Coronavirus Job Retention Scheme

The Government has stated that “Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis”

The GOV.UK website states:

You will need to:

  • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

It also states that “HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.”

We have tried to answer as many as we can in this guide, but please be aware that payroll and employment law are complicated areas and the legal side of things will take weeks or months to be finalised by the government.  You should seek independent advice from a HR specialist or employment lawyer.


When does the Coronavirus Job Retention Scheme take effect?

Furloughed employees must have been on your PAYE payroll on 28th February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

The scheme has retrospective effect from 1st March 2020 and is expected to apply for three months, so until the end of May 2020. Employers can implement furlough leave immediately.

Do we require employees’ consent to put them on furlough leave?

To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.  A4C have a draft furlough leave agreement which you are welcome to use, email esther@a4cgroup.co.uk.

Can an employee insist on going onto furlough leave?

No. It is the employer’s decision.  The employer can choose whether to implement furlough leave and, if implemented, for which employees it will apply to.  The employer cannot discriminate, equality and discrimination laws will apply in the usual way

Can we ask employees who are on furlough leave to perform some work from home?

No, the intention of the Government is that furlough leave is a direct alternative to redundancy so the expectation is that the employer has no work to give furloughed workers. 

Can we furlough people for part of their time?

No, the essence is that they are sitting at home doing nothing.  If an employee is doing shorter hours then they are not eligible for furlough payments and you should pay them as normal.

What if the employee has more than one job?

They can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

Will furloughed workers be given payslips?

Yes, at A4C we will add an additional code to your payroll account and will use this to record payments, rather than using the salary or hourly pay functions.  This will enable us to provide reports on the total amount of furloughed pay.

Will the furloughed payments be subject to tax and NI?

Yes, the payments will be taxable, NIC-able and pensionable (where applicable).

Who pays the Employer’s National Insurance and Employer’s Pension Costs?

The grant will cover the lower of 80% of an employee’s regular wage or £2,500 per month PLUS employer National Insurance Contributions and automatic enrolment employer pension contributions.

How do I receive the grant money from HMRC?

HMRC are working urgently to set up a system for reimbursement, this will be a portal whereby you submit a claim (hence a4c setting up reporting features in your payroll).

When will I receive the grant money from HMRC?

The current expectation is that the portal will be live in April for applications and that payments will come through at the end of May 2020.  The image below, created by the Financial Times, may help to demonstrate the cash flow position:

How do I pay my staff in the meantime?

The expectation is that you have reserves to pay your staff, whilst waiting for the grant funding to come through.  If this is not the case then the government have paused VAT payments for three months, so you could use your VAT money.  Alternatively you could access an overdraft or apply for a Coronavirus Business Interruption Loan.

If borrowing is not an option ask your employees for their permission to agree for their salary payments to be delayed until cash is available.

Who is liable for the wages payments?

The whole essence of the Coronavirus Job Retention Scheme is that it is a funding scheme where the government reimbursees the employer for their liability to pay the salary.

Does an employer still have to pay into their furloughed worker’s pension?

Yes, the employer is not relieved of paying employment costs, so these will still stand.

What about National Minimum Wage?

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.  Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

Can I furlough and then unfurlough employees depending on workloads?

If you furlough someone you can then unfurlough them if work picks up, but the expectation is that employers won’t be able to re-furlough them again.  This will prevent employer’s from rotating their staff to take advantage of the government grant.

How do you calculate 80% of pay for salaried workers?

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.  Fees, commission and bonuses should not be included.

How do you calculate 80% of pay for people whose pay varies?

If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

If furloughed, do workers accrue holiday?

Yes.

Is it fair that someone can be furloughed and be paid to do nothing while others are working?

It doesn’t seem very fair, but we are in unprecedented times and that’s where we find ourselves.

Can maternity / paternity leave be cut short to move from SMP/SSP to receiving furloughed wages?

Yes, it’s believed that this would be okay but then the parent would be expected to return to work when the job retention scheme ends.

Can you increase pay or apply backdated pay rises and then furlough staff?

We don’t know what the anti-fraud measures will be, but if it feels morally wrong then it probably won’t be allowed.  At A4C we will not be doing anything to encourage fraud or which may trigger future HMRC investigations.

I am self-employed, can I receive furloughed wages?

