Change of VAT rules for Builders and those in the Construction Scheme from 1st March 2021 – Final Countdown

This is the 3rd attempt at setting a date for the introduction of these changes and as it stands at the moment this date will not be changed.

It applies only to VAT-registered businesses who are supplying/receiving services that are reported under CIS.

In other words, it applies to services supplied between the majority of construction sub-contractors and contractors in the UK.

If your CIS business is the recipient of construction services, and receives an invoice with the reverse charge applied, then you account for the VAT amount as part of your overall input tax, as if you’ve charged it to yourself.

If your business is not VAT registered then the reverse charge cannot be applied to you, and standard VAT rules apply for the supplier (so they will charge you the VAT and account for it as usual).

If you’re not VAT registered, you should make it clear to the supplier in writing.

Crucially, reverse charges do not contribute to a company’s potential VAT threshold. So if you aren’t registered for VAT then any attempt to apply the reverse charge will not push you over the limit.

Notably, the reverse charge also doesn’t apply to end users, such as the people who use a building that’s been constructed by the provided services, and nor does it apply to some of those connected to them, such as landlords or tenants.

For sake of clarity, HMRC says the VAT reverse charge for construction doesn’t apply to sub-contractors unless the answer to all of the following questions is positive:

  • Are any of the supplies you are making within the scope of the CIS?
  • Is the supply standard or reduced-rated?
  • Is your customer VAT registered?
  • Will your payment be reported under CIS?
  • Are you sure the customer is not an end user?

Introduction of the VAT domestic reverse charge for construction

Many businesses use VAT payments from customers as a source of working capital before sending the funds to HMRC.

But from 1 March 2021, VAT cash will no longer flow between VAT registered businesses involved in the construction industry.

The UK government is rolling out a reverse charge initiative aimed at tackling fraud totalling millions of pounds per year.

This is caused when suppliers or ‘subcontractors’ charge main contractors VAT but ‘disappear’ before passing sums on to HMRC.

The VAT reverse charge rules apply to suppliers of specified services, reported under the CIS.

The changes also apply to goods, where those supplies are provided alongside services specified in the CIS. This will see many more businesses affected than first thought.

It is anticipated that the businesses most directly affected by the building and construction legislation will be those which supply services to main contractors, or that operate through recruitment agencies or umbrella companies.

How does the domestic reverse charge work?

Suppliers will no longer be required to charge or receive VAT from their main contractor customers.

Instead, main contractors will effectively charge themselves VAT on subcontractors’ services, and pay the VAT sums that would have been paid to the subcontractor direct to HMRC in their VAT returns.

From 1 March 2021, for impacted suppliers, subcontractors will need to issue domestic reverse charge VAT invoices to main contractors, which must include wording that reverse VAT rules apply and that the customer must account for the VAT.

This requirement applies through the supply chain until main contractors sell to end users (clients) who do not sell on services.

The new arrangements will only apply to:

  • Individuals or businesses registered for VAT in the UK, which sell to other VAT-registered businesses
  • Entities that provide services specified under CIS. These include the construction, renovation and demolition of structures; painting and decorating, as well as services such as heating, ventilation and air conditioning.

The arrangements do not apply to businesses providing other support services such as surveying, architecture and consultancy; machinery, drilling or extraction, and the installation of security systems.

HMRC covers a full breakdown of services are that are included and exempt under CIS.

Check when you must use the VAT reverse charge for building and construction services

When you must use the reverse charge

You must use the reverse charge for the following services:

  • constructing, altering, repairing, extending, demolishing or dismantling buildings or structures (whether permanent or not), including offshore installation services
  • constructing, altering, repairing, extending, demolishing of any works forming, or planned to form, part of the land, including (in particular) walls, roadworks, power lines, electronic communications equipment, aircraft runways, railways, inland waterways, docks and harbours, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for purposes of land drainage, coast protection or defence
  • installing heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems in any building or structure
  • internal cleaning of buildings and structures, so far as carried out in the course of their construction, alteration, repair, extension or restoration
  • painting or decorating the inside or the external surfaces of any building or structure
  • services which form an integral part of, or are part of the preparation or completion of the services described above – including site clearance, earth-moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works

