COVID-19 Coronavirus – PSTAX Business Continuity Plans and Updates
UPDATE – THURSDAY 21 MAY 2020
Working with you through COVID-19 and beyond
In these uncertain and unusual times, we recognise that it is often difficult to move projects forward as you might wish. Things that we would usually have taken for granted – like the ability to meet in a room to learn, share, and develop ideas and plans – are just currently not available to us.
We could just sit back and hope that things will soon ‘get back to normal’, and in the meantime, put our proposed projects on hold. This might be a viable short-term option, but the danger is that momentum is lost, and things just grind to a halt, perhaps permanently.
We have spoken to several clients who are keen to progress projects even in these most difficult of circumstances. At PSTAX it is in our DNA to work with our clients and help to overcome obstacles – but this almost led to a big mistake!
We started to consider how, in the current circumstances, we could support our clients without the benefit of conducting face-to-face meetings, training courses and seminars.
As soon as lockdown started, we realised that we would have to engage with our clients differently, and we immediately set to work on finding, acquiring, and learning the technology to run webinars. At first, it was daunting, but it had to be done – we had no choice. There was a steep learning curve, a lot of trial and error (fortunately among us), but the result was far better than we had expected!
It was only then that we realised the big mistake was assuming that we had to try to replicate what we would do at a face-to-face event, rather than freeing ourselves from the restrictions of a physical meeting.
There is a real benefit in being able to work with you without the constraints of having to have everyone physically located together. The obvious and immediate benefit is that we all save on the time and cost of travelling, not to mention not having to find and secure a suitable venue, and co-ordinate diaries.
But this also leads onto some greater benefits; it means that we can structure things in a more logical and user-friendly way – without having to cram everything into one session. We can set a timetable and a pace that gives everyone a chance to absorb things – some thinking space.
With webinars, online workshops, online meetings, and podcasts, we can create a bespoke solution for any problem and deliver it in a way that can be tailored to any set of circumstances.
This doesn’t mean that face-to-face meetings and physical events are a thing of the past – far from it, as they will often offer the best and most logical solution. But, likewise, the alternatives that have been forced upon us by necessity offer a whole new range of options and benefits. We will continue to embrace technology to ensure we deliver solutions that meet your needs in the best way possible.
We are currently working on a number of new offerings that can be delivered remotely, and we will be sharing these with you shortly.
In the meantime if there are any projects that you would like to progress but have held back because of the current circumstances, please talk to us – we are confident that we can work with you to move things forward.
UPDATE – FRIDAY 1 MAY 2020
Sales of Medical supplies and Personal Protection Equipment (“PPE”) – temporary zero rate
HMRC announced on 30 April in RCB 4 (2020) a temporary zero rate of VAT on supplies of PPE. The measure starts on 1 May 2020 and lasts until 31 July 2020.
Supplies of PPE normally are liable to VAT at the standard rate. But for PPE recommended for use in connection with protection from infection with coronavirus (in guidance published by Public Health England), a temporary zero rate will apply. This will be done by a new Group 20 to Schedule 8 of the Value Added Tax Act 1994.
Many public authorities are supplying PPE in response to the coronavirus. This new relief will mean that VAT will be relieved on supplies to the NHS and other bodies not able to recover their VAT costs.
Please find a link to RCB 4 (2020) here.
If you need any further information, please contact:
Nick Burrows 07805 449651 email@example.com
Richard Strevens 07787 428605 firstname.lastname@example.org
Andrew Stanton 0345 6861321 email@example.com
UPDATE – FRIDAY 17 APRIL 2020
PSTAX – Business Update
In March we issued an eAlert telling you that we were temporarily suspending team travel and face-to-face meetings, with the promise to keep this under review.
In line with government guidelines announced on Thursday 16 April, we will be extending the following measures for at least a further three weeks from today.
- We will not visit clients for a further three weeks from 16 April 2020. We will review this continually in line with government recommendations
- Employees who fall into the ‘vulnerable’ category might have an additional period of time with no face-to-face meetings. Again, this will be continually reviewed
If you have a meeting booked with us within the next three weeks, we will be contacting you in the next couple of days to discuss alternative ways of carrying out the meeting (eg conference call, Microsoft Teams, Skype etc)
- Our CCO Seminar, at the RAF Club on 11 June 2020, is going ahead at the moment. This will be reviewed and reported on regularly
Clearly, it’s not business as usual. However, we will continue to provide the same comprehensive taxation support to all our clients. All team members are now working from home but his will not disrupt services to clients in any way. Our ICT and telephone systems are already cloud-based and therefore not fixed to a specific location.
You can contact us on the phone and email as always, and our helpline is running as normal. Client meetings will still take place through conference calls or online facilities – we are already set up to use Skype, Microsoft Teams and Zoom, but we will work with other platforms if preferred.
We have also been testing new technology allowing us to broadcast live and interactive events on-line, and details of this will be advertised in separate eAlerts.
We have also received glowing client feedback for our all taxes FAQ eAlerts about COVID-19. We continue to keep a daily register of all COVID-19 related helpline questions and will update you regularly.
UPDATE – WEDNESDAY 15 APRIL 2020
COVID-19 Employer Update
We would like to draw attention to no fewer than four COVID-19 related documents that were released late last week and/or over the Easter weekend. Our summary of these is provided below, along with appropriate links.