No, this scheme only applies to employees paid via PAYE.  The government has introduced the Self-Employment Income Support Scheme for sole traders and partnerships. https://a4cgroup.co.uk/news/covid-19-self-employment-grant/

I am a director; can I receive furloughed wages?

The opinion is that Company directors who receive salaries through PAYE can be furloughed and apply for a grant of 80% of their salary during the coronavirus pandemic. A furloughed director will only get 80% of their PAYE earnings, so if some earnings are drawn by dividends they won’t get part of that. 

As with other businesses, such directors would need to have been on the payroll on 28 February 2020 and they cannot work while they are on furlough leave. We do not yet know the extent to which minor directorial duties would be disregarded, or whether the requirement that a furloughed employee should do ‘no work’ would prohibit this.

Where can I go for more information?

To see the government guidance visit https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Legal Disclosure

Please note, the information given in this FAQ document is by nature generic and there are a great number of uncertainties and challenges in the current situation.  A4C accepts no liability for any action or inaction taken on the basis of this document.

For further support an advice please speak to an employment lawyer or visit the ACAS website – https://www.acas.org.uk/coronavirus

Self-employment Income Support Scheme

· Are you self-employed?  This means are you a sole trader or in a partnership?

· Did you submit a self-assessment tax return for the tax year 2018/2019?

· Were more than 50% of your earnings from self-employment?

· Did you have trading profits of less than £50,000?

If you can answer yes to each of the above then you will qualify for the self-employment income support scheme.

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

We appreciate that you will have lots of questions and therefore we have have tried to answer as many as we can in this guide.


How is the self-employment grant calculated?

You will receive an average of the profits made from self-employment over the past three years. 

  • HMRC will add together your trading profits for the tax years 2016/17, 2017/18 and 2018/19. 
  • This total will be divided by 3 to get your yearly average. 
  • This will then be divided by 12 to get your monthly average. 
  • You will be paid 80% of your monthly average, up to a maximum of £2,500 per month for 3 months.

How will I receive the payment?

HMRC will pay the grant directly into your bank account, in one instalment. 

When will I receive the payment?

It is expected to be paid at the end of June 2020.

Who is eligible?

Only people who have submitted a self-assessment tax return for 2018/19 will be considered. 

What if I haven’t yet filed my tax return for 2018/19?

The filing deadline for this was 31st January 2020, however if you haven’t yet filed your tax return you have until 23rd April 2020 to submit it to be considered for this grant.

How do I apply?

You don’t need to.  HMRC will contact you automatically if you are eligible for the scheme and will invite you to apply online.

Do I pay tax on the grant?

Yes, you will need to include your grant payment on your self-assessment tax return for the 2020/21 tax year.  If will form part of your taxable income and will be subject to the normal taxes.  You will also need to include the grant if you claim tax credits.

What happens if I started self-employment after April 2019?

Unfortunately, in this instance you won’t be considered for the grant.  This is to avoid fraudulent claims.  Instead you should be able to claim Universal Credits. (https://www.gov.uk/universal-credit)

Does the grant include directors of limited companies?

No, this is only for people who operate as sole traders or in a partnership.

If I work as a subcontractor in the construction industry will I still get a tax rebate this summer?

Yes, if you are due a tax rebate for the 2019/20 tax year then your rebate will be processed as normal following the submission of your self-assessment tax return.

What happens if I haven’t been trading for three years?

If you have filed a self-assessment tax return for 2018/19 and your profits from self-employment are beneath £50,000 and form more than 50% of your income then you will still be considered.  The grant will be averaged over the available tax returns submitted.

What can I do if my profits were over £50,000?

You will not be considered for the self-employment income support scheme but you may be able to claim Universal Credits. (https://www.gov.uk/universal-credit)

What can I do if my profits were less than 50% of my income?

You will not be considered for the self-employment income support scheme but you may be able to claim Universal Credits. (https://www.gov.uk/universal-credit)

Where can I go for more information?

To see the government guidance visit https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

When there’s a storm you need to dance in the rain!

This week I have spoken to lots of a4c’s clients and have been really encouraged by the positivity around.  There’s some creative thinking going on, which I love!

The reality is that we can’t change the situation we are faced with but we can change how we react to it.  I thought I would jot down a few notes, which could help if you’re feeling low or uncertain at this time and if you want to talk through your action plan, then the team at a4c are here for YOU.

