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HELP FOR INDIVIDUALS AND THE SELF-EMPLOYED

If you have any questions, please get in touch with our COVID-19 Task Force here


RELEVANT AS OF 1:00pm 24 November 2020
Personal Wealth

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What does being furloughed mean?

If your employer does not have sufficient work for you at present due to the impact of the coronavirus pandemic on their business, you may be furloughed under the Coronavirus Job Retention Scheme (CJRS)

HMRC have confirmed that in addition to applying to general employees, the CJRS can extend to cover directors of a company and salaried partners of a Limited Liability Partnership.

Further details on the CJRS are given here.

Statutory Sick Pay (SSP)

Employees are now eligible to receive SSP (at £94.25 per week) if they need to self-isolate because of coronavirus. They will also be able to receive their SSP from day one, rather than from the fourth day of their absence from work. SSP will be payable to those staying at home on government advice, as well as those who are infected, e.g. if someone in your household is sick and you are self-isolating.

If employees need to provide evidence to their employer that they need to stay at home due to coronavirus, they will be able to get it from the NHS 111 online service instead of having to get a fit note from their doctor. This service was launched on 20 March.

Are you eligible for Tax-Free childcare?

Temporary changes have been made to the qualifying criteria for Tax-free childcare and 30 hours free childcare during the COVID-19 crisis.

These may impact on you if you (or somebody you live with) is either:

  • On furlough,
  • Not able to work or is working less,
  • Self-employed, or
  • A critical worker.

Further details can be found here.

Council Tax 2020-21 Hardship fund

As part of its response to COVID-19, the government announced in the Budget on 11 March that it would provide local authorities in England with £500 million of new grant funding to support economically vulnerable people and households in their local area.

Further details on this fund have now been provided here

Deferral of 31 July 2020 Self-Assessment payments on account for all, not just the self-employed 

If you are personally within the self-assessment tax return regime and were due to make a payment on account on 31 July 2020, you may be one of the 11 million people that deferred this payment until 31 January 2021 without incurring any interest or penalties. If you did this, you can still make the 31 July payment on account at any time before 31 January 2021, without incurring any interest.

On 24 September 2020, Rishi Sunak announced that this deferral has been extended further for. Taxpayers with up to £30,000 of Self-Assessment liabilities due on 31 January 2021 will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months (up to 31 January 2022). This will include liabilities that would ordinarily be due on 31 Jan 2021, as well as any liability that was due on 31 July 2020 but had been deferred until 31 Jan 2021. The self-service facility can be found by logging into your usual HMRC account and it is available to taxpayers who:

  • Are up to date with submitting their tax returns (so make sure you file your 19/20 tax return by 31 January 2021)
  • Do not owe any other taxes to HMRC
  • Do not have any other payment plans set up with HMRC
  • Owe between £32 and £30,000 in Self-Assessment tax
  • Make an application within 60 days of the usual tax due date.

Interest will be charged on the tax but only from 1 February 2021. HMRC’s current official interest rate is 2.60%.

Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan. See more detail here.

Are you late in paying a tax liability or filing a tax return?

If so, under normal circumstances you are likely to incur an interest charge and/or a penalty unless HMRC agree that you had a ‘reasonable excuse’.

HMRC have updated their guidance to confirm that if your ability to deliver your tax return or pay a tax liability was impacted by COVID-19 then this may constitute a reasonable excuse.  However, in your appeal against any interest/penalty charge you will need to explain how it impacted on your ability to meet your reporting/payment obligations and demonstrate that you took remedial action at the earliest opportunity.

Reduced charges for withdrawals from Lifetime ISAs (LISAs)

The Treasury has announced that withdrawals from LISAs between 6 March 2020 and 5 April 2021 will be subject to a reduced withdrawal charge of 20% (normally 25%). Anybody who has withdrawn funds since 6 March 2020 and were charged a 25% withdrawal charge will be refunded the difference.

Salary sacrifice arrangements

If your employer operates a flexible benefits package then some of the options may involve a salary sacrifice arrangement that can only be changed when a ‘life-event’ occurs e.g. marriage, birth of a child etc.

HMRC have updated their guidance to confirm that the current Covid-19 pandemic will count as a ‘life-event’ and therefore if you wish to change any of your salary sacrifice arrangements you should contact your employer to see if this is possible.

WHAT IF I’M SELF-EMPLOYED? 

On 26 March the Chancellor announced the first grant under the Coronavirus Self-employed Income Support Scheme (SEISS) and on 29 May announced that there would be a second grant in August 2020.  It was previously announced that this would be the final grant under the scheme. However, on 24 September the government announced that further grants will be provided. This will benefit people who are currently eligible for SEISS (although they do not have to have made a claim) and either temporarily cannot trade or are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year. After the November lockdown announcement, the third grant was increased and will cover 80% of average monthly profits for November to January, up to a cap of £7,500. Claims for this grant can be made from 30 November and must be made before 29 January 2021. An additional grant, which may be adjusted to respond to changing circumstances, will be available to cover the period from February 2021 to the end of April.

HMRC’s guidance on the scheme can be read  here.

SEISS is for certain self-employed individuals (including partners in a partnership) and is in the form of a taxable grant.

It is available for self-employed individuals (including partners in partnerships) whose business has been adversely affected by the coronavirus pandemic, but who still traded during 2019/20 and 2020/21 (or would have done if it weren’t for coronavirus). This does mean that if you incorporated your self-employment business during 2019/20, you will not be able to claim the grant.

