Our Tax Briefing June 2020 includes the following:
- Self-employed Grants
- VAT Zero Rates
- Help With Statutory Sick Pay
- Grants From Local Authorities
- Working at Home Expenses
- CIS Repayments
- Off-payroll Working Deferred
- VAT and Bad Debt Relief
If you are self-employed and your business has been adversely affected by COVID-19 you may be eligible to claim a grant from HMRC of up to £7,500
To qualify for this self-employed income support scheme (SEISS) you must meet all of these conditions:
- you traded in 2018-19 and submitted your tax return for that year by 23 April 2020;
- you continued to trade in 2019-20 and expect to trade in 2020-21;
- your self-employed profits made up at least half of your average annual income over the years 2016-17 to 2018-19 or those years in which you were self-employed; and
- your profits from self-employment in 2018-19 did not exceed £50,000 or your average annual profits for 2016-17 to 2018-19 did not exceed £50,000.
You can check whether you are eligible for the grant by using HMRC’s SEISS eligibility tool on gov. uk or we can check for you.
If you are eligible you should have received a letter, email or text from HMRC telling you when you can submit your SEISS grant claim. If you have not received such a communication we can contact HMRC on your behalf to find out why.
HMRC will calculate how much grant you are due from the tax returns you have already submitted.
HMRC will calculate how much grant you are due from the tax returns you have already submitted. All you need to do is claim it. Once your claim is accepted you should receive the money straight into your bank account within six working days.
Do not be taken in by spam emails or texts which tempt you to click on an embedded link to claim the grant. The genuine HMRC emails do not include a clickable link nor require a reply.
VAT ZERO RATES
There are three rates of VAT applicable to sales in the UK: standard 20%; reduced 5%; and zero 0%. Products and services are very rarely switched between different rates but on 1 May 2020 digital publications and personal protective equipment were switched from standard to zero rate VAT with immediate effect.
The sale of physical books, newspapers, newsletters and magazines has always been zero-rated but the digital versions of the same products were standard-rated. In the Budget on 11 March the Chancellor announced that digital publications would be zero-rated from 1 December 2020 but that rate change has been brought forward to 1 May 2020.
Personal protective equipment (PPE) as defined by Public Health England is zero-rated for sales made between 1 May 2020 and 31 July 2020 inclusive. This is to help care homes and other businesses who need to buy PPE but cannot reclaim the VAT.
If your business has recently begun to produce protective equipment such as hospital gowns or face masks, check that VAT has been correctly accounted for.
HELP WITH STATUTORY SICK PAY
If you have paid statutory sick pay (SSP) to employees who were unable to work because they had COVID-19 symptoms, or they self-isolated because someone in their household had such symptoms, you may be eligible to reclaim that SSP.
In order to reclaim the SSP, all of these conditions must be met:
- your PAYE scheme was registered with HMRC by close of business on 28 February 2020;
- on that date you had fewer than 250 employees registered across all of your PAYE schemes; •your business was not in difficulty on 31 December 2019; and
- you will not breach the state aid limits for your business sector by claiming the SSP refund.
The latter two conditions are due to the SSP refund being classified as state aid. The maximum amount of SSP-related state aid an individual business can receive is €800,000 although lower limits apply to the agriculture and fishing sectors.
Usually SSP is payable from the fourth day of an employee’s absence due to illness, however where the employee’s absence relates to COVID-19 symptoms SSP is payable from the first day the individual was unable to work. Only SSP relating to COVID-19 matters can be reclaimed by the employer and for a maximum of 14 days per employee, even if the individual is unable to work for a longer period.
A refund claim can cover any number of employees who received SSP over multiple pay periods but be sure to keep good records of which SSP payments you have included in a claim. The online portal to claim SSP refunds opened on 26 May and we can submit claims on your behalf.
GRANTS FROM LOCAL AUTHORITIES
To help businesses struggling due to the COVID-19 lockdown, local authorities have been distributing grants of £25,000 or £10,000 to certain businesses which pay business rates on properties with a rateable value of less than £51,000. In addition businesses which qualify for rural relief or small business rates relief should automatically receive a grant.
WORKING AT HOME EXPENSES
Doc tors have been retiring early and turning down extra shifts because their higher earnings generate pension contributions in excess of the
permitted level of their annual allowance, leading to a penal tax charge.
This comes with advantages, not least avoiding the daily commute, but may also create costs for the employee such as additional power and water used whilst working. The employer can help with those costs by paying employees a tax-free and NIC-free allowance of £6 per week (£4 for periods before 6 April 2020).
If the employer does not pay the home-working allowance the employee can claim the flat rate amount from HMRC directly.
If the employer does not pay the home-working allowance the employee can claim the flat rate amount from HMRC directly, either on their tax return or using form P87 (online or by post). This is a recent change in practice by HMRC who previously would not permit employees to claim for home-working expenses without evidence that increased costs were incurred.
Where the employee needs additional office equipment to make home-working possible or bearable, the employer can provide such items with no tax charge as long as there is no significant private use. If the employee has purchased their own necessary home office equipment the employer can reimburse the cost of those items with no tax or NIC charges arising. This is another change in tax law, effective for payments made to employees from 16 March 2020 to 5 April 2021.
Subcontractors registered in the construction industry scheme (CIS) will normally have tax deducted from their invoices by the companies they work for
At the end of the tax year that CIS tax needs to be tallied up and set against the subcontractor’s own tax liability. In most years once business expenses are taken into account the subcontractor will be due a tax repayment.
If you are a sole trader the quickest way to receive this tax repayment is to submit your personal tax return for 2019-20. We can help you with that. HMRC have promised to speed up the processing of tax repayments this year as many construction workers have been unable to work since March.
If you trade through your own limited company the CIS tax deducted from your invoices is first set against the PAYE and NIC the company owes to HMRC. Any CIS tax not off-set in this way can be reclaimed from HMRC either online or by post. Using the online method means you will receive the tax refund more quickly. You can ask for the tax repayment to be set against other tax your company owes such as corporation tax or VAT.
Do not delay paying tax because you believe there is a CIS tax refund due to you or your company.
In normal times paying your VAT late will create a default surcharge which is imposed at a higher percentage each time your VAT payment or VAT return is late. Currently the VAT due on returns for periods ending in February, March or April 2020 is automatically deferred to 2021 but you will have to pay that VAT eventually, so put aside what you can to pay the VAT when it falls due.
OFF-PAYROLL WORKING DEFERRED
Changes to the application of the IR35 rules (known as off-payroll working) were due to come into effect from 6 April 2020 but due to the COVID-19 pandemic those changes have been deferred until April 2021.
VAT AND BAD DEBT RELIEF
Unless you use the VAT cash accounting scheme you have to account to HMRC for the VAT you charge on sales even if the customer does not pay you. However when you write off a sales debt as bad you can reclaim the VAT from HMRC if it meets these conditions:
- at least six months have passed since the payment date for the invoice (not the invoice date);
- the debt has not been assigned, sold on or factored; and
- the VAT was declared to HMRC on a VAT return.
Shaun is a builder using the FRS with a rate of 9.5%. He charges his customer £6,000 including VAT of £1,000. Shaun pays HMRC £570 (9.5% x £6,000) under the FRS. His customer does not pay so six months after the due date Shaun can claim £1,000 from HMRC as bad debt relief.