COVID-19: Support for businesses who are paying sick pay to employees

We will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:

• this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
• employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
• eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force
• the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

GOV.UK Guidance
COVID-19: support for businesses

CGA have added a bit more detail to the above info taken from the Gov.UK website in respect of SSP and those who are self-employed or paid under the lower earnings limit and therefore not entitled to SSP  

Sick Pay Entitlement

Statutory Sick Pay (SSP) is the minimum entitlement and is available to all employees who earn at least £118 per week (length of time employed is not applicable).

SSP is paid at a rate of £94.25 per week for up to 28 weeks.

Waiting days have been temporarily suspended – SSP will therefore be payable from the first day of sickness (rather than from day 4).

The Government will reimburse small businesses (those who have less than 250 employees) any Statutory Sick Pay (SSP) they have to pay to their workers for the first 14 days of illness.

These provisions relate to employees who have been diagnosed with COVID-19 and also cover those that self-isolating under written notice from either a GP or NHS 111.

We don’t have any information as to whether SSP will be extended to any future forced coronavirus lockdown.

Processing and claiming

In your payroll software process SSP as you would do normally so that this is clearly recorded – guidance will be found in your payroll software.

If you are paying employees an enhanced sick pay amount, add this as usual so that the gross pay is the required amount – but the SSP and enhanced amounts are recorded separately.

While existing systems are not designed to facilitate such employer refunds for SSP, the government will work with employers over the coming months to set up a repayment mechanism for employers as soon as possible.  It may be that

Self-employed or paid under the Lower Earnings Limit and not entitled to SSP.

The government recognises that self-employed people and employees below the Lower Earnings Limit are not entitled to SSP.

The recent Budget announced further support by making it quicker and easier to receive benefits:

  • A ‘new style’ Employment and Support Allowance will be payable for people directly affected by COVID-19 or self-isolating according to government advice for from the first day of sickness, rather than the eighth day
  • People will be able to claim Universal Credit and access advance payments where they are directly affected by COVID-19 (or self-isolating), without the current requirement to attend a jobcentre
  • For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by COVID-19 or self-isolating according to government advice for the duration of the outbreak, ensuring self-employed claimants will be compensated for losses in income.
  • For further advice you should contact Jobcentre Plus Telephone: 0800 169 0350

Spring Budget 11 March 2020

In the face of Brexit uncertainties and the recent Coronavirus outbreak the new Chancellor, Rishi Sunak, was faced with falling economic indicators, the need to boost NHS services and was consequently limited in his options to spend on plans to improve business confidence and fund infrastructure projects.

Interestingly, there were a number of measures that will directly benefit those affected by the current COVID-19 outbreak and these are reported in this update.

Details of other changes for 2020-21 – for individuals and businesses – are set out in our Budget Summary below.

Personal Tax and miscellaneous matters

Statutory Sick Pay (SSP)

SSP will be temporarily payable from day 1 instead of day 4 for affected individuals and will include those infected and those self-isolating, who are not infected.

Those who cannot claim SSP, the self-employed for example, are to be provided with easier access to Universal Credits and the Contributory Employment and Support Allowance.

Local Authority Hardship Fund

Government is providing a new £500m Hardship Fund so local authorities can support economically vulnerable people and households.

Most of this funding will probably support the extension of council tax relief.

Personal Tax allowance

The personal Income Tax allowance for 2020-21 is maintained at £12,500 (2019-20 £12,500).

Income Tax bands, rates and the dividend allowance

The Income Tax bands for 2020-21 have also been maintained at 2019-20 levels. They are:

Consequently, the higher rate threshold will stay as £50,000 from April 2020. There is no change in Income Tax rates, and the tax rates applied to dividend income.

Changes to these Income Tax bands apply to England, Wales and Northern Ireland. The Scottish parliament now set their own Income Tax bandings.

Earlier payments of Capital Gains Tax (CGT)

As previously announced, from April 2020, UK residents will be required to make a payment on account for CGT due on a chargeable residential property sale. For example, the sale of a buy-to-let property. A formal computation of any gains and payment of CGT due on the disposal will have to be made within 30 days of the property disposal.

The changes have applied from April 2019 for non-UK residents.

Capital Gains Tax Private Residence Relief changes

From April 2020, the government is making two changes to the private residence relief:

  1. The final exempt period will be reduced from 18 months to 9 months, with no change to the 36 months available for those disabled or in care homes, and
  2. Lettings relief will be reformed so that it only applies in certain circumstances where the property owner is in shared occupancy with the tenant.

CGT Entrepreneurs’ relief

One of the significant announcements in the budget speech was the reduction of the lifetime allowance for this relief from £10m to £1m. This will apply to all relevant business disposals on or after 11 March 2020. The Chancellor has avoided the abolition of the relief but has restricted lifetime claims to £1m.

Special provisions may apply to disposals contracted for sale before 11 March 2020, but when the sale was not completed at that date.

Business owners and their advisors will need to consider other options to reduce CGT on business sales in excess of this £1m limit.

CGT annual allowance

The annual tax-free allowance is to be increased to £12,300 for 2020-21 (£12,000 2019-20).

The equivalent allowance for trustees is £6,150 (£6,000 2019-20).

Tax benefit charges for low CO2 vehicles

In an attempt to support new regulation in this area, the listed benefit rates will be cut by 2% for vehicles that qualify for the new standard (Worldwide harmonised Light Vehicle Test Procedure (WLTP) for all new cars registered from 6 April 2020).

Tobacco Duty Rates

All tobacco products will see an increase in duty by 2% above the current rate of inflation.

Hand-rolling tobacco will see an increase of 6% above the rate of inflation.

These changes will impact prices from 6pm, 11 March 2020.

Vehicle Excise Duty

Rates are due to be increased in line with the Retail Prices Index from April 2020.

Fuel Duty

Is frozen for another year.

Alcohol duty rates

Alcohol Duty rates remain unchanged for 2020-21. This will be welcome news for pubs and bars.

ISA limits 2020-21

Adult savings limits remain unchanged at £20,000.

Junior ISA limits are increased to £9,000.

Zero-rating of VAT for women’s sanitary products

This measure is to be introduced from 1 January 2021.

Bank support from mortgage lenders

Although not a budget announcement, a number of banks and other mortgage lenders are offering a moratorium on mortgage repayments to those directly affected by the Coronavirus. This is welcome support for individuals whose income may be diminished by absence from work. At least one High Street lender has committed to a three-month moratorium.

Banks are also considering increasing credit card limits and cash withdrawal limits.

Business Tax changes

National Insurance

It was confirmed that the tax threshold for National Insurance Contributions will rise to £9,500 from April 2020 (was £8,632). This should save £100 a year in National Insurance contributions for some 31 million people.

Relief for Statutory Sick Pay payments

Small and medium sized businesses, those with less than 250 employees at 28 February 2020, will be able to reclaim any approved SSP payments. The actual method for making a claim is yet to be agreed as current payroll processes cannot accommodate this type of refund.

Watch this space as this is a welcome cost saver for smaller businesses.

Business Rates Retail Discount Scheme

The government has already announced that, for one year from 1 April 2020, the business rates retail discount for properties with a rateable value below £51,000 in England will increase from one third to 50% and will be expanded to include cinemas and music venues.

To support small businesses, in response to COVID-19, the retail discount will be increased to 100% and expanded to include hospitality and leisure businesses.

The government previously committed to introducing a £1,000 business rates discount for pubs with a rateable value below £100,000 in England for one year from 1 April 2020. To further support pubs, in response to COVID-19, the discount will be increased to £5,000.

Affected businesses should receive amended rates bills for 2020-21 from their local authority. Regional variations may apply.

One-off grant for small businesses

The government is to provide a £3,000 grant to businesses that presently qualify for the Small Business Rates Relief or Rural Rate Relief.

Businesses that think they may be eligible should contact their local authority.

Coronavirus Business Interruption Loan Scheme

The government will launch a new, temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, to support businesses to access bank lending and overdrafts.

Government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £1.2 million in value. This new guarantee will initially support up to £1 billion of lending on top of current support offered through the British Business Bank.

HMRC’s Time To Pay Scheme

HMRC are expanding the number of operatives that manage calls from taxpayers that are unable to pay their taxes on time. If readers are concerned about meeting tax payments call the dedicated help-line 0800 0159 559.  

Corporation Tax

The previously announced reduction in Corporation Tax from 19% to 17% – from April 2020 – has been scrapped. Corporation Tax rates are to remain at 19% for the financial year beginning 1 April 2020.

Structures and Buildings allowance

The annual writing down rate is to be increased from 2% to 3% from April 2020.

Digital Services Tax

Despite opposition from various quarters it looks as if the new Digital Services Tax of 2% will be applied to digital businesses from April 2020.

This will be a major revenue raiser for HMRC.

Capital loss restriction from 1 April 2020

For accounting periods ending on or after 1 April 2020, companies making capital gains will only be able to offset up to 50% of those gains using carried-forward, allowable capital losses.

Employment Allowance

The present £3,000 relief that reduces employer’s NIC contributions is to be increased to £4,000 from April 2020. From 6 April 2020, you will only be able to claim if your Class 1 NIC bill was below £100,000 in the previous tax year.

Car and van benefits charges

Van benefit charges and car and van fuel benefit charges will be increased to account for inflation from April 2020.

R&D expenditure credit

This “Above the line” expenditure credit is currently 12% of qualifying R&D expenditure. This is to be increased to 13% from 1 April 2020.

Zero-rating of e-publications

From 1 December 2020, e-books, e-newspapers, e-magazines and academic e-journals will be zero-rated for VAT purposes.

VAT reverse-charge for the construction sector

A reminder that the domestic reverse charge process will apply to the construction sector from 1 October 2020.

Affected contractors that are still unsure of the changes they will need to make are invited to call so we can help you set up the relevant systems.

VAT registration threshold – no change

The present VAT registration limit (£85,000) and deregistration limit (£83,000) will continue to apply for a further two years; until 31 March 2022.

Clamp-down on tax evaders

As is usual, the budget includes a number of provisions to reduce the successful application of tax avoidance strategies.

Bank support for small businesses

In concert with the flexibility being offered to individuals, banks are looking at relaxing their criteria that would allow small businesses affected by Coronavirus disruption to obtain loans on favourable terms.

Climate issues

The government will also invest in the natural environment: planting enough trees to cover an area the size of Birmingham, restoring peatlands and providing more funding to protect the UK’s unique plants and animals.

The government will also go further to tackle the scourge of plastic waste by introducing a Plastic Packaging Tax, as well as providing further funding to encourage producers to make their packaging more recyclable.

Loans to directors and staff

If a company makes loans to its employees (including directors) there may be tax consequences. The same may also apply to loans extended to their family members.

For example, the employer will have an obligation to report a beneficial loan to HMRC (and pay Class 1A NIC) and the deemed benefit would be a taxable benefit in kind for the relevant employee.

A beneficial loan is one that is interest free or the rate charged is below the “official rate” and the benefit is the difference between these interest rate charges.

Fortunately, not all loans create a tax problem, certain loans are exempt from this reporting obligation. These could include loans employers provided:

  • in the normal course of a domestic or family relationship as an individual (not as a company you control, even if you are the sole owner and employee),
  • with a combined outstanding balance due from an employee of less than £10,000 throughout the whole tax year,
  • to an employee for a fixed and never changing period, and at a fixed and constant rate that was equal to or higher than HMRC’s official interest rate when the loan was taken out – the current rate is 2.5%,
  • under identical terms and conditions as those provided to the public (this mostly applies to commercial lenders),
  • that are ‘qualifying loans’, meaning all the interest charged to the loan account qualifies for tax relief.

Loans written off will also create a National Insurance Class 1 charge for the employee. They must be reported on a P11D and the employer has an obligation to deduct and pay Class 1 NIC, from the employee’s salary, on the amount written off for tax purposes.

And finally, loans by a company to its directors or shareholders may create additional corporation tax charges.

If you are contemplating loans to employees (or director/shareholders) or have current loans outstanding can we suggest that we undertake a review to ensure any tax consequences are minimised.