Given the amount of client interest in these topics, we will be running two Webinars on Tuesday and Thursday of next week. The first, on Tuesday 21 April at 3pm, will be available to local authorities who have signed up to our recently advertised ‘COVID-19 employer support package’. For details of the package see our E-Alert from 7 April or feel free to request a copy. We will accept written requests to sign up to the package right up to the time of the webinar.
The second, on Thursday 23 April at 3pm, is purely for emergency services bodies. Please note that the Webinars are only accessible via a link which will be sent to participants in advance. To register your interest in attending, please email firstname.lastname@example.org. We will then send you a formal agenda and request confirmation of your intention to join, which will trigger our sending of the webinar link.
In both cases, please feel free to request an agenda even if you are not sure whether you wish to/can attend.
Update to HMRC Guidance for Salary Sacrifice and Optional Remuneration Arrangements
Reasons for varying an employee’s salary sacrifice now include a change in circumstances regarding coronavirus. Such schemes can now allow opting in or out under those circumstances. Additionally, schemes that are under the ‘transitional’ or ‘grandfathering’ rules, ie were set up before 6 April 2017 for ultra-low emission cars, accommodation or school fees, will also be unaffected if a change to the T&Cs is directly connected to coronavirus. For more information, go to:
This is also reflected in revised Optional Remuneration (‘OpRA’) legislation which is revised such that, during a period when the ‘grandfathering’ rules apply, a break in salary sacrifice arrangements due to coronavirus will not constitute making a new agreement and so will not trigger OpRA. For more information, go to:
CIOT Working from Home Guidance
The Chartered Institute of Taxation (‘CIOT’) has produced guidance on home working and related topics. This body is in regular communication with HMRC and appears to have sought clarity in relation to some key issues, although it is clear that HMRC/Government responses are still awaited. With regard to the deduction for home working expenses made by employees under Section 336 of ITEPA, the CIOT has repeated the guidance from the EIM and specifically the four important conditions that must all apply for the employee to get tax relief on £26 per month (£6 per week). This mirrors our recent E-Alert on the same topic.
“For a claim for tax relief on household expenses to be made it is necessary to evidence the expense has been incurred wholly, exclusively and necessarily in the performance of the duties of the employment. HMRC accept that these conditions are met where the following circumstances apply:
- the duties that the employee performs at home are substantive duties of the employment. “Substantive duties” are duties that an employee has to carry out and that represent all or part of the central duties of the employment;
- those duties cannot be performed without the use of appropriate facilities;
- no such appropriate facilities are available to the employee on the employer’s premises (or the nature of the job requires the employee to live so far from the employer’s premises that it is unreasonable to expect him or her to travel to those premises on a daily basis); and
- at no time either before or after the employment contract is drawn up is the employee able to choose between working at the employer’s premises or elsewhere.
Where an employer’s premises is closed or access is restricted as a result of the employer’s response to COVID-19 and the employee is required to continue to perform the duties of their employment at home as a consequence (i.e. a ‘homeworking arrangement’ exists) HMRC may agree that the third bullet point above is met. This said, our understanding is that HMRC will only accept a homeworking arrangement exists for the purposes of an employee making a claim for tax relief for their additional household expenses where no facilities were available for the employee to work at the employers premises and there was no choice available to the employee other than to work from home.
Note also that at the time of writing clarification is awaited as to whether HMRC accept that for where an employee is working from home due to COVID-19 the fourth bullet point above will be treated as met for the period during which the employee’s workplace is closed and the employee has no choice other than to work from home.”
It is PSTAX’s view that this is consistent with our original advice in which we confirmed that employees would not have an automatic right to claim tax relief from HMRC under Section 336 for home working, due to the additional restrictions in the legislation that are present. In its Employment Income Manual guidance that was updated just last week, HMRC states that “…exempt payments can be made to employees who work at home under a voluntary homeworking scheme. So the fact that an exempt payment has been or could be made does not mean that the employee is entitled to (tax) relief for household expenses.”
However, it appears that the CIOT is attempting to get further clarity from HMRC in relation to the four conditions and it is still possible that HMRC will take a more relaxed approach when it comes to processing relevant claims. We will update clients if/when we receive any further information.
Briefing Paper on the Coronavirus Job Retention Scheme (‘CJRS’)
A ‘briefing paper’ has been issued by the House of Commons Library in relation to the Coronavirus Job Retention Scheme. Dated 9 April, it provides a comprehensive summary of the workings of the scheme by reference to 33 questions and answers across 24 pages of text. The intention of the paper is not to supplement the GOV.UK guidance or provide interpretations on which employers can rely, but to provide a wider context for the changes, in particular with regard to the overlap between ‘furlough’ and employment law. By way of example, it covers subjects not addressed by the Government guidance including how being furloughed affects continuity of employment and annual leave entitlement.
For a majority of employers who are already committed to furlough arrangements, this document is an essential read. However, for public bodies, the paper is much less relevant. On the critical question of whether public bodies can use the Job Retention Scheme, the paper simply states:
“The guidance says that public sector employers are expected not to furlough workers if they continue to receive funding for staff costs.”
