July 2020

Most of the update relates to COVID-19 measures announced yesterday and the second Self-Employment Income Support Scheme grant that can be applied for in August, but there are other updates to note as well.

Chancellor unveils three-point plan for jobs

On 8 July, Chancellor Rishi Sunak announced a three-point plan to support jobs in the wake of the COVID-19 pandemic when he delivered a Summer Economic Update to Parliament.

Mr Sunak confirmed the Coronavirus Job Retention Scheme (CJRS) will end as planned this October. The CJRS will be followed by a Job Retention Bonus, which will be introduced to help firms keep furloughed workers in employment. This will see UK employers receive a one-off payment of £1,000 for each furloughed employee who is still employed on 31 January 2021. To qualify for the payment, employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme on 31 October 2020 and the end of January 2021.

The Chancellor also launched a £2 billion Kickstart Scheme that will aim to create subsidised six-month work placements for young people aged 16-24 who are claiming Universal Credit. Funding available for each placement will cover 100% of the National Minimum Wage for 25 hours a week, plus the associated employer national insurance contributions (NICs) and employer minimum automatic pension enrolment contributions. Employers will be able to top this wage up.

In order to support the UK's tourism and hospitality industry, the Chancellor announced a cut in the rate of VAT from 20% to 5% for the sector. This applies to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises, as well as supplies of accommodation and admission to attractions, including theme parks and zoos, across the UK. This is effective from 15 July to 12 January 2021.

Additionally, the Eat Out to Help Out scheme will entitle every diner to a 50% discount of up to £10 per head on their meal at any participating, eligible food service establishment from Mondays to Wednesdays in August. Participating establishments will be fully reimbursed for the 50% discount.

Stamp duty temporarily reducedin England

Chancellor Rishi Sunak announced a temporary cut in the rate of Stamp Duty Land Tax (SDLT) in order to boost confidence in the flagging housing market in his Summer Economic Update.

Property transactions fell by 50% in May this year and house prices have fallen for the first time in eight years. In response, the government will temporarily increase the nil-rate band of residential SDLT in England and Northern Ireland from £125,000 to £500,000. This will apply to non-commercial property purchases from 8 July 2020 until 31 March 2021.

Note that first time buyers already have an exemption for purchases up to £300,000 and the additional dwelling supplement still applies.

The Welsh Land Transaction Tax (LTT) is not affected but an announcement regarding LTT is expected soon.

Flexible furloughing on job retention scheme

On 1 July, changes to the Coronavirus Job Retention Scheme (CJRS) saw flexible furloughing introduced, so employees will no longer have to be furloughed for a minimum period of three weeks.

Following the change, the CJRS has more flexibility to allow claims on a pro rata basis. Employers will be able to permit employees to work some of the week and be furloughed for the rest. A written agreement is needed.

An employee needs to have been furloughed for at least three consecutive weeks between 1 March and 30 June to be eligible for furlough from 1 July. Additionally, after 1 July, employers may be subject to a cap on the number of employees that can be claimed for in a CJRS claim they are able to make.

The CJRS changes have effect from 1 July until the closure of the scheme on 31 October.

Parents returning from statutory maternity leave, paternity leave, adoption leave, shared parental leave and bereavement leave are broadly exempt from the CJRS furlough changes so parents who are returning to work over the coming months will be eligible for the CJRS despite the scheme closing to new entrants on 30 June.

Additionally, from 1 August, the level of the grant will be reduced each month. From August the employer will need to pay employer national insurance and pension contributions for the time the employee is furloughed. For August, the government will continue to pay 80% of wages up to a maximum of £2,500 proportional to the hours the employee is furloughed. For September, the government will pay 70% of wages up to £2,187.50, and for October, the government will pay 60% of wages up to a maximum of £1,875. During these months employers will have to top up employees' wages to ensure they receive 80% of their wages up to the £2,500 cap.

If we are managing your furlough claims, please ensure you keep us up to date with details of any changes. If you are calculating your own claims, please check the advice from HMRC on www.gov.uk as the rules are complex and subject to frequent updates.

Government expands aid for start-ups and innovators

The government has expanded its COVID-19 support for start-ups and innovative companies with the launch of a new fund.

On 27 June the government announced the Sustainable Innovation Fund (SIF), which is aimed at helping businesses to keep 'cutting edge' projects and ideas alive during the pandemic.

The SIF will make almost £200 million available to UK companies that are developing new technologies in certain areas. These include making homes and offices more energy efficient, creating ground-breaking medical technologies, and reducing the carbon footprint of public transport.

The government is asking research and development-intensive businesses to apply for the funding.

Bank of England increases stimulus package for UK economy

On 18 June, the Bank of England increased the stock of purchases of UK government bonds by an additional £100 billion to help boost the UK economy following the coronavirus (COVID-19) pandemic. The £100 billion in additional quantitative easing funds takes the total to £745 billion.

FCA confirms further support for consumer credit customers

The Financial Conduct Authority (FCA) has confirmed further support for users of certain consumer credit products if they are experiencing temporary payment difficulties due to the coronavirus pandemic.

The measures outline the options firms will provide for credit card, revolving credit and personal loan customers who are coming to the end of a payment freeze. They also outline options for customers who have agreed an arranged interest-free overdraft of up to £500.

In addition, customers yet to request a payment freeze or an arranged interest-free overdraft of up to £500 will have until 31 October 2020 to apply for one.