Perspective

It’s important right now to be aware of who you’re talking to and the messages you’re hearing, if you watch the news channels 24/7 you’ll be consumed with the Armageddon storyline.  This becomes so overwhelming that you won’t just be focusing on the problems in front of you now, you’ll be focusing on ALL the problems you could have FOREVER MORE.  This isn’t helpful.  You can’t deal with problems you don’t know about yet. 

Preserve your energy by only focussing on the next three months.  If we look to other countries there’s a pattern that in three months we may be coming out the other side.  That’s not long in business. 12 weeks is one quarter of the year.  Think how quickly your VAT return comes around each time!

The key is to look at the situation in front of you through a different lens.  Positive thinking is not just about thinking good things because if you are in a position of fear it will make you worse as you feel that you have to compensate for the people around you not taking it seriously.  Instead you have to break things down into manageable chunks.

The process to change your mindset includes a number of steps:

1.      Embrace the melt down

Talk through the fears and worries you are harbouring.  Don’t indulge in the feelings but realistically list the worries you have and identify those that you have control over. Dump the rest. 

If you need to, embrace the melt down.  Think of yourself as a caterpillar.  To metamorphize the caterpillar fully liquifies before the cells reform to become a butterfly!

2.      Buy into a better vision of the future

To rebuild you need to look for a vision of the future which is different from the one you are currently blinded with, so scenario plan.  Where are the opportunities in this situation?

In the film Forrest Gump there’s a scene where the storm hits.  Their shrimp fishing boat is being thrown around in the waves and rain.  Forrest is scared but Lieutenant Dan is angry, he yells “YOU CALL THIS A STORM?!”.  Cut to the morning after and a news reporter shows the devastation amongst the fishing community with boats smashed to pieces.  There’s only one boat remaining, which sails into port loaded with shrimp.  The Bubba Gump Shrimp empire is born!

The message is that those who did nothing and thought they would be safe in the harbour didn’t survive.  You need to embrace the storm and dance in the rain!

3.      Practical forecasting and scenario planning

What’s the worst-case scenario over the next three months?  It could be that you’ll have no money.  If this were to happen what can you do? Is there cash in the bank?  Do you have an overdraft? Can you secure finance?  Do you need to make cuts?  Should you defer tax payments? Can you take a mortgage payment holiday?  You have options.

4.      Galvanise your team and get everyone feeling loved and motivated

What do you have to do to get through the next three months?  If you’ve got a valued team it’s vital that you keep them.  Have honest conversations with them to avoid their worry.  The government said this week “Employers, stand by your team and we will stand by you”.  Give them certainty that they’ll have a job at the end of this and that they will continue to be paid so that together you can get through this. 

Remember that behaviour breads behaviour.  If you are loyal to your team you will be rewarded with loyalty when we come out the other side. 

5.      Build foundations

Use this time to get the things done that you’ve been putting off.  Strengthen the foundations of your business.  Review and improve your systems and processes. Explore opportunities you’ve not had time to do before.  Work out how you can digitise your offering.

6.      Start to look-up and consider the opportunities

People still have money.  They are still spending but today they buy loo roll instead of iphones.  How can you tap into their needs over the next 12 weeks? 

Think outside the box. 

  • Parents are home schooling their kids can you do an online lesson plan or offer a mail order arts & crafts product? 
  • People are stuck indoors and missing their fitness routine, can you run a workout they can follow online? 
  • The focus is on cleanliness, can you build a cleaning offering into your list of services? 
  • Bars and restaurants are closed but the supermarkets have no food, can you switch your restaurant to a high end take-away?

7.      Long-term marketing, investing in your customers and supporting your community

It might be that you can’t make money in the current situation so work on keeping your customers engaged, and then in 12 weeks’ time you can start to sell again. Your audience will remember and stick by you. 

Create blogs, videos, help sheets.  Give your time for free, support others with your experience and advice.  Invest in long term relationship building rather than direct sales.

Where the attention goes the energy flows…

We didn’t choose for this to happen but as business owners and entrepreneurs this is what we’re good at.  Covid-19 is an obstacle in our business and we are experts in overcoming obstacles. You already have the skill-set to cope.  So ask yourself;

  • What am I going to focus on? 
  • What does it mean?
  • What am I going to do about it?