When you must not use the reverse charge

Do not use the charge for the following services, when supplied on their own:

  • drilling for, or extracting, oil or natural gas
  • extracting minerals (using underground or surface working) and tunnelling, boring, or construction of underground works, for this purpose
  • manufacturing building or engineering components or equipment, materials, plant or machinery, or delivering any of these to site
  • manufacturing components for heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection systems, or delivering any of these to site
  • the professional work of architects or surveyors, or of building, engineering, interior or exterior decoration and landscape consultants
  • making, installing and repairing art works such as sculptures, murals and other items that are purely artistic signwriting and erecting, installing and repairing signboards and advertisements
  • installing seating, blinds and shutters
  • installing security systems, including burglar alarms, closed circuit television and public address systems

Flowchart to help you decide whether to apply normal vat rules or to apply the domestic reverse charge

Flowchart for businesses receiving building and construction services to check whether normal VAT rules or the domestic reverse charge applies

Supplier checks

A builder selling construction services must first be sure that his customer is both CIS and VAT registered.

It is recommended that the customer’s VAT number is checked by using HMRC’s new VAT number checker service. It might be worthwhile making this check an annual task, just in case the customer has deregistered during the year, perhaps due to reduced turnover.

A potential difficulty is when the customer is in the process of applying for a VAT number from HMRC. In this situation, you should consider the advice given in VAT Notice 735, para 9.3.2, which is to request a 20% advance deposit from the customer to cover the potential output tax liability if things go wrong.

The HMRC guidance advises: “Any deposit taken in these circumstances can be refunded when they can show evidence that they’ve got their VAT registration number.”

Customer checks

The challenge is to make sure that reasonable steps have been taken to check a customer is bona fide. A lot of this process comes down to common sense. If your client is doing business with a new customer, a due diligence process should have been carried out as part of the commercial decision to take on that customer.

HMRC has confirmed that a builder who has been deliberately misled by a customer but has taken reasonable steps to check their credibility will not be held responsible for underpaid output tax. The ‘reasonable steps’ issue is well-summarised by para 9.3.1 of VAT Notice 735.

Three points to remember

There are three priorities for those who are buying in building services from March onwards.

  • Incorrectly charged VAT – Make sure that you are not charged VAT by a builder when the reverse charge should apply. You can still claim input tax in Box 4 but HMRC has the power to assess output tax for the same amount, as if the reverse charge had been carried out correctly. 
  • Nature of work -Check that the work comes within the scope of the CIS and that the supplier is providing building services, but is not an employment business which is only making a supply of staff rather than construction services. Supplies by an employment business are subject to normal VAT rules.
  • End user or intermediary supplier -The final check is for customers to advise their builders before work starts if they qualify as either an ‘end user’ or ‘intermediary supplier’ for any of the work in question, as I explained in Domestic Reverse Charge: The final countdown for builders.

Conclusion

As with many issues in tax, advance planning is the key to reducing the risk of errors.

  • make sure your accounting systems and software can deal with the reverse charge
  • consider whether the change will impact your cash flow
  • make sure all your staff who are responsible for VAT accounting are familiar with the reverse charge and how it will work

The aim of the new rules is to reduce the incidence of VAT fraud in the construction industry – don’t play into the hands of the fraudsters by having weak checking procedures.

Apply for a Kickstart Scheme grant: 29 or less job placements

There has been a very welcome important change to this scheme.

From 3 February 2021, employers can apply directly to the Kickstart scheme for any number of job placements. We are removing the threshold of 30 job placements. You can also choose to apply through a Kickstart gateway, including those supporting sole traders.

Kickstart gateways already working with the scheme can continue to add more employers and job placements to their grant agreement.

What the Kickstart Scheme is

The Kickstart Scheme provides funding to create new job placements for 16 to 24 year olds on Universal Credit who are at risk of long term unemployment. Employers of all sizes can apply for funding which covers:

Employers can spread the start date of the job placements up until the end of December 2021.

Guidance – Apply for a Kickstart Scheme grant: 29 or less job placements

HMRC Deferred Payments Update

Coronavirus VAT Deferral Scheme – January 2021 Update

A new payment scheme will be opened by HMRC shortly to allow for payments of VAT originally deferred between 20th March 2020 and June 2020 to be paid in 11 interest free instalments.  All instalments must be paid by the end of March 2022.

