PWA TAX UPDATE – FEBRUARY 2021
Coronavirus Job Retention Scheme
Key deadlines to be aware of:
- January claims must be submitted no later than Monday, 15 February 2021
- February claims must be submitted no later than Monday, 15 March 2021
The UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month, until the end of April 2021.
You can claim before, during or after you process your payroll. If you can, it’s best to make a claim once you’re sure of the exact number of hours your employees will work. This will mean you will not have to amend your claim at a later date.
If you have already submitted your claims for January 2021 but find you need to make a change because you did not claim enough, you can do this until 1 March 2021.
PWA continues to make claims for you as it has since the start of the scheme at a cost of £25+VAT per claim.
Furloughing employees due to caring responsibilities
If an employee asks to be furloughed because they have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school or childcare facilities closing, you can place them on furlough and claim for them under the CJRS.
Publishing information on claims
In January 2021 HMRC published a list of employers’ names who have claimed CJRS for periods from December 2020 onwards.
From 25 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 CJRS claims for periods starting on or after 1 December 2020. The published value of your claim will be shown within a banded range.
HMRC will not publish details of employers claiming through the scheme if they can show that publicising these would result in a serious risk of violence or intimidation to individuals, or those living with them.
From 25 February 2021, employees will also be able to check if an employer has made a CJRS claim on their behalf through their online Personal Tax Account.
Details of CJRS claims will now be published monthly as part of HMRC’s commitment to transparency and to deter fraudulent claims.
VAT deferral new payment scheme – opt-in from the end of February 2021
If you deferred VAT due from 20 March 2020 to 30 June 2020 and still have payments to make, you can now opt into the VAT deferral new payment scheme to pay your deferred VAT over a longer period.
The VAT deferral new payment scheme is expected to open 23 February 2021 and close at the end of June 2021. If you opt-in you can make up to 11 smaller monthly instalments, interest free.
You can opt into the scheme online without the need to call HMRC.
Businesses that need more help to pay their deferred VAT should contact HMRC.
If you can pay your deferred VAT by 31 March 2021 you should do so.
- such supplies, examples include landlords, tenants and property developers
Spotlight 57– Disguised Remuneration: Tax avoidance by selling future business revenues to a revenue service trust
HMRC is aware of an arrangement where a business may enter into an agreement with a trust and claim to have sold the rights to its future revenue to the trust. HMRC views this as tax avoidance.
HMRC has published Spotlight 57 to explain why this type of arrangement should not be used. If you are thinking of using this type of arrangement, we strongly advise to steer clear.
Prepare for tax changes if you engage or supply contractors – Off-payroll working rules (IR35)
Actions you may need to take to prepare
If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6 April 2021. For all contractors working through their own limited company, you need to:
- identify contractors who work in this way
- decide if they are inside or outside the rules
- inform your contractors of their status determination, and any agencies you engage with
- be ready to add them to payroll if needed
- be ready to deal with any disputes
- maintain a robust audit trail, and test your processes, systems and controls
If you are an employment agency which supplies contractors who work through their own limited company or other intermediary, you need to understand the changes and may also need to take action. You need to:
- identify contractors who work in this way
- be ready to pass on the status determination statement to any agencies you engage with down the supply chain or be ready to put contractors onto payroll
- maintain a robust audit trail, and test your processes, systems and controls
HMRC have committed that they will take a supportive approach and help customers who are trying to do the right thing. HMRC is also committed that customers will not have to pay penalties for inaccuracies relating to the off-payroll working rules in the first 12 months unless there is evidence of deliberate non-compliance. This intent has not changed.
If you are a small business the changes to the off-payroll working rules do not apply to you, or the contractors you may engage. This is because the contractor’s limited company or other intermediary will remain responsible for determining if the contract is inside the off-payroll working rules, and accounting for and paying the relevant Income Tax and National Insurance Contributions.
If the rules do not apply to you because you are a small business, tell your contractors.
Changes to the Construction Industry Scheme
Legislative changes to tackle Construction Industry Scheme (CIS) abuse are planned for April 2021.
These changes will clarify:
- the definition of deemed contractors
- that materials can only be claimed by the sub-contractor incurring the cost
- that the scope of the false registration penalty is being extended
HMRC will also have the power to amend the CIS deduction amounts claimed by sub-contractors on their Real Time Information (RTI) Employer Payment Summary (EPS) returns.
The government has agreed social security coordination provisions with the EU in the Trade and Cooperation Agreement. These make sure workers who move between the UK and the EU only have to pay into one country’s social security scheme at a time.