We are facing a storm, but we are facing it together.  A4C will continue to stand by your side and give you the support you need as we look forward to a time when things return to normal!

We wish you and your family good health and good fortune in the weeks & months ahead.

Coronavirus Pandemic – What support is available?

The current coronavirus situation is not like anything we’ve experienced before.  It has resulted in restrictions on travel and public gatherings, as well as supply chain disruptions and market uncertainty. 

The pressure on businesses and individuals is raising concerns and therefore we have created this guide to help you see what support is available.


Government Support

UPDATED 27th MARCH (Red headings & Yellow blocks show the changes)

Self-employment Income Support Scheme

For sole traders and people in a partnership, HMRC will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

Coronavirus Job Retention Scheme

HMRC will reimburse 80% of furloughed (basically another word for redundant) workers wage costs, up to a cap of £2,500 per person per month. This scheme covers workers on the payroll as at 29th February and kicks in from 1st March.

Details of the scheme have been published by the Government. We’ve created a Furloughed Leave page to answer your Frequently Asked Questions.

Does it include directors? We don’t know, at this stage.

VAT and Income Tax Payment Deferral

VAT – The government announced that VAT will not need to be paid until at least 30th June and then any unpaid VAT must be paid by 5th April 2021. This is an automatic offer with no applications required.

If you have a direct debit in place for VAT then you will need to cancel this with your bank to avoid the payment being taken automatically.

Income Tax – The self assessment payments on account, due by the self-employed on 31st July, have been deferred until 31st January 2021.

Both taxes will still be payable so these are deferrals rather than write offs!

HMRC Time to Pay

HMRC have set up a dedicated phone helpline to support businesses and self-employed people concerned about not being able to pay their tax, due to the coronavirus pandemic.

The number to call is:

0800 0159 559

Opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm.

If you are having cash flow problems and need to delay your tax payment then call HMRC asap.  They will agree an instalment arrangement and will suspend debt collection proceedings and will cancel penalties and interest. 

Communication is key, as soon as you realise you may not be able to make the tax payment you should call HMRC.  Our feedback so far has been that the helpline staff are friendly and understanding.

Please be aware that the Helpline has reached capacity a few times in the past week. As you will imagine HMRC are under huge pressure and many of the details are not fully avaliable as yet so please be patient if you need to call.

Coronavirus Business Interruption Loan Scheme

In the Budget 2020 the Chancellor announced that a Coronavirus Business Interruption Loan Scheme (CBILS) would be created.  This provides attractive finance options to businesses including:

  • Loans
  • Overdrafts
  • Invoice finance facilities
  • Asset finance facilities

The money borrowed will need to be paid back with terms from 3 months to 10 years.

The interest free period on loans under this scheme has been extended from 6 to 12 months.

Once agreed, specific scheme details will be made available here – https://www.british-business-bank.co.uk/ourpartners/supporting-business-loans-enterprise-finance-guarantee/

Business Rate Relief

Business properties with a rateable value below £51,000 will receive a 100% discount on their business rates.  Your local authority will rebill you as soon as possible. 

Further guidance on this will be published on 20th March 2020.

Small Business Grants

Small Businesses who pay little or no business rates will be eligible to a one-off grant to help you meet your ongoing business costs.  Funding for the scheme will be provided to local authorities in early April.

The value of this grant has been increased from £3,000 to £10,000.

Businesses in the retail, hospitality and leisure sectors could receive £10,000 or £25,000 depending on whether their ratable value is under or over £15k pa.

How to access the grant? You don’t need to do anything, your local authority will write to you in the coming weeks.

Companies House

If you have limited company accounts due to be filed, but you need more time due to the coronavirus, then Companies House will grant a two-month filing extension.  This will avoid the automatic late filing penalties.

IMPORTANT – you need to apply for the extension. A4C can make the application on your behalf so let us know asap if you would like this extension.

IR35 Reform Postponed

It may be too late for some, but last night the government announced that the changes planned to off-payroll working rules have been postponed until 1st April 2021. 

If you are a contractor who was affected by these changes then your agency or end client will be communicating with you this week.

Support for Employers

The government has published guidance, which outlines what you need to know as an employer. 

