The answers provided to the questions below cannot be relied upon without checking with your accountant and/or tax advisor first. The information is correct for the specific question asked, but may change over time as a result of legislation and may not apply in your particular case. We cannot take any responsibility for action taken as a result of relying on these Q&A scenarios.
Corona Virus - Furlough Scheme & Job Retention Scheme
Please explain the furlough rules, as I understand they have changed from 1 July 2020.
You are correct; from 1 July 2020 the furlough rules have become more flexible to encourage employers to help ease employees back to work by allowing them to work part of the time and furloughed for the remainder.
At the same time, the Govt. furlough support is being reduced as employers take more of the burden of the furlough cost.
From 19 March until 30 June 2020, an employee who was furloughed was not allowed to carry out any work for their employer. The employer could apply to HMRC for a full refund of 80% of the Employees gross salary (up to a maximum of £2,500 per month) plus associated Employers NI and pension costs.
From 1 July, HMRC support will slowly reduce and is due to stop on 31 October 2020.
The changes are as follows:
July- No change to previous support
August – As for July, but furlough no longer reimburses Employers NI and Pension payments
September – As for August, but furlough support is only 70% of Employees Gross salary up to a max. of £2,187.50 per month
October- As for September, but furlough support is only 60% of Employees Gross salary up to a max. of £1,875.
Please note that despite HMRC support reducing in September and October, the furloughed employee is still entitled to 80% of their gross salary; it is just the HMRC support which is reduced.
The Furlough scheme ends on 31 October 2020.
Can I bring a ‘furloughed’ employee back to work on a part-time basis?
Yes, but prior to 1 July, after that week’s work, the employee had to be furloughed for 3 more consecutive weeks. From 1 July the furlough rules have been relaxed and flexi-furlough is now possible, where the employee can be working part of the time and on furlough for the remainder.
When the Furlough scheme ends on 31 October 2020, what replaces it?
The furlough scheme ends on 31 October 2020 and a new scheme, known as the ‘Job Support Scheme’ will replace it.
The Govt. has shifted the emphasis from paying employers to keep staff on their payroll even if they are unsure a job exists, to subsidising employers to retain staff, even if they only require them to work 33% of their usual hours. Any less than 33% rules the employer out the Job retention scheme.
What is the Job Retention Scheme (‘JRS’) and when does it start and stop ?
The JRS will starts on 1 November 2020, the day after the Furlough scheme ceases, but it is not alike for like replacement and will last until 30 April 2021.
It is intended to encourage employers to retain employees where a job exists, but they cannot be taken back full time. It will not help employees where they cannot work at least 33% of their usual hours.
The rules are:
- The employee must have been on the payroll since at least 23 September 2020
- The employee must be working for a minimum of 33% of their usual hours to be eligible
- The employee is then paid 2/3 of any hours when they are laid off
- The employer pays for all the hours worked
- The employer and HMRC pay 50% each of the 2/3 of the hours not worked, but HMRC’s contribution is capped at £697.72 per month
Eg. If an employee works 33% of their usual hours, they receive 77% of their normal wage and the employer pays the first 55% and HMRC the balance of 22%
Can I be furloughed in my main job, whilst having another job in which I am still working?
The answer is yes, as long as your main employer agrees. As far as HMRC are concerned, it is not a problem.
Corona Virus- Self Employed
I am self employed and last year my profit was £25,000. What help can I get? My wife is self employed too, but she earned £60,000 last year. Can she get help too?
There is good news and bad news.
1.Any Self employed person (or partner in a business) who earned less than £50,001 last year (2018/19) and whose self employed income was less than 50% of their total income, will be eligible for support under the Self Employed Income Support Scheme (SEISS).
2.The SEISS was initially only for the period Apr-Jun20 and consisted of a grant from HMRC of 80% of their profit in equal monthly instalments, up to a max. of £2,500 per month, being £7,500 in total. This will be paid in one lump sum.
3.The SEISS has now been extended for another 3 months – see Q&A below for more details.
4.Your wife, who earned over £50,001 is disqualified from this scheme and gets nothing.
5. You must contact HMRC and make a claim, via the online form, but the claim for the first period Apr-Jun20 must be made before 13 July 2020
When does the Self Employment Income Support Scheme end and how do I qualify?
