Self-Employed and Job Retention Scheme changes

Self-Employed Income Support Scheme (SEISS)

No doubt due to recent lobbying by the press and other interested support groups, the Chancellor has extended the SEISS for a final three-month period to 31 August 2020.

This means that the self-employed who are eligible to claim will have received six-months financial support from government.

As before, applicants will have to wait until the last month of the claim period, August 2020, to make a claim.

A bullet-point summary of the changes is set out below:

  • SEISS extended for three months to 31 August 2020
  • Applications covering the June – August 2020 period will open in August.
  • Grant available will be 70% of eligible earnings (previous quarter 80%).
  • Maximum grant for the three-months will be £6,570 (previous quarter £7,500) paid in a single instalment.
  • Eligibility criteria remains unchanged.
  • A self-employed person can claim for the second grant, to August 2020, even if they had not claimed for the first grant.
  • More information on these changes will be published 12 June 2020.

If you are eligible to make a claim for this second grant under the scheme you will still be subject to the same rules regarding eligibility. You will need to confirm that your business has been adversely affected by the Coronavirus outbreak.

If you did not claim for the first quarter, to May 2020, as your business at that time was not adversely affected, but will be affected in the quarter to 31 August 2020, it will be possible to claim for the second quarter.

And finally, claims for the first quarter (March-May 2020) will close 13 July 2020.

Coronavirus Job Retention Scheme (CJRS)

As previously announced, the CJRS has been extended to 31 October 2020 and will be changed to a flexible arrangement from 1 July 2020 to allow employees to resume part-time working.

The Chancellor and his advisers will be gritting their teeth as drawing a line in the sand by tapering and then closing the CJRS on 31 October 2020 will force the hand of employers to consider their options. It is likely that redundancies will start to climb from that date as will the number of the unemployed.

A bullet-point summary of the changes announced is set out below: 

  • The CJRS will close to new entrants on 30 June 2020. The final date employers can furlough staff for the first time will be 10 June 2020.
  • From 1 July 2020, employers can bring back employees to work part-time, for any amount of time and any shift pattern. Any claim under CJRS will be limited to normal hours not worked.
  • June/July 2020 – Government will continue to pay 80% of costs up to the £2,500 cap.
  • August 2020 – Government will pay 80% of wages up to £2,500 cap, but employers will have to cover employers’ NIC and pension costs for the hours the employee does not work.
  • September 2020 – Government will pay 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs and 10% of wages to a total cap of £2,500.
  • October 2020 – Government will pay 60% of wages up to a reduced £1,875 cap. Employers will pay employers’ NIC, pension costs and 20% of wages to a total cap of £2,500.
  • The cap will be proportional to hours not worked.
  • The CJRS will be closed-down 31 October 2020.

The above changes to a flexible approach cloak a raft of detail that government is not publishing until 12 June 2020. Those responsible for making CJRS claims will need to wait for these further clarifications as they will explain how employers should calculate claims.

We will be integrating the changes into our payroll services when they are available and will contact clients if further details regarding part-time working are to be introduced.

Clearly, there are planning considerations. Please call if you have employees on furlough and you need to consider your options; for part-time working up to 31 October and longer-term considerations after this date.  
 

New advisory fuel rates published

Advisory fuel rates are intended to reflect actual average fuel costs and are updated quarterly. The rates can be used by employers who reimburse employees for business travel in their company cars or where employees are required to repay the cost of fuel used for private travel. HMRC accepts there is no taxable profit and no Class 1A National Insurance on reimbursed travel expenses where employers pay a rate per mile for business travel no higher than the published advisory fuel rates.

Employees can also use the advisory fuel rates to repay the cost of fuel used for private travel. In this case, HMRC will accept there is no fuel benefit charge. The advisory rates are not binding if you the employer can demonstrate that employees cover the full cost of private fuel by repaying at a lower rate per mile.

The latest advisory fuel rates become effective on 1 June 2020. Fuel rates are reviewed four times a year with changes taking effect on 1 March, 1 June, 1 September and 1 December. You can use the previous rates for up to 1 month from the date the new rates apply.

The new rates are as follows:

Engine size     Petrol – amount per mile   LPG – amount per mile
1400cc or less      10p 6p
1401cc to 2000cc       12p 8p
Over 2000cc       17p 11p

 

Engine size      Diesel – amount per mile
1600cc or smaller   8p
1601cc to 2000cc     9p
Over 2000cc   12p

Hybrid cars are treated as either petrol or diesel cars for this purpose.