You can find full details here – https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/guidance-for-employers-and-businesses-on-coronavirus-covid-19

Key elements for you as an employer are:

  • Where possible, you and your team should work from home.
  • Any staff who are poorly or need to self-isolate will be entitled to Statutory Sick Pay (SSP) from day one and for up to 14 days. 
  • SSP is calculated through your payroll so email Tom with details of any absences and he will provide the calculations and supporting payslips (payroll@a4cgroup.co.uk).
  • SPP is normally a cost to the business but in the Budget 2020 the government announced that SSP paid due to coronavirus would be reimbursed to employers.  Details on this process to follow.
  • Employers should maintain records of staff absences, but the requirement for a doctor’s sick note has been relaxed, to ease the pressure on GP surgeries.

Universal Credits

Anyone not eligible to receive the self-employment income support scheme grant, furloughed pay or statutory sick pay are able to claim Universal Credit and / or Employment Support Allowance.

You can get help and advice from your Jobcentre Plus work coach or the Citizens Advice – https://www.citizensadvice.org.uk/ .

Mortgage Relief

Mortgage lenders have agreed to offer a 3-month mortgage relief holiday.  The payments will still be due, but our understanding is that they will be added to the end of your mortgage term (effectively extending your repayment period by 3 months).

Call you mortgage company to arrange your payment holiday.

Insurance

Most businesses have insurance and some policies include business interruption cover.  Therefore, it’s vital that you check with your insurance provider to see if you have any opportunity to claim. 

Many policies are limited to business damage through flood or fire, but do check your policy just in case!


What else can you do?

Check your costs

Identify which are essential and which are nice to have.  You may not want to cancel that Neflix subscription (understandable) but perhaps the purchase of golf clubs on the horizon can wait a few months?

Support your local businesses

Like you, there are thousands of independent businesses in the UK who are worried about surviving this.  We can all do our part to help them buy shopping local, whether it be an independent clothing store or a take-away from your favourite restaurant. 

Let’s support each other to get through this together.

Use your downtime wisely

  • Update your marketing plan
  • Complete your stock-take (perfect timing for most clients with a year-end of 31/3/20)
  • Review systems and procedures
  • Sign up for that software trial you’ve been meaning to test
  • Re-connect with friends, colleagues, suppliers, neighbours (albeit via FaceTime!)

A4C Support

We are in financially testing times right now but the staff and systems in place at A4C mean that we can continue to support you, just as we always have done.  As a team we are all working remotely but our robust IT systems mean that normal daily tasks can be completed without disruption.

Our focus over the coming months will be to deliver all deadline driven work as usual.  This involves Payroll, CIS, VAT Returns and Limited Company Accounts filing.

Any clients who wish to have a strategy review, in light of Covid-19 and the cash flow impact on their business, are welcome to book a call with Esther.

Please email esther@a4cgroup.co.uk to arrange a slot next week.

We are facing a storm, but we are facing it together.  A4C will continue to stand by your side and give you the support you need as we look forward to a time when things return to normal!

We wish you and your family good health and good fortune in the weeks & months ahead.

Coronavirus Update from a4c

We are in financially testing times right now but the staff and systems in place at a4c mean that we can continue to support you, just as we always have done.

We will follow government advice and will provide updates from time to time to ensure that you are kept fully informed, particularly in the following areas:

Employee safety

Thankfully all staff at a4c are currently healthy and working their usual patterns.  We have now moved to homeworking but with technology and robust systems in place we hope you won’t notice the difference!

Obviously for now we are not arranging any face-to-face meetings but we’re happy to speak to you on the telephone.

Service continuity

By working remotely we can ensure that your deadlines will be met without disruption.

Client support

Our focus over the coming months will be to deliver all deadline driven work as usual.  This involves Payroll, CIS, VAT Returns and Limited Company Accounts filing.

Any clients who wish to have a strategy review, in light of Covid-19 and the cash flow impact on their business, will be invited to book a call with Esther.

Keep calm and carry on

We are confident that the systems and processes in place within a4c mean that we can continue to support you and your business throughout 2020 and we look forward to a time when things return to normal!

We wish you and your family good health and good fortune in the weeks & months ahead.

Budget Report 2020

The 2020 Budget Report was delivered on Wednesday 11th March by Rishi Sunak.

The headlines in the media include the government’s plans to provide unlimited financial support to the NHS in light of the coronavirus, the Environment Agency will receive an increase in funding for flood defence and there were pledges in relation to infrastructure and green priorities.