You will need to opt into this scheme and we will update you further once the scheme is open.

Get ready to opt in to the new payment scheme

Before opting in you must:

  • create your own Government Gateway account if you don’t already have one
  • submit any outstanding VAT returns from the last 4 years. You will not be able to join the scheme if you have not done so
  • correct errors on your VAT returns as soon as possible
  • make sure you know how much you owe, including the amount you originally deferred and how much you may have already paid

You should also:

  • pay what you can as soon as possible to allow us to show the correct deferred VAT balance
  • consider the number of equal instalments you’ll need, from 2 to 11 months

October 2020 Update

VAT

On the 24th September the chancellor announced that businesses who deferred VAT due from 20th March to 30th June 2020 will now have the option to pay in smaller payments over a longer period of time.  Smaller payments can now be made up to the end of March 2022 and will be interest free.

You will need to opt into this scheme, more information will become available in the coming months regarding this.

Self- Assessment Tax

Check what you need to do after 31 July 2020 if you chose to defer your second payment on account for the 2019 to 2020 tax year.

HMRC have produced a summary of your options, however there is no extended deferral mechanism past 31st January 2021.

You can apply for Time To Pay – if you know that you cannot make your payments then the sooner you do this the better.

If your outstanding self-assessment tax is less than £30,000 then you can apply online for time to pay via your Personal Tax Account.

You can also use this option to set up any regular payment for self-assessment should you wish to put a budget plan in place. For more information on ways to pay click here.

Corporation Tax and Pay As You Earn

No deferral has been granted in respect of Corporation Tax liabilities or PAYE/NIC payments, businesses that attempt to get up and running again as the lockdown eases may find themselves in difficulty funding these liabilities, especially when business was tough even before lockdown.

If your business is facing that challenge during this time, you may be asking: will HMRC give me more time to pay Corporation Tax or PAYE/NIC liabilities if I cannot pay them on time? The answer is, they may, if you make a request for a Time to Pay arrangement with them.

Some key points you need to know before contacting HMRC about TTP

  • When to apply? As soon as possible if a tax payer thinks they will have difficulties making their next payment on a timely basis.
  • What do you need to prepare beforehand? Full information concerning the individual or business’s financial situation should be available, including but not limited to details of bank loans presently held, details of application for additional bank funding, the sale of assets, etc. This is because questions asked by HMRC can be detailed to the extreme.
  • Will there be interest involved? In any TTP arrangements, forward interest will be charged where appropriate.

It’s important to act now

While in recent months, HMRC Debt Management teams appear to have been applying a light touch in relation to the collection of arrears, this will not last forever. With this in mind, if your business has a tax debt, you should approach the appropriate Debt Management Team and reach an agreement to clear the arrears in a formal arrangement over a period of time.

Self-Employed Income Support Scheme SEISS – January 2021 Update

On 26 March 2020, the Government announced a support package for those who are self-employed or a member of a partnership and have lost income due to the COVID-19 crisis. 

This is aimed at self-employed businesses that DO NOT trade through a limited company, that have generated profits and where those profits are your main or only source of income.

With the closure of the claims window for the 3rd grant and the details of the 4th grant potentially not being announced until the budget on the 3rd March, we have set out a summary of the Grants to date

SEISS grants currently cover the following periods

NameClaim periodClaim deadlineGrant size
Fourth grantFeb 2021-April 2021 TBATBA
Third grantNov 2020-Jan 202129 Jan 2021Up to £7,500
Second grant14 July – Oct 202019 Oct 2020Up to £6,570
First grantMarch – July 202013 July 2020Up to £7,500

The Self-Employed Income Support Scheme (the ‘scheme’) is open to those who have annual profits of less than £50,000 and receive at least half their income from self-employment.  Where the conditions outlined below are met, eligible individuals can apply for a grant payment under a total four rounds of the scheme. All payments are subject to income tax and Class 4NICs.

The first round of grants, for which claims closed on 13 July 2020, was worth:

  • up to 80% of average monthly trading profits,
  • for a period of three months,
  • capped at an overall maximum of £7,500.