Don’t fall for this scam

The Insolvency Service has issued a warning that fraudsters have been contacting investors in insolvent schemes claiming to be from the Official Receiver’s office or to have been appointed by the Official Receiver to help recover funds for a fee.

These approaches are always fraudulent.

Official Receivers or any agent legitimately instructed to act on their behalf will never ask you to pay a fee to get some or all of your investment back.

The Official Receiver can only make a return to you as a creditor in failed schemes if it is possible to identify and sell any remaining assets owned by the liquidated company you bought your investment from. All too often businesses of this nature have few if any, assets left to repay creditors and it can take several years to undertake complex asset recovery work and complete a liquidation.

Paying a fee will not make you a priority creditor, meaning you get paid faster or increase the chance of you getting any money back.

If you are asked to pay a fee to get your money back someone is attempting to scam you.

The Official Receiver does not charge investors a fee to get money back and does not employ anyone else to do this on their behalf.

You should report all fraudulent contact from individuals, stating they can get your lost investments back for a fee, to the Official Receivers. You can also report these approaches to Action Fraud.

Pay-back to save tax

At first sight, company car drivers whose private fuel costs are met by their employers may seem to be onto a good thing, but there is a nasty tax hit…

Enter, the Car Fuel Benefit charge.

Let’s say the following circumstances apply:

  • list price of your car when new was £30,000
  • your employer pays for all your private fuel
  • CO2 emissions are 147 g/km, and
  • the car has a diesel engine, 2000 cc.

The 2019-20 benefit in kind charge for the use of the car (this is added to your taxable income for the year) is £9,900. This would cost a standard rate taxpayer £165 a month in Income Tax.

But then the provision of private fuel would trigger an additional Car Fuel Benefit charge of £7,953. This would cost a standard rate taxpayer an extra £133 a month.

As the title of this article suggests it is possible to reimburse your employer for private fuel provided and avoid this Car Fuel Benefit charge completely. Here’s what you would need to do:

  • First of all, calculate your private mileage for the 2019-20 tax year. Estimates won’t do, you will need to create evidence, a mileage log for example.
  • Multiply this private mileage by HMRC’s Advisory Fuel Rate. The present rate per mile for a 2000 cc diesel car is 11p.

Armed with this information you can now do the sums. In the above example, if the driver’s private mileage was 5,000 miles during 2019-20, the amount that needs to be repaid to the employer is £550. That’s just £46 per month.

Which means, for an effective outlay of £550, the car driver – if a basic rate tax payer – will save £1,593 in tax (£7,953 x 20%). That’s an overall cash saving of £1,043.

If you are receiving private fuel from your employer, or indeed providing private fuel for your employees, it is well worth crunching the numbers to see if there is a cash advantage to repaying any private fuel.

There are deadlines to consider and we can help you with the math and the reporting processes required.

Final planning note for employers

The Car Fuel Benefit Charge not only creates a tax charge for the employee, it also creates a National Insurance charge for the employer. And so, allowing employees to repay their private fuel costs will also reduce your NIC costs. A classic win-win outcome.

Current Advisory Fuel Rates

To assist with your calculations, see previous article, we have reproduced below the current, HMRC Advisory Fuel Rates. They are:

These rates apply from 1 December 2019.

Engine sizePetrol – amount per mileLPG – amount per mile
1400cc or less12 pence8 pence
1401cc to 2000cc14 pence9 pence
Over 2000cc21 pence14 pence
Engine sizeDiesel – amount per mile
1600cc or less9 pence
1601cc to 2000cc11 pence
Over 2000cc14 pence

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

Advisory Electricity Rate

The Advisory Electricity Rate for fully electric cars is 4 pence per mile. Electricity is not a fuel for car fuel benefit purposes.

Tax Diary February/March 2020

1 February 2020 – Due date for Corporation Tax payable for the year ended 30 April 2019.

19 February 2020 – PAYE and NIC deductions due for month ended 5 February 2020. (If you pay your tax electronically the due date is 22 February 2020)

19 February 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 February 2020.

19 February 2020 – CIS tax deducted for the month ended 5 February 2020 is payable by today.

1 March 2020 – Due date for Corporation Tax due for the year ended 31 May 2019.

2 March 2020 – Self assessment tax for 2019/19 paid after this date will incur a 5% surcharge.

19 March 2020 – PAYE and NIC deductions due for month ended 5 March 2020. (If you pay your tax electronically the due date is 22 March 2020)

19 March 2020 – Filing deadline for the CIS300 monthly return for the month ended 5 March 2020.

19 March 2020 – CIS tax deducted for the month ended 5 March 2020 is payable by today.

Trivia Networking Event

Image result for Networking

Connect, Inspire, Collaborate

Open to all, you have the opportunity to connect with fellow professionals, discover new relationships, participate in a general trivia game, free raffle or simply enjoy pure networking.

Judy Parsons ‘LinkedIn Lady’ will be in attendance and sharing some tips with you.

Try your hand in the raffle with a difference – the prize?  The whole room to yourself for 2 minutes – hone that elevator pitch, and share your business with us.

Event Date: Wednesday, April 22nd 2020
Event Time: 10am -12.30pm
Event Location: York Marriott Hotel, Tadcaster Road, YORK YO24 1QQ
Booking Details: Contact Anne Ma’aye via email or telephone
Cost: to include light refreshments £15

How to pay: Please send bank transfers to Network York 45702446 60-60-05

Attendees include current members of Network York which include professionals in the following sectors.

  • Commercial Litigation
  • Accounting
  • Investment
  • Wealth Management
  • Residential and Commercial Lending
  • Company Commercial Law
  • Human Resources
  • Mortgage services
  • Brand & Design
  • Telecom services
  • Chartered Architects & Historic Building Consultants.
  • Bespoke & Eco Builders
  • Professional facial aesthetics
  • Education Health & Social Care
  • Niche Tours promoting artisan local drinks industry
  • Business and Personal Protection
  • Commercial and Advertising photography
  • Utilities

Who are Network York ?

Network York is a grouping of professional people working together and with each other to help promote their business both big and small.

We have a wonderful grouping of people from many different professions and businesses.

We meet monthly, share ideas, and interact with each other for everyone’s mutual benefit.

We are celebrating our 14th anniversary and we are expanding, we won’t be getting too big as the close-knit nature of our grouping is part of our every success.

Off-Payroll working arrangements from April 2020

Changes will come into effect in April mainly affecting those working through their own Limited Company who are working for only/mainly one client/end user and where the employment status would indicate that of an employee.

The main change is that the end user/client is responsible for determining the status using the HMRC Check Employment Status for Tax (CEST) and if you are determined to be an ‘employee’ for tax purposes then you will be caught by the Off-Payroll arrangements.

The rules will apply where your client/end user meets 2 or more of the following conditions:

  • Annual turnover of more than £10.2 million
  • Balance sheet total of more than £5.1 million
  • More than 50 employees  

Small businesses (i.e the size of your customer/end user) will continue under the existing IR35 rules.

This will have a financial impact on your available income.

If you think you may be affected by the new rules and want to know how this will impact you then please contact us to discuss further.

https://www.gov.uk/guidance/april-2020-changes-to-off-payroll-working-for-clients

What now?

Even though many of the uncertainties that have plagued UK politics during 2019 are still to be decided, at least the hiatus in parliament has been resolved; the Conservatives now have a working majority and we can expect action on a number of fronts.

Brexit

Business readers with any sort of trading platform with the EU need to consider their options as the EU withdrawal agreement is likely to be ratified by 31 January 2020. At a minimum, EU traders should complete their Brexit impact assessments and take steps to mitigate any apparent risks identified.

Please call if you would like our help with this process.

When will the 2020 Budget be announced?

The new government will probably concentrate on the EU withdrawal process during January and it is unlikely Budget announcements will be in evidence before February.

Budget issues do need to receive fairly urgent attention as there are a number of Income Tax reliefs that are still to be determined for 2020-21.

As details emerge we will be publishing our usual Budget round-up and advising clients of any new opportunities to trim their tax bills and take advantage of any new opportunities revealed.