These high-level announcements are positive for the UK as a whole, but what did the budget deliver for you as a taxpayer:

  • If you run a business
  • If you are a limited company
  • If you are an employer
  • If you are an employee
  • If you are self-employed (sole trader / partnership)
  • If you are a landlord

We cover each of these areas in this special a4c 2020 budget blog…


If you run a business

Expanded Business Rates relief will be increased to 100% in 2020/21 for most small businesses.

A dedicated helpline for those who need a deferral period on their tax liabilities (time to pay arrangement) will be manned by 2000 HMRC staff.

HMRC will also waive late payment penalties and interest where a business experiences administrative difficulties contacting HMRC or paying taxes due to COVID-19. 

If you are a limited company

Corporation tax will remain at 19%, the lowest in the G7 and G20.

Entrepreneurs Relief is being reformed but not scrapped, as many had feared leading up to the budget.  The government will reduce the lifetime limit on gains eligible for relief to £1 million from £10 million.  The reduced 10% rate of Capital Gains Tax on qualifying disposals remains in place. 

The review of the off-payroll working rules (IR35) has been concluded and the planned reforms will be implemented on 6th April 2020, as previously announced.

The government will reduce most company car tax rates by 2% in 2020-21 for cars first registered from 6 April 2020.

If you are an employer

The Employment Allowance for Employer National Insurance Contributions is increasing from £3,000 to £4,000, an average gain of £850 per year. (Note this won’t apply if you are the sole director / employee).

The government will support small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related Statutory Sick Pay (SSP) by refunding eligible costs (limited to two weeks per employee).

If you are an employee

The COVID-19 response fund will temporarily extend Statutory Sick Pay (SSP) for those advised to self-isolate, and those caring for others who self-isolate, to be paid from the first day of sickness absence, rather than the fourth day.

The National Insurance Contribution thresholds will be increased from £8,632 to £9,500, saving a typical employee around £104 a year from April.

The National Living Wage will increase from £8.21 to £8.72 in April 2020 and is expected to be over £10.50 in 2024.

The government will increase the home-working flat rate allowance, available to employees to cover additional household expenses, from £4 per week to £6 per week.  This will take effect from April 2020.

If you are self-employed (sole trader / partnership)

The National Insurance Contribution Lower Profits Limit will be increased from £8,632 to £9,500, saving a typical self-employed person around £78 a year from April.

The government will explore how to improve the guidance available for self-employed people applying for a mortgage.

The government will consider how to provide appropriate support to self-employed parents so that they can continue to run their businesses, as part of its wider review of Parental Pay and Leave.

To make it easier for self-employed people to navigate the tax system, the government will launch new interactive online guidance for taxpayers with non-Pay As You Earn income this summer.

If you are a landlord

No changes to the removal of finance relief on mortgage interest payments.

Other key points

Fuel duty will be frozen for the tenth consecutive year.

A freeze in duty rates for beer, cider and spirits.

Tampon Tax – the 5% rate of VAT on women’s sanitary products – will be scrapped from 1 January 2021.

The Budget also announced substantial green policies to reduce emissions, ensure our environment is protected and resilient to climate change, and generate green economic opportunities across the UK.

Reference

For the full Budget Report 2020 visit https://www.gov.uk/government/publications/budget-2020-documents/budget-2020

Or to discuss how the Budget Report 2020 will impact you and your business give us a call on 01737 652 852.

Since 2016 there has been no charge to tax and NIC on “trivial” benefits provided to an employee. This means that these do not  need to be shown as a benefit on a form P11D but are still tax deductible in the company accounts.

What is a trivial benefit?

It’s a gift to an employee, not linked to their duties.  For example a bunch of flowers, a candle, office ice creams on a sunny day, gift vouchers on their birthday etc.

The rules state:

  • the cost must not exceed £50 (or £50 per person in the case of a benefit provided to several employees at once);
  • the benefit must not consist of cash or a credit token (including the use of a credit card);
  • there should be no salary sacrifice involved; and
  • provision of the benefit can not be linked to any particular services provided by the employee.
  • There is no limit to the number of trivial benefits allowed to staff in the year.
  • However, in the case of directors and their family members the trivial benefits are capped at £300 per year.

 

An example could be buying an employee a gift around the time of their birthday, sending an employee flowers to celebrate an event, giving a gift voucher to show appreciation to a member of staff.

