Covid 19 ” Mini Budget “

Yesterday the Chancellor announced several different measures aimed at boosting the UK economy as it goes through the negative down turn following the Covid pandemic and lockdown. The main measures were :

1) There is to be a Job Retention Bonus of £1,000 as a one off payment to employers who legitimately furloughed an employee and made the appropriate claim, with the employee remaining continuously employed until 31st January 2021. The employee must earn at least £520 per month for November, December, and January on average. The bonus will be claimable in February once the January RTI information has been received by HMRC.

2) There will be a VAT reduction from 20% to 5% on any eat in or hot take away food and drinks from restaurants, cafes, and pubs from 15th July to 12th January 2021. This reduction though excludes alcohol. The reduction also applies to holiday accommodation in hotels, B&B’s, Campsite and Caravan Parks, as well as attractions such as cinemas, theme parks, and zoos. How much of this will be passed on to the customer will be interesting to see.

3) The stamp duty land tax zero rate threshold has been increased with immediate effect until 31st March 2021, whereby no stamp duty will be payable on the first £500,000 ( previously £125,000 ) meaning a potential maximum saving on properties over the £500,000 threshold of £15,000. This does not impact on the 3% surcharge for second or more properties, irrespective of that property value. This should provide a boost to the housing market, which in turn will boost associated sales such as furnishings, furniture, and white goods.

4) A bit of a gimmick possibly, but worth taking advantage of if that’s what you would be doing anyway, is the eat out to help out scheme, which gives diners 50% off meals and non alcoholic drinks on Monday to Wednesday dining, up to as maximum of £10 per person. The restaurant/establishment has to be registered for the scheme, and there is no upper limit on how many times the scheme can be used by an individual.

5) For any employees furloughed on or before 30th June, the claim under the CJRS must be made no later than 31st July, otherwise it will be lost. And as previously reported, the amounts claimable under the CJRS changes with effect from 1st August. In addition, HMRC will shortly be contacting selected customers to discuss their claims!!!! which no doubt follows our recent article that a significant number of false and fraudulent claims have been made, and which HMRC are already aware of. If you need to disclose an error, then do so immediately.

6) There are new job creation grants and assistance which will come into force such as the ” kickstart ” job placement where an employer will receive a government contribution towards 6 months of wage costs for every 16 to 24 year old hired by employers, and the £2,000 grant for creating new apprenticeship roles over the next 6 months.

7) Homeowners will be able to obtain vouchers to make their homes more energy efficient, up to a maximum of £5,000 ( or £10,000 for some of the poorest families ). This will go towards loft/wall/floor insulation, eco friendly boilers, heat pumps, double/triple glazing, low energy lighting, energy efficient doors etc. It is hoped that this will give a boost to the various trades sectors.

Confess To Furlough Abuses

Legislation is currently being fast tracked through to law to allow HMRC to reclaim any furlough money overpaid to employers, or not spent on wages as intended. The legislation talks of ” deliberately ” making an incorrect claim, so should protect the innocent errors due to misunderstandings.

There are 2,000+ employers who have currently been reported to whistleblowing hotlines for furlough fraud. These will be at the top of HMRC hitlists but random compliance checks should also be expected.

Whilst guidance on the scheme has been regularly updated, what has been crystal clear from the outset is that if the employer made a claim then the employee could do NO WORK whatsoever for the employer, or linked employers, until flexible furlough is introduced from 1st July.

Now is the time for employers to re visit the claims that they have made.

The draft legislation states that penalties will apply if the employer fails to notify HMRC about the situation and any incorrect claim within 30 days. It also goes on to add that company officers ( directors and secretaries ) will be personally liable.

Our advice is if you have made a claim, then this should be reviewed by comparing the claim to the guidance freely available on the government website and/or on ACAS website, and checking the accuracy and validity of the claim. If an error is identified, then this should be notified to HMRC without delay.

Self Employed Income Support Scheme Extension

The self employed scheme has now been extended, to allow eligible businesses ( self employed individuals or partners in a self employed partnership ) to claim a second and final grant if the business has been adversely affected by Covid 19 on or after 14th July 2020. The claim can be made in August, and it does not matter if the first grant was not claimed.

A claim for the first grant must be made on or before 13th July 2020.

A claim can be made if all of the following conditions apply : you traded in 2018/19 and submitted your tax return by 23rd April 2020 for that year; you traded in 2019/20; you intend trading in 2020/21; your trade has been adversely affected by Covid 19.

Adversely affected could include being shielded, self isolating, sick because of Covid 19, have care responsibilities because of Covid 19, supply chains are interrupted, you have fewer customers, your staff cannot work.

You can check your eligibility for the scheme at www.tax.service.gov.uk/self-employment-support

The first grant is worth 80% of the average monthly trading profits covering 3 months worth of profits capped at £7,500 in total. The second grant is worth 70% of the average monthly trading profits covering a further 3 months worth of profits capped at £6,570 in total. These grants constitute normal taxable trading income.

Domestic Reverse Charge Delayed

The introduction of the domestic reverse charge for construction services will be delayed for 5 months from 1st October to 1st March 2021, because of the impact of the coronavirus pandemic on the construction industry.

There will also be an amendment to the original legislation, to make it a requirement for businesses to be excluded from the reverse charge because they are end users or intermediary suppliers, they must inform their subcontractors in writing that they are the end user or intermediary supplier.