The second round of grants, for which claims opened on 17 August 2020 and closed on 19 October, is worth:

  • up to 70% of average monthly trading profits,
  • for a period of three months,
  • capped at an overall maximum of £6,570.

On 24 September 2020 it was announced that the scheme would be extended further for self-employed individuals who were currently eligible for the SEISS and are actively continuing to trade, but facing reduced demand due to COVID-19.

This extension will be in the form of a further third and fourth round of grants. The third round of grants, for which applications opened on 30 November 2020 and will close on 29 January 2021, covers the period from the start of November 2020 until 29 January 2021 and is worth:

  • up to 80% of average monthly trading profits, 
  • for a period of three months,
  • capped at an overall maximum of £7,500.

The fourth round will cover a three-month period from the start of February until the end of April. The Government have indicated that they will review the level of the fourth round and set this in due course.

HMRC calculate how much eligible individuals will receive. Individuals therefore do not need to calculate the amount they are due, but they do need to make a claim to receive funds under the scheme. 

Below we have set out an outline of how HMRC determine eligibility, the amount receivable for both grants, and how the claims process works. 

Who is eligible for the Self-Employed Income Support Scheme (SEISS)?

For the first round of grants, HMRC provided a standalone online eligibility checker which allowed individuals, or their agents, to check if they were eligible for the scheme in advance of making a claim. This eligibility checker was withdrawn for the second round of grants onwards, where eligibility was confirmed as part of the application process.

You could claim under the first and second rounds of the scheme if you were a self-employed individual or member of a partnership and you:

  • carry on a trade which has been adversely affected by COVID-19 (for example because you’re unable to work, or you have had to scale down/stop trading);
  • traded in the tax years 2018-19 and 2019-20;
  • submitted your self-assessment return for the tax year 2018-19 on or before 23 April 2020;
  • intend to continue trading in 2020-21; and
  • meet the profits condition.

These eligibility criteria were the same for both the first and second grant. The one notable variation was in the timing of when a trade has to be adversely affected:

  • To claim the first grant, the trade must have been adversely affected by COVID-19 in the period up to and including 13 July 2020.
  • To claim the second grant, the trade must have been adversely affected on or after 14 July 2020.

The Treasury Direction dated 24 November sets out that, in order to be eligible for the third grant, all of the same conditions have to be met as for the first and second grants. However, there are two extra conditions which must also be met in order to be eligible for the third grant:

  • The trade must have suffered from reduced activity, capacity or demand in the period from 1 November 2020 to 29 January 2021 as a result of COVID-19; and
  • The claimant must reasonably believe they will suffer a significant reduction in trading profits for the basis period including those months as a result.
  • A claim cannot be made for the third grant if the reduced activity, capacity or demand is caused solely because a person is required to self-isolate, or care for someone required to self-isolate as a result of travelling to the UK.

Who isn’t eligible for the Self-Employed Income Support Scheme (SEISS)?

You will not be eligible for the first, second or third grants if any of the following apply:

  • You started your trade after 5 April 2019 (i.e. you did not trade in the tax 2018-19).
  • You did not submit your 2018-19 tax return by 23 April 2020.
  • Your trading income forms less than half of your total income (for example, your main income comes from employment, which you top up with a smaller amount from self-employment).
  • You traded in 2016-17 and 2018-19 but not 2017-18; and you do not meet the first test of the profit condition (i.e. in 2018-19 your trading profits were more than £50,000, or less than your non-trading income in that year).
  • You are a director of a limited company.
  • You operate a Furnished Holiday Letting business.
  • You are operating a trade through a trust.

Other points to note:

  • In calculating eligibility and the amount which can be claimed, HMRC will not take into account any self-assessment returns submitted after 23 April 2020.
  • Claims based on late returns submitted between 26 March and 23 April 2020 will be subject to additional anti-fraud checks.
  • If you amend a submitted return after 26 March 2020 any changes will not be taken into account when working out your eligibility or amount of the grant.
  • HMRC will only look at your original return if a tax return is under enquiry, or the subject of a contract settlement.
  • If you are taking a break from your trade due to having a baby or adoption, or have done so since 6 April 2019, you will still be eligible.  Claiming maternity allowance will not affect eligibility.

