November 2020

Technical and Client Update

In this issue

Coronavirus Job Retention Scheme

Job Retention Bonus (JRB)

Government increases support for self-employed across the UK

Government loan schemes

Business Grants

Mortgage and consumer credit payment holiday extension

Airbnb reporting property rental details to HMRC

Christmas (virtual) parties and gifts and tax implications

Identify HMRC related scam phone calls, emails and text messages

The off-grid day

Coronavirus Job Retention Scheme

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.

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 Job Retention Bonus 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.

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 who are experiencing reduced demand or cannot trade due to the effect of Coronavirus. They then 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: -

  1. Have submitted a 2018/19 Tax Return within the permitted time frame.
  2. Have traded in the tax year 2019/20.
  3. Intend to continue to trade in the tax year 2020/21.
  4. Have trading profits that do not exceed £50,000 in 2018/19 or an average of 2016/17, 2017/18 and 2018/19.
  5. Have the majority of income being derived by self-employment.
  6. 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.

Business Grants

Businesses required to close in England due to local or national restrictions will be eligible for the following:

  • For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
  • For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
  • For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.

Business grant policy is fully devolved. Devolved Administrations will receive UK Government financial support which they could use to establish similar schemes.

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. Therefore if you have already had a 3 month mortgage repayment holiday can apply for a further 3 months.

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.

Airbnb reporting property rental details to HMRC

You may have seen in the newspapers that Airbnb will share data with HMRC about the earnings of hosts (those who let out property) on its UK platform in the tax years 2017/18 and 2018/19.

It is anticipated that HMRC will use this data to open enquiries into the tax affairs of individuals who have not declared letting income for 2017/18 and 2018/19. The deadline for opening an enquiry into a self-assessment return for 2018/19 is 31 January 2021, if the return was issued and submitted on time. The discovery rules allow HMRC to go back much further, potentially up to 20 years in some cases if the property income has not previously been reported.

Rent covered by Rent a Room Relief

However, it is likely that for many property owners who are renting their property via Airbnb, the rental income will be tax free if it is within the £7,500 rent a room relief and will not even need to be reported. This applies where room(s) in the taxpayer’s main residence are rented out, typically to lodgers.

Where the house is owned jointly they would qualify for £3,750 each tax free.

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.

The off-grid day

Blocking out a whole day once a month can work wonders for your productivity.

Time management courses, books and best practice all suggest carving out some time each day to focus on being productive and working towards your goals and personal business objectives.

However this often conflicts with the emails, notifications, calls and reminders that we are all bombarded with on a daily basis.

The traditional approach to time blocking simply doesn’t go far enough. Blocking out an hour each day might give you time to focus on progressing a particular project, but just as you start to get into your groove, your hour will be up and you’ll have to move on to the next thing on your agenda.

Calculating the return on investment on time blocking is pretty straightforward. If you are focused on what you want to achieve, then the more time you block out, the greater the return you will experience in terms of productivity. So how about blocking out an entire day, once a month?

To make this work, focus on your key business objectives. Perhaps you are working on a particular project such as entering a new market or launching a new product. Try blocking out one day per month to progress those key objectives. Aim to start early, say 7am and finish late. Log out of your email and block out the time in your calendar. Make sure that your colleagues know that you are uncontactable for the day and ensure that there is another senior person available to handle any queries that come up during the day.

Even short interruptions can interrupt the continuous flow of your off-grid day so make a deal with yourself - no calls, no email and no distractions. In order to make these key days work, populate your off-grid days in your calendar for the next 12 months and defend those days - don’t give them up for anything.

Finally, in order to maximise your off-grid day, you may need to enlist the support of your family to take care of the day to day logistics of family life. The key thing is to remember to say thanks and to pick up your share on other days. Like everything in life, it’s all about balance.