COVID-19 Government Rescue Update 13 May 2020

HMRC has released further clarification on a number of its new business measures. Our concise weekly breakdown is intended to help businesses keep up to date with the continuously evolving changes.

Coronavirus Job Retention Scheme (CJRS)

Employers

The Chancellor, Mr Rishi Sunak, has extended the CJRS for an additional four months to remain open until the end of October 2020.

The extension has two phases:

  • Under current arrangements the government pays either 80% of a furloughed employee’s monthly wage, or £2,500, whichever is lower. The first phase is for the current arrangement to continue until the end of July.
  • The second phase extends the CJRS until the end of October 2020, with additional flexibility introduced from 1 August to help furloughed employees back into work and to ease the burden on the government:
    • From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive at least 80% of their salary, up to £2,500 a month.
    • The scheme will continue for all sectors and regions of the country.
    • More specific details and information around the implementation of the new phase from 1 August will be made available by the end of May.
Employees
  • The Chancellor has assured workers that, through the combined support of the government and employers, they will continue to receive the same level of overall support from 1 August as they do now under the scheme, that is, receive at least 80% of their current salary up to £2,500 per month.
  • The government will explore ways through which furloughed workers who wish to do additional training or learn new skills are supported during this period.

Self-Employment Income Support Scheme (SEISS)

Self-employed

HMRC have commenced contacting self-employed people and individuals of partnerships who may be eligible for the SEISS.

The SEISS enables such individuals to claim a taxable grant worth 80% of their average trading profits up to a maximum of £7,500 (equivalent to three months’ profits). This grant is payable in a single instalment.

  • Online checker
    • Individuals may check on HMRC’s website whether they are eligible for the SEISS. The person simply needs to enter their Unique Tax Reference number and their National Insurance number and HMRC’s system will determine whether they are eligible. This can be done online here
    • Eligible individuals will be given a date from when they can submit their claim and requested to either confirm or update their contact details.
  • The claims portal opened today, which is earlier than originally expected.
  • Eligible individuals are being provided with details of a date between 13 May and 18 May from which they can apply for the SEISS. These dates are staggered in order to help HMRC manage demand of the service.
  • The applicant will be asked to provide their Government Gateway credentials (user ID and password) and check that their bank and contact details are up to date. This is important so that HMRC can remind them by email or text message when it’s their turn to make a claim.
  • Eligible individuals who do not have their Government Gateway credentials should set these up as soon as possible as their accountant will not be able to make a claim on their behalf. The quickest way to register and obtain the Government Gateway credentials is through HMRC’s SEISS checker tool. Once an individual is regarded as eligible, the SEISS checker tool will provide an option for the person to register on the Government Gateway. HMRC have said that they will make this registration a swift process and that an individual will not need to wait for a letter through the post before they can get their credentials.
  • The claims process is straightforward,  and those eligible will have the money paid into their bank account by 25 May, or within six working days of completing the claim. 
  • The application process will show how HMRC has calculated the grant that the individual is due to receive. If the individual disputes the method of calculation, they (or their tax agent) can ask HMRC to review it.
  • Check our article from 23 April, which contains a flow chart to help determine whether an individual is eligible for the SEISS.

Expenses and benefits provided to employees during COVID-19

Employers

Any taxable expenses and benefits should be reported to HMRC via forms P11D, or in certain cases via a PAYE Settlement Agreement (“PSA”).

A PSA allows an employer to make one annual payment to cover all the tax and National Insurance due on minor, irregular or impracticable expenses or benefits for employees. Any expenses or benefits covered by a PSA do not need to be reported on forms P11D.

HMRC had announced in March 2020 that employers may report any expenses or benefits paid to employees, which are related to coronavirus, on their PSA. This means that the employer can settle the tax and National Insurance contributions on any COVID-19 related expenses or benefits, even though the responsibility would usually have fallen on the employee.

Last week HMRC issued additional guidance on how to treat certain expenses and benefits provided to employees during COVID-19. This guidance has been provided for Income Tax purposes only, and not National Insurance purposes.