Yes. The Self Employment Income Support Scheme (SEISS) which initially covered the period Apr-Jun20 only and was capped at the lower of 80% of self employed earnings for the previous year, with a maximum payment of £7,500 for the 3 months, has been extended for a further 3 months to cover the period Jul-Sep20, but the maximum payout has been reduced to the lower of 70% of self employed earnings with a maximum payout of £6,570 for the 3 months.
Corona Virus- Other Government Support
What is the Government doing to help employers ?
The Govt. have introduced a series of measures intended to help businesses survive during this period of enforced closures. They have been well documented on the Govt. website, www.Gov.UK and in articles in our Relevant News section on this website.
The following is a list of those measures:
- Furlough scheme (running until 31 October 2020
- Job retention scheme (starting 1 November 2020)
- Postponement of payment of VAT due between Apr-Jun2020, until January 2021
- Postponement of personal tax, due 31 July 2020, until 31 January 2021
- Business Interruption loan scheme
- Bounce back loan
- Self employed Income support scheme
- One year rates holiday and Govt. grant of £10,000/£25,000 for businesses occupying premises with a rateable value below £50,000
- Job retention bonus of £1,000 per employee
What is a bounce back loan ?
This is a 100% Government guaranteed bank loan calculated as a maximum of 25% of the businesses’ annual turnover, to a maximum of £50,000, in which there are no charges, interest or repayments in Year 1. Thereafter, interest Is capped at 2.5%pa and the loan repayable over 5 years. The business must be based in the UK and affected by the coronavirus.
What is the Job Retention Bonus ?
This is a one-off payment to employers of £1,000 for every employee who they had previously furloughed and who remains continuously employed until 31 January 2021. The employee must be earning £520 per month on average between 1 November 2020 and 31 January 2021, to be included in the scheme.
PERSONAL AND BUSINESS TAX
What are the recent changes to Stamp Duty Land Tax (SDLT) and what does it mean for a house buyer?
SDLT is paid on the purchase of UK based property.
When purchasing a UK residential property as your main and only home, the first £125,000 was free of SDLT and then SDLT was charged on higher rates as the value increased.
The Chancellor has increased the free band to £500,000 from 8 July 2020 until 31 March 2021, so no SDLT is payable at all on this amount during this period, saving £15,000 in SDLT.
However, if it is a second (or more) property there remains a 3% SDLT surcharge and there is no saving to be had,
I don’t think I will be able to pay my self-assessment tax in January 2021. What should I do?
If you cannot pay your Self-Assessment tax bill next January 2021 and owe £30,000 or less then you might be able to set up a Time to Pay Arrangement (‘TTP’) arrangement which lets you pay your Self-Assessment tax bill in instalments.
You must call the Self-Assessment helpline (details below) and explain your predicament; HMRC are willing to help with payment arrangements, but may ask for evidence of your income and expenses and reasons why you cannot pay; Covid related reasons are viewed favourably.
Only agree to monthly amounts that are affordable and do not be pressurised into making unrealistic payments that you cannot maintain.
We can help you, if you need to present information to HMRC.
Self Assessment Payment Helpline
Telephone: 0300 200 3822
HMRC Coronovirus Helpline
Telephone: 0800 015 9599
What is the rate of VAT?
The VAT rate remains at 20% but from 15 July 2020 until 12 January 2021 there is a temporary reduced rate of VAT to 5% for certain supplies of:
• Hotel and holiday accommodation
• Admission to certain attractions
Please go to the Government website (www.gov.uk) for the full list of supplies, but a sample of the most popular are:
• Food and non alcoholic drink sold on premises
• Hot takeaway food
• Sleeping accommodation min hotels
• Admission fees to theatre, cinema, exhibitions, concerts etc
I bought a property in my name some years ago to provide me with additional income both now and in my retirement. I understand the HMRC have changed several things that affect the tax I pay on this rental income, but I am not sure what they are. Can you help?
Thank you for your question. This is something which affects many taxpayers and there is a lot of ignorance surrounding these important changes.
