PWA Tax Update (August 13th 2020)

Coronavirus Job Retention Scheme

What employers need to do from 1 August

From 1 August CJRS continues to provide grants for furloughed employees, but no longer funds employers’ National Insurance (NI) and pensions contributions. Employers now have to make these payments from their own resources for all employees, whether furloughed or not.

What employers need to do from 1 September

From 1 September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours furloughed employees do not work

  • Employers will need to pay 10% of furloughed employees’ wages to make up 80% of their total wages up to a cap of £2,500. The wage cap is proportional to the hours not worked
  • Employers will continue to pay furloughed employees’ NI and pension contributions.

Make sure you’re paying the correct workplace pension contributions

The Pensions Regulator (TPR) would like to remind you that your workplace pension duties apply whether your staff are working or are being furloughed as part of the Coronavirus Job Retention Scheme. However, since the beginning of this month you have needed to pay the pension contributions and National Insurance contributions for your furloughed staff.

Redundancy

The Government has introduced legislation which will ensure that employees who have benefitted from the Coronavirus Job Retention Scheme do not lose out on certain entitlements. The legislation will ensure that a number of statutory rights including redundancy pay, notice pay and compensation for unfair dismissal are based on an employee’s normal pay, rather than their furlough pay (potentially 80% of their normal wage).

The new legislation will ensure that the entitlements outlined above, relating to termination of employment, are based on an employee’s normal pay rather than on any reduced rate relating to being furloughed. Whilst the Government hope that employers will do everything they can to avoid making redundancies, this legislation will ensure that where someone who had previously been furloughed does lose their job, they receive the full compensation they are due.

 

 

VAT reverse charge on building and construction services

The reverse charge measure will now come into effect on 1 March 2021, in order to help the construction sector deal with the impacts of COVID-19; this will allow businesses more time to prepare.

Every VAT registered construction business will have received an individual letter in February 2020, advising them to check if they might be liable for the reverse charge. If so, they should start to prepare now.

The key aspects are:

  • It will apply to standard and reduced-rated supplies of building and construction services made to VAT registered businesses, who in turn also make onward supplies of those building and construction services
  • The contractor will be responsible for paying the output VAT due rather than the sub-contractor but can continue to reclaim this amount as input tax
  • The scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme but does not include supplies of staff or workers for use by the customer
  • The legislation introduces the concept of “end users” and “intermediary suppliers”. This covers businesses or groups of associated businesses that do not make supplies of building and construction services to third parties and as such are excluded from the scope of the reverse charge if they receive such supplies. Examples include landlords, tenants and property developers.

End of VAT payment deferrals period

To provide government support during the early stages and peak of the COVID-19 pandemic, HMRC gave businesses the option to defer VAT payments if they were unable to pay on time. They could do this without incurring late payment interest  or penalties.

Under the scheme, payment of VAT due between 20  March and 30 June could be deferred until 31 March 2021. VAT deferred through the scheme can be paid through ad hoc payments and overpayments ahead of the deadline if preferred, so long as full payment is made by that date.

As planned, the scheme came to an end on 30 June. Businesses now need to set up any cancelled direct debits in time for payment of their next VAT return.

Finance Act 2020  – changes  to company car tax

At Autumn Budget 2017 the government announced that it would bring in legislation reflecting the use of the worldwide harmonised light vehicle test procedure (WLTP) for measuring CO2 emissions for all cars first registered on or after 6 April 2020. The legislation in Finance Act 2020 introduced modified tables of WLTP appropriate percentages (based on emissions) to be used for the purposes of calculating company car tax for the years 2020-2021 and 2021-2022. The appropriate percentage for zero emission cars first registered before 6 April 2020 (with emissions measured under the previous new European driving cycle (NEDC) testing regime) has also been modified for those years.

The charges for 2020-21 have now been issued and are available within the PWA tax data card sent free to every PWA client. If you do not have the card please let us know and we will gladly send you one.