June 2020 Fuel Rates

New fuel rates apply with effect from 1st June 2020. For one month from the date of change either the new rates or the old rates can be used. For this purpose hybrid cars are treated as either petrol or diesel cars, and these rates can also be used for VAT recovery purposes, but employers need to keep VAT receipts. For a fully electric car, the rate is 4p per mile.

The new rates are :

Petrol : engine size 1,400cc or less 10p; 1,401 cc to 2,000cc 12p; over 2,000cc 17p.

Diesel : engine size 1,600cc or less 8p; 1,601cc to 2,000cc 9p; over 2,000cc 12p.

LPG : engine size 1,400cc or less 6p; 1,401cc to 2,000cc 8p; over 2,000cc 11p.

Second Lump Sum Grant For Self Employed

HMRC have confirmed that the Self Employment Income Support Scheme ( SEISS ) will be extended. The eligibility criteria will remain the same but the grant will be 70% rather than 80% of average earnings for 3 months and the cap will be £6,570 down from the first grant cap of £7,500.

This is good news for the self employed, as more than 2.3 million individuals claimed a SEISS grant first time around.

The first claim period covered March to May, and the SEISS portal for this claim will close on 13th July. An individual does not need to have claimed the first grant to be eligible for the second grant.

Applications for the second grant will open in August, and HMRC expect to publish further guidance on 12th June.

Flexible Furloughing

From 1st July ( earlier than previously announced to start in August ) an employer can flexibly bring a previously furloughed employee back to work part time. The government will continue to pay 80% of the wages for the normal hours they don’t work up to the end of August, and subject to satisfying all the criteria. There will be no minimum time that staff can be furloughed for, compared to the current 3 week period.

Any working hours must cover at least 1 week and the agreement with the employee must be in writing. When claiming the grant, this must be for a minimum of a week, but longer periods can be claimed for if this is the preference of the employer. The data submitted to HMRC will include the employees usual hours, and actual hours worked.

From August the government grant for furlough will be slowly tapered off.

In June & July the government will pay 80% of wages ( up to a cap of £2,500 per month), + employers NIC + pension contributions.

In August the government will pay 80% of wages ( up to £2,500 again ) but NO NIC & NO pension costs.

In September the government will pay 70% of wages ( up to £2,187.50 per month ) but NO NIC & NO pension costs. The employer must pay 10% to top the wages up to the 80% amount, again capped at £2,500.

In October the government will pay 60% up to £1,875 with employers paying 20% to take the cap to £2,500, + the NIC + the pension.

It is important to note that the scheme will close to new entrants from 30th June. After that date the grants will only be available in respect of employees who had previously been furloughed for the minimum 3 week period. This means that the final date that an employee can be furloughed for the first time, and qualify for any furlough grants from 1st July onwards, is the 10th June date. This will then allow the current 3 week furlough period to be completed by 30th June.

Personal Liability on Bounce Back Loans

The bounce back loan scheme seems to have been the saviour of a lot of small businesses, with more than £14 billion borrowed under the scheme since its launch on 4th May. These loans are interest free for the first 12 months, and do not carry a personal guarantee for the directors. This all seems positive up to now.

However, there is a false assumption that if the company subsequently enters into a formal insolvency process, then there can be no liability on the directors.

This will NOT be the case if the directors have acted improperly and breached their fiduciary duties or abused the scheme.

Directors need to remain conscious of potential misconduct charges and preferential payments under the Insolvency Act and Companies Act.

A typical scenario may be where the bounce back loan is used to repay other company debts which may have personal guarantees attached. If this happens, and the company then goes into liquidation, then the insolvency practitioner would challenge this act, and pursue the directors personally as a preferential payment.

Covid 19 – Sick Pay Scheme

The Coronavirus Statutory Sick Pay Rebate Scheme ( CSSPRS ) enables small and medium sized employers to recover statutory sick pay which they have paid to their employees when the absence was related to Coronavirus. Employers can claim for a maximum of 2 weeks under the scheme, with no waiting days. For claims between 13th March and 5th April 2020 the rate of SSP was £94.25 per week, and since 6th April 2020 it is £95.85 per week.

The claim must be made through the CSSPRS online portal which opens on 26th May. Claims can be made by the employer, or the tax agent.

To make a claim, employers will need to be registered on the government gateway, and will need : the employer PAYE scheme reference; contact name and telephone number; UK bank or building society details for BACS receipts; the total amount of Coronavirus SSP paid for the claim period; the number of employees being claimed for; and the start date and end date of the claim period.

HMRC have confirmed that claims can be made for multiple pay periods and employees at the same time with the start date of the claim being the start date of the earliest pay period being claimed for, and the end date of the claim being the end date of the most recent pay period.

Furlough Update

This week the Chancellor has confirmed that the furlough scheme will now be extended until October of this year. It was due to end by 30th June.

There will, however, be changes to the scheme, and it is telling that the Chancellor made reference to employers making a contribution to the furlough payments. Other than making a reference to the employers contributing, there is currently no more detail. The changes will also include the ability for furloughed employees to work on a part time basis.

The changes to the scheme will come into force in August, and the full details of the changes to the scheme are expected from the government by the end of this month.