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.

As part of a number of measures to support the country during the coronavirus (COVID-19) pandemic, Working Tax Credits payments will be increased by £1,045 to £3,040 per year from 6 April 2020 until 5 April 2021.

The amount a claimant or household will benefit from will depend on their circumstances, including their level of household income. But the increase could mean up to an extra £20 each week.

If you claim Working Tax Credits, you don’t have to take any action or contact HMRC – the increase in your payments will start from 6 April 2020.

If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:

• defer the payment until a later date

• pay the VAT due as normal

It does not cover VAT MOSS payments. HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement. You will still need to submit your VAT returns to HMRC on time. HMRC will continue to process VAT reclaims and refunds as normal during this time.

If you choose to defer paying your VAT

If you choose to defer your VAT payment as a result of coronavirus (COVID-19), you must pay the VAT due on or before 31 March 2021. You do not need to tell HMRC that you are deferring your VAT payment.

Payments made by Direct Debit

If you normally pay by Direct Debit you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.

After the VAT deferral ends

VAT payments due following the end of the deferral period will have to be paid as normal. Further information about how to repay the VAT you’ve deferred will be available soon.

For Income Tax Self-Assessment, payments due on the 31 July 2020 may be deferred until 31 January 2021.

Eligibility

You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.

How to access the scheme

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until January 2021.

Businesses furloughing staff during the coronavirus outbreak will receive further financial support – with the costs of employer national insurance and pension contributions being covered by the government.

Under the scheme, employers can claim a grant covering 80% of the wages for a furloughed employee, subject to a cap of £2,500 a month.

New guidance on the Coronavirus Job Retention Scheme published by the government also confirmed that those made redundant after 28 February can be reemployed and placed on furlough.

Those on furlough will also be permitted to volunteer for the NHS without risking their pay.

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.