New coronavirus-related measures impacting on the employment relationship

The government’s latest advice, as confirmed in the COVID-19 Secure guidelines for different types of workplaces, is that office workers who can work effectively from home should do so over the winter. However, anyone else who cannot work from home should go to their place of work, but employers should consult with their staff to determine who needs to come into the workplace safely taking account of the worker’s journey, caring responsibilities, protected characteristics and other individual circumstances. Extra consideration should be given to those workers at higher risk. 

In addition to this change of position for office workers, a raft of new coronavirus-related legislative measures have now taken effect in England, some of which directly impact on the employment relationship (with slightly different restrictions applying in Scotland, Wales and Northern Ireland). These include that:

  • Staff in a wide range of hospitality and retail venues are now required to wear face coverings when working in a part of the premises that is open to the public, and where they come or are likely to come within close contact of any member of the public – but those who are already exempt from the existing face covering obligations, such as because of an underlying health condition, continue to be exempt from this new obligation. However, the offence of failing to wear a face covering when legally obliged to do so is committed by the worker, not by their employer, and so it is the worker’s responsibility to pay the relevant fine. That said, it is an offence for an employer to prevent, or to seek to prevent, a worker who is subject to the requirement to wear a face covering from wearing a face covering, and therefore it is recommended that employers mandate the wearing of face coverings where required
  • A wider range of leisure and entertainment venues, services provided in community centres and close contact services must now comply with the COVID-19 Secure requirements as a legal obligation, with fines of up to £10,000 for repeated breaches
  • Employers must not knowingly allow or permit a worker, or agency worker, who is being required to self-isolate to attend their workplace, or any other place (except the place where they are required to self-isolate) for any purpose connected to their employment during their self-isolation period. Breach of this provision will result in a fine starting at £1,000 and increasing to £10,000 for repeated breaches. The worker is also now obliged to inform their employer, as soon as reasonably practicable, of the requirement on them to self-isolate, and the start and end dates of their self-isolation period, in circumstances where they would otherwise be required to attend work.

Which way to go?

If your business has managed to negotiate the pandemic thus far without shedding staff you have probably made good use of the furlough scheme.

Unfortunately, in recent months the Government’s contribution to furloughed costs has been reducing, and at the end of October the Coronavirus Job Retention Scheme (loosely referred to as the furlough scheme) is closing down.

Last week, the Chancellor outlined his follow up plan – The Job Retention Scheme (JSS) – and the response from employers has been less than enthusiastic.

The JSS requires employers to employ staff for at least 33% of their normal hours, pay one-third towards any furloughed time and cover NIC and pension costs. On this basis, employers would be paying more to keep three staff working part-time, each working one-third of their normal hours, than employing one person working full time.

Employers will therefore need to consider their options. Should they soldier on, attempting to keep the team together with Government support, or is it time to take a look at what the future trading position of the company is likely to be and plan accordingly?

Readers finding themselves unable to decide which way to jump may need to step back and take a fresh look at their options. To do this it may be necessary to create a detailed business plan or revise existing forecasts based on the evolving situation.

One thing is clear, the present COVID disruption seems unlikely to disappear any time soon. From 1 January 2020, we will need to cope with Brexit issues and the Chancellor keeps reminding us that the cost of funding coronavirus grants will need to be paid for…

We can help. Please call if you would like to discuss the best way to approach this challenging planning process.

Acas, CBI and TUC on handling redundancies

Acas, the CBI and the TUC have issued a joint statement to employers on best practice for handling redundancy situations caused by the coronavirus pandemic. The statement recognises that employers may need to make redundancies in order to survive, but it urges them to exhaust all possible alternatives before doing so and to carry out effective consultation with workers and trade unions. 

The statement then calls on all employers considering redundancies to work with their workers and trade unions and get the process right by following these five guiding principles:

  1. Do it openly: there are rules for collective redundancies (those involving 20 or more staff), but whatever the scale, the sooner people understand the situation, the better for everyone.
  2. Do it thoroughly: to understand what's happening, people need information and guidance, and staff representatives need proper training.
  3. Do it genuinely: consultation means hearing people's views before making a decision, so employers need to be open to alternatives put forward by individuals or unions and should always give feedback.
  4. Do it fairly: all aspects of the redundancy procedure should be conducted fairly and without any form of discrimination.
  5. Do it with dignity: losing your job has a human as a well as a business cost; the way an employer lets people go says a lot about the organisation's values. Employers should therefore think about how they will handle the conversation and whether it will take place face-to-face or remotely and should remember that they may want to rehire the same person in the future.

Excuse v apology

We have all been in situations where we have received bad service. 

For example, you place an order in a busy restaurant and notice that folks who had arrived after you were receiving their order before you. Time passes. Still no sign of your dinner. Stretched to its limit, your patience expires, and you call over the waiter who marches over to the kitchen area. There is an exchange between the waiter and the chef and it is evident that your order has been overlooked. 

On his return to your table the waiter explains that they are really busy, and your order won’t be much longer. He could have said, apologies, your order has been overlooked. It will be ten minutes and we won’t be charging you for your drinks…

There is a lesson that we can learn from this sort of exchange.