How much might I get?

The first grant was calculated as 80% of average trading profits for a three-month period, subject to an overall cap of £7,500.  The second grant is calculated as 70% of average trading profits for a three-month period, and capped at £6,570. The third grant will be calculated as 80% of average trading profits for a three-month period, and capped at £7,500. The Government have not yet confirmed how the fourth grant will be calculated.

There is no link between the amount of grant received and the level of income lost by the trade due to COVID-19.

You must keep a record of the amount claimed, your claim reference number and evidence that your business has been adversely affected by coronavirus.

Please note that claims will be dealt with through GOV.UK only – any texts, calls or emails purporting to be from HMRC asking you to click a link or provide personal information are likely to be a scam so please exercise caution.

COVID-19: Support for businesses that pay business rates 2021 update

Business Support Grants from January 2021 delivered by Local Authorities

From the 5th January 2021 onwards, Local Authorities will be delivering The Local Restrictions Support Grant (Closed), Closed Businesses Lockdown Payment and the Additional Restrictions Grant

Local Restrictions Support Grant (Closed) Addendum Scheme

For Businesses that were open as usual, but then required to close due to national restrictions imposed by government may be eligible for the LRSG (Closed) Addendum schemes:

  • from 5 January 2021 onwards
  • between 5 November and 2 December 2020

Eligible businesses may be entitled to a cash grant from their local council for each period under national restrictions.

When national restrictions are introduced and businesses are required to close, the LRSG (Closed) Addendum schemes supersede the LRSG (Closed)LRSG (Open) and LRSG (Sector) schemes.

Eligibility

Your business may be eligible if it:

  • is based in England
  • occupies property on which it pays business rates (and is the ratepayer)
  • has been required to close because of the national restrictions from 5 January 2021 onwards, or between 5 November and 2 December 2020
  • has been unable to provide its usual in-person customer service from its premises

For example, this could include non-essential retail, leisure, personal care, sports facilities, tourism and hospitality businesses. It could also include businesses that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses can get one grant for each non-domestic property.

Coronavirus Closed Business Lockdown Payment

For The Closed Businesses Lockdown Payment (CBLP) supports businesses that have been required to close due to the national restrictions that began on 5 January 2021.

Eligible businesses may be entitled to a one-off cash grant of up to £9,000 from their local council.

Local councils will pay the same businesses that are eligible to receive the Local Restrictions Support Grant (Closed) Addendum for the national lockdown period that began on 5 January.

Eligibility

Your business may be eligible if it:

  • is based in England
  • occupies property on which it pays business rates (and is the ratepayer)
  • has been required to close because of the national restrictions from 5 January 2021 onwards
  • has been unable to provide its usual in-person customer service from its premises

This could include non-essential retail, leisure, personal care, sports facilities, tourism and hospitality businesses. It could also include businesses that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.

Eligible businesses can get one grant for each non-domestic property.

Coronavirus Additional Restrictions Grant

For closed businesses that do not directly pay business rates as well as businesses that do not have to close but which are impacted. In addition, larger grants can be given than those made through LRSG (Closed).

Local councils can determine which businesses to target and determine the amount of funding from the ARG.

Eligibility

Local councils have the freedom to determine the eligibility criteria for these grants. However, we expect the funding to help those businesses which – while not legally forced to close – are nonetheless severely impacted by the restrictions.

This could include:

  • businesses which supply the retail, hospitality, and leisure sectors
  • businesses in the tourism and events sectors
  • business required to close but which do not pay business rates

Useful links

Business Support Package for January Lockdown – Guidance for Local Authorities

Selby District Council – Additional Restrictions Grant Scheme

York City Council – Additional Restrictions Grant Scheme

Coronavirus Job Retention (Furlough) Scheme extended

June 2021 Extended Coronavirus Job Retention Scheme to 30th September 2021 – Update and Refresher

Background

On 3 March 2021, at the Spring Budget, the Chancellor confirmed that the Coronavirus Job Retention Scheme (CJRS) will run until 30 September 2021

The current version of the scheme is the third iteration of the original CJRS that commenced in March 2020. This ‘extended’ scheme commenced on 1 November 2020, following the announcement of further lockdown measures for England at the time, and was originally intended to run until 31 December 2020.  The latest extension to 30 September 2021 means the third version of the scheme will run for a total of 11 months.