It is important to note that your business must have been adversely affected by the pandemic and that HMRC may challenge claims at a later date which could result in a need to repay the grant and possibly penalties in extreme cases.  In this regard, HMRC have published some example scenarios HERE of how a business might be adversely affected.

It is possible for people receiving the grant to continue working as self-employed or take on another employment including voluntary work.

When announcing the scheme the Chancellor made reference to the fact that the self-employed would be receiving support similar to that received by the employed, despite the fact that they made lower National Insurance contributions and that this would need to be considered in the future. Consequently, we are expecting to see significant changes to the taxation of the self-employed in the future.

HMRC is looking for SEISS grants to be taxable on receipt in the 2020/21 tax year, irrespective of the business accounting date and with no allocation of any part of the grant to 2019/20.

They have also indicated that their intention is to recover any SEISS grant which was not due by way of a 100% tax charge in a manner which is independent of the self-assessment tax return, although penalties are only likely to be levied in cases of deliberate non-compliance.

The first and second grants under the SEISS

The scheme is now closed to new claims for the first and second grants. The eligibility criteria is the same for both grants, and is summarised below

The grant is calculated based on your average profits and losses for the 2016-17, 2017-18 and 2018-19 tax years (where applicable). The maximum grant is £2,500 per month or 80% of your average monthly profits for a three month period (whichever is lower).

The “average profit” figure is calculated by deducting allowable business expenses and capital allowances from your total trading income for that period. It does not take into account, losses carried forward from previous years, or your personal allowance.

To qualify, trading profits cannot exceed £50,000 and must make up more than half your total income. Both these criteria are determined by either looking at your 2018-19 trading profits or, alternatively, an average of the position for the 2016-17, 2017-18 and 2018-19 tax years. If you have only recently become self-employed, such that you did not report self-employment income in the 2018-19 tax year, you will not be able to apply for the grant. Click here for more information on how HMRC will work out trading profits and non-trading income for SEISS.

You should not claim the grant if you are above state aid limits or operating a trade through a trust. The grant is not counted as ‘access to public funds’, and therefore may be claimed on all categories of work visa.

Check if your circumstances affect your eligibility, for any of the following:

  • if your return is late, amended or under enquiry
  • if you’re a member of a partnership
  • if you’re on or took parental leave
  • if you have loans covered by the loan charge
  • if you claim averaging relief
  • if you’re non-resident or chose the remittance basis
  • if you’re above the state aid limits
What else should I be aware of?

If you’ve overclaimed through the SEISS, you must notify HMRC within 90 days of receipt of the grant (or by 20 October 2020 if you received the grant before 31 July). HMRC will be issuing penalties and they’re clear that the onus is on the taxpayer to alert them of overclaims. You can read more here.

Those affected by coronavirus will be able to apply for Universal Credit and can receive up to a month’s credit up front without physically attending a job centre. The notes available from the NHS 111 online service will also be accepted by job centres as evidence of not being able to attend.

New Employment Support Allowance (ESA) claimants usually need to wait seven days before being eligible for their money, but this will now not apply if they are suffering from coronavirus or are required to stay at home. Instead it will be payable from day one.

HMRC have also relaxed the rules surrounding claiming Universal Credit to make it easier to claim during the period of the outbreak. The ‘Minimum Income Floor’ for the self-employed who have been affected by the economic impact of the pandemic will be removed, meaning they can access Universal Credit at a rate equivalent to statutory sick pay.

In the meanwhile don’t forget that despite the Budget confirming that the new rules around off-payroll workers in the private sector would apply from 6 April 2020 the uncertainty brought by the COVID-19 pandemic has led to the government postponing the introduction of this legislation for a year until April 2021.

How does this affect other government benefits?

Individuals working reduced hours due to Covid-19 or who have been furloughed by their employer will not have their tax credits affected, the Government has confirmed.

Individuals can continue to claim Working Tax Credit and be treated as if they were working their normal hours.

Disabled and sick claimants who cannot attend a reassessment for their Personal Independence Payment (PIP) or ESA, due to coronavirus, will continue to receive their payments while their assessment is rearranged. Claimants who are staying at home as a result of coronavirus will have their mandatory work search and work availability requirements removed to account for a period of sickness.

Tenants and Landlords

Housing Secretary Robert Jenrick has announced that emergency legislation is being implemented to stop new evictions from both social and private rented accommodation amidst the national emergency. Landlords were previously not able to start proceedings to evict tenants during the pandemic. However, this legislation has now expired and courts are able to start reviewing proceedings again.

However, the government has also been working to widen the ‘pre-action protocol’ on possession proceedings. This means that prior to landlords starting proceedings to evict a tenant, there is an increased burden on the landlords to make every effort to work with tenants to try and resolve the issue privately before taking the matter to court.

The government also recognised the additional financial pressures on landlords, confirming that the three-month mortgage payment holiday (announced on the 17th March) will be extended to landlords whose tenants are experiencing financial difficulty due to the virus. Following the November lockdown announcement, the government confirmed that borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.

Non-UK residents remaining in the UK due to the pandemic

If you are non-UK resident and have been forced to stay in the UK due to the coronavirus restrictions, HMRC may disregard up to 60 additional days that you spend in the UK for the purposes of certain tests under the Statutory Residency Test legislation on the basis that the pandemic falls under the category of ‘exceptional circumstances’.  However, this will depend on the specific facts and circumstances of each case and therefore professional advice should be sought.

If you need any help, please get in touch with Sarah Axe

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