Written by Louise Somerset, partner and head of private client tax services at Smith & Williamson in Bristol
Though the primary concern may be public health, it is natural for individuals to be concerned about how current circumstances will impact their finances.
It is in the Government’s interests to support taxpayers and businesses through this crisis, who will in their turn support the economy once restrictions are lifted, and tax measures are likely to be used as a tool for support.
Deferring tax payments
If you have a tax payment that you will struggle to make, you should contact HMRC to discuss a deferral as soon as possible. We can do this for our clients. HMRC has set up a dedicated helpline to support businesses and the self-employed whose finances are affected by COVID-19, including the option to agree Time To Pay (TTP) arrangements where appropriate. TTP arrangements can also be made for personal tax payments on the normal helpline.
A TTP arrangement involves an extended payment deadline, normally collecting regular instalments of tax over the extension period. The extension is rarely more than one year. Penalties are waived if the TTP deadlines are met, though interest generally applies. The Government has confirmed that, if a business or self-employed individual has administrative difficulties in contacting HMRC or paying tax, it will explore cancelling late payment penalties and interest.
July tax payments deferred
The self-assessment income tax payments due in July have all been deferred automatically until January 2021. No interest nor penalties will be applied. Originally, this measure was announced as applicable only to the self-employed, but now covers all those with July income tax payments.
The guidance states that the deferral is optional, and that if you are still able to pay your second payment on account on 31st July you should do so.
VAT payments deferred
All required VAT payments have been deferred until the end of June to assist the cashflow of UK businesses. This applies automatically to all VAT payments, but the Government will pay VAT refunds and reclaims as normal.
Residence, Domicile and Remittance Basis Manual
Some individuals who are normally non-UK tax residents may find that, due to travel or other restrictions arising from the pandemic, they spend more time in the UK than planned. Days spent in the UK can usually be ignored, up to a maximum of 60 days, if the individual’s presence in the UK is due to exceptional circumstances beyond their control. The individual also needs to leave the UK as soon as circumstances permit to qualify for this exception.
The Government has published new guidance on the interaction of COVID-19 and exceptional circumstances as follows.
Circumstances are considered exceptional if you:
· are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
· find yourself advised by official Government advice not to travel from the UK as a result of the virus
· are unable to leave the UK as a result of the closure of international borders
· are asked by your employer to return to the UK temporarily as a result of the virus
Off-payroll working rules deferred (IR35)
New rules requiring businesses to assess whether or not contractors should be treated as employees have been deferred for a year to 6th April 2021. Off-payroll working rules reforms postponed until 2021
Job retention scheme – wage reimbursement
The Chancellor has offered businesses help with paying the wages of employees who would otherwise be laid off. If a worker is ‘furloughed’, HMRC will reimburse 80 per cent of their wage cost, capped at £2,500 per month. This can include those who are also company directors in certain limited circumstances.
The system for reimbursement is still being set up, but if a business needs cash flow support prior to this it can apply for a COVID-19 business interruption loan.
Income support for the self-employed
After some pressure, the Chancellor has announced measures to support the self-employed that are roughly on par with the support offered to employees. The self-employed will however be permitted to continue trading while claiming the support.
Those who are self-employed, and have lost income due to COVID-19, may be eligible for a taxable cash grant from the Government. This is broadly available to those with trading profits under £50,000 and will be up to 80 per cent of average monthly earnings, capped at £2,500 per month.
Only those who were shown as self-employed on their 2018/19 tax returns will be eligible, but if they have not yet filed the return they have until 23rd April to file if they wish to claim income support.
The scheme will run for three months initially, and payments are expected to be made in June.
The Government has announced a raft of non-tax measures to support businesses and these include:
· measures to ease access to and increase eligibility for benefits, including sick pay;
· increases in certain benefits;
· rates relief for many businesses, along with linked grants and loans (interest free for up to a year); and
· ‘mortgage holidays’ for up to 3 months for homeowners, or landlords of tenants, who are experiencing financial difficulties due to COVID-19.