PWA Tax Update (incl rules on virtual Xmas Parties) 11th Dec 2020

PWA TAX BULLETIN DECEMBER 2020

Extension to the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (CJRS) has been extended until the end of March 2021 for all parts of the UK.

From 1 November, the UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month.

The terms of the scheme will be reviewed in January 2021.

You must continue to pay the associated employer National Insurance contributions and any pension contributions from your own funds.

You and your employees do not need to have benefitted from the scheme before to claim for periods after 1 November.

There are now monthly deadlines for claims.

This means that you may need to submit earlier than you have in previous months.

You must submit any claims for November, no later than 14 December.

Publishing employers’ information From February 2021

HMRC will publish the names, an indication of the value of claims and Company Registration Numbers (for those who have one) of employers who make Coronavirus Job Retention Scheme (CJRS) claims that cover periods from December onwards.

Employers can request their details are not published where disclosure of this information would result in a serious risk of violence or intimidation to the employer, an employee, director or member of their household. Details of CJRS claims will be published monthly as part of HMRC’s commitment to transparency and to deter fraudulent claims.

Employees will also be able to check if their employer has made a CJRS claim on their behalf through their online Personal Tax Account from February 2021.

Employees should talk to their employer in the first instance if they have any questions.

 

Job Retention Bonus and Job Support Scheme

The Job Retention Bonus will no longer be paid in February 2021, as CJRS will be available at that time.

An alternative retention incentive will be put in place and will be announced in Parliament by the Chancellor at the appropriate time.

The launch of the Job Support Scheme has also been postponed.

 

VAT Deferral

As part of the Winter Economy Plan the Government announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.

Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.

You will need to opt into the scheme, and if you do, this means that your deferred VAT liabilities do not need to be paid by the end of March 2021.

The VAT deferral new payment scheme will require a direct debit to be set up as part of the digital opt-in process and this must be done by the authorised bank account holder only.

If you can pay your deferred VAT, you should still do so by 31 March 2021.

You should contact HMRC’s Time to Pay service if you need more help to pay deferred VAT.

 

VAT reverse charge for construction and building services

In order to help construction businesses deal with the effects that the coronavirus pandemic has had on them and give them more time to prepare, this reverse charge measure – originally due to be introduced from 1 October 2020 – will now come in on 1 March 2021.

Every VAT registered construction business will have received a letter in September 2020, advising them to check if they may be liable for the reverse charge.

If they are liable, 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.

 

 

Statutory Sick Pay eligibility for those self-isolating or shielding due to coronavirus

If your employee is sick or incapable of work, you must pay them a minimum of Statutory Sick Pay (SSP), where they are eligible.

If your employee is clinically extremely vulnerable and cannot work because they have received a notification advising them to shield, you can furlough them under the Coronavirus Job Retention Scheme if you are eligible to do so.

As a minimum, you must pay them SSP, where they are eligible.

You must pay SSP from the first day of your employee’s absence from work if they are self-isolating due to COVID-19. This could be because:

  • They are displaying symptoms of, or have tested positive for, COVID-19
  • Someone in their household (including linked or extended household) is displaying symptoms of, or has tested positive for COVID-19
  • They have been notified by the NHS or public health authorities that they have been in contact with someone with COVID-19.

Your employee may be required to self-isolate multiple times. Each time they are required to self-isolate “provided all eligibility criteria are met” they must receive SSP for the duration of their absence.

Small and medium employers can reclaim up to two weeks of SSP paid per employee for absences related to COVID-19.

An isolation note service was introduced to reduce pressure on GPs by avoiding the need for employees to contact their GP unnecessarily for evidence relating to self-isolation.

HMRC suggest that employers use their discretion around the need for medical evidence where an employee is advised to self-isolate in accordance with public health advice. Employers can check an isolation note is valid by using the check an isolation note service.

Virtual Christmas Parties Due to the coronavirus restrictions

 

You may be unable to host your usual Christmas Party for your employees.

HMRC have confirmed that the annual parties’ exemption (s264 ITEPA03) will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.

Therefore, subject to the normal conditions of the exemption being met, the expenses of hosting a virtual event, including providing entertainment, equipment and refreshments principally for enjoyment or consumption by your employees during the event, will be exempt.

For annual parties or similar annual events, no liability to income tax arises provided the cost of the annual event does not exceed £150 per head, and that the event is available to employees generally.

Please note that the exemption is not limited to Christmas parties, therefore it will still apply if you decide to postpone your party or function, as long as the function takes place within the current tax year and is within the £150 limit.

 

IR35

If you engage or supply contractors, there are some important tax changes In less than 100 working days the way you pay contractors may change.

Changes to the Off-payroll working rules (IR35) come into effect on 6 April 2021.

If you engage contractors who work through their own limited company or other intermediary, and you are a medium or large sized non-public sector organisation then you need to take action to prepare.

If you supply contractors who work through their own limited company or other intermediary, and you are an employment agency, you need to understand the changes and may need to take action.

 

Capital Allowances

HMRC has announced an extension of First Year Allowances for cars, Zero Emission Goods Vehicles & Equipment for Gas Refuelling Stations.

First year allowance (FYA) rules for business expenditure on business cars, zero emission goods vehicles and equipment for gas refuelling stations are being extended from April 2021 until April 2025.

This measure also reduces the CO2 emission thresholds which are used to determine the rate of capital allowances available for business cars.

What this means for you from April 2021

Business cars:

  1. The 100% FYA will only be available for the purchase of new electric cars or cars which have zero CO2 emissions
  2. Writing Down Allowance (WDA) at the main rate (18%) will only be available for cars with CO2 emissions not exceeding 50g/km
  3. WDAs at the special rate (6%) will be available for cars with CO2 emissions exceeding 50g/km.

Corporation Tax CT600 Tax Return – Reporting ‘zero emissions cars’ From 1 April 2021 there will be  new boxes on the CT600 Return to allow reporting of zero-emissions cars independent of other FYA’s within the ‘Allowances and Charges in Calculation of trading profits and losses’ section of the Return:

  1. Zero Emissions cars box.
  2. Disposal Value box.