A guide by the Tolley tax team, updated to 23 March 2020.
The escalation of the coronavirus (COVID-19) outbreak and the global response of all governments to the crisis has caused significant turbulence in recent days. Travel restrictions, social distancing measures and large-scale quarantines are all having significant impact.
This note details the main tax issues that may be relevant to your clients during these difficult times, discussing relevant employment tax, personal tax, business tax and VAT issues. As would also be expected, there are also a wide range of short-term government support initiatives now available to access and these are also detailed in this note. For government guidance on tax issues, loans, and grants for businesses, employers and employees, see the Gov.UK website.
On 20 March 2020, the government announced that it will step in and help pay people’s wages with the introduction of a ‘coronavirus job retention scheme’.
In a bid to encourage employees to ‘furlough’ staff rather than lay them off, HMRC will provide grants which the chancellor said will cover 80% of the salary of retained furloughed workers, up to a cap of £2,500 per employee per month. We understand that the furloughed employee must undertake no work for their employer, and the 80% reimbursement would be based on previous pay.
The government has placed no limit on the funding available for the scheme and it is open to any employer in the UK, regardless of size or sector, and covers the cost of wages backdated to 1 March 2020.
To access the scheme, all UK employers need to designate affected employees as ‘furloughed workers,’ and notify their employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
Employers also need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
The chancellor said the government was aiming for the scheme to be up and running before the end of April 2020, with the first grants to be paid within weeks. The scheme will be in place for at least three months, but will be extended as needed.
HMRC is working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
The chancellor was silent on the tax and NIC consequences of the grant, particularly for the employer. It is expected that HMRC will publish detailed guidance shortly on how these arrangements will work to avoid any unexpected costs.
As part of a broad package of measures to protect the economy from the coronavirus outbreak, the planned introduction of off payroll working in the private sector is postponed for one year from 6 April 2020 to 6 April 2021. It was stressed that this is simply a deferral and not a cancellation of the regime, but this pause will bring welcome relief to many during these uncertain times. Hansard
Following Spring Budget 2020, statutory sick pay (SSP) rules are to be changed temporarily to help workers affected by the coronavirus outbreak. The chancellor confirmed the prime minister’s previous announcement that SSP will be paid from day 1 rather than day 4, before announcing the following new measures:
Spring Budget 2020, paras 1.94, 1.95
Self-employed individuals and employees below the lower earnings limit who are not eligible for SSP can more easily make a claim for universal credit or contributory employment and support allowance:
Spring Budget 2020, para 1.96
HMRC has confirmed that if an employee has already exhausted their 28 weeks SSP then they will not be entitled to any more, even under coronavirus, and should be served the SSP1 form and advised to claim universal credit or employment support allowance.
In addition, to help insulate businesses against the impact of coronavirus, small and medium-sized businesses (with less than 250 employees) will have the costs of SSP for any employee off work because of coronavirus for up to 14 days refunded by the Government in full.
The full eligibility criteria for the scheme is as follows:
Spring Budget 2020, para 1.99
The exact legislative and / or other mechanisms whereby these changes are to be introduced have yet to be announced. The Coronavirus Bill makes provision for HMRC to make the necessary changes via regulations.
HMRC has confirmed that where a pregnant woman stays at home following Government guidance on coronavirus, it is not classed as a pregnancy-related illness. Normal rules will apply, in that SSP covers this and the woman does not have to bring her maternity pay period forward. See the Maternity pay guidance note.
Currently, employers may make contributions towards an employee’s home expenses under ITEPA 2003 s 316A. Amounts can be paid in respect of the reasonable additional costs that an employee incurs. This exemption only applies to amounts reimbursed by the employer and not to costs borne by the employee.
In order for the exemption to apply, there must be ‘homeworking arrangements’ in place.
The exemption is designed to cover the additional costs of things such as increased heating, lighting or electricity costs. It does not cover expenses that the employee incurred in order to allow them to work at home. For example, mortgage interest payments, building alterations or the cost of additional equipment that the employee has to provide to work at home.
