HMRC changes coronavirus business helpline number to increase capacity

HMRC has set up a helpline for businesses and self employed who are concerned about paying their tax due to Covid-19.  The updated helpline number is 0800 024 1222 and is open 8am – 4pm Monday to Friday.

Support to the self employed

In the latest step to protect individuals and businesses, Rishi Sunak has set out plans that will see the self-employed receive up to £2,500 per month in grants for at least 3 months.

Millions of people across the UK could benefit from the new Self-Employed Income Support Scheme, with those eligible receiving a cash grant worth 80% of their average monthly trading profit over the last three years.

Self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account. The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

To qualify, more than half of their income in these periods must come from self-employment.

To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.

The income support scheme will cover the three months to May and grants will be paid in a single lump sum instalment covering all 3 months at the beginning of June.

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

Notes

• further information and details of the scheme will be shared shortly by HMRC

• HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant

• this scheme also applies to members of partnerships

• before grant payments are made, the self-employed will still be able to access other available government support for those affected by coronavirus including universal credit and business continuity loans where they have a business bank account.

Businesses to be given an additional 3 months to file accounts

A joint initiative between the government and Companies House means that businesses will from today be able to apply for an additional 3 months to file accounts. The move is designed to help companies avoid penalties as they deal with the impact of COVID-19. As part of the agreed measures, those citing issues around COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.

HMRC to manage job retention scheme

Chancellor Rishi Sunak has announced that the Government will pay the wages of employees unable to work due to the coronavirus pandemic, paying 80% of the salary of staff retained by their employer up to £2,500 a month. The move, which covers gross pay, will be backdated to the start of March and last for three months. Mr Sunak said the coronavirus job retention scheme, which will be run by HMRC, would be extend the “if necessary”.

Mr Sunak also announced that VAT payments will be deferred until the end of June, while self-assessment income tax payments for July 2020 are to be deferred for six months. The Universal Credit standard allowance for the next 12 months has been increased by £1,000 a year, as has the Working Tax Credit basic element. The Chancellor said HMRC is working to ensure the first grants are available within weeks, with businesses able to apply for relief from Monday

Small firms set to see £250k loans

Banks are set to pledge interest-free loans of up to £250,000 for small businesses, with it reported that Chancellor Rishi Sunak’s emergency coronavirus loans will initially take the form of overdrafts that could be available within 48 hours. The Mail on Sunday says SMEs will be able to borrow a quarter of a million pounds from one of 40 lenders without having to secure the loan against assets.

Small firms will be able to apply for loans of up to £5m under the Government’s business interruption loans programme, but these are expected to take longer to arrange and may need to be secured against assets.

Chancellor under pressure to save the self-employed

The Chancellor Rishi Sunak is under further pressure to help self-employed people since Boris Johnson’s crackdown as many fear the new restrictions will prevent them from earning an income. Mr Sunak has already been accused of leaving the self-employed behind with the support measures he introduced last week. The Times reports that Mr Sunak is expected to announce measures at the end of the week as officials work to overcome significant “technical barriers”.

HMRC Budget 2020 measures which support businesses and employers on COVID-19: The Chancellor set out a plan to support public services, individuals and businesses that may be affected by COVID-19.  These include:

• For businesses with fewer than 250 employees, the cost of providing 2 weeks of COVID-19 related statutory sick pay per employee will be refunded by the government in full. This will provide 2 million employers with up to £2 billion to cover the costs of large-scale sick leave. HMRC will provide further details in due course on how employers can access the rebate. More information about this and regular updates can be found on GOV.UK.

• A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. Through this, businesses may be able to agree a bespoke Time to Pay arrangement. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Further HMRC related Budget 2020 measures:

• Capital Gains Tax annual exempt amount is increased from £12,000 to £12,300

• NIC Class 1 primary threshold is increased to £183 per week, equivalent to £9,500 per year. The Class 4 lower profits limit is also increased to £9,500

• NIC employment allowance for employers is increased from £3,000 to £4,000 per year, but it is also worth mentioning that the allowance is being separately reformed, also from 6 April 2020, to restrict the allowance to employers whose NICs liability in the previous tax year was less than £100,000.

• Pension lifetime allowance is increased in line with inflation to £1,073,100 for 2020/21.

• There will be an increase to the Research & Development Expenditure Credit from 12% to 13%.

• The off-payroll working rules ensure that individuals who work through an intermediary (usually a personal service company) and would have been an employee had they provided their services directly, pay the same Income Tax and National Insurance Contributions as other employees. The government seeks to address non-compliance with the off-payroll working rules (IR35) by extending similar reform to medium and large sized organisations across all sectors from April 2020.

