As we explained in our newsletter on 7 May 2020, the self-employed income support scheme (SEISS) was rolled out without access for tax agents. This means your clients have had to submit their own claims, and will no doubt turn to you to sort out any muddles.
If your client has been told by HMRC that he is not eligible to claim SEISS, this may be due to fat finger mistakes when typing the UTR or NI numbers. You can double check the SEISS eligibility by using the online eligibility checker. There is an option at the end to complete a form to request a review by HMRC. You can do this as the taxpayer’s agent.
You may have told your self-employed clients how much SEISS grant to expect. Your client can forward to you the calculation of the SEISS grant which is reflected to him at the end of the claims process. If this figure is not what you expect you or your client can request a review.
The taxpayer should do this as part of the SEISS claim process, but you need to request the review through your own agent’s portal. You will need the following data about the client to hand:
grant claim reference
national insurance number
You will also need to say why you think the HMRC calculation of the grant is wrong.
We outlined how the SEISS grant would be calculated in our newsletter on 16 April 2020, but HMRC has recently added more examples of how it uses the figures reported in the tax returns for 2016/17 to 2018/19. Read this guidance before appealing.
Many employees are now required to work at home as their workplace is closed. Some employers have been very supportive of their employees, providing all the equipment required, and reimbursing expenses, others not so much.
As we explained in our newsletter on 9 April 2020, employers can pay their employees a homeworking allowance to compensate for the additional household expenses incurred when working at home. Where the allowance doesn’t exceed £6 per week (£26 per month) the employee is not required to provide evidence of additional costs, and the payment is tax-free and NIC-free (ITEPA 2003, s 316A).
If the employer doesn’t pay the homeworking allowance, HMRC’s view was the employee could only claim a tax deduction for additional homeworking costs under ITEPA 2003, s336, which has much stricter conditions.
However, on 15 May 2020 HMRC changed its policy as set out in the Employment Income Manual (EIM32815). It will now accept claims for homeworking expenses from employees of £6 per week (£26 per month) under ITEPA 2003, s 336 with no proof of the costs required. The cost of business telephone calls can be claimed in addition to this deduction.
HMRC also implies that homeworking expense claims for periods before 6 April 2020 will be accepted using the rate of £4 per week (£18 per month). Such claims can be submitted on the SA tax return or using form P87, but they must be made within four years of the end of the tax year to which they apply.
In our newsletter on 9 April we also warned that where the employee has purchased office equipment to allow them to work from home, any reimbursement of those costs by the employer could create a taxable benefit. However, that problem will now be resolved by a change in regulations.
There will be a temporary tax exemption where employees are reimbursed for the cost of equipment needed solely for them to work at home, where the payment is made to the employee between 16 March 2020 and 5 April 2021.
The UK-wide stay at home instruction arrived so quickly that many people were not able return a company car that they were no longer permitted to use. In such circumstances the car remains available to the employee to use privately and hence the taxable benefit continues.
HMRC will accept that the company car is “not available” and not taxable (even where it is parked at the employee’s home) in two circumstances:
The contract to lease or provide the car has been terminated, and the car keys have been returned to the employer or to an approved third party (eg the dealer).
The lease contract has not been terminated, but the car keys have been returned to the employer or approved third party, then 30 days after the keys were returned the car will be considered to be “not available”.
Remember all electric company cars have zero taxable benefit in 2020/21 (our newsletter 28 November 2019), so its not necessary to change the lease on the director’s Tesla.
Where the employee is using their company car or their own car for voluntary work during the coronavirus crisis, and the employer is reimbursing the mileage costs, those reimbursements are taxable. This is because the journeys undertaken for voluntary work are not business journeys. The reimbursed amounts must be reported on the P11D or included in a PAYE settlement agreement.
Some employees are living away from home while continuing to work, to avoid infecting members of their household with the coronavirus. Where the employer is paying for that alternative accommodation, that amounts to a taxable benefit, which must be reported on the P11D for the relevant tax year.
Employees who live on the site of their permanent employment, are taxed on the value of that accommodation unless one of these conditions are met:
Its necessary for the employee to live there to properly carry out their duties
The accommodation is provided to allow the employee to better perform their duties and it is customary for such employees to use such accommodation; or
There is a threat to the employee’s security and special security arrangements are in force that require the employee to live in that accommodation.