According to UK Finance, its members have offered over 27 million interest-free overdrafts, provided 992,400 payment deferrals on credit cards and 686,500 payment deferrals on personal loans during the pandemic.

Private sector off-payroll reforms given go ahead for April 2021

The introduction of off-payroll rules to the private sector will go ahead as planned next April after an attempt to delay them failed in the House of Commons.

The reforms of the off-payroll rules to the private sector, which are known as IR35 and have applied to the public sector since 2017, was reviewed earlier this year.

They will shift the responsibility for assessing employment status to the organisations employing individuals.

The rules would have applied to contractors working for medium and large organisations in the private sector and were due to come into effect on 6 April this year. Due to the disruption caused by the outbreak of the coronavirus, the decision was taken in March to delay the introduction until 6 April 2021.

Advisory Fuel Rates from 1 June 2020

These rates apply from 1 June 2020 for refunds to company car business fuel use. You can use the previous rates for up to 1 month from the date the new rates apply.

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

VAT fuel scale charges

The VAT road fuel scale charges are amended with effect from 1 May 2020. Businesses must use the new scales from the start of the next prescribed accounting period beginning on or after 1 May 2020.

1. The valuation table sets out the new scale charges (a VAT inclusive amount). This table must be operated in accordance with the notes to the table and these are set out below.
2. The VAT rate tables set out the VAT to be charged if your account for VAT on an annual, quarterly or monthly basis.

Where the CO2 emission figure is not a multiple of 5, the figure is rounded down to the next multiple of 5 to determine the level of the charge.

National insurance contributions

In 2015, the way in which Class 2 national insurance contributions are collected - through self-assessment rather than by direct collection - has given rise to many cases where HMRC has incorrectly ceased to demand contributions. Contributions can also go missing for employees.

HMRC provides a very useful service in the personal tax account which allows individuals to check their contribution history. If a gap is identified, there are three steps to go through:

1. Check for errors (contributions made that have not been credited)
2. Check whether national insurance creditsare available to fill the gap
3. Consider making voluntary contributions. It is usually possible to pay voluntary contributions for six years but until 5 April 2023 it may be possible to make up for gaps between 6 April 2006 and 5 April 2016.

You will only get the full state pension on retirement if you have paid, or been credited with, National Insurance contributions for 35 years.

Please note that if you are not working while looking after your child, you can get National Insurance credited to your account if you claim Child Benefit until your youngest child is 12. A credit for grandparents is also available.

The credits are automatically added to your National Insurance account when you claim Child Benefit, so you don't need to do anything other than ensure you have made the Child Benefit claim even if you opt not to receive the payments to avoid having to repay them.

Check if you can claim a grant through the Self-Employment Income Support Scheme

If you are self-employed or a member of a partnership and have been adversely affected by COVID-19 you can claim a taxable grant worth 80% of your average monthly trading profits, paid out in a single instalment covering 3 months' worth of profits, and capped at £7,500 in total.

You must make your claim for the first grant on or before 13 July 2020.

This scheme has been extended so you may be eligible for the second and final grant if your business has been adversely affected on or after 14 July 2020. You will be able to make a claim from 17 August 2020.

You can make a claim for the second grant if you're eligible, even if you did not make a claim for the first grant. Find out more about the extension to the scheme.

How the grant works

If you receive the grant you can continue to work, start a new trade or take on other employment including voluntary work, or duties as an armed forces reservist.

The grant does not need to be repaid but will be subject to Income Tax and NIC.

HMRC will work out if you're eligible and how much grant you may get.

Who can claim

You can claim if you're a self-employed individual or a member of a partnership and all of the following apply:

1. you traded in the tax year 2018 to 2019 and submitted your self-assessment tax return on or before 23 April 2020 for that year
2. you traded in the tax year 2019 to 2020
3. you intend to continue to trade in the tax year 2020 to 2021
4. you carry on a trade which has been adversely affected by coronavirus

Your business could be adversely affected by coronavirus if, for example:

you're unable to work because you:

• are shielding
• are self-isolating
• are on sick leave because of coronavirus
• have caring responsibilities because of coronavirus

you've had to scale down, temporarily stop trading or incurred additional costs because:

• your supply chain has been interrupted
• you have fewer or no customers or clients
• your staff are unable to come in to work
• one or more of your contracts have been cancelled
• you had to buy protective equipment so you could trade following social distancing rules

Find examples of when you would be 'adversely affected'.

You should not claim the grant if you're a limited company or operating a trade through a trust.

If you claim Maternity Allowance this will not affect your eligibility for the grant.

To work out your eligibility, HMRC will first look at your 2018 to 2019 self-assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

If you are not eligible based on the 2018 to 2019 self-assessment tax return HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019.

Grants under the Self-Employment Income Support Scheme are not counted as 'access to public funds', and you can claim the grant on all categories of work visa.

You must make the claim yourself as otherwise the claim may trigger a fraud alert, and you will have to contact HMRC. This will cause a significant delay to you receiving your payment.

Domestic Reverse Charge VAT for Construction Services

This new proposal has been delayed to 31 March 2021.

A domestic reverse charge means the UK customer who receives supplies of construction services must account for the VAT due on these supplies on their VAT return, rather than the UK supplier.

This removes the scope for fraudsters to steal the VAT due to HMRC and follows similar measures introduced in response to VAT fraud for mobile telephones, computer chips, emissions allowances, gas and electricity, telecommunication services and renewable energy certificates.

Construction companies should receive updates on how this will work in practise from their software supplier as it will mean a change to the accounting rules for VAT.