HMRC Letter to Agents re CJRS
Another document that has recently surfaced is a letter from Jim Harra, CEO of HMRC, to Agents. This asks for help from Agents in ensuring that the CJRS delivers as intended. The letter advises what information will be required from employers when the on-line service launces on 20 April. It also warns that there will be insufficient capacity for HMRC support via the telephone helpline service, stating that the service is designed to be ‘self-serve’ with guidance in place.
We will await further announcements with interest.
UPDATE – TUESDAY 7 APRIL 2020
COVID-19 Daily Helpline Cases
In our eAlert of 25 March 2020 we promised to share with you the virus-related frequently asked question (“FAQS”) from our VAT and tax helplines. This is our first summary of the FAQs. Please contact us if you need any further information.
VAT Helpline – Frequently Asked Questions
Making tax digital (“MTD”)
. Will MTD be delayed?
. As we announced in our recent eAlert, the second phase of MTD has been delayed until April 2021. This new date applies as well to bodies, such as public authorities, who have had six-month deferrals.
Domestic reverse charge for construction services (“DRC”)
. Will the DRC be delayed?
. Despite growing pressure for a postponement, HMRC has not announced yet a delay to DRC’s start date of 1 October. We are monitoring the situation closely and will let clients know if this changes.
Employment expenses –evidence for VAT claims
. Can electronically submitted or photographed invoices and receipts be used as evidence for VAT claims?
. Yes, provided the receipts/invoices meet the requirements for input tax recovery, and, if they are scanned or photographed, all the details are legible.
HMRC’s guidance on the evidential requirements can be found here: https://www.gov.uk/vat-record-keeping
. Public authorities are paying suppliers “retainer fees” or similar to ensure continuity of service. An example is payments to transport organisations who take children to and from school. What is the VAT treatment of these payments?
. The Cabinet Office has published a Procurement Policy Note – Supplier relief due to COVID-19 (Action Note PPN 02/20), which sets out various measures to ensure service continuity during and after the virus outbreak. It has several actions that authorities can take such as payment against revised/extended milestones or timescales, interim payments, forward ordering, payment on order or payment in advance/prepayment.
The VAT treatment will depend on the agreement between the authority and the supplier. If it is a service continuity payment such as a retainer so that the authority preserves its right to receive services in future, the supplier should be charging VAT as appropriate. Other situations might arise in which the authority provides grant aid to organisations and these payments would be outside the scope of VAT.
It is for the supplier to get the VAT treatment right, but if VAT is charged it can be reclaimed by the authority, subject to the normal rules.
. The government announced temporary changes to the VAT payments due between 20 March 2020 and 30 June 2020, allowing them to be deferred, as part of its COVID-19 rescue package to help businesses manage their cashflow.
Does this apply to local authorities and their wholly-owned companies, and is it automatic?
. The measures apply to all businesses.
The VAT return will need to be completed as normal (ie accounting for output tax and input tax) but if this results in a net payment due to HMRC, it can be withheld. This deferral is automatic and does not need to be applied for.
The output tax must be included if the net result is a repayment due from HMRC.
It is very rare for a public authority to be in the position of a payment return (ie payment due to HMRC) and even in the event of such occasion the deferment is optional.
It is more common for a wholly-owned trading company to be in the position of a payment return.
Should either body choose to use the deferral option, if applicable, the VAT return should be submitted as normal but there would be no requirement to pay the VAT due until the end of the 2020/21 tax year. Any direct debits set up to repay HMRC would need to be cancelled but should be reinstated following the end of the deferral period.
If payment is deferred in one period and a refund due in the next period, there will still be an entitlement to the full refund – it will not be reduced by the amount deferred in a previous period
HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement.
The following is taken from HMRC guidance:
For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.
All UK businesses are eligible.
How to access the scheme
This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period.
Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.”
VAT on financial support for leisure centres/leisure centre staff
. To help leisure centres during the COVID-19 closure period, local authorities are agreeing to pay management fees in advance, as well as providing extra funding to cover staffing costs. Will VAT be charged by the supplier, and will it be recoverable by the authority?
. There is no problem with paying management fees to the leisure centre operators in advance, and VAT would be charged by them as normal. The issue of an invoice by the supplier would create a tax point allowing the local authority to recover the VAT incurred, subject to normal rules.
If the management agreement would usually result in a taxable fee being raised to the leisure centre operator, there would be no issues with the authority waiving this fee during the closure period. There would be no VAT to account for as no income would have been received.
It would be the responsibility of the leisure centre operator to assess the VAT liability of any income received towards the cost of staffing. If the operator is supplying something in return for the funding, then the authority might be charged VAT. If, however, it was deemed to be a true grant, the payment would be outside the scope of VAT. Any VAT charged would be recoverable, subject to the normal rules.
Some authorities are structuring the payment made to cover staff costs as a loan, which would be repayable over the term of the management agreement. If this was the case, the repayment of the principal value of the loan would be outside the scope of VAT, with any interest received being exempt from VAT. If the operator was eligible to receive funding from the government to cover 80% of the staffing cost, which it repays to the authority under this agreement, this would just be part of the loan repayment and outside the scope of VAT.
Food parcels and “meals on wheels”
. Public authorities are putting together food parcels to distribute to residents. Should VAT be accounted for on any income received?
. The VAT liability will ultimately depend on the arrangement.