Advisory Electricity Rate

HMRC accepts that if you pay up to 4p per mile when reimbursing your employees for business travel in a fully electric company car there is no profit. While electricity is not considered a fuel for tax and NICs purposes, the Advisory Electricity Rate is now published quarterly alongside the other advisory fuel rates.

Rules on waiving income or donating to charities

HMRC has published a new press release that provides some advice for people choosing to give up their income to support their business or donate to charity during the Coronavirus (COVID-19) pandemic.

Employers, directors and employees have several options to support a business or employer, including:

  • Waiving their salary or bonuses before they are paid. A ‘waiver of remuneration’ happens when an employee gives up rights to remuneration and gets nothing in return. If an employee and employer agree to a reduction in the employee’s remuneration before they are paid, for example to support company cashflow during the pandemic, then no Income Tax or National Insurance contributions (NICs) will be due on the amount given up.
  • Waiving the right to any dividends. This can be actioned by directors or other shareholders, including employees. a Deed of Waiver must be formally executed, dated and signed by shareholders and witnessed and returned to the company. The waiver must be in place before the right to receive a dividend arises.
  • Giving salary or dividends back to their employer after they have been paid. It is not possible to claim back the Income Tax and NICs that would already have been deducted from the salary or bonuses on payment.

There are also options to donate to charities. The Payroll Giving scheme allows employees to make a tax free donation to charity directly from their pay if their employer runs a payroll giving scheme which has been approved by HMRC.

Gift Aid Donations allow charities and community amateur sports to claim 25p worth of tax relief on every pound donated. Higher rate or additional rate taxpayer can claim additional tax relief on the difference between the basic rate and their highest rate of tax.

Estate Agents who may be exempt from Money Laundering registration

HMRC is responsible for the money laundering supervision of a number of businesses including estate and lettings agents. Estate agency businesses that HMRC is responsible for supervising should be aware of the requirement to register with HMRC and the penalties for not doing so. It is a criminal offence to trade as an estate agency or letting agency business (as defined within the Regulations) without being registered for money laundering supervision.

The following business types are not required to register:

  • a lettings agent only carrying out lettings work not defined within the Regulations, for example, below 10,000 euros per month
  • an auctioneer already registered with HMRC as a high value dealer
  • publishing adverts or distributing information, for example in a newspaper
  • an intermediary, like an internet property portal for private sales, allowing private sellers to advertise their properties and letting sellers and buyers to contact each other (but only if you do nothing else covered by the general definition of estate agency work)
  • a solicitor carrying on estate agency work as part of that practice as a solicitor, and not as a separate business

There are also estate agents who may be regulated by the Financial Conduct Authority (FCA), for example, because they provide consumer finance or hire purchase services. In this situation HMRC and the FCA will consider the possibility of a single supervisor overseeing the anti-money laundering arrangements on a case-by-case basis.

New HM Treasury instructions re CJRS

The Chancellor, Rishi Sunak has made a further Treasury Direction under sections 71 and 76 of the Coronavirus Act 2020 concerning the Coronavirus Job Retention Scheme (CJRS).

The CJRS currently helps employers furlough their employees with significant government support. Employers can currently claim cash grants of up to 80% for eligible furloughed wages to a maximum of £2,500 per month, plus the employer National Insurance contributions and minimum auto-enrolment employer pension contributions on that 80%.

The new Direction was published on 22 May 2020 (but the document is dated 20 May 2020) and makes a number of changes to the first Direction. Among the changes, the new Direction makes it clear that written agreement for an employee to cease all work has to be retained by the employer until at least 30 June 2025. The new Direction also provides further details on the training activities a furloughed employee can undertake and concerning the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) transfer rules.

The new Treasury Direction continues to refer to the scheme as running until the end of June 2020 although the Chancellor has previously announced that the scheme will continue in its current form until the end of July. From 1 August until 31 October 2020, the scheme is expected to continue in a modified format. Further details on the changes are expected to be released shortly and it seems likely that further updated Treasury instructions will be published in due course.

Employee car ownership schemes

An Employee Car Ownership Scheme (ECOS) is a set of arrangements whereby employees acquire cars from a specified, often single source and within a specified financing framework. The use of an ECOS can effectively be seen as a halfway measure between providing a company car and leaving an employee to make all their car arrangements privately.

An ECOS gives employees similar benefits to having a company car, for example a new car on a regular basis, and/or central organisation of insurance and servicing but is structured in such a way that normal car and fuel benefit provisions do not apply.