The employer may choose to reimburse the full amount of the employee’s extra costs. In which case, the employee and the employer must keep records to substantiate the reimbursement. This may prove difficult as the increased amount needs to be proven.
Alternatively, the employer may choose to reimburse based on HMRC-approved scale rates without the employer having to justify the amount paid. For tax years from 2012/13 to 2019/20, these amounts are £4 per week or £18 per month.
The government announced that from 6 April 2020, the tax and NIC exempt amount that can be paid towards the additional costs of working from home is increased from £4 to £6 per week, where the employees work at home under ‘homeworking arrangements’. As a result, employers can pay eligible employees an additional £2 per week to cover business costs when working from home.
OOTLAR, para 2.11
Employers need to think ahead and plan for the potential disruption to their workforce. They may now see employees having trouble getting to their normal place of work, notably because of illness but also because of self-isolation and other unexpected events (such as the closure of schools). Employers should assess their employees’ ability to work remotely, taking into consideration their IT setup and equipment at home, and review their ‘working from home’ policies if these are already in place.
The second self assessment payment on account for the 2019/20 tax year is deferred from 31 July 2020 to 31 January 2021. In effect, this means that the 2019/20 balancing payment due by 31 January 2021 will be the total income tax, capital gains tax, class 2 and class 4 NIC due for the tax year less the first payment on account. No interest will be applied for the period between 31 July 2020 and 31 January 2021.
Initially, the government guidance suggested that this deferral was available to the self-employed only. However, the HMRC Press Office has confirmed to Tolley that this deferral applies to all those required to make payments on account under the self assessment system.
The deferment applies automatically without the need to make an application.
Individuals may wish to contact their advisers to see whether the impact of coronavirus may reduce their 2019/20 taxable income such that a claim can be made to reduce the 2019/20 payments on account. This would then generate a partial refund of the first payment on account.
Under the UK statutory residence test (SRT), individuals prevented from leaving the UK may be able to discount days of presence for determining tax residency if they qualify as ‘exceptional circumstances’. Examples of ‘exceptional circumstances’ include national or local emergencies, such as war, civil unrest or natural disasters, and a sudden or life-threatening illness or injury.
HMRC has confirmed that the following days will be regarded as exceptional circumstances due to coronavirus:
It is important to note that there is a 60-day cap for days disregarded through exceptional circumstances. RDRM13230 states: 'The maximum number of days spent in the UK in any tax year that may be ignored due to exceptional circumstances is 60. This is a limit, not an allowance or entitlement. It applies whether there is one event or several events in the same tax year. Days spent in the UK over the 60-day limit count as a day of presence for the purposes of the SRT.'
Individuals who have made an election to stop receiving child benefit due to the high income child benefit charge (HICBC) may wish to consider revoking the election in order to restart their claim. The child benefit may need to be ultimately paid back via the self assessment tax return, but it can help a little towards easing immediate cash flow concerns. The election can be revoked by completing a form online via the GOV.UK website (a Government Gateway account is necessary) or by contacting the Child Benefit Office by telephone on 0300 200 3100. The election must be revoked by the person who originally made it, which is the person who is to receive the child benefit. Child benefit will start to be paid again from the Monday following the call or receipt of the form. However, if neither partners’ adjusted net income is expected to exceed £60,000, the revocation can be backdated to the start of the tax year.
While most UK incorporated companies are resident in the UK regardless of the location of central management and control, a few companies that are usually UK resident (for example, those incorporated outside the UK but managed in the UK) still fall under the case law test for residence.
This, or the effective management test, may also be of relevance for any company that may be dual resident and so needs to apply any tiebreaker provision in the relevant double tax treaty in order to determine residence.
With directors of companies potentially stranded abroad due to coronavirus, but business still needing to continue, board meetings may be held with directors joining remotely. This could potentially impact on where the central management and control (or effective management) of those companies is located. It should be considered on a case-by-case basis whether a director not situated in the UK at the time of the meeting should join a particular board meeting and ensure that the chair of the meeting is in the UK. Similar considerations but in reverse should take place for a company that is not UK resident but has directors in the UK.
This is a complex area that will not be relevant to many companies. For companies that may be affected, this issue should be considered for each board meeting, and contemporaneous minutes evidencing the location of directors attending meetings should be kept. It is unlikely that a single meeting will tip the balance regarding residency, but as travel disruptions are likely to continue for several months, this concern may become more relevant over time.
Companies may also need to consider whether directors are permitted to attend board meetings virtually, or from particular locations, under their articles of association. There may be specific provisions (in the articles or elsewhere) that provide for exceptional circumstances, but this needs to be considered on a case-by-case basis.
Some businesses may have insurance cover for pandemics and/or government-ordered closures. The government confirmed on 17 March 2020 that its advice to avoid pubs, theatres, etc is sufficient to make a claim under such a policy. However, most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and exclude pandemics, so businesses should check the terms and conditions of their specific policy and contact their providers.
Many businesses have experienced a rapid and unexpected decrease in their revenue streams as a result of coronavirus. As a result, they may be suffering cash flow problems that could impact their ability to pay any VAT due in respect of their VAT return period ending 31 March 2020 and later, depending on the severity of the ongoing situation.
As a result of these ongoing concerns, the chancellor has announced a delay in the requirement to remit VAT payments that applies from 20 March 2020 until 30 June 2020. All UK businesses are entitled to delay payment of any VAT due automatically with no requirement to formally apply for the extension. Businesses are not required to make a VAT payment during this period.
Businesses will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. We understand that further guidance will be published shortly to assist businesses with deferring VAT payments and this guidance note will be updated to reflect this as soon as it is published.
Smaller businesses who consider that they will now be trading under the VAT deregistration threshold may wish to consider cancelling their VAT registration number if they believe that they will meet any of the following criteria.
According to Notice 700/11, businesses can voluntarily cancel their VAT registration number when any of the following occurs:
If the business is requesting voluntary VAT registration cancellation on turnover grounds, it will need to tell HMRC why it thinks its turnover is going to fall below the VAT registration cancellation limit; for example, reduced opening times, lost contracts or changes to the business practices. HMRC should also be advised regarding what the business expects its turnover will be in the following 12 months. When calculating the turnover, it should be done on a VAT-exclusive basis.
HMRC will not allow a business to cancel its registration if the reduction in its turnover is the result of an intention to stop trading or suspend making taxable supplies for 30 days or more in the next 12 months.
Businesses who meet any of the above conditions can use the online service to notify HMRC that they wish to cancel their VAT registration number. Businesses can also complete a form VAT7: application to cancel your VAT registration and send it to HMRC through the post. Businesses may have to account for VAT on any stocks and assets on hand at the time of deregistration.
Individuals and businesses can access financial help through several government measures, including:
Advisers may be asked to assist clients in accessing the government assistance being offered. It appears that the current measures are being offered with little or no checks undertaken to verify if coronavirus is actually causing the financial difficulty. However, advisers should nonetheless advise clients to keep full records to prove how they have been directly impacted by coronavirus in case of a later challenge. A subsequent compliance check or enquiry could lead HMRC to a taxpayer’s social media accounts, and contradictory evidence would cause problems.
Advisers may wish to check their professional indemnity insurance as they may be asked to make representations on behalf of clients that they were ill or otherwise impacted. In the absence of definitive coronavirus testing, advisers could find themselves inadvertently put in the position of making a false representation, or giving advice based on incomplete facts.
Time to pay arrangements are negotiated agreements with HMRC that allow for the payment of self assessed tax after its due date. In response to the coronavirus crisis, businesses and individuals are being assured that time to pay can be used as a way of easing cash flow concerns by paying tax in instalments.
For more on the details of negotiating these arrangements, see the Time to pay arrangements for tax due under self assessment guidance note.
Universal credit is a tax-free state benefit that is available for individuals and the self-employed on low incomes. Measures taken by the government to enable faster access to universal credit during the coronavirus outbreak include dispensing with the usual requirement for a minimum income floor. For more details, see the Universal credit guidance note.
The standard allowance for universal credit and the basic element of working tax credit are to be increased by £20 per week from 6 April 2020. This is in addition to the 2020/21 uprating announced at Spring Budget 2020. See the Computing the working tax credit guidance note.
From April 2020, local housing allowance rates are increased to the 30th percentile of market rents. This applies to all private renters who are new or existing universal credit housing element claimants and to existing housing benefit claimants.
It should be noted that an application for universal credit usually means that HMRC is released from any existing time to pay arrangement and the tax debt is transferred to the Department of Work and Pensions. The tax debt will be repaid through a reduction in the universal credit payments. A taxpayer may therefore have to choose between seeking assistance through universal credit or through a time to pay arrangement.
A number of measures to support businesses were announced at Spring Budget 2020 and subsequently extended by the chancellor.
These include:
Business rates and the grant funding are administered by local authorities. The business rates holiday is applied automatically and local authorities should write to eligible businesses with a restated 2020/21 bill. Similarly, local authorities should write to businesses that are eligible for the £25,000 grant with further details. Any questions as to the eligibility for the business rates holiday or provision of the grant should be directed to the local authority. Any businesses that are unsure of their local authority can find this via the tool on the Gov.UK website.
The coronavirus business interruption loan scheme will be delivered by the British Business Bank. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) and will not charge businesses or banks for this guarantee. The scheme will support loans of up to £5 million in value. Businesses can access the first 12 months of that finance interest-free, as the government will cover the first 12 months of interest payments. The intention behind this scheme is to give lenders confidence to continue to lend to SME. The scheme is available from 23 March 2020.
A guide by the Tolley tax team, updated to 23 March 2020.
The escalation of the coronavirus (COVID-19) outbreak and the global response of all governments to the crisis has caused significant turbulence in recent days. Travel restrictions, social distancing measures and large-scale quarantines are all having significant impact.
This note details the main tax issues that may be relevant to your clients during these difficult times, discussing relevant employment tax, personal tax, business tax and VAT issues. As would also be expected, there are also a wide range of short-term government support initiatives now available to access and these are also detailed in this note. For government guidance on tax issues, loans, and grants for businesses, employers and employees, see the Gov.UK website.
On 20 March 2020, the government announced that it will step in and help pay people’s wages with the introduction of a ‘coronavirus job retention scheme’.
In a bid to encourage employees to ‘furlough’ staff rather than lay them off, HMRC will provide grants which the chancellor said will cover 80% of the salary of retained furloughed workers, up to a cap of £2,500 per employee per month. We understand that the furloughed employee must undertake no work for their employer, and the 80% reimbursement would be based on previous pay.
The government has placed no limit on the funding available for the scheme and it is open to any employer in the UK, regardless of size or sector, and covers the cost of wages backdated to 1 March 2020.
To access the scheme, all UK employers need to designate affected employees as ‘furloughed workers,’ and notify their employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
Employers also need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
The chancellor said the government was aiming for the scheme to be up and running before the end of April 2020, with the first grants to be paid within weeks. The scheme will be in place for at least three months, but will be extended as needed.
HMRC is working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
The chancellor was silent on the tax and NIC consequences of the grant, particularly for the employer. It is expected that HMRC will publish detailed guidance shortly on how these arrangements will work to avoid any unexpected costs.