If the authority is asking for donations only, and the resident will receive the parcel regardless of whether they make a payment or not, any income received will be considered a grant and outside the scope of VAT. This is because there is no direct link between the payment and the food parcel received by the resident. Any VAT incurred will be fully recoverable, subject to the normal rules.
If the authority is purchasing the food to sell on to any resident, the local authority will be able to recover any VAT incurred (subject to the normal rules) but will also need to account for the necessary VAT on the income received.
If the local authority supplies hot food or catering, any charges it makes would be liable to VAT including the delivery element; if the supply is ‘food’ that qualifies at the zero rate, then such a supply, including the delivery element, would be zero rated.
If a ‘food parcel’ is being supplied, it would not be artificial to split the supplies within the parcel for VAT purposes, accounting for VAT on the standard rated elements only.
The local authority could be purchasing the shopping by acting as an agent for the resident. As it would be purchasing the shopping on behalf of the individual, it would not be able to recover any VAT charged; however, any funding received to cover the cost would be outside the scope of VAT.
Finally, if the authority assesses the individual to confirm that they are eligible to receive the food parcel, there is a strong argument that this will be a supply of welfare services and outside the scope of VAT. Any VAT incurred on the purchase of the food will be recoverable, subject to the normal rules.
Direct payments for personal protection equipment (“PPE”) equipment
. Direct Payment service users are buying gloves and aprons in addition to their usual PPE. Direct Payments are paid to clients who have been assessed as needing help from Social Services but who arrange and pay for their own care and support services instead of receiving them from the local authority. They appoint Personal Assistants (PAs) to carry out personal hygiene, socialisation etc.
Due to the COVID-19 situation these clients have had to purchase more gloves and aprons for their PAs than normal, and they are entitled to be reimbursed by the local authority. When the local authority reimburses them can we recover the VAT?
. Direct payments have always involved VAT ‘losses’, because any VAT charged on the goods and services procured by those who choose to arrange their own care is non-deductible by the local authority.
This is the same now for the PPE items that are bought by such individuals, even if paid for by the local authority. This is because the supply of such equipment is to the individual and not the local authority.
But if the local authority bought the items itself and provided them to the qualifying individuals without payment, then the local authority could recover the VAT because it would have received the supply.
Free fuel for emergency services
. BP has offered to provide all emergency services with “free” fuel at forecourts. We use fuel cards and we will not be charged for the fuel from BP garages until the end of April. It can be for the fleet ie liveried and business-use-only Officer’s cars. BP might do some promotion on “we are giving fuel in the crisis” etc but we are not giving them any advertising. Are there any VAT implications or pitfalls we need to be aware of?
. Providing there is nothing given in return for the use of the free fuel we cannot think of any VAT implications for the authority. Advertising would be considered a supply by the authority but just mentioning this in Bulletins, for example, would not count as advertising. Further, if BP has offered to provide you with the free fuel without the obligation of you advertising, you are not supplying it with anything even if you do subsequently publish details (as you are doing so with no obligation placed on you by BP). In other words, BP is giving you the fuel regardless and this does not depend on you providing the advertising.
ET Helpline – Frequently Asked Questions
Childcare Salary Sacrifice Schemes
. With employees working from home and not needing to use childcare, can we temporarily suspend their salary sacrifices?
. The employee should not withdraw from the Scheme completely, otherwise the tax exemption will be lost. Generally, we would recommend maintaining a minimum contribution level to remain in the scheme. However, we are aware that HMRC guidance confirms that a break of up to 52 weeks can be taken – allowing the employee to then re-join the scheme – without jeopardising the tax exemption, so long as certain conditions are met. These are that the employee is still with the same employer and they have not told their employer that they want to leave the scheme (eg, because they have started using the Tax-free Childcare Scheme). The link to the relevant guidance is available here: https://www.gov.uk/expenses-and-benefits-childcare
Expenses for Homeworking
. Can employers pay employees any tax-free expenses where they must now work from home?
. HMRC guidance confirms that (for 2020/21) £6 per week (£26 per month) may be paid to staff tax/NIC free where the employer requires staff to work from home under formal arrangements that are agreed between the employer and employee. For 2019/20, figures of £4 per week (£18 month) may be paid.
The Job Retention Scheme (‘JRS’)
. Can a public sector organisation benefit from the grants available through the Job Retention Scheme (‘JRS’)?
. Although the guidance is far from clear at the moment, we would expect the scheme to apply to anyone from whom tax/NIC has been deducted as long as:
- They were working/earning during February;
- Their work has ended as a direct result of the coronavirus; and
- That they have been correctly furloughed by their employer.
It should be noted that Government advice is somewhat contradictory regarding whether public bodies are eligible for JRS funding but, subject to any funding issues, we would expect public bodies to be able to use the JRS where the above conditions are met. We would expect further clarification on this point soon; in the meantime, employers who have not furloughed staff will definitely not be eligible for funding. Please note that the remainder of the questions/answers below assume that public bodies will be eligible to participate in the JRS.
. Can Apprentices be furloughed?
. Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, they must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage as appropriate for all the time they spend training. This means the employer must cover any shortfall between the amount the employer can claim for their wages through this scheme and their appropriate minimum wage.
. Can an employee be furloughed if they were made redundant or they stopped working for the employer after 28 February?
. Yes. If an employee was made redundant, or they stopped working for the employer, on or after 28 February 2020, they can be re-employed, put on furlough and a claim for their wages be made through the scheme.
