be between £32 and £30,000
- the payment plan needs to be set up no later than 60 days after the due date of a debt
Customers using self-serve Time to Pay will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from 1 February 2021.
You can still pay your deferred July 2020 payment on account any time up to 31 January 2021. There’ll be no interest or penalty as long as you pay in full by that date. More details can be found here.
Self Assessment customers can set up their own online payment plan to help spread the cost of their tax bill. Please click here for further details.
HMRC’s normal time to pay self-assessment helpline (details can be found here) is still available to taxpayers unable to use the online service, whose debts exceed £30,000 or require more than a year to repay their tax debts.
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 their payments on time.
Bounce Back Loans – repayment flexibility
Businesses including GPs and doctors who have a limited company who took out a Bounce Back Loan (BBLS) will get more repayment time through a new Pay as You Grow flexible repayment system.
This includes extending the length of the loan from six years to ten, which will cut monthly repayments by nearly half. Interest-only periods of up to six months and payment holidays will also be available to businesses.
The Government also intends to give Coronavirus Business Interruption Loan Scheme (CBIL) lenders the ability to extend the length of loans from a maximum of six years to ten years if it will help businesses to repay the loan.
On 31 October an extension in applications for the government’s coronavirus loan schemes until the end of January 2021 was announced, while firms can ‘top up’ existing Bounce Back Loans should they need additional finance.
Please do get in touch should you wish to discuss CBILS/BBLS if you have not done so already.
We continue to keep our clients and contacts updated via our Coronavirus Hub with the information issued by the Government to support businesses and individuals. We will continue to update the hub with the latest developments so please check back regularly. Alternatively, you can follow us on our social media channels below: