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Employers who provided taxable expenses and benefits to employees in 2019/20 need to tell HMRC about them by 6 July 2020, if they have not opted to tax them via the payroll.

Non-payrolled taxable expenses and benefits are reported to HMRC on form P11D. Employers must also file a P11D(b) by the same date. This is the employer’s declaration that all required P11Ds have been submitted, and also the statutory Class 1A return.

Taxable value

The taxable value of the benefit is normally the cash equivalent value. However, where the benefit has been provided under an optional remuneration arrangement, such as a salary sacrifice scheme, and is one to which the alternative valuation rules apply, the taxable amount is the relevant amount. Broadly, this is the salary foregone where this is higher than the cash equivalent value calculated under normal rules.

Exempt benefits

Benefits and expenses that are exempt from tax do not need to be included on the P11D. However, remember to check that all associated conditions have been met.

The exemption for paid and reimbursed expenses means that no tax liability arises where the employer meets or reimburses expenditure which would have qualified for tax relief if met by the employee. Paid and reimbursed expenses falling within the scope of the exemption do not need to be reported on the P11D.

PAYE Settlement Agreements

An employer can use a PAYE Settlement Agreement (PSA) to meet the tax liability on certain benefits and expenses on the employee’s behalf. Items included in a PSA do not need to be returned on the P11D. A PSA is a continuing agreement and remains in place until revoked. Review PSAs before 6 July 2020 to ensure they remain valid and to add any new items that you wish to include.

Payrolled benefits

Employers can opt to tax benefits through the payroll (‘payrolling’) instead of reporting them to HMRC on the P11D. This option is available for all benefits excluding low-interest and interest-free loans and living accommodation. However, the employer must register before the start of the tax year to payroll.

Payrolled benefits do not need to be included on the P11D; however if other benefits are also provided, these must be included.

Remember to include payrolled benefits in the calculation of the Class 1A liability on the P11D(b).

Online or paper forms

Expenses and benefits returns can be filed online using HMRC’s Expenses and Benefits Online Service, PAYE for Employers or commercial software.

However, there is no requirement to file online and paper returns can be filed if this is preferred.

The deadline is 6 July 2020. Employees should be given a copy of their P11D by the same date.

A nil return is required where HMRC have sent a P11D(b) or a P11D(b) reminder letter. It can be made online at www.gov.uk/government/publications/paye-no-return-of-class-1a-national-insurance-contributions.

Pay Class 1A National Insurance

Class 1A National Insurance contributions for 2019/20 should be paid by 22 July 2020 if payment is made electronically. If payment is made by cheque, as 19 July falls on a Sunday, the cheque should reach HMRC by Friday 17 July.

The self-employment income support scheme (SEISS) provides financial help to self-employed traders and partners in partnerships who have lost income as a result of the COVID-19 pandemic. Not all self-employed traders can benefit – it is only open to those with profits from self-employment of £50,000 or less who have filed a 2018/19 tax return. The scheme will provide eligible traders with a grant equal to 80% of average profits for three months, capped at £2,500 a month. The grants should be paid in early June 2020.

Who is eligible?

To qualify, the individual must:

• have submitted their self-assessment tax return for 2018/19 by 23 April 2020;

• traded in 2019/20;

• be continuing to trade when they claim the grant, or would be except for the Coronavirus pandemic;

• intend to continue to trade in 2020/21; and

• they have lost profits due to the Coronavirus.

Traders who had not submitted their 2018/19 tax return by 23 April 2020 are not able to claim a grant under the SEIS.

£50,000 profit limit

The grant is limited to traders whose trading profits are not more than £50,000 either for 2018/19 or on average for the three years 2016/17 to 2018/19 inclusive. This if a trader has profits in excess of £50,000 for 2018/19 they can still qualify if their average profits over 2016/17, 2017/18 and 2018/19 are less than £50,000. Profits from self-employment must comprise at least 50% of the individual’s income.

Amount of the grant

The grant is based on average trading profits over the following three tax years:

• 2016/17;

• 2017/18; and

• 2018/19.

The grant is worth 80% of the average trading profits (capped at £2,500 per month) for three months. Where self-assessment returns have not been submitted for 2016/17, 2017/18 and 2018/19, the grant will be calculated by reference to average profits for continuous periods of self-employment, either 2017/18 and 2018/19 or only 2018/19 where the trader was not trading in 2017/18, even if they traded in 2016/17. This will apply, for example, to those who only started trading in 2017/18 or 2018/19.

Making a claim

It is not yet possible to claim. HMRC are to write to those who (based on 2018/19 filed returns) they think are eligible for a grant in mid-May. Claims must be made via the online portal once this is open and grants should be paid in early June.

Help for those outside the scheme

The SEISS will not help all self-employed traders who lose income as a result of the pandemic. Those whose profits exceed £50,000 either in 2018/19 or an average over the three-year period from 2016/17 fall outside its scope, as do those who did not submit a 2018/19 tax return by 23 April 20202 or who did not start to trade until 2019/20. Individuals outside the scheme can, if eligible, make a claim for universal credit if they need financial help during the pandemic.

Deferring VAT and self-assessment

The self-employed can also take the opportunity to defer the self-assessment second payment on account for 2019/20, due by 31 July. Where this option is taken, the payment must be made by 31 January 2020. VAT registered businesses can also take advantage of the VAT deferral option.

The Coronavirus Job Retention Scheme (CJRS) enables employers who are unable to maintain their workforce due to the COVID-19 pandemic to furlough their staff and claim a grant of 80% of the employee’s wages to a maximum of £2,500 a month. Employers are also able to claim the associated employer’s National Insurance contributions on the amount claimed, and also the minimum pension contributions that they are required to make under auto-enrolment. The full amount of the grant must be paid over to the furloughed employee, and the employee pays PAYE tax and National Insurance in the usual way. Employers can choose to top up the amount paid to employees to maintain their usual salary but are under no obligation to do so. The money received by the employer is taxable income and is taken into account computing their taxable profits.

Eligible employers

Claims can be made by employers who have furloughed staff as a result of the COVID-19 pandemic, as long as they: • created and started a PAYE payroll scheme on or before 19 March 2020; • are enrolled for PAYE online; and • have a UK bank account.

Eligible employees

Claims can only be made in respect of furloughed employees. The scheme does not apply to staff who have had their hours and pay reduced. Furloughed employees cannot do any work for the employer while furloughed, although they may be able to work for a different unconnected employer if their contract permits this or work in a self-employed capacity. Only furloughed employees who were on the payroll on or before 19 March 2020 and in respect of whom a PAYE submission had been made by this date are within the scope of the scheme. Employees who were on the payroll as at 28 February 2020 and who were made redundant after that date and before 19 March 2020 can be included in the scheme if the employer re-employs them and furloughs them. The employee does not need to be re-employed by 19 March to be eligible for furlough. The option to furlough an employee is available regardless of what type of contract an employee is on. Thus the scheme can be used to furlough employees on full or part-time contacts and also those on flexible or zero-hours contracts.

Amount of the claim

Employers can claim 80% of a furloughed employee’s wages to a maximum of £2,500 a month. The calculation of the amount which can be claimed will depend on how the employee is paid and whether their pay varies. The claim will be based on the employee’s ‘wages’, which are the regular payments which the employer makes to the employee. It will include non-discretionary overtime, fees and commission, but no discretionary payments. Payments in kind are also excluded. The employer can also claim the associated employer’s National Insurance and minimum pension contributions on the amount of the grant. HMRC have produced a calculator which can be used to work out the amount which can be claimed in respect of a furloughed employee. Claims should be made online via the online portal. Employers should receive the money within six working days.