. Can an employee be furloughed who is ‘shielding’ in line with public health guidance (or who needs to stay at home with someone who is shielding)?
. Yes, if they are unable to work from home and the employer would otherwise have to make them redundant.
. Is it possible to furlough an employee who is unable to work because they have caring responsibilities resulting from coronavirus, eg employees who need to look after children?
. Yes, it has now been confirmed that employees in this position can be furloughed.
. Where JRS applies, can the value of benefits in kind and salary sacrifice schemes be taken into account?
. The reference salary should not include the cost of non-monetary benefits including benefits in kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme. Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a ‘life event’. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
. Can we use the JRS to pay any self-employed workers ?
. No, the JRS only applies for workers who are your own employees.
. What about IR35 workers deemed ‘in scope’?
. Generally speaking, where you have workers who are providing their services through their own companies (PSCs) and have been confirmed as being ‘in scope’ of the IR35 legislation, you would only treat them as ‘deemed employees’. They would remain employees of their own companies and responsible for their own JRS claims. However, please note that the Cabinet Office has issued specific guidance for public bodies in respect of ‘contingent’ workers, including personal service companies and agency workers, working on behalf of public bodies. The guidance provides for public bodies to pay 80% of the contingent worker’s pay where they are unable to work because of the coronavirus. This scheme is a separate arrangement to the JRS with and would appear to take precedence over it. This means some of the answers above may not apply for this specific category of worker. Further details are available via the following link https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/877221/PPN02_20-Contingent-Workers-Impacted-by-Covid-19-2.pdf We will be issuing an updated alert shortly.
. Does the JRS apply to those who are office holders even if they do not have full employment rights?
. Yes, if the public body pays an office holder under deduction of PAYE/NIC the scheme can apply in respect of such individuals.
. Where can I find further details regarding the JRS?
. Government guidance containing detailed information regarding eligibility and the information required to make a claim is available via the attached link: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme#history
Travel, subsistence and accommodation expenses
. Can we pay employees the cost of travelling to work in their own cars if they are unable to use public transport at the current time?
. It has been a long-standing principle of tax law that travelling between home and work is private travel and, consequently, any payments by the employer in respect of this are subject to tax/NIC. There is no statutory basis that would allow this principle to change during the current situation. However, employers may wish to request from HMRC whether any tax/NIC liability arising could be paid by the employer through a PAYE Settlement Agreement (‘PSA’).
. Can emergency services employers provide living accommodation for police/fire officers and other staff if they are advised not to stay at home because of coronavirus?
. HMRC has historically accepted that living accommodation provided for police officers is exempt from a tax charge under the living accommodation rules, although additional living costs met are not. However, there is no justification for the exemption to apply under the relevant legislation so it is recommended that HMRC agreement be sought for any arrangements that are put in place. Fire officers that are not on call are not exempt from a tax charge in respect of provided living accommodation, but it may be possible to seek HMRC agreement that a relaxation of the rules be allowed during the current situation. For other staff it is unlikely that there is any basis for provided living accommodation to be exempt from a tax charge. It may be possible to reach agreement from HMRC regarding how any benefit should be quantified under the legislation and potentially for the employer to meet any tax/NIC liability on behalf of the employees under a PSA.
If you have any questions, please contact one of the team below:
|Nick Burrows||07805 449651||Nick.Burrows@pstax.co.uk|
|John Harling||07768 446381||John.Harling@pstax.co.uk|
UPDATE – FRIDAY 27 MARCH 2020
Latest Employment Taxes Developments
Following our eAlert on Wednesday, there have been some developments over the past 24 hours in relation to Homeworking Arrangements and support from HMRC on coronavirus related issues.
- Homeworking Arrangements
We have been inundated with queries on the helpline in respect of the amounts that employees can be paid for homeworking (‘employer allowance’), or that can be claimed as tax relief from HMRC (‘deduction claimed by employee’). As of 25 March 2020, there has been a significant update in HMRC’s Employment Income Manual which covers these points.
Under Section 316A ITEPA 2003, where there is a proper ‘homeworking arrangement’, with effect from 6 April 2020, employers can pay £6 per week (or £26 per month for monthly paid employees) to an employee working regularly at home without the employer having to justify the amount paid, or the employee having to keep any records to justify this expenditure. As reported only yesterday, these rules already allow for a figure of £4 per week, or £18 per month, to be paid by way of a homeworking allowance to employees.
To meet the criteria of ‘homeworking arrangements’:
- there must be arrangements between the employer and the employee
- the employee must work at home regularly under those arrangements
The arrangements need not be in writing but usually will be. They do not need to apply to all employees. The exemption does not apply where an employee works at home informally and not by arrangement with the employer. It is expected, therefore, that there would be some regularity in the home-working arrangements, rather than being on an ‘ad hoc’ basis, as and when the employee chooses to work there. However, where employees are now required by the employer to work from home for the whole working week, or where there is some form of agreed rota of days at home and days in the office, we believe that this would satisfy the terms of the exemption. No revision to an employee’s contract of employment would be required in order for the allowance to be payable free of tax/NIC.