As part of a broad package of measures to protect the economy from the coronavirus outbreak, the planned introduction of off payroll working in the private sector is postponed for one year from 6 April 2020 to 6 April 2021. It was stressed that this is simply a deferral and not a cancellation of the regime, but this pause will bring welcome relief to many during these uncertain times. Hansard
Following Spring Budget 2020, statutory sick pay (SSP) rules are to be changed temporarily to help workers affected by the coronavirus outbreak. The chancellor confirmed the prime minister’s previous announcement that SSP will be paid from day 1 rather than day 4, before announcing the following new measures:
Spring Budget 2020, paras 1.94, 1.95
Self-employed individuals and employees below the lower earnings limit who are not eligible for SSP can more easily make a claim for universal credit or contributory employment and support allowance:
Spring Budget 2020, para 1.96
HMRC has confirmed that if an employee has already exhausted their 28 weeks SSP then they will not be entitled to any more, even under coronavirus, and should be served the SSP1 form and advised to claim universal credit or employment support allowance.
In addition, to help insulate businesses against the impact of coronavirus, small and medium-sized businesses (with less than 250 employees) will have the costs of SSP for any employee off work because of coronavirus for up to 14 days refunded by the Government in full.
The full eligibility criteria for the scheme is as follows:
Spring Budget 2020, para 1.99
The exact legislative and / or other mechanisms whereby these changes are to be introduced have yet to be announced. The Coronavirus Bill makes provision for HMRC to make the necessary changes via regulations.
HMRC has confirmed that where a pregnant woman stays at home following Government guidance on coronavirus, it is not classed as a pregnancy-related illness. Normal rules will apply, in that SSP covers this and the woman does not have to bring her maternity pay period forward. See the Maternity pay guidance note.
Currently, employers may make contributions towards an employee’s home expenses under ITEPA 2003 s 316A. Amounts can be paid in respect of the reasonable additional costs that an employee incurs. This exemption only applies to amounts reimbursed by the employer and not to costs borne by the employee.
In order for the exemption to apply, there must be ‘homeworking arrangements’ in place.
The exemption is designed to cover the additional costs of things such as increased heating, lighting or electricity costs. It does not cover expenses that the employee incurred in order to allow them to work at home. For example, mortgage interest payments, building alterations or the cost of additional equipment that the employee has to provide to work at home.
The employer may choose to reimburse the full amount of the employee’s extra costs. In which case, the employee and the employer must keep records to substantiate the reimbursement. This may prove difficult as the increased amount needs to be proven.
Alternatively, the employer may choose to reimburse based on HMRC-approved scale rates without the employer having to justify the amount paid. For tax years from 2012/13 to 2019/20, these amounts are £4 per week or £18 per month.
The government announced that from 6 April 2020, the tax and NIC exempt amount that can be paid towards the additional costs of working from home is increased from £4 to £6 per week, where the employees work at home under ‘homeworking arrangements’. As a result, employers can pay eligible employees an additional £2 per week to cover business costs when working from home.
OOTLAR, para 2.11
Employers need to think ahead and plan for the potential disruption to their workforce. They may now see employees having trouble getting to their normal place of work, notably because of illness but also because of self-isolation and other unexpected events (such as the closure of schools). Employers should assess their employees’ ability to work remotely, taking into consideration their IT setup and equipment at home, and review their ‘working from home’ policies if these are already in place.
The second self assessment payment on account for the 2019/20 tax year is deferred from 31 July 2020 to 31 January 2021. In effect, this means that the 2019/20 balancing payment due by 31 January 2021 will be the total income tax, capital gains tax, class 2 and class 4 NIC due for the tax year less the first payment on account. No interest will be applied for the period between 31 July 2020 and 31 January 2021.
Initially, the government guidance suggested that this deferral was available to the self-employed only. However, the HMRC Press Office has confirmed to Tolley that this deferral applies to all those required to make payments on account under the self assessment system.
The deferment applies automatically without the need to make an application.
Individuals may wish to contact their advisers to see whether the impact of coronavirus may reduce their 2019/20 taxable income such that a claim can be made to reduce the 2019/20 payments on account. This would then generate a partial refund of the first payment on account.
Under the UK statutory residence test (SRT), individuals prevented from leaving the UK may be able to discount days of presence for determining tax residency if they qualify as ‘exceptional circumstances’. Examples of ‘exceptional circumstances’ include national or local emergencies, such as war, civil unrest or natural disasters, and a sudden or life-threatening illness or injury.
HMRC has confirmed that the following days will be regarded as exceptional circumstances due to coronavirus:
It is important to note that there is a 60-day cap for days disregarded through exceptional circumstances. RDRM13230 states: 'The maximum number of days spent in the UK in any tax year that may be ignored due to exceptional circumstances is 60. This is a limit, not an allowance or entitlement. It applies whether there is one event or several events in the same tax year. Days spent in the UK over the 60-day limit count as a day of presence for the purposes of the SRT.'
Individuals who have made an election to stop receiving child benefit due to the high income child benefit charge (HICBC) may wish to consider revoking the election in order to restart their claim. The child benefit may need to be ultimately paid back via the self assessment tax return, but it can help a little towards easing immediate cash flow concerns. The election can be revoked by completing a form online via the GOV.UK website (a Government Gateway account is necessary) or by contacting the Child Benefit Office by telephone on 0300 200 3100. The election must be revoked by the person who originally made it, which is the person who is to receive the child benefit. Child benefit will start to be paid again from the Monday following the call or receipt of the form. However, if neither partners’ adjusted net income is expected to exceed £60,000, the revocation can be backdated to the start of the tax year.
While most UK incorporated companies are resident in the UK regardless of the location of central management and control, a few companies that are usually UK resident (for example, those incorporated outside the UK but managed in the UK) still fall under the case law test for residence.
This, or the effective management test, may also be of relevance for any company that may be dual resident and so needs to apply any tiebreaker provision in the relevant double tax treaty in order to determine residence.
With directors of companies potentially stranded abroad due to coronavirus, but business still needing to continue, board meetings may be held with directors joining remotely. This could potentially impact on where the central management and control (or effective management) of those companies is located. It should be considered on a case-by-case basis whether a director not situated in the UK at the time of the meeting should join a particular board meeting and ensure that the chair of the meeting is in the UK. Similar considerations but in reverse should take place for a company that is not UK resident but has directors in the UK.
This is a complex area that will not be relevant to many companies. For companies that may be affected, this issue should be considered for each board meeting, and contemporaneous minutes evidencing the location of directors attending meetings should be kept. It is unlikely that a single meeting will tip the balance regarding residency, but as travel disruptions are likely to continue for several months, this concern may become more relevant over time.
Companies may also need to consider whether directors are permitted to attend board meetings virtually, or from particular locations, under their articles of association. There may be specific provisions (in the articles or elsewhere) that provide for exceptional circumstances, but this needs to be considered on a case-by-case basis.
Some businesses may have insurance cover for pandemics and/or government-ordered closures. The government confirmed on 17 March 2020 that its advice to avoid pubs, theatres, etc is sufficient to make a claim under such a policy. However, most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and exclude pandemics, so businesses should check the terms and conditions of their specific policy and contact their providers.
Many businesses have experienced a rapid and unexpected decrease in their revenue streams as a result of coronavirus. As a result, they may be suffering cash flow problems that could impact their ability to pay any VAT due in respect of their VAT return period ending 31 March 2020 and later, depending on the severity of the ongoing situation.
As a result of these ongoing concerns, the chancellor has announced a delay in the requirement to remit VAT payments that applies from 20 March 2020 until 30 June 2020. All UK businesses are entitled to delay payment of any VAT due automatically with no requirement to formally apply for the extension. Businesses are not required to make a VAT payment during this period.
Businesses will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. We understand that further guidance will be published shortly to assist businesses with deferring VAT payments and this guidance note will be updated to reflect this as soon as it is published.
Smaller businesses who consider that they will now be trading under the VAT deregistration threshold may wish to consider cancelling their VAT registration number if they believe that they will meet any of the following criteria.