NB: HMRC has not confirmed whether “security arrangements” includes health security, as it normally means a terrorist or stalker type threat.
On 30 April the Government announced two VAT rate changes from standard rate to zero rate, for digital publications and personal protective equipment (PPE), both to take effect from 1 May 2020.
The rate change for digital publications was due to apply from 1 December 2020, as announced in the March 2020 Budget, timed so subscriptions taken out as Christmas presents would qualify for the lower rate.
However, during this coronavirus lockdown sales of physical newspapers and magazines have plummeted, while students are having to use digital materials to continue their studies. The Government has therefore decided to lower the VAT rate immediately.
Publishers may have missed this change in the middle of the other chaos, so check that your clients have changed their systems to account for the correct VAT rate from 1 May 2020. Pricing policies may also need to be reviewed.
Clubs and societies which distribute a physical magazine will also benefit as currently they need to apportion part of their membership subscriptions to the zero-rated magazine. Now they will not be penalised by switching to 100% digital publications.
The change in VAT rate for PPE is only temporary; it applies for sales made between 1 May 2020 and 31 July 2020 inclusive. Where businesses have recently started to produce say hospital gowns or face masks, check that VAT has been correctly accounted for.
The VAT due for the quarter to 31 March 2020 is payable by 7 May 2020, and where a direct debit is set up the amount due would normally be collected by 10 May. However, as 8 to 10 May is a long bank holiday weekend, the DD will be collected on 7 May 2020.
Where your client wants to take advantage of the deferral of VAT payments between 20 March and 30 June remind them to cancel their DD for paying VAT. This can be done the online VAT account or by contacting their bank. Agents can’t change banking details on behalf of a client.
HMRC has updated its guidance concerning the VAT deferral, confirming that annual account advance payments due between 20 March and 30 June can also be deferred, but not VAT MOSS payments or import VAT. Any deferred VAT will have to be paid on or before 31 March 2021.
Many businesses may be due a VAT repayment in the current VAT period as they have little or no sales, but still have bills that include VAT. To obtain these repayments quickly the business can change to monthly VAT returns by altering their VAT periods in their online VAT account.
If you have taken on a new client and you want authorisation to act for VAT, the online authorisation form asks for the box 5 figure from the “last VAT return”. However, since the VAT returns submitted under MTD enter HMRC via an API, the authorisation system can’t see them. To answer the question correctly you need to supply the box 5 figure from the last VAT submitted before MTD.
The annual tax on enveloped dwellings (ATED) is payable for UK residential properties worth over £500,000 which are owned by companies or other non-natural persons. The 2020/21 chargeable year runs from 1 April 2020, and the ATED return and payment must be received by HMRC by midnight on 30 April 2020.
You may believe that no ATED charge is due because the property is commercially let, or some other relief applies. In that case an ATED relief declaration must be filed by 30 April, but this form can cover a number of properties.
The quickest way to submit ATED returns and relief declarations is to use the ATED online service. You need to register with this service as an agent to submit your clients’ ATED forms. Each client must also be registered using their UTR number, and appoint you as their agent for ATED.
All overseas companies that let UK residential properties should now have a UTR number for corporation tax, as they need to pay corporation tax on their UK property income from 6 April 2020.
The online ATED service will calculate the ATED charge due, but you need to chose the valuation band for the property. This will be the value as at 1 April 2017 or the acquisition date if later.
If the property value is within 10% of a band boundary you can use the structured email form to ask for an ATED banding check, but it could take 30 days or more to get a reply. To avoid penalties for late ATED forms, it would be better to submit the ATED return using the valuation you have and amend it later.
HMRC is encouraging tax agents to correspond with it by email where possible and has introduced a number of temporary concessions to avoid processing paper forms.
VAT errors in excess of £10,000 normally have to be reported on form VAT652, but during the coronavirus shutdown the VAT post room is closed so you need to submit this form by email to: firstname.lastname@example.org
The IHT400 and IHT100 forms normally require a “wet” signature of the trustees or personal representatives, but where there is a professional agent acting for the estate HMRC will accept a printed signature accompanied by a statement from the agent confirming that all PRs or trustees have seen and agreed the account. All payments for IHT due should be made electronically or by phone as HMRC is not accepting payments by cheque.