Deduction claimed by employee
If an employer does not make a payment for homeworking, an employee may be able to claim tax relief directly from HMRC under Section 336 ITEPA 2003. From 6 April 2020, employees can claim tax relief on a flat rate of £6 per week (or £26 per month for monthly paid employees), without having to justify that figure. We should point out, however, that there are certain tests that need to be met by the employees before HMRC will approve a claim, which are more restrictive than the ‘homeworking arrangements’ detailed above. Based on the legislation, and without any concessionary approach yet adopted by HMRC in relation to this matter, the employee would have to demonstrate that they perform ‘substantive duties’ at home and that they would be unable to perform those duties at any existing work location. In view of the risk of your employees making claims for tax relief to HMRC which they cannot substantiate, we do not recommend that employees are encouraged or advised to make this claim at this time. However, PSTAX will be identifying this as an important issue for HMRC to consider over the coming days/weeks and hopes to be able to persuade HMRC to permit the claims on the basis of the more widely drawn conditions in S316A. We will keep clients advised of any progress on this.
- Support from HMRC on Coronavirus related issues – dedicated HMRC helpline
As announced by HMRC on 26 March 2020, there is now a dedicated helpline for employers or self-employed workers. The number to call is 0800 024 1222. Despite HMRC’s assurances that around 2,000 call handlers will be available to provide support, we suspect that if you require prompt and accurate assistance on this matter, you might get a much more focussed and efficient service from our PSTAX employment tax helpline. We’re here to help.
Because these Homeworking Arrangements cover allowances, VAT cannot be reclaimed on the payments. If employers reimburse actual expenditure for Homeworking Arrangements, VAT can be reclaimed with an appropriate VAT invoice or receipt.
We hope that you find this update useful.
We will send more updates as things develop but, in the meantime, if you have any questions, please contact one of the team below:
UPDATE – WEDNESDAY 25 MARCH 2020
Coronavirus (COVID-19) Tax Developments
The COVID-19 situation continues to develop and rightly the top priority is everyone’s health and welfare. Tax will not be the main priority, but there will be things for organisations to consider to ensure they can respond effectively. PSTAX will try to make this easier for you by helping you understand the tax developments and by sharing information we have from official sources and our clients and contacts.
We will give regular updates about the new tax measures, and this eAlert contains the first of these. Additionally, PSTAX is compiling a register of the questions that we are frequently seeing on our VAT and Employment Tax helplines relating to the effects of COVID-19. We will share regularly these questions, and our answers, with all our clients.
On top of that, we invite you to tell us about the tax-related issues you have dealt with so we can share these as well. If you would like to contribute to the register, please email the details to Georgia Gladdish (email@example.com).
By gathering as many examples as possible, we will be able to provide a comprehensive list of tax-related issues with questions, answers, and best practice. We have listed below the examples we have already, but first, we summarise here the tax-related government announcements that might affect you.
Government announcements – VAT
Output Tax Deferral
VAT payments for the next quarter can be deferred.
The VAT return will need to be completed as normal (i.e. accounting for output tax and input tax) but if this results in a net payment due to HMRC then the payment can be withheld. Based on this understanding the output tax must be included if the net result is a repayment due from HMRC.
It is rare for a section 33 body to be in the position of a payment return (ie payment due to HMRC) and even in such an event, the deferment would be optional.
However, the deferral will be relevant for public body trading companies. If a VAT payment was due to be made between 20 March 2020 and 30 June 2020, the payment won’t be collected. It is an automatic deferral so no application is needed but if payments are normally made by direct debits, they should be cancelled.
Postponement of Making Tax Digital – Phase Two
We have not heard any reports of HMRC considering the postponement of the Making Tax Digital deadline for Phase Two. Although the deadline is 1 October 2020 for Section 33 bodies, HMRC expects businesses to already be working towards this deadline.
HMRC is expected to announce soon how the output tax deferral will work with Making Tax Digital.
There is, however, the potential for a deadline extension for businesses with complex or legacy IT systems, which is detailed in 184.108.40.206 of VAT Notice 700/22
Government announcements – Employment Taxes
Coronavirus Job Retention Scheme
Following the Chancellor’s announcement on 20 March that HMRC would support ‘businesses’ with the cost of continuing to pay employees who would otherwise be laid off during the current crisis, it has been confirmed that the Coronavirus Job Retention Scheme will apply to all employers including the public sector. This applies in respect of so-called ‘furloughed’ workers who have been asked to stop working but who are being kept on the payroll. Under the arrangement, HMRC will reimburse 80% of their wages up to £2,500 per month (the payments will be subject to PAYE and NICs as normal). This will be backdated to 1 March 2020 and is initially open for three months.
Employers are advised that they will need to:
- designate affected employees as ‘furloughed workers,’ and notify their employees of this change; and
- once the new online portal is live, submit information to HMRC about the employees that have been furloughed and their earnings (HMRC will set out further details on the information required).
The following link includes a little more detail, but there are still further issues that need to be clarified: https://www.businesssupport.gov.uk/coronavirus-job-retention-scheme/
Helpline queries and other matters – VAT
Payment to school transport providers
Some local authorities have agreed to pay school transport companies a percentage of the agreed contract price during the period of school closures.
It is for the suppliers to assess the correct VAT liability under the agreement, but we expect that if it is considered a business charge under the contract, VAT will be charged to the local authority at the appropriate rate.
