Tax – Page 6 – Debonair Management Services Limited

Unsurprisingly, HMRC has announced how they will be cracking down on fraudulent grant claims. Due to the speed and urgency that claims were made and issued, there are likely to be a number of innocently miscalculated grants and HMRC is requesting that businesses double-check their calculations and notify HMRC within 90 days of receiving any grants, however the penalties will largely be directed at those who deliberately did not comply with the criteria and knowingly submitted fraudulent claims.

This applies to the Coronavirus Job Retention Scheme (CJRS) and the Self Employment Income Support Scheme (SEISS) as well as the Coronavirus Statutory Sick Pay Rebate Scheme and other coronavirus business support grants. In this blog, we have explained how to repay an over claimed CJRS or SEISS grant, when you need to do this and what penalties you may face if you do not comply.

Why would I need to repay part or all of a claim?

Under the CJRS, the main reasons that could trigger a partial or full repayment of a claim include:

grants not used for the purposes for which they are intended;
calculation errors
employees working during periods that they are on furlough.

For those who claimed under the SEISS you will need to repay some or all of your grant if you:

received more than HMRC said you were entitled to
your business was not adversely affected
you did not trade in the tax year 2019 to 2020
you did not intend to continue to trade in the tax year 2020 to 2021
you have incorporated your business since 5 April 2019

When do I need to inform HMRC about an overpayment?

If you have claimed too much for a grant and have not repaid it, you must notify HMRC and repay the money by the 20 Oc‌to‌be‌r 2020 if you received money you’re not entitled to or if your circumstances changed on or before 22 J‌ul‌y or within 90 days if you received the money after 22 July.

How do I tell HMRC about an over claimed grant?

CJRS: If you are making another CJRS claim, you can report the overpayment as part of the claims process, and the new claim will be adjusted to count for the overpayment. If you are not making any further claims, you will need to contact HMRC who will then provide a reference number for you to make a repayment. Further guidance can be found here.

SEISS: To repay an over claimed SEISS grant you will need to log into your Government Gateway account and fill out the relevant form with your grant claim reference and Self Assessment Unique Taxpayer Reference (UTR) number. Once you have filled this form out, HMRC will give you the details of where to repay the funds.

What penalty could I face if I do not notify HMRC?

For an over claimed CJRS payment that is not paid back within the notification period, you may have to pay a penalty of up to 100% of the amount of the CJRS grant that you were not entitled to receive or keep. HMRC has been very clear that the onus is on the taxpayer to determine if they received an incorrect grant amount.

If you received an overpayment under the SEISS, the penalty will depend on whether you knowingly over claimed or not. If you knowingly applied and received a grant whilst being ineligible, the penalty will be based on the amount you were not entitled to receive along with other factors. If you honestly believed you were eligible, and you later realised this was not the case, HMRC will only penalise you if you have not repaid the grant by 31 January 2022.

DMS Posts, Tax

Self-Employment Income Support Scheme grant extension

November 5, 2020 Debonair Management Services Limted

The UK Government recognises the continued impact that coronavirus (COVID-19) has had on the self-employed and has taken action to provide support.

The Self-Employment Income Support Scheme grant extension provides critical support to the self-employed in the form of 2 further grants, each available for 3 month periods covering November 2020 to January 2021 and February 2021 to April 2021.

1. Who can claim

To be eligible for the grant extension self-employed individuals, including members of partnerships, must:

have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
declare that they intend to continue to trade and either:
- are currently actively trading but are impacted by reduced demand due to coronavirus
- were previously trading but are temporarily unable to do so due to coronavirus

2. What the grant extension covers

The extension will last for 6 months, from November 2020 to April 2021. Grants will be paid in 2 lump sum instalments each covering a 3 month period.

The third grant will cover a 3 month period from 1 November 2020 until 31 January 2021. The Government will provide a taxable grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. This is an increase from the previously announced amount of 55%.

The Government are providing the same level of support for the self-employed as is being provided for employees through the Coronavirus Job Retention Scheme which has also been extended until March 2021.

The Government has already announced that there will be a fourth grant covering February 2021 to April 2021. The Government will set out further details, including the level, of the fourth grant in due course.