From 1 April 2016, HMRC withdrew the right to deduct 10% from the rental income on furnished lettings that previously allowed for general wear and tear. The immediately increased the profits subject to tax.
Furthermore, HMRC withdrew the ability to deduct loan interest from the rent, to calculate taxable profit. Instead, they tax the rent at the top rate but only allow tax relief on the interest at 20%, which significantly increases the tax liability for 40% taxpayers where interest was a large part of the cost.
Somebody told me that when I sell a property, I have to pay tax straightaway. Is that right?
If you are selling your own home, then as long as it is within 9 months of moving out, then there is no tax to pay, as any gain is exempt, After 9 months, any future gains may be subject to Capital Gains Tax.
If you are selling an investment property, then the gain arising between the time you bought it and the selling price less direct expenses, is subject to capital gains tax at up to 28%.
As from 6 April 2020, this must be paid within 30 days of the sale, whereas prior to that date it was the 31 January following the year of the sale, so a very significant difference.
The important thing to be aware of, is not just the tax, but having the information from when you purchased the house and any major improvements, so as to be able to calculate the gain.
Can I gift my property to my children, as I don’t need the income and maybe it will help reduce any Inheritance Tax when I’m gone? I presume there is no tax on making the gift?
Thank you for this question, which seems simple, but is anything but.
The simple answer is ‘yes,’ you can gift anything as there is no Inheritance Tax on lifetime gifts, BUT if you die within 7 years of making the gift, it will be included in your Estate for Inheritance Tax.
But the second part of your question is not so obvious. Making a gift of property will trigger Capital Gains Tax, even though no money changes hands. The gain is the difference between the purchase price (or value at 5 April 1982 if later) and the sales price and the Capital Gains Tax @28% of this figure is payable 30 days later.
If the donor dies within 3 years of making a gift of a property, then it the worst of all worlds; both the Capital Gains Tax @ 28% at the time of the gift and the Inheritance Tax on the property at value at date of death at 40%.
I am the director of a UK limited company and we are growing very quickly. Last year our company’s Turnover was £7 million with total assets of £6 million and over 100 employees. I am not sure if I need an audit, as my turnover is below the £10 million audit limit.
The short answer is you do need an audit. The reason is there are 3 statutory limits, and an audit is required if any 2 of them are breached. You company’s turnover is below the £10.2M limit but breaks both the other limits of £5.2M assets and 50 employees.
My company does not need an audit, but I am worried that something is not right. Is the audit a ‘sort of’ guarantee?
The audit process is what you think; it is not a guarantee of anything, but rather our objective as auditors is to obtain reasonable assurance that the financial statements are free from material misstatement, whether due to fraud or error. The word ‘material’ is defined as anything that could reasonably be expected to influence a reader of the accounts to form a different conclusion. It is true that as part of the audit, we highlight in the audit report whether: The accounting records are accurate The financial statements agree to those records All required disclosures have been made We received all the information and explanations we requested and if we are not satisfied, we qualify our audit and explain the problems we encountered.
I have offered my top manager a company car, but he is nervous about being taxed on it. Is there a cost for him and is there a cost to me, his employer?
MAYBE and MAYBE This seems a strange answer, but it’s true. It depends on what car you provide The car is a benefit to the employee, provided by the employer and this benefit is calculated by a fixed percentage of the list price of the car when new and not the cost paid by the company. From 6.4.20 for one yea only, the % for electric cars is Zero! Hence the benefit is zero and the tax for both employee and employer is zero. For tax year 2021/22 this increases to 1% and for 2022/23 to 2%, so it is extremely tax efficient to receive an electric company car. Hybrids, petrol and diesel cars have higher and higher %s, which can be checked online, applied to the list price and hence the benefit is higher.
How much can I earn tax free?
This depends on the type of income and gain.
The basic rules are as follows:
|Income Tax||£12,500 tax free allowance on any income|
|Savings allowance||£5,000 tax free if majority of income is from savings|
|£1,000 tax free if minority of income from savings|
|Dividend allowance||£2,000 tax free|
|Capital Gains Tax||£12,000 tax free|
|Rent a room||£7,500 tax free|
In a possible scenario, a tax payer could have:
|Rent a room in their home||£7,500|
|And pay no tax|