The last thing you want your customers to feel is that their grievances are not being understood. In our example, the diners will carry their dissatisfaction with them – however good the meal is – and they will not be willing ambassadors for your business. A short apology and compensation for your error would clear the air and re-establish goodwill.

And so, the next time you feel you need to excuse your actions, consider an apology if you have not met the expected levels of service for your business. 

The new Winter Economy Plan – Summary of Measures

The Chancellor, Rishi Sunak, has today delivered a statement to the House of Commons outlining plans to help protect jobs across the UK whilst the country faces a resurgence of coronavirus and a winter of uncertainty. The Chancellor was facing mounting pressure to reveal future changes as many of the schemes and reliefs previously announced are coming to an end including the furlough scheme at the end of October. 

It has also been confirmed that the Budget that was expected to be delivered in the autumn will now take place next year. The measures announced today are more clearly focused on keeping the economy ticking over during the coming weeks and months.

The main focus of the Chancellor’s announcements is a new Job Support Scheme and an extension to the Self Employment Income Support Scheme as well as additional flexibilities for businesses who have borrowed money as a result of the pandemic.

Details of these announcements follow:

Job Support Scheme

  • A new 6-month scheme starting from 1 November 2020. 
  • This scheme has been designed to support viable jobs and employees must work at least one-third of their hours, paid as normal, in order to qualify for the scheme. The government and employer will then each cover one-third of any remaining hours the employee is not working. 
  • Employees will therefore forego one-third of their pay for the hours that they have not been working. This means that employees working the minimum one-third of their hours will still receive at least 77% of their pay. 
  • The level of the grant will be calculated based on an employee’s usual salary but subject to a cap. 
  • The Chancellor said that the scheme will be open to all small and medium-sized businesses, but larger businesses will only qualify when their turnover has fallen as a result of the pandemic. 
  • You can still use this scheme even if you have not previously participated in the Coronavirus Job Retention Scheme. 
  • The previously announced Job Retention Bonus, allowing qualifying businesses to claim a £1,000 for each CJRS participating employee, will remain. Employers can claim both the Job Retention Bonus and funding through the Job Support Scheme. 

Self-Employment Income Support Scheme extension

  • The Chancellor announced additional help for the self-employed based on similar terms and conditions as the new Jobs Support Scheme. 
  • The extended scheme will apply for 6 months from 1 November 2020 with an initial taxable grant made available to those who continue to trade and are currently eligible for SEISS. 
  • The initial lump sum will cover three months of profits from 1 November 2020 calculated as 20% of average monthly profits, up to a total of £1,875. 
  • An additional second grant will be available from 1 February 2021 to 30 April 2021, but the level of this second grant amount is subject to review. 

Loan deadlines extended

  • Businesses that have taken out a Bounce Back Loan will be able to benefit from a new Pay As You Grow flexible repayment system. 
  • This will include an extension in the loan term from six to ten years. There will also be new options for interest-only repayments for up to six months as well as payment holidays. 
  • The Coronavirus Business Interruption Loans will also have their Government guarantee extended to ten years. 
  • The deadline for applying for all the Government’s coronavirus loan schemes will be standardised and pushed back until 30 November 2020. 
  • A new successor loan guarantee programme is also expected to be introduced early next year. 

New VAT Payment Scheme

  • Businesses had the option to defer the payment of any VAT liabilities due between 20 March 2020 and 30 June 2020. 
  • The deferred payment was due to be paid in full to HMRC by 31 March 2021. 
  • The Chancellor has now confirmed that businesses will instead be able to make 11 smaller interest-free payments during the 2021-22 financial year.

Self-Assessment payment deadlines

  • Taxpayers that were due to make their second payment on account for the 2019-20 tax year had the option to have the payment due date deferred until 31 January 2021. 
  • It will now be possible to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility for this payment and also for payments due in January 2021 extending the deadline until January 2022. 

VAT reduction for hospitality and tourism sector

  • The VAT reduction that was announced as part of the Summer Economic update was scheduled to end on 12th January 2021. 
  • The end date for the VAT cut has now been extended until 31 March 2021 to give the affected sectors more time to adjust to the difficult trading conditions. This means that VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes and pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5% until the end of March 2021. 

The new incentives announced today should be welcomed as the government continues to try and cope with this unprecedented pandemic. Managing the economic ramifications are causing great difficulties for many people and businesses across the country. These steps, at least, give affected businesses and individuals a degree of certainty as to the level of government assistance available to them throughout the coming months. 

As more details emerge on the various schemes announced today we will update you further.

When the cash basis is not available to a property business

The cash basis scheme helps landlords, sole traders and other unincorporated businesses to benefit from a simpler way of managing their financial affairs. The scheme is not open to limited companies and limited liability partnerships. The entry threshold for the cash basis scheme is £150,000 and qualifying businesses can stay in the scheme until their business turnover reaches £300,000. 