If a local authority incurs VAT relating to school transport charges (even in a suspension period of those services), it can be recovered under section 33 on receipt of a VAT invoice.
If, however, it is a true grant and does not relate to any supply of services, any payment will be outside the scope of VAT.
Expenses claims – electronic evidence for VAT recovery
A large number of staff are now working from home and might be submitting expenses and accompanying evidence electronically. For confirmation, electronic evidence is acceptable for VAT recovery providing it meets the general requirements.
Please be careful that all details are included on the electronic version, especially for invoices where certain details are included on the back of the invoice.
Cancelled events and ticket refunds
If an event is cancelled and people are allowed refunds, VAT would need to be adjusted in the normal way. We have seen situations where the ticketholders have donated the ticket refund back to the event organiser.
If the event never takes place and the ticket price paid changes into a genuine, voluntary donation, no VAT is due.
Appeals to the Tribunals
The President of the First-Tier Tax Tribunal issued directions on 24 March saying that all proceedings and time limits are stayed (delayed) for 28 days.
Helpline queries and other matters – Employment taxes
Loss of Protected Pension Age
We are aware that there might be several cases across the UK where serving firefighters and police officers have reached the end of their thirty-year service, aged between 50 and 55, and are intending to retire and take their pension benefits. But, in the current climate, we are certain that police and fire bodies will want to retain their experienced personnel beyond those dates, to ensure local capability and improve resilience.
However, the potential loss of protected pension age is a problem carrying with it significant tax-related risks. Since the problem was first identified a few years ago it has been the ‘norm’ for retiring officers to take a one-month break before resuming any work with the same ‘scheme employer’ to avoid the additional tax charges. Yet, given the scale of the current crisis, even a break of this length could create resourcing and resilience issues.
Therefore, we have asked HMRC to consider if there is anything that can be done, on a national basis, to alleviate the tax-related risks and allow forces/fire services to retain the services of these key workers without the need for a break in service. HMRC has advised us that it is aware of the problem and will give this due consideration to see what steps can be taken to address this issue. We will let you know when we hear.
Travel for key workers
Certain key workers could find themselves incurring additional costs of driving to work, not being able to use public transport. If their employers reimburse the cost of travelling between home and work, this should be paid via the payroll with tax/NIC deducted and accounted for.
Alternatively, it might be possible to obtain HMRC agreement that such expenses may be included in a PAYE Settlement Agreement, where the employer would meet the tax/NIC liability on a grossed-up basis. This would save having to do a payroll adjustment and prevent employees from having a shortfall (due to tax/NIC deductions) in their travel reimbursement.
Childcare salary sacrifice schemes
As their children are at home, employees might want to reduce their salary sacrifices for childcare vouchers or directly provided childcare. Employees who leave a scheme altogether would not be able to receive the tax/NIC relief due if they want to ‘re-join’. Therefore, we recommend that employees remain in the scheme, but be allowed to reduce their salary sacrifice to a minimum agreed level to benefit from the tax-exemption once their childcare requirements increase after the ‘lockdown’ has ceased.
Employers might provide additional IT equipment to allow employees to work from home. This can include appropriate furniture, a printer, a monitor, etc. No benefit-in-kind will arise where this is primarily provided for a business reason.
Employers might also reimburse employees’ additional costs incurred from working from home. Employers can pay a homeworking ‘allowance’ to employees of up to £4 per week (£18 per month), which would not give rise to a tax/NIC liability so long as they regularly work at home under agreed homeworking arrangements. Also, in the recent Budget, it was announced that employees not reimbursed any home working costs by their employer could claim a tax deduction of £6 per week.
Future updates and FAQs
We hope that you find this update helpful. Remember, please let us know of any tax-related matters that you think will be useful to share with our other clients.
We will send more updates as things develop, but in the meantime if you have any questions, please contact:
|Nick Burrows||07805 449651||Nick.Burrows@pstax.co.uk|
|Duncan Groves||07760 271490||Duncan.Groves@pstax.co.uk|
UPDATE WEDNESDAY 18 MARCH 2020
We wrote to all clients last week with details of our Business Continuity Plan, including amendments for COVID-19.
The current situation is moving at a fast pace and we are committed to making sure that we are up to date, taking appropriate measures to prevent the spread of the virus in line with Government advice and communicating these to our clients as quickly and clearly as we can.
The well-being of our clients and our team are our first and utmost priority. However, we can also give you assurance that even following guidelines around self-isolation and social distancing, we will continue to provide clients with our usual high level of services with very minimal disruption. Our business continuity plan is published on our website and can be found here.
PSTAX Management team last night held our second (and now regular) COVID-19 emergency meeting and we have taken the following decisions, which have immediate effect:
- Our employees will not visit clients for an initial period of four weeks. This will be reviewed on an ongoing basis.
- After the initial four weeks, employees who fall into the ‘vulnerable’ category might have an additional eight weeks of no face-to-face meetings. Again, this will be continuously reviewed.
If you have a meeting booked with us within the next four weeks, we will be contacting you in the next couple of days to discuss alternative ways of carrying out the meeting (eg conference call, Microsoft Teams, Skype etc)
- For the Employment taxes in-house training events scheduled for March and April, we are working with clients to rearrange or seek alternative delivery methods
- Our CCO Seminar, at the RAF Club on 11 June 2020, remains planned at the moment. This will be reviewed and reported upon on an on-going basis
Although our fixed base HQ in Dartford remains open, all of our support team members are now working from home until further notice. This will not disrupt services to clients in any way as they currently all mix/match between the office and home. Our ICT and telephone systems are already completely mobile and not fixed to a geographical location.