The grants are taxable income and also subject to National Insurance contributions.

3. How to claim

The online service for the next grant will be available from 30 November 2020. HMRC will provide full details about claiming and applications in guidance on GOV.UK in due course.

Budget, DMS Posts, Tax

What’s changing for small businesses in the 2020/2021 tax year?

April 3, 2020 Debonair Management Services Limted

A new tax year is starting on April 6th, which will mean many of the changes announced in recent Budgets will come into effect. Before the 2020/2021 tax year kicks off, here’s a roundup of some of the key changes small business.

Changes to some tax and National Insurance rates and bands

Some of the rates and bands have been frozen, while others have increased. Here are the rates and bands that will come into effect on 6th April:

England, Northern Ireland and Wales

	2020/21	2019/20
Personal allowance	£12,500	£12,500
Employee’s NI becomes due at	£9,500	£8,632
Employer’s NI becomes due at	£8,788	£8,632
Higher rate tax becomes due at	£50,000	£50,000
Class 2 NI becomes due when profits exceed	£6,475	£6,365
Class 2 NI per week	£3.05	£3.00
Class 4 NI becomes due when profits exceed	£9,500	£8,632

Scottish Tax Rates and Bands

The Scottish rates of income tax will change to the below on 11th May 2020.

	2020/21	2019/20
Personal allowance	£0 – £12,500	£0 – £12,500
Starter rate 19%	£12,501 – £14,585	£12,501 – £14,549
Basic rate 20%	£14,586 – £25,158	£14,550 – £24,944
Intermediate rate 21%	£25,159 – £43,430	£24,945 – £43,430
Higher rate 41%	£43,431 – £150,000	£43,431 – £150,000
Top rate 46%	Over £150,000	Over £150,000

Employment Allowance Increased

The Employment Allowance will increase from £3,000 to £4,000 on 6th April but from this date, only businesses with an employer’s NI liability of under £100,000 a year will be eligible to claim the allowance.

National Minimum Wage / National Living Wage rates per hour increased

The following rates will all increase on 6th April:

	2020/21	2019/20
Employees aged 25 and over: NLW	£8.72	£8.21
Employees aged under 18: NMW	£4.55	£4.35
Employees aged 18-20: NMW	£6.45	£6.15
Employees aged 21-24: NMW	£8.20	£7.70

Student Loan Income thresholds

The levels of income above which student loan repayments are due will change on 6th April as follows:

	2020/21	2019/20
Undergraduate loan: plan 1	£19,390	£18,935
Undergraduate loan: plan 2	£26,575	£25,725
Postgraduate loan	£21,000	£21,000

Working from home rate for employees increased

If any of your clients operate their own limited company and claim costs for working from home, HMRC will ask them for proof of any working from home costs of over £6 (rather than £4) from 6th April 2020.

Delays and cancellations to planned changes

Corporation Tax rate holds steady

The rate at which limited companies pay Corporation Tax was originally planned to decrease from 19% to 17% on 1st April but these plans have now been cancelled. The rate of Corporation Tax will now remain at 19%.

IR35 changes delayed

Changes to the operation of IR35 legislation in the private sector that were due to take effect on 6th April 2020 have now been delayed until April 2021.

DMS Posts, PAYE, Tax

Coronavirus Job Retention Scheme – What do we know so far?

March 24, 2020 Debonair Management Services Limted

The Government announced an extensive package of support on Friday 20 March for employers coping with the commercial difficulties arising from Covid-19. This has been welcomed by employers, many of whom we have been speaking to, who have been extremely concerned about how to pay wages when revenues have dried up or they have been forced to close. Those businesses have been facing very tough choices around lay off, short term working and redundancies – while trying to balance the finances, needs of the business and the livelihoods of their staff and communities.

The key measure announced to help employers is the Coronavirus Job Retention Scheme. Through this, employers can claim a grant to cover up to 80% of an employee’s wage costs. At the time of writing (19:00 on 22 March), we are awaiting detailed guidance as to exactly how this will work: but what do we know about the scheme so far?

Which employers are eligible for the scheme?

All UK employers can apply – you don’t need to be in any specific sectors, just pay people via PAYE. This includes businesses of any size and includes charitable or non profit.