Guidance

Full guidance on the scheme is available on GOV.UK on their Coronavirus Job Retention Scheme pages

HMRC have also produced a step by step guide and a list of monthly claims deadlines. There are also live webinars, and more information on the business support finder on GOV.UK.

Outline of the scheme

The key features of the extended CJRS (version 3) are:

  • Employees are entitled to 80% of the current salary for hours not worked up to a maximum cap of £2,500 per month throughout the lifetime of this scheme.
  • Employees can be fully or flexibly furloughed – so they are permitted to work part time and be paid their usual salary for those hours, while receiving furlough pay at 80% for their unworked hours.
  • Employees must agree to being fully or part furloughed before their new working arrangements start and the employer must confirm details of their new terms and conditions in writing.
  • Employees who are required to shield, are clinically vulnerable or have childcare responsibilities can be furloughed.
  • Employers can claim support from the Government for the cost of unworked hours, although the support will reduce from 1 July 2021 with employers asked to contribute to employees’ furlough pay during July to September.
  • Employers must meet any associated costs of Employer’s National Insurance Contributions (NIC) and pension contributions from November 2020 to September 2021. 
  • Claims should start and end in the same month.
  • Claims should run for a minimum period of 7 consecutive days unless they relate to a short period at the start or end of a month.
  • Employers can claim up to 14 days in advance of making payments to staff but are encouraged to defer claiming until staff hours are finalised where possible, to avoid having to amend claims.

Employees should receive up 80% of their usual pay for the hours not worked throughout. There are special rules to determine what an individual’s usual pay is. (NB For periods from 1 May, changes were made affecting how average wages should be calculated when an employee has variable pay and has had periods of statutory leave. These changes are explained under the heading ‘Employees returning from family-related statutory leave’.) 


March 2021 Update to Furlough Scheme

The CJRS has been extended until 30th September 2021 and the level of grant to employers will stay the same until 30th June 2021.

Changes to the level of grant from 1st July 2021 can be found here.


January 2021 Update to Furlough Scheme

The Coronavirus Job Retention Scheme has been extended until 30 April 2021.

Claims for furlough days in January 2021 must be made by 15 February 2021.

You can no longer submit claims for claim periods ending on or before 31 October 2020.


October 2020 Update to Furlough Scheme

On 31 October the CJRS was extended until December and the JSS that was due to commence on 1 November was postponed.

The new Job Support Scheme (JSS), which was the government’s replacement wage support scheme, had been set to launch on 1 November, with the government publishing 11 detailed guidance notes on the evening of 30 October to help employers in administering the same. This scheme has, however, now been postponed until the extended CJRS ends.

Below we summarise the key aspects of the extended CJRS and answer some of the key questions employers are likely to have.