According to Notice 700/11, businesses can voluntarily cancel their VAT registration number when any of the following occurs:
If the business is requesting voluntary VAT registration cancellation on turnover grounds, it will need to tell HMRC why it thinks its turnover is going to fall below the VAT registration cancellation limit; for example, reduced opening times, lost contracts or changes to the business practices. HMRC should also be advised regarding what the business expects its turnover will be in the following 12 months. When calculating the turnover, it should be done on a VAT-exclusive basis.
HMRC will not allow a business to cancel its registration if the reduction in its turnover is the result of an intention to stop trading or suspend making taxable supplies for 30 days or more in the next 12 months.
Businesses who meet any of the above conditions can use the online service to notify HMRC that they wish to cancel their VAT registration number. Businesses can also complete a form VAT7: application to cancel your VAT registration and send it to HMRC through the post. Businesses may have to account for VAT on any stocks and assets on hand at the time of deregistration.
Individuals and businesses can access financial help through several government measures, including:
Advisers may be asked to assist clients in accessing the government assistance being offered. It appears that the current measures are being offered with little or no checks undertaken to verify if coronavirus is actually causing the financial difficulty. However, advisers should nonetheless advise clients to keep full records to prove how they have been directly impacted by coronavirus in case of a later challenge. A subsequent compliance check or enquiry could lead HMRC to a taxpayer’s social media accounts, and contradictory evidence would cause problems.
Advisers may wish to check their professional indemnity insurance as they may be asked to make representations on behalf of clients that they were ill or otherwise impacted. In the absence of definitive coronavirus testing, advisers could find themselves inadvertently put in the position of making a false representation, or giving advice based on incomplete facts.
Time to pay arrangements are negotiated agreements with HMRC that allow for the payment of self assessed tax after its due date. In response to the coronavirus crisis, businesses and individuals are being assured that time to pay can be used as a way of easing cash flow concerns by paying tax in instalments.
For more on the details of negotiating these arrangements, see the Time to pay arrangements for tax due under self assessment guidance note.
Universal credit is a tax-free state benefit that is available for individuals and the self-employed on low incomes. Measures taken by the government to enable faster access to universal credit during the coronavirus outbreak include dispensing with the usual requirement for a minimum income floor. For more details, see the Universal credit guidance note.
The standard allowance for universal credit and the basic element of working tax credit are to be increased by £20 per week from 6 April 2020. This is in addition to the 2020/21 uprating announced at Spring Budget 2020. See the Computing the working tax credit guidance note.
From April 2020, local housing allowance rates are increased to the 30th percentile of market rents. This applies to all private renters who are new or existing universal credit housing element claimants and to existing housing benefit claimants.
It should be noted that an application for universal credit usually means that HMRC is released from any existing time to pay arrangement and the tax debt is transferred to the Department of Work and Pensions. The tax debt will be repaid through a reduction in the universal credit payments. A taxpayer may therefore have to choose between seeking assistance through universal credit or through a time to pay arrangement.
A number of measures to support businesses were announced at Spring Budget 2020 and subsequently extended by the chancellor.
These include:
Business rates and the grant funding are administered by local authorities. The business rates holiday is applied automatically and local authorities should write to eligible businesses with a restated 2020/21 bill. Similarly, local authorities should write to businesses that are eligible for the £25,000 grant with further details. Any questions as to the eligibility for the business rates holiday or provision of the grant should be directed to the local authority. Any businesses that are unsure of their local authority can find this via the tool on the Gov.UK website.
The coronavirus business interruption loan scheme will be delivered by the British Business Bank. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) and will not charge businesses or banks for this guarantee. The scheme will support loans of up to £5 million in value. Businesses can access the first 12 months of that finance interest-free, as the government will cover the first 12 months of interest payments. The intention behind this scheme is to give lenders confidence to continue to lend to SME. The scheme is available from 23 March 2020.