How do you access the scheme?

According to guidance on the Gov.uk webpage, employers will 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.
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.

It is unclear at this time what (if any) financial information an employer would need to provide to HMRC to show that you cannot cover staff costs due to Covid-19.

The employer will be able to claim a grant of up to 80% of the employees wage for all employment costs, up to a cap of £2,500 per month.

The scheme will be backdated to 1 March (useful for employers who have already had to make lay offs) and will be open for at least 3 months, but extended ‘for longer if necessary’.

As this is a reimbursement grant, the employer will make the wage payment to the furloughed employee and then be reimbursed by HMRC. At this stage the timescale is unknown, although the Chancellor suggested the first payouts could be made by the end of April at the latest. Please see here for more details of support that may assist with cash flow through this time.

What does Furloughed mean?

There is no previous legal term for this and it is a completely new concept to English Employment Law. The common definition of to ‘furlough’ is to allow or force someone to be absent temporarily from work.

We understand that if an employer needs to make an employee redundant or lay them off, they can instead discuss with the employee them becoming classified as a ‘furloughed worker’. This would mean they would remain on the employer’s payroll, rather than being made redundant or laid off with no pay. Their employment would continue but they could not undertake any work for the employer while classified in this way.

We are still waiting for the detail, but it seems most likely that if an employee has an express lay off clause in their contract, the employer could designate the employee as a furloughed worker. The employer would need to discuss this with staff.

If the employee does not have a lay off clause in their contract, the employer is likely to need to have a discussion and seek the employee’s consent to be classified as a furloughed worker. Given that the alternative could be redundancy, most employees are likely to agree. This may depend on what amount of paid notice, Statutory Redundancy Pay and holiday pay they would receive if made redundant. It may also depend on whether the employer is able to ‘top up’ the pay (so the furloughed worker is paid 100% not 80%) or offer for the employee to take or be paid for their accrued but not yet taken annual leave as well.

Does the employer have to pay more than 80% to Furloughed Workers?

No – the early guidance is clear that the employer could choose to fund the differences between this payment and the employee’s salary, but does not have to.

At this point in time we don’t know whether the 80% grant is limited to just salary or whether it extends to include Employers National Insurance or costs for any benefits such as pensions, health insurance etc. Although it seems unlikely, this might mean that the sum actually paid to the employee is less than 80% of net salary, so care should be given by employers when communicating with staff to say that wage payments for furloughed employees will be in accordance with the scheme.

We also don’t know how that 80% would be calculated for those whose monthly or weekly salary varies. Again at this stage it is best to communicate to those staff that payments will be in accordance with the scheme once clarified.

Possible knock on impacts?

At this stage, it is right to feel relieved that there will be a safety net. Further clarification will be welcome, especially in the following areas which could become problematic as this develops:

If an employer need some employees to continue to work, how do they choose who to classify as a furloughed worker and who should work on? In the absence of any guidance, we would recommend a selection criteria akin to a redundancy selection matrix, making sure you avoid any discriminatory criteria. It will be interesting to see whether any Government emphasis is placed on giving furloughed status to those who have medical conditions that place them at higher risk from Covid-19 or those who need to care for dependants. Without that Government emphasis employers may face discrimination risks in doing so.
How do you deal with dissatisfaction of those good employees that you ask to carry working on, when other possibly less high performing employees are offered and become furloughed?
How do you deal with those on Maternity? We expect it will be the position that those on maternity remain on maternity leave until they wish to return, at which point you would need to assess whether there is work for them or offer them to be furloughed. This could cause issues given that the payment to employees who are furloughed could be significantly higher than statutory maternity pay.
What about those who are currently off sick or self isolating on SSP? Should they be furloughed?
If there is a delay in payment by HMRC, can you pass that delay on to your employees? This seems unlikely to be encouraged and without provision by the Government may amount to a breach of contract or unlawful deduction of wages. HMRC has set-up a dedicated helpline on 0800 0159 559 for businesses and individuals in financial distress.

We anticipate HMRC will provide details in due course and we will provide updates regularly. In the interim we recommend you regularly check the Gov.uk website which is being updated most days.