Working temporarily in the UK or EU
If you are sending an employee to work temporarily in the EU, you or your employee can apply for a certificate or document from HMRC, so that for up to 24 months, you can both continue to only pay National Insurance contributions in the UK.
If you are bringing an EU-based employee to work in the UK temporarily, they can also apply for a certificate from the EU Member State in which they are based. This will make sure you and your employee will only pay social security contributions in their home country for up to 24 months.
Student and postgraduate loans
Student and postgraduate loans thresholds and rates
From 6 April 2021 are:
- Plan 1 – £19,895, earnings above this threshold will continue to be calculated at 9%
- Plan 2 – £27,295, earnings above this threshold will continue to be calculated at 9%
- Plan 4 – new plan type, Scottish Student Loans (SSL) £25,000, earnings above this threshold will be calculated at 9%
- Postgraduate loan (PGL) – £21,000, earnings above this threshold will continue to be calculated at 6%
Student and postgraduate loans and Off-payroll working rules
Organisations are not responsible for deducting either student loan or postgraduate loans, or both, for workers engaged through their own companies. The worker will account for either student loan or postgraduate loan, or both, obligations in their own tax return.
New National Minimum Wage rates and changes to the National Living Wage qualifying age
From 1 April 2021 the National Minimum Wage rates are increasing.
The age from which workers become eligible for the higher National Living Wage will be lowered. This means that from 1 April 2021 workers aged 23 and over will now also be entitled to be paid at least the National Living Wage.
Employers should make sure they are ready by:
- taking appropriate payroll action for all workers who are eligible
- continuing to pay their workers what they are entitled to
Notice of Coding
Notice of Coding email notifications will be sent from week commencing 8 February 2021 to 7 March 2021. The notice advises that the coding for the tax year starting 6 April 2021 can be viewed online.
We expect paper P9 coding notices to arrive with employers on or around 19 March 2021.
If you have any employees who live in Scotland or Wales for most of the year, they need to make sure HMRC has their correct address on record. This is so they pay the correct amount of Income Tax as rates and tax bands vary between England, Scotland and Wales.
Register as an employer
You normally need to register as an employer with HMRC when you start employing staff or using subcontractors for construction work. You must register before the first payday.
Once HMRC has processed your request, it takes 5 working days to get your new Employer PAYE reference. You cannot register more than 2 months before you start paying people.
If HMRC does not receive any submissions or information within 120 days following the issue of your new PAYE reference, then your PAYE scheme may be cancelled.
If you do not pay anyone for a period longer than one month, but still require your PAYE scheme to remain open, you can tell HMRC by completing the ‘Period of Inactivity’ fields on your Employer Payment Summary. Guidance is available on what payroll information to report to support you.
Failure to do this may result in your PAYE scheme being incorrectly stopped. You will not always receive written notification from HMRC when this happens.
PWA is happy to apply for any new payroll for you FOC.
National Insurance number delays – update
The Department for Work and Pensions (DWP) is offering a limited National Insurance number service, but you can now employ someone before they have their National Insurance number, provided you can confirm they are legally entitled to work.
When applying for a National Insurance number all applicants need to have their identity verified. DWP continues to work on developing a digital service. The latest version is currently being tested and will enable applicants, whose identity has been verified by another UK Government Department, to make an application for a National Insurance number.
Business Tax Account – 2013 to 2014 and 2014 to 2015 data to be removed
The Business Tax Account currently shows employers’ liabilities and payments data for 2013 to 2014 onwards. In line with HMRC’s other online services, this will be limited to current tax year plus the previous 6 years.
The change means that data for 2013 to 2014 and 2014 to 2015 will not be shown on the Business Tax Account.
National Insurance holiday for employers of veterans
At Spring Budget 2020, the Chancellor announced the introduction of a National Insurance holiday for employers that hire former members of the UK regular armed forces. The holiday will exempt employers from any National Insurance contributions liability on a veteran’s salary up to the Upper Secondary Threshold (UST) in their first year of civilian employment.
This relief will be available from April 2021. Employers will be able to claim this relief for 12 months starting from the first day of the veterans first civilian employment after leaving Her Majesty’s armed forces. Subsequent employers will be able to claim this relief during this 12 month period.
A full digital service will be available to employers from April 2022; however, transitional arrangements will be in place in the 2021 to 2022 tax year which will effectively enable employers of veterans to record details of veterans’ employments to then claim the holiday relief from April 2022.