Key points

  • The CJRS will now remain open until December and will not close, as originally planned, on 31 October. The exact end date is currently unknown but it is perhaps likely to coincide with the proposed ending of the new lockdown in England on 2 December. The government has confirmed that there will be no gap in eligibility for support between the previously announced end-date of the CJRS and this extension.
  • The introduction of the JSS (both the Open and Closed schemes) will be postponed until the CJRS ends.
  • The level of grant under the extended CJRS will mirror levels available to employers under the original CJRS in August. This means that the government will pay up to 80 per cent of an employee’s normal pay up to a cap of £2,500 and employers will be responsible only for National Insurance Contributions and pension contributions. As with the original CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
  • Given the previous scaling back of the CJRS (in October the government contribution was limited to 60 per cent of normal pay) and the acknowledged reduced level of support under both the JSS Open and Closed, the extended CJRS is significantly more generous to employers.
  • Importantly, to access the extended scheme, neither the employer nor the employee needs to have previously used the CJRS. To be eligible, employees merely need to have been on an employer’s PAYE payroll before midnight on 30 October (with a Real Time Information (RTI) submission notifying payment for that employee to HMRC having been made on or before 30 October). This is a significant change to the original CJRS, where the vast majority of employees had to have been furloughed for a period of at least 3 consecutive weeks ending on or before 30 June to enjoy continued access to the scheme through July to the end of October.
  • It is unclear whether the extended scheme will allow employers to rehire employees who have been made redundant and put them on furlough (as was the case in certain circumstances under the original CJRS). This will need to be clarified by the government in due course but given the requirement is that employees need to have been on an employer’s PAYE payroll before midnight on 30 October, this does theoretically mean that employees made redundant effective on 31 October (and the date the original CJRS was due to close) could be in scope under the extended scheme. However there are employment law implications to rehiring employees so employers considering this should give this careful thought.
  • Flexible furloughing will continue to be an option in addition to full-time furloughing so employees will be able to work some of their hours (and be paid for this by their employer) and receive furlough pay for unworked hours. Calculations determining usual hours and worked hours will broadly follow the same methodology as under the original CJRS.
  • The government expects that publicly funded organisations will not use the extended scheme, as was the case for the original CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements will continue to apply to these employers.
  • The extended CJRS will operate as the original CJRS did, with businesses being paid upfront (as opposed to in arrears under the JSS) to cover wage costs. The government has noted, however, that there will be a short period where the legal terms of the extended scheme are changed and systems updated in which businesses will be paid in arrears.
  • It is also unclear how the furlough extension will interact with the Job Retention bonus. Under the current rules of the Job Retention bonus scheme, the employee needs to be retained in employment and paid a minimum amount for November, December and January. It’s unclear if furlough pay will count towards the minimum (the government has confirmed that JSS pay counts so in principle it seems likely that furlough pay should also count) or if the government will now amend the bonus scheme.

Points for employers to consider

  • Most businesses will have been planning workforce changes to dovetail with the original 31 October end date for the CJRS and the introduction of the JSS from 1 November. These plans will need to be revised given the extension of the CJRS and in most cases, urgent communications will be required with employees. The nature of this communication will vary depending on what plans and communications the employer had already put in place.
  • Employers with staff still on furlough and/ or flexible furlough may simply want to extend these existing furlough arrangements through until December. Many existing furlough agreements will be drafted to come to an end either on the expiry of the CJRS or on 31 October. Given previous issues under the original CJRS as to how to obtain and document employee agreement to CJRS terms, it would be sensible to get relevant employees to return signed letters indicating their agreement to an extension (or an appropriate collective agreement with any recognised trade union) or, at least, to respond by email confirming their agreement to remain on furlough until December on existing furlough terms. This will be easier if the extension to furlough is on the same terms as up to 31 October.
  • Employers who have topped up pay throughout any previous furlough arrangements may want to extend furlough arrangements but may need to scale back or remove the top up. In this instance, employee consent to any such changes may be required, depending on the wording of the furlough agreement – in which case employers should seek the employee’s consent to the change urgently.
  • Some employers may have already put in place appropriate JSS (Open) temporary working agreements with their employees to commence on 1 November. In such cases, employers should now communicate with their employees about the extension of the CJRS (and that the JSS has been postponed) and, if appropriate, ask them to agree to be furloughed until December instead. Any such communication could confirm any flexible furlough arrangements that might be put in place (if there is some work you want the employees to perform) and point out that the arrangements will be more generous through November than they would have been under the JSS (subject to any top that you may have planned to offer under the JSS). As per the above, employers should seek, obtain and record employee agreement to this change (whether that be in writing, through collective agreement or by email).
  • There may be other cases where employees have not been on furlough and are not signed up to a JSS temporary working agreement. This might be, for example, where an employee was precluded from being furloughed between July to October as they had not been furloughed for 3 consecutive weeks by the end of June. If you are now considering furloughing any such employees up until December, it will be important to enter into the more detailed furlough agreement that you have used for other furloughed employees.

Guidance

Claim for wages through the Coronavirus Job Retention Scheme

So, what changes on 1 January 2021?

Deal or no deal, the way people live and work will be different.