• From 6 April 2020 the government will increase the maximum flat rate deduction available for employees under homeworking arrangements from £4 to £6 per week.

• From 1 April 2021 there will be a 2% surcharge on Stamp Duty on non-UK residents purchasing residential property in England and Northern Ireland.

• The Entrepreneurs’ Relief lifetime limit has been reduced from 10 million to £1 million. This will apply to qualifying disposals made on or after 11 March 2020 and to certain disposals made before 11 March 2020.

• There will be an increase in Structures and Building allowance for capital allowances from 1 April 2020 from 2% to 3%. The SBA was introduced last year for non-residential structures and buildings and provides relief on eligible expenditure on a straight-line basis.

The following rate increases are to be applied from April 2020:

•Aged 25 and over will be entitled to £8.72 per hour (previously £8.21)

•21 to 24 year olds will be entitled to £8.20 per hour (previously £7.70)

•18 to 20 year olds will be entitled to £6.45 per hour (previously £6.15)

•16 and 17 year olds will be entitled to £4.55 per hour (previously £4.35)

•Apprenticeship rate increases to £4.15 per hour (previously £3.90)

The Apprentice rate is applicable for those on an apprenticeship aged under 19 years of age or if they are in their 1st year of the apprenticeship.

Pension savings can be tax efficient as contributions to registered pension schemes, attracting tax relief up to certain limits. Limit on tax relief Tax relief is available on private pension contributions to the greater of 100% of earnings and £3,600. This is subject to the annual allowance cap. Tax relief may be given automatically where your employer deducts the contributions from your gross pay (a ‘net pay scheme’). Alternatively, if you pay into a personal pension yourself or your employer pays contributions into the scheme after deducting tax, the pension scheme will claim basic rate relief (‘relief at source’). Thus if you pay £2,880 into a pension scheme, your scheme provider will claim basic rate relief of £720, meaning your gross contribution is £3,600. If you are a higher or additional rate taxpayer, the difference between the basic rate tax and your marginal rate can be reclaimed from HMRC via your self-assessment return.

Annual allowance

The pension annual allowance caps tax-relieved pension savings – contributions can be made to a registered pension scheme in excess of the available annual allowance, but they will not attract tax relief. The annual allowance is set at £40,000 for 2019/20; although this may be reduced if you have high earnings. The annual allowance taper applies where both your threshold income is more than £110,000 (broadly income excluding pension contributions) and your adjusted net income (broadly income including pension contributions) is more than £150,000. Where the taper applies, the annual allowance is reduced by £1 for every £2 by which adjusted net income exceeds £150,000 until the annual allowance reaches £10,000. This is the minimum amount of the annual allowance. Only the minimum allowance is available where adjusted net income is £210,000 or more and threshold income is more than £110,000. The annual allowance can be carried forward for up to three tax years if it is not used, after which it is lost. The current year’s allowance must be used first, then brought forward allowances from an earlier year before a later year.

Example

Harry has income of £100,000 in 2019/20. He has received an inheritance and wishes to make pension contributions of £60,000. In the previous three years he has used £10,000 of his annual allowance, leaving £30,000 to be carried forward for up to three years. To make a contribution of £60,000 for 2019/20, Harry will use his annual allowance of £40,000 for 2019/20 and £20,000 of the £30,000 carried forward from 2016/17. The £10,000 remaining of the 2016/17 allowance will be lost as cannot be carried forward beyond 2019/20. The unused allowances of £30,000 for 2017/18 and 2018/19 can be carried forward to 2020/21.

Reduced money purchase annual allowance

A lower annual allowance of £4,000 (money purchase annual allowance (MPAA)) applies to those who have flexibly accessed pension contributions on reaching age 55. This is to prevent recycling of contributions to secure additional tax relief.

Lifetime allowance

The lifetime allowance places a ceiling on your pension pot. For 2019/20 it is set at £1,055,000. A tax charge will apply if you exceed the lifetime allowance.

The high-income child benefit charge (HICBC) applies to claw back child benefit from either the claimant or his or her partner where at least one of them has income of £50,000 or more. The charge is perhaps one of the more unfair tax charges in that the person who suffers the liability may not be – and often isn’t – the person who received the child benefit.

Nature of the charge

The charge may apply to an individual with income over £50,000 where either they or their partner has received child benefit in the tax year. It may also bite where someone else gets child benefit for a child who lives with you and they contributed an equal amount to the child’s upkeep. It does not matter whether the child living with the individual is theirs or not. It is important to note here that ‘partner’ does not have to be a spouse or civil partner – the charge also applies to unmarried couples living together as spouses or civil partners. The measure of income for the purposes of the charge is ‘adjusted net income’. Broadly, this is income after taking account of Gift Aid donations and pension contributions and, for the self-employed, trading losses. Where both partners each have income in excess of £50,000, the charge is levied on the higher earner; if their income is the same, it is the person who receives the child benefit who pays the charge.