  • Living accommodation (e.g. Company owned/rented accommodation):
    • If an employee, working at a permanent workplace (i.e. contracted to work there on an on-going basis), is provided with living accommodation to continue working due to COVID-19, then that living accommodation is a taxable benefit for the employee. Exemptions may be available from the charge if the accommodation is “job-related” accommodation, e.g. it is necessary for the proper performance of the employee’s duties that they should reside in the accommodation.
    • However, if the employee is working at a temporary workplace (i.e. contracted to work there for less than 24 months), and is provided with living accommodation because of COVID-19, then tax relief is available.
  • Lodging expenses:
    • If an employee cannot return home because of COVID-19 and the employer either pays directly or reimburses their expenses of lodging and subsistence, then those expenses are taxable on the employee.
  • Volunteer work related to COVID-19 carried out by an employee:
    • If an employee uses their own car to volunteer, the employer can refund the employee up to the level of the approved mileage allowance rate. This is a taxable benefit. If the employer pays less than the approved mileage allowance rate the employee cannot claim mileage allowance relief.
    • If an employee uses a company car to carry out the volunteer work, and the employer refunds the fuel costs, then such refunds are taxable benefits for the employee.
  • Transport costs:
    • If an employer pays or refunds the cost of transport from work to home, then it is a taxable benefit for the employee. An exemption from this is available if all of the following 4 conditions are met:
      1. the employee has to work later than usual, and until at least 9pm
      2. this happens irregularly
      3. by the time the employee finishes work, either public transport has stopped, or it would not be reasonable to expect them to use public transport
      4. the transport is by taxi or similar road transport
  • If a car-sharing arrangement stops because of unforeseen and exceptional circumstances, which are coronavirus-related, and the employer provides transport or reimburses the additional cost from the employee’s home to workplace, this would also be exempt.
  • However, the total number of exempt journeys cannot exceed 60 journeys in a tax year. This is a single limit that applies to the aggregate of late-night journeys and the failure of any car-sharing arrangements. In such a case, the free or subsidised transport is a taxable benefit.
  • “Availability” of a company car:
    • An employee (either furloughed or working from home) may have possession of a company car. HMRC will treat the company car as “available for private use” for this employee, even though the employee may have been:
      1. instructed not to use the car;
      2. asked to take and keep a photographic image of the mileage both before and after a period of furlough; or
      3. unable to physically return the car or the car cannot be collected from the employee.

This means that the company car is a taxable benefit for such an employee.

  • A company car will only be regarded as “unavailable for private use”, whilst being in the possession of the employee, if the employee does not possess the car keys. This means that the car keys must be returned to the employer/relevant 3rd
  • A company car benefit-in-kind cannot be reported through a PSA.
  • Loans to employees:
    • A salary advance or loan to help an employee at a time of hardship counts as an employment-related loan. Loans provided with a value less than £10,000 in a tax year are non-taxable.
  • Please read our Homeworking section (30 March 2020), where we have covered the tax position of various expenses of employees working from home because of COVID-19.

Reporting Capital Gains Tax on UK property

UK Residents

From 6 April 2020, UK resident individuals and trusts are required to report a disposal of UK residential property and pay the related Capital Gains Tax with 30 days of completion.

Due to COVID-19, HMRC will not issue a late filing penalty for any transactions completed between 6 April 2020 and 1 July 2020, as long as they are reported by 31 July 2020.

Interest will nevertheless be charged on any Capital Gains Tax that remains unpaid after 30 days from completion for all transactions from 6 April 2020.

Late filing penalties will be issued for transactions completed on or after 2 July 2020, at the standard rates.

Non-UK Residents

From 6 April 2020, a non-UK resident must report a disposal of any UK property and pay the related Capital Gains Tax within 30 days of completion.

Due to COVID-19, HMRC will not issue a late filing penalty for any transactions completed between 6 April 2020 and 1 July 2020, as long as they are reported by 31 July 2020.

Interest will nevertheless be charged on any Capital Gains Tax that remains unpaid after 30 days from completion for all transactions from 6 April 2020.

Late filing penalties will be issued for transactions completed on or after 2 July 2020, at the standard rates.

New government statistics on CJRS and loan support

The government has published new statistics that show businesses have benefitted from over £14 billion in loans and guarantees to support their cash flow during the COVID-19 crisis. The statistics, as at 11 May 2020, are outlined in the table below:

  Cumulative number of approved facilities Cumulative value of approved facilities Cumulative number of applications
Bounce Back Loan Scheme 268,173 £8.378 billion 363,646
Coronavirus Business Interruption Loans Scheme 35,919 £6.094 billion 71,316
Coronavirus Large Business Interruption Loans Scheme 59 £359 million 358

New statistics of the CJRS were published on 12 May and details are covered in the table below.

Number of Jobs Furloughed 7.5 million
Number of Employers Furloughing 935,000
Total £ claimed £10.1 billion

If you wish to discuss any of the key points and receive advice on how best to manage the next steps, then please contact us. We understand the difficulties that businesses face during this challenging time, and we can offer guidance to you, your business and your employees. 

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