Happy Birthday, Happy Easter, Happy Christmas, Happy Friday, Happy Valentines, Happy Halloween!

Remember if you are the director of your own limited company and you receive a salary via the company payroll then you are also an employee and therefore are entitled to receive trivial benefits from your company.

These are capped at £300 per year, however you could ‘gift’ yourself a John Lewis or Amazon voucher six times throughout the year to enjoy this tax free perk!

The IR35 rules are not new and most people who work as a contractor via a Personal Service Company (PSC) are familiar with this legislation, however from April 2020 there will be a change which is expected to have a huge impact on the contracting sector.

IR35 Recap

To recap, IR35 was intended to deal with the problem of those who were employees in all but name, i.e. they had gone ‘off payroll’ in order to save tax and NI by trading through a PSC.  Employers will have seen benefits too by saving employer’s NI, removing the burden of PAYE admin and avoiding employment rights.

Currently the worker decides if their contract is caught by IR35. There are a number of tests to follow and often working practices and a contract review are sufficient evidence for those outside of the legislation.

Changes

From April 2020, it will be the end client making the IR35 assessment.

There are rumours that banks and other medium and large engagers could take a blanket approach and pull all contractors into IR35.  This means that tax and national insurance will be applied resulting in a significant drop in the contractor’s net take home pay.

The rules state that the end client will need to assess each contractor individually using HMRC’s online Check Employment Status Tool (CEST) and provide them with a Status Determination Statement (SDS).  The problem is that CEST won’t be updated until the end of the year and therefore these assessments cannot truly begin until January 2020.  This leaves many people in limbo until the New Year.

Points to consider:

  • The changes don’t impact ‘Small Business’ (less than £10.2 million annual turnover or less than £5.1 million balance or less than 50 employees).
  • Even if the end client is deemed a Small Business, if there is an intermediary in place, such as a national recruitment agency, then you may still be affected.
  • Use the time now to review your contracts and working practices with your end client to establish if they will consider you caught by IR35 from April 2020.
  • Consider negotiating a higher rate, to compensate the reduction in net take home pay.
  • Establish if your end client would consider offering you a PAYE contract instead (the benefit of this includes paid holiday pay, sick pay, maternity / paternity pay, pension contributions and other employment rights).
  • Review your industry sector to seek new contract opportunities with a ‘Small Business.

It’s good to talk

Prior to a4c, Esther spent many years working within the recruitment industry, specifically working with contractors.  She has an indepth understanding of the PSC market and would be happy to book a call if you wanted to discuss your specific circumstances.

Feel free to make contact to schedule a telephone meeting.

If you have a buy-to-let property, which you intend to dispose of in 2020, then there are three key changes in the Finance Act 2020 which may have a significant impact on the amount of tax you pay and the timing of this payment.

1. Capital Gains Tax (CGT) rule changes

From April 2020 if you sell a residential UK property and there is a Capital Gain to be declared, then you will need to prepare and file a new stand-alone CGT return (previously this calculation was included in your self-assessment tax return).

The main challenge will be that you have 30 days to file the CGT return following the date of completion.  This deadline also applies to paying any tax due!

HMRC anticipates that your solicitor will handle this administration for you however, as they will require agent authorisation, this may not always be possible within the timescales and may result in penalty notices.

To prepare for this a4c will be developing a new stand-alone CGT service to be available from April 2020.

2. Private Residence Relief (PPR) rule changes

The amount of CGT payable on the sale of a second property can often be reduced by applying reliefs.  The first is called Private Residence Relief (PPR) and allows the CGT calculation to give you relief for the period that the property was your main home.  This includes a final period reduction, even if you didn’t live in the property at the end.

If you lived in the home at any point as your main residence then the final period relief is currently 18 months (this was 3 years up until 2015).  From April 2020, the final period relief will reduce to 9 months.  This could have an impact on the amount of CGT due.

3. Removal of Letting Relief

The other change is the removal of letting relief, in most cases.  Until recently if you rented out your second home then you could claim letting relief, which reduced the amount of capital gains tax due.

From April 2020 letting relief will only apply if the property is occupied by the owner at the same time as the tenant.  As the majority of people move out when they rent it (rather than share with a lodger) this letting relief can be considered as effectively abolished.

If you are concerned about how the changes will impact your finances then give the a4c office a call on 01737 652 852.