How the charge is calculated

The charge claws back 1% of child benefit for every £100 by which adjusted net income exceeds £50,000.  Where adjusted net income is £60,000 or more, the charge is 100% of the child benefit received in the tax year.

Paying the charge

Where a person is liable for the HICBC, they must declare it on their self-assessment tax return. The tax can be paid via self-assessment. Alternatively, if the tax return was filed by 30 December 2019 and the underpayment for the year in total is less than £3,000 it can be collected through PAYE via an adjustment to the tax code.

Worth stopping the claim?

Where the charge is equal to the full amount of the child benefit, it may seem easier not to claim it, rather than claiming it only to have to pay it back. However, child benefit paid for a child under 12 comes with National Insurance credits, helping to build up entitlement to the state pension. If the claimant does not otherwise pay sufficient National Insurance for the year to be a qualifying year, failing to claim may adversely affect their state pension. The solution is to claim but elect not to receive the benefit.

When deciding what to give as Christmas gifts, the possibility of triggering an unintended inheritance tax liability is not one that immediately springs to mind. However, there are traps that may catch the unwary.

Income or capital

When making a gift, it is important to ascertain whether the gift is being made out of income or from capital. There is an inheritance tax exemption for normal expenditure from income. To qualify, the gift must be made regularly and only from surplus income. It is important that after making the gift you have sufficient income left to maintain your usual lifestyle. To avoid unwanted questions, it is a good idea to set up a regular pattern of giving and keep records to show that the gifts were made from income.

A gift that is made from capital – for example, from the proceeds from the sale of a property or a gift of a valuable antique – will reduce the value of the estate. Unless the gift falls within the ambit of another exemption, the gift will be a potentially exempt transfer (PET) and will be taken into account in working out the inheritance tax due on the estate if you die within seven years of making the gift.

Gifts to spouses and civil partners

The inter-spouse exemption protects gifts between spouses and civil partners. Consequently, gifts of any value can be given to a spouse or civil partner without worrying about the inheritance tax implications.

Annual allowance

Everyone has an annual allowance for inheritance tax purposes of £3,000. The annual allowance enables you to give away £3,000 every year in assets or cash, in addition to gifts covered by other exemptions, without it being added to the value of your estate. You can also carry forward the annual exemption to the following year if it is not used, so if you did not use it in the last tax year, you can make gifts of up to £6,000 this year without having to worry about inheritance tax. However, any unused allowance can only be carried forward to the following tax year, after which it is lost.

Small gifts

The small gifts exemption enables you to make gifts of up to £250 a year to as many people as you like without having to keep a tally for inheritance tax purposes. However, the same person cannot benefit from a small gift of £250 in addition to the annual gifts allowance.

Wedding gifts

If a family wedding is on the horizon, you can take advantage of the wedding gifts exemption to make further gifts. To qualify, the gifts must be made before the wedding not afterwards. The exempt amounts are set at £5,000 for gifts to a child, £2,500 for gifts to a grandchild or great-grandchild and at £1,000 for a gift to another relative.

The introduction of a VAT domestic reverse charge for building and construction has been delayed by 12 months and will now be implemented on 1 October 2020.

The delay is due to the concerns raised by industry representatives and recognises that some businesses in the construction sector need more time to implement the new reverse charge. As this is close to the date the UK is due to exit the EU and to help these businesses by giving them additional time to prepare, the introduction of the reverse charge will be delayed.

To help businesses get ready in the next 12 months, HMRC say they will continue to work closely with the construction sector to raise awareness and provide additional guidance and support to ensure all businesses will be ready for the new implementation date.

If your self assessment tax bill for a year is for £1,000 or more and you paid 80% or less of your total income tax liability at source, e.g. through PAYE, you’re required to make payments on account (POAs) to HMRC towards your next tax bill. However, due to a problem with HMRC’s computer you might be off the hook for the POAs for 2018/19.

If your SA tax bill for 2017/18 meant you should have been liable to POAs for 2018/19 (normally due on 31 January 2019 and 31 July 2019) but HMRC hasn’t demanded or included them in your SA account, you won’t have to pay anything until 31 January 2020. Because the error was HMRC’s they won’t charge you interest for paying the tax later than the usual due dates.

From 1 April 2019 the National Minimum Wage rates increased.  Employees aged 25 or over are legally entitled to £8.21 per hour.  Employees aged 21 to 24 – £7.70 per hour, employees aged 18-20 – £6.15 per hour, under 18 – £4.35 per hour and for apprentices £3.90 per hour.