We will continue to keep you updated as things change, both by email update and on our website, but please don’t hesitate to contact us directly at any time.
MONDAY 9 MARCH 2020
PSTAX has robust and sustainable business continuity plans should the COVID-19 Coronavirus (the virus) spread as the worst-case scenario predicts. In the event of widespread disruption, taxation support might not be a primary concern, but we can confirm that, if you need advice or assistance, PSTAX will be able to help as usual.
As you will have seen, the virus is a new strain of Coronavirus first identified in Wuhan City, China in January 2020. Since then the virus has been appearing in countries across the World, including the UK.
As the number of confirmed cases of the virus in the UK continues to rise, the country is busy putting in place protective measures to prevent spread of the virus.
We would like to take this opportunity to tell you about our business continuity plans, both generally and in relation to how things might develop for the UK.
PSTAX currently delivers its services via a combination of progressive technology solutions, mobile working, and a team that is based in various locations across the UK (rather than one fixed geographical HQ location).
Working in this way means that when unexpected events occur, we have already robust plans to minimise disruption for clients when we are faced with external challenges.
As part of our ISO 9001 accreditation we maintain a business continuity plan, which is reviewed on an annual basis and has recently been updated to incorporate remedial action in relation to a Coronavirus threat. A copy is published on our website and can be found here.
What happens if the Management Team is away from the business?
The company is headed by the Managing Director (Peter Gladdish) and has three heads of service.
- Employment taxes (Duncan Groves)
- Indirect Taxes (Nick Burrows)
- Resources (June Wright)
Each service head has a deputy who is actively involved in the day-to-day management of each team ensuring that no area is left without experienced leadership to cover both planned and unplanned time out of the business.
How will we keep on top of the current virus issue?
The Management Team is monitoring and regularly discussing how and to what extent clients might be affected by the virus. We will seek to make appropriate contingency plans so that clients receive the regular and timely support they are used to.
Because we work closely together across the VAT and ET teams, in worst-case scenario VAT consultants could step in temporarily on ET projects, and vice versa.
What happens if we have team members in self-isolation?
The PSTAX team already work from different locations throughout the UK and all staff have the ability and equipment to work from home – this is business as usual for us. In the case of any required self-isolation (not sickness) all team members would be able to carry on with their normal day-to-day workload. If they were too poorly for this, work would be reallocated electronically to other team members without the need to break the isolation period.
What’s happening to meetings?
We plan to attend all our booked meetings in person.
However, if any of the team is unable to travel, either because of government recommendation or a client ban on visitors to their establishment, we would arrange in advance and with agreement with our client to run the meeting by telephone conference call or internet video conferencing; both types of technology are installed at PSTAX and regularly used.
What happens if I’m booked onto a PSTAX event?
We intend to run all our training courses, seminars and forums as published and in line with our terms and conditions.
However, we will be continually monitoring this situation as the virus situation evolves and we will let all delegates know personally if we have to cancel or change the delivery method for any event.
How do I find out about any changes if I’m not already booked?
Updates will be posted on the PSTAX website about any major changes that could affect clients.
You can also email or telephone us at any time for an update.
The newly appointed Chancellor of the Exchequer Rishi Sunak will deliver the Budget 2020 speech on Wednesday 11 March. His speech is reported to include a package of emergency measures for organisations to deal with the knock-on effects of the virus.
Budget 2020 Updates
The following items will be of interest in relation to COVID-19.
The Budget set out a £12bn plan to support public services, individuals and businesses that maybe affected by COVID-19.
An initial £5bn COVID-19 response fund set aside to ensure NHS and other public services receive the funding they need to tackle the impacts of the virus.
Individuals will be able to obtain a notification of advice to self-isolate from NHS111 which can be used as evidence for absence from work.
Hardship fund – the Government will provide a grant of £500m to Local Authorities to support vulnerable people and households in their area. Most of this is envisaged to be used as Council tax relief.
The Government are issuing a number of additional small business rates reliefs for businesses affected by COVID-19. The Budget statement indicates that local authorities will be fully compensated for these measures.
Statutory Sick Pay
The forthcoming COVID-19 Bill will temporarily allow SSP to be paid from the first day of sickness absence, rather than the fourth day, for employees who have COVID-19 or must self-isolate, in accordance with government guidelines.
The Budget sets out a further package to widen the scope of SSP and make it more accessible, although please note that this support, as set out below, will not extend to public bodies with more than 250 employees.
The government will temporarily extend SSP to cover:
- individuals who are unable to work because they have been advised to self-isolate
- people caring for those within the same household who display COVID-19 symptoms and have been told to self-isolate
The government will support certain employers to cope with the extra costs of paying COVID-19 related SSP by refunding eligible SSP costs. The eligibility criteria for the scheme are as follows:
- this refund will be limited to two weeks per employee
- employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020
- employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- employers should maintain records of staff absences, but should not require employees to provide a GP fit note
- the eligible period for the scheme will commence from the day on which the regulations extending SSP to self-isolators come into force