  • People planning to move between the UK and EU to live, work, or retire will no longer be automatically allowed to do so
  • The UK will apply a points-based immigration system to EU citizens
  • Travel rules are changing, so check your passport is still valid, that you have health insurance and the right driving documents
  • The UK will no longer make big annual payments towards the EU’s budget
  • Arrivals from the UK will stand in a different queue at passport control in EU countries
  • Businesses trading with the EU will face a lot more paperwork

Transition

Importing Goods into the UK from the EU

Exporting Goods to the EU from the UK

Virtual Christmas parties will qualify for tax exemption

HMRC has confirmed that they will accept a virtual Christmas party as an event which is capable of falling within the tax exemption rules for annual functions.

‘Having considered the scope of section 264 ITEPA03 (annual parties exemption), we are pleased to confirm that the exemption will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.

‘Therefore, the cost of providing food, entertainment, equipment and other expenses which may be incurred in hosting a virtual event, will be exempt, subject to the normal conditions of the exemption being met.

‘It is important to note that the intention of the exemption is to allow for costs of provision which are generally incurred for the purposes of the event itself, and that the event, along with any associated provision, is available to employees generally. We will be updating our GOV.UK guidance shortly.’

The rules allow employers to spend up to £150 per head (including VAT) towards the costs of an annual function such as a seasonal party, without creating a tax liability.

To qualify the party must be an annual event which is open to all staff generally, or all staff at a specific location, if the employer has more than one location. If the employer has more than one annual event in a tax year, for all the events to be tax-free the combined cost per head must be no more than £150

Gifts to employees can be tax-free

Some employers may wish to give a small gift to their employees. As long as the employer meets the relevant conditions, no tax charge will arise on the employee.

A tax exemption is available which should help employers ensure that the benefits provided are exempt and do not result in a reportable employee benefit in kind. In order for the benefit to be exempt it must satisfy the following conditions:

  • the cost of providing the benefit does not exceed £50 per employee (or on average when gifts are made to multiple employees)
  • the benefit is not cash or a cash voucher
  • the employee is not entitled to the benefit as part of a contractual arrangement (including salary sacrifice)
  • the benefit is not provided in recognition of particular services performed by the employee as part of their employment duties
  • where the employer is a ‘close’ company and the benefit is provided to an individual who is a director, an office holder or a member of their household or their family, then the exemption is capped at a total cost of £300 in a tax year.

If any of these conditions are not met then the benefit will be taxed in the normal way subject to any other exemptions or allowable deductions.

No more than £50

One of the main conditions is that the cost of the benefit does not exceed £50. If the cost is above £50 the full amount is taxable, not just the excess over £50. The cost of providing the benefit to each employee and not the overall cost to the employer determines whether the benefit can be treated as a trivial benefit. So, a benefit costing up to £50 per employee whether provided to one or more employees can be treated as trivial. Where the individual cost for each employee cannot be established, an average could be used. HMRC examples consider various gifts including turkeys, bottles of wine and gift vouchers

New Grant Announced for businesses forced to close in second lockdown

Please note: This information has been updated and you may be eligible for further support – please click here to find out more about the support available for businesses who pay business rates.

Businesses who are forced to close under the second national lockdown, which comes into force on Thursday, will be entitled to a new tiered grant of up to £3,000 per month

Those forced to closed their doors will receive grants worth up to £3,000 per month under the Local Restrictions Support Grant (LRSG).

Effected businesses will be eligible for the following:

  • For properties with a rateable value of £15,000 or under, grants to be £1,334 per month – or £667 per 2 weeks
  • For properties with a rateable value of between £15,000-£51,000 grants to be £2,000 per month, or £1,000 per 2 weeks
  • For properties with a rateable value of £51,000 or over grants to be £3,000 per month, or £1,500 per 2 weeks

Grant will be distributed by local authorities so you should keep an eye on your local council website to see what information is available – currently this is very little.

Local Business Support and Advice

Self-employment Income Support Scheme (SEISS) Grant extended

Please note: This scheme has been updated and you may be eligible to claim further Self-employment Income Support Grants – please click here to find out more.

The government is increasing its support to the self-employed over the coming months and ensuring people get paid faster than previously planned, it was announced 2nd November 2020.

  • As SEISS grants are calculated over three months, the November boost to 80 per cent, along with the 40 per cent level of trading profits for December and January, increases the total level of the third grant to 55 per cent of trading profits. That means the maximum grant will increase to £5,160.
  • 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.

Brief Guidance

Self-Employment Income Support Scheme Grant Extension