HMRC has published special guidance on the ECOS due to the Coronavirus restrictions. If an employee has not been able to return the car to the dealership or factory for its assessment, there may be an Income Tax charge on the amount of the loan still owing.

If the loan period was less than 4 years, it may be possible for the employee to arrange an extension with the loan provider for a few more months. This will cover the period until the car can be returned and the loan settled. If this is done, HMRC will accept that the arrangements do not give rise to the Income Tax charge. If, however, the loan is extended beyond 4 years, an Income Tax charge will arise.

Reimbursing expenses for home office equipment

HMRC has updated its guide for employers who have employees working from home due to the COVID-19 outbreak. This could be a result of the workplace being closed or because employees are following government advice to self-isolate.

The updated guidance reflects temporary changes to the rules for reimbursing employees for the purchase of office equipment whilst working from home. The guidance originally published on 26 March 2020 stated that if employers reimburse expenses for office equipment their employees have bought that this is taxable and should be reported on the employers PAYE Settlement Agreements.

In a written statement published on 13 May 2020, Jesse Norman, The Financial Secretary to the Treasury announced the introduction of a temporary measure to support employees who are working from home as a result of the pandemic. This temporary measure states that employer reimbursements for the cost of home-office equipment expenses will be exempt from tax and NICs.

The expenditure must meet the following two conditions to be eligible for relief:

  1. That equipment is obtained for the sole purpose of enabling the employee to work from home as a result of the Coronavirus outbreak, and
  2. The provision of the equipment would have been exempt from Income Tax if it had been provided directly to the employee by or on behalf of the employer (under section 316 of ITEPA).

The exemption is a temporary measure and will have effect from the day after the regulations come into force until the end of the tax year 2020/21. However, we are told that HMRC will exercise its collection and management discretion and will not collect tax and NICs due on any reimbursed payments made from 16 March 2020 (the date the government recommended working from home) to the date these regulations take effect.

Apply for NIC Childcare Credits

National Insurance credits can help qualifying applicants to fill gaps in their National Insurance record. This can assist taxpayers to build up the amount of qualifying years of National Insurance contributions which can increase the amount of benefits a person is entitled to such as the State Pension.

National Insurance credits are available in certain situations where people are not working and, therefore, not paying National Insurance credit. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.

The CA9176 form is used to apply for National Insurance childcare Class 3 credits if you are an adult family member caring for a child under 12 (usually while the parent or main carer is working). This form has been updated to include care that is being provided from a distance because of Coronavirus (COVID-19) – for example, by telephone or video if the carer was required to self-isolate. This Coronavirus measure applies to the 2019-20 and 2020-21 tax years.

Depending on your circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these as well as other benefits such as Jobseeker’s Allowance.

Further support for charities from VAT receipts

It has been revealed by HM Treasury that the VAT collected on donated personal protective equipment (PPE) will be given to charities supporting the NHS and care workers. This measure will apply to all the VAT collected on donations made from 1 March until 30 April – the period between PPE donations starting and when the temporary zero VAT rate on PPE became effective on 1 May 2020.

The government donation will be made to support frontline workers affected by Covid-19 equally through the Care Workers Charity and NHS Charities Together. The donation which will be equivalent to the VAT collected is expected to be worth between £500,000 to £1 million. The Department for Health and Social Care will make the donation of the VAT on the government’s behalf.

Chief Secretary to the Treasury Steve Barclay said:

'Frontline health workers are fighting Coronavirus day in, day out – in our hospitals, care homes and communities. Whilst we will never be able to fully express our gratitude to them, we want these donations to be a small sign of our appreciation. From the Treasury and the whole government, we say thank you for all you are doing.'

Additional funding for charities and social enterprise

The government's dormant assets scheme allows money in accounts that have been dormant for at least 15 years to be made available for certain qualifying charitable and community causes.

The Culture Secretary, Oliver Dowden has announced that £150 million from dormant bank and building society accounts is to be unlocked to help charities, social enterprises and vulnerable individuals during the Coronavirus outbreak.

The £150 million charity injection is made up of the accelerated release of £71 million of new funds from dormant accounts alongside £79 million already unlocked that will be repurposed to help charities’ Coronavirus response and recovery.

The money will be used to support urgent work to tackle youth unemployment, expand access to emergency loans for civil society organisations and help improve the availability of fair, affordable credit to people in vulnerable circumstances.

Since the scheme was launched in 2011 over £600 million has been distributed to good causes. However, it is important to note that the original account holder retains the rights to repayment of any monies within the scheme after providing satisfactory proof that the money is theirs.