Since the 2017-18 tax year, it has been the default basis for most property businesses that are run by individuals or partnerships with income for the tax year of £150,000 or less. A landlord can elect to opt out of the scheme in which case they can continue to use generally accepted accounting practice (GAAP) to calculate their taxable profits. 

HMRC’s property income manual lists the following list of circumstances when the cash basis is not available to a property business. 

  • A: The property business is run by a company, limited liability partnership (LLP), trustees or a corporate firm (a partnership with at least one non-individual member).
  • B: Receipts that would be brought into account under the cash basis for the tax year exceed £150,000. This amount must be proportionally reduced if the property business is only carried out for part of the tax year.
  • C: If the property business is being carried on jointly with a spouse or civil partner, the same basis must be used by both individuals, unless they make a declaration under S837/ITA 2007 that they are beneficially entitled to the income in unequal shares.
  • D: Business premises renovation allowance has been claimed, and a balancing event in the tax year gives rise to a balancing adjustment.
  • E: An election is made to use GAAP because the person believes that traditional accounting is more appropriate. The election must be made within one year of the filing date for that tax year.

Definition of a potentially exempt transfer

The majority of gifts made during a person's life are not subject to tax at the time of the gift. These lifetime transfers are known as 'potentially exempt transfers' or 'PETs'. These gifts or transfers achieve their potential of becoming exempt from Inheritance Tax if the taxpayer survives for more than seven years after making the gift. There is a tapered relief available if the donor dies between three and seven years after the gift is made.

The effective rates of tax on the excess over the nil rate band for PETs is:

  • 0 to 3 years before death 40%
  • 3 to 4 years before death 32%
  • 4 to 5 years before death 24%
  • 5 to 6 years before death 16%
  • 6 to 7 years before death 8%

HMRC’s internal Inheritance Tax manual states that subject to certain exceptions, a PET is a lifetime transfer of value that satisfies three conditions. They are that:

  • the transfer is by an individual on or after 18 March 1986
  • it would be a chargeable transfer apart from IHTA84/S3A (or, if only partly chargeable, is a PET to the extent that it would be chargeable), and
  • it is a gift to another individual or to a specified trust.

Companies in partnership

A Partnership is a relatively simple way for two or more legal persons to set up and run a business together with a view to profit. Partnerships can take many forms. Legal persons other than individuals can also be partners in a partnership. For example, companies may form partnerships with other legal persons including individuals, other companies and trustees.  For tax purposes, a ‘company partnership’ is a partnership in which at least one member is a company. 

A company in a partnership is treated like any other partner except that they have additional tax and reporting obligations. This means that each company member liable to UK Corporation Tax (CT) is required to include in its CTSA return the share of profits it derives from the partnership.

In partnership return context the term ‘CT partnership’ is used to describe a partnership all of whose members are within the charge to CT.

The CT charged on a company partner in respect of its share of partnership profits is not a partnership debt.  None of the other partners are therefore liable for that tax.

Removing your home address from the public register

Company directors and other eligible people such as company secretaries, people with significant control (PSC) and LLP members can apply to remove their personal addresses from the UK’s official company register on Companies House. 

Company directors and others are still required to provide an alternative correspondence address if they are appointed to a live company. If they are no longer appointed to a company, then an alternative address is not required and only the first half of their postcode will be made available to the public. The option to remove your home address from the public register is not available if the home address is the same as the company’s registered office address. 

There is a charge of £32 per document where a director wants to suppress their home address. The fee was reduced from £55 to £32 from 1 June 2020 following the introduction of new software that has significantly reduced the processing time for these applications.

During the COVID-19 outbreak, the fee should be paid online before the application is submitted. The quickest way to then proceed is to email a copy of the SR01 application together with the payment reference to Companies House. This will allow Companies House to process the application without delay. Applicants can still send a completed SR01 application by post, but it is taking Companies House much longer than usual to process paper applications due to coronavirus.

Claiming tax relief for work related expenses

Employees who need to buy equipment to use as part of their employment may be able to claim tax relief based on the cost of the equipment acquired. In most cases you can claim tax relief on the full cost of this type of equipment as it usually qualifies for a type of Capital Allowance called annual investment allowance. Any tax relief would be reduced if the employer provides a contribution towards buying the item.

The way to claim tax relief depends on the amount you’re claiming. HMRC provides the following information on making a claim:

Claims up to £2,500

You should make your claim:

  • using a Self-Assessment tax return if you already fill one in
  • online or by printing and posting form P87 if you don’t already fill in a tax return 
  • by phone if you’ve had a successful claim in a previous year and your expenses are less than £1,000 (or £2,500 for professional fees and subscriptions)

Claims over £2,500

  • You can only claim using a Self-Assessment tax return. You will need to register if you don’t already complete a return.

There are different rules for employees who use their own uniforms, work clothing and tools for work. It is possible to claim for the cost of repairing or replacing small tools you need to do your job (for example, scissors or an electric drill), or cleaning, repairing or replacing specialist clothing (for example, a uniform or safety boots). A claim for valid purchases can be made against receipts or as a 'flat rate deduction'. However, an employee cannot claim relief on the initial cost of buying small tools or clothing for work.