All work on tax enquiries has been paused so HMRC will not press you for replies to queries or ask for new information or documents until the coronavirus lock down is lifted.
The First Tier Tax Tribunals have not been sitting since 24 March, and are due to resume again on 21 April, but that shutdown period is likely to be extended. If you want to appeal to the tax tribunal against a HMRC decision you should do so within the normal 30 days, but use the online appeals service, or email.
The Government has urged everyone to work from home if they can. This allows millions of people to stay at home, protect the NHS and save lives.
Working at home will increase the running costs of the property slightly as more energy and water is used. The employer can help the employee with these costs by paying them an allowance of £6 per week (£26 per month) from 6 April 2020.
This is allowance was increased from £4 per week in the Spring budget, and is tax free when the employee is working at home under homeworking arrangements. HMRC has indicated that home working arrangements will exist where the employee’s workplace has closed or the employee is following advice to self-isolate.
Where the employer pays for the necessary equipment needed to work from home such as; laptop, monitor, keyboard, desk and chair, no taxable benefit arises. However, if the employee buys those items personally and the employer reimburses the cost, that reimbursed amount will be taxable as it is difficult for the employee to prove the items are “necessarily” required for their work. The employer could pick up the extra tax due in a PAYE settlement agreement.
HMRC will pay a taxable grant to self-employed individuals and partners equivalent to 80% their average trading profits for three months, capped at £2,500 per month.
However, the grant will not be payable to anyone who:
has average profits of £50,000 or more per year – they will get nothing;
has not submitted a tax return for 2018/19, taxpayers have until 23 April 2020 to submit this return in order to qualify;
receive less than half of their annual taxable income from self-employed profits.
It is difficult to determine the income of self-employed individuals in real time, so the Government has chosen to base the amount of grant available on the average of reported profits in the last three tax returns: 2015/16 to 2018/19. If the taxpayer started trading in this period the monthly average of profits will be drawn from the periods in which they were trading.
Those who started trading on or after 6 April 2019 are not eligible for this grant. It is also likely, but not confirmed, that people who earn the majority of their income from furnished holiday lettings will not qualify for this grant.
HMRC will contact those taxpayers who are eligible for this grant and will invite them to apply for the payment online. It is not clear not how this contact will be made, possibly by letter, but certainly not by email or text message. Warn your clients to be aware of scams offering money from HMRC and asking for bank details to be confirmed by clicking a link in an email or replying to a text.
To obtain the grant taxpayer will probably have to pass through the normal two step security process used to access their online personal or business tax account on gov.uk. If your clients haven’t yet used this online account to view their personal tax details, encourage them to do so.
The taxpayer may also have to confirm that they were trading in 2019/20 and expect to continue to trade in 2020/21 once the shutdown has been lifted.
The grant for three months will be payable in one lump sum into the taxpayer’s bank account, but the money will not be available until June.
All VAT registered businesses have an automatic VAT payment holiday for the period from 20 March to 30 June. The VAT due between those dates does not have to be paid until around 31 March 2021, but exactly when the deferred payment will become due is to be clarified.
Where the business pays VAT by direct debit (DD), it must cancel its DD to take advantage of the VAT deferment. This needs to be done at least 5 working days before the payment is due to be taken. HMRC cannot cancel the DD from their end, and the VAT reported on the VAT return will be taken automatically if the DD is not cancelled.
Businesses who pay the VAT by electronic transfer can simply not make the payment due in the period. They do not have to inform HMRC why the payment is not made.
HMRC’s systems should be adjusted so that default surcharges are not trigged by payments not arriving in the 20 March to 30 June period. We understand that HMRC will not charge interest on the deferred VAT payments, but that is to be clarified.
The VAT return must still be submitted on time. Where the business is due a VAT repayment it is even more important to get the return in on time, as the repayment will be accelerated to business.
Self-employed individuals and partners will have a payment on account (POA) to make on 31 July 2020, for the tax year 2020/21. This POA can be reduced by the taxpayer making an adjustment in their personal tax account, or by using form SA303. However, this is not necessary for the POA due on 31 July 2020, as HMRC is providing an automatic payment holiday.
As with VAT, where the income tax is normally paid by direct debit that DD must be cancelled or the tax will be taken.
This tax payment holiday only applies to anyone who has to make a POA on 31 July 2020, including employed taxpayers who may be making a POA because of tax due on dividends or other income.