Van benefit and car and van fuel benefit uprating for 2021
The government has announced that the van benefit charge and fuel benefit charges for cars and vans will be uprated by the Consumer Price Index from 6 April 2021. The uprate will take effect as follows:
- van benefit charge will uprate from £3,490 to £3,500
- car fuel benefit charge multiplier will uprate from £24,500 to £24,600
- van fuel benefit charge will uprate from £666 to £669
Company car changes for P11D: Ultra-low emission vehicles and Worldwide Harmonised Light Vehicle Test Procedure
Ultra-low emission vehicles (ULEV)
To support the Government’s commitment to improving air quality in towns and cities, HMRC are changing the car and car fuel benefit calculation.
On 6 April 2020, HMRC introduced 11 new bands for ULEVs including a separate zero emissions band.
If a car has a CO2 emission figure of 1-50g/km you will now need to provide the car’s zero emission mileage. This is the distance that the car can travel in miles on a single electric charge.
Worldwide Harmonised Light Vehicle Test Procedure (WLTP)
In 2017, the Government announced that it will replace the system for measuring car emissions for the purposes of calculating company car tax and vehicle excise duty with the implementation of the new testing regime, the WLTP.
WLTP aims to be more representative of real-world driving conditions.
Following a review which reported in July 2019, the Government confirmed that new cars first registered from 6 April 2020 will use CO2 emission figures based on WLTP. Cars registered prior to 6 April 2020 will use CO2 emission figures based on the current testing regime, New European Driving Cycle (NEDC).
How this affects you
There will be no change to the way you currently report your company car tax data. However, you may need to provide additional information on the P11D.
PWA offers a P11D service at a very reasonable cost.
Completing section F on a P11D for the 2020 to 2021 tax year
From 6 April 2021 a new zero emission mileage field will be shown on the P11D form. If a car has a CO2 emission figure of 1-50g/km you will now need to provide the car’s zero emission mileage. This is the maximum distance in miles that the hybrid car can be driven in electric mode without recharging the battery.
- The online P11D will be updated with the changes. For paper P11D submissions you will need to make sure you complete the latest version as historic copies may not include the new zero emission mileage field.
- From 6 April 2021 it will be mandatory to provide the date a car is first registered. A new field will be available to enter this information.
If you are leasing the vehicle, you should get this new data item in the same way you currently receive your Company Car Tax reporting data from the car leasing firm or fleet provider.
If this information is not available, you can get the zero emission mileage figure via the car’s manufacturer.
If you own the vehicle, the zero emission mileage figure can be found on your vehicle’s Certificate of Conformity (CoC).
The zero emission mileage maybe displayed as ‘electric range’ on the CoC, for hybrid cars registered:
- before 6 April 2020 (NEDC) the ‘electric range’ within section 49.2 on the CoC should be used
- from 6 April 2020 (WLTP) the ‘electric range (EAER)’ within section 49.5.2 on the CoC should be used
This may also be referred to as combined or equivalent Annual Equivalent Rate (AER) (EAER) combined.
If the zero emission mileage figure is displayed on the CoC in kilometres, you will need to convert the figure into miles and round up to the nearest mile before updating this field on the P11D.
Failure to get the data from the correct source could lead to incorrect company car benefit in kind being calculated.
The car’s date first registered can be obtained through the car leasing firm or fleet provider. The information is also available on the car’s logbook (V5C).
For car averaging purposes in tax year 2020 to 2021 onwards any notional CO2 between 1-50g/km will need a zero emission mileage figure. If this scenario applies a default figure of 50 should be entered in the zero emission mileage field when submitting the company car details to HMRC.
Changes to the treatment of termination payments and post-employment notice pay for Income Tax
In July, HMRC published draft legislation affecting Post-Employment Notice Pay (PENP). These changes are expected to take effect from 6 April 2021, pending Parliamentary approval.
The changes give an alternative PENP calculation where an employee’s pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months. From 6 April 2021, employers will need to use the alternative calculation for all employees who meet these criteria. Employers have had the option of using this calculation since October 2019, on an extra-statutory basis, but from April 2021 it will be required.
These changes also align the tax treatment of PENP for individuals who are non-resident in the year of termination of their UK employment with the treatment for all UK residents. From 6 April 2021 earnings that arise pursuant to PENP will be subject to Income Tax, Class 1 National Insurance contributions and PAYE for non-residents to the extent that they would have worked in the UK during the notice period.