Accounting and Taxation advice in Hexham, Northumberland

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Thoughts for the week ending 12th June

Hi folks,

Well did you have your barbecue? I had my son from Manchester who came up for the day with his partner at 2 metres social distancing on a very cold Sunday wearing all my cold weather walking gear. We didn’t do the barbecue - we had soup which felt more appropriate, and we actually had a Brazier which is something I managed to get online for an outdoor summer party some time ago. Actually, a Brazier is a fantastic thing for social distancing - it gives you a little focal point outside and nobody is going to stand within a metre of it so the people on the other side are always going to be 2 metres away. I would recommend it.

It’s very strange to see your son for the first time in three months and not be able to hug him though!

This weekend’s social distancing event is meeting my other son and his wife and two little ones. We are meant to be having a barbecue in the garden but, apparently, we’re going to have thunderstorms so I’m not sure how that’s going to work. Perhaps if they can roll out this antibody test we might actually know who we can see, perhaps in a ‘normal’ way, and who we can’t.

Non-essential retail will be opening from next week - hurray. My non-essential retail therapy has got to be a bookshop - I’m dying to go to one. Cogito Books in Hexham have done a fantastic job of enabling you to order things online now, and they actually deliver – now that’s what I call COVID-19 initiative.



How to foot the bill: I’ve been thinking this week about how we are going to pay for all this. The TaxPayers’ Alliance is calling for the abolition of tax on employment and wealth and say business tax relief should be increased, at least temporarily, as a way to get the economy going again. I have to say I think that’s probably rather too extreme for Rishi Sunak.

A Treasury paper, leaked to the Telegraph, suggests that there are currently discussions about increasing income tax, VAT, corporation tax and national insurance. Adding 1p to the £ from 20% to 21% on income tax is said to have the potential for raising £4.7bn each year. Adding 1p in the £ to the 40% rate has only been said to bring in a further £1bn per annum, while increasing the 45% rate to 46% would only net around £105m. Targeting only the high earners may therefore not yield anywhere near enough to claw back the current year’s budget deficit of approximately £337bn, as per a report in the Financial Times.

There is also a suggestion that long-term capital taxes might be looked at as these are probably less socially divisive, particularly as there are some major reliefs that would be easy to amend in this area.

And now the technical bits:

Coronavirus job retention scheme (CJRS) – Furlough: Several weeks ago HMRC told people not to adjust future claims for errors made on previous claims because there would be a mechanism developed for amending previous claims.  At last this is now in place – well, partially!  As part of the online claim process it now asks you if you have over-claimed in a previous month. If you answer yes it will ask you the amount and will reduce the current claim accordingly.  A good example of an over claim is if you have claimed employment allowance but also claimed the employers NI on your furlough claim.  If you have under-claimed a previous claim you cannot do this online and have to contact HMRC on 08000 241 222 when the HMRC officer will put through a parallel claim for the extra grant due and provide a reference number.  If you have an amendment to make but no further claim to make, then you need to wait a bit longer for a new process to be developed.

There has been some clarity on claiming employment allowance and furlough.  The main rule is, and always has been, that you cannot claim employment allowance at the same time as claiming employers NI through the furlough scheme.  However, you can claim employment allowance in a later month in the year when you are not claiming furlough e.g. November.  Just be careful that when you start claiming employment allowance in, for example, November that your payroll software doesn’t back date the claim to April.

If you have received a furlough claim you should make your PAYE and NI payments to HMRC on time, and not use the time to pay Coronavirus support to delay payment.  The furlough grant is given for the purpose of paying employees their net salaries and for paying the PAYE and NI, therefore you should pay across all of the grant to your employees and the relevant part to HMRC.

Please remember to keep all your records for at least six years in relation to furlough – which you should be doing anyway for PAYE purposes.

One of the rules for the CJRS from 1 July is that you cannot furlough an employee from 1 July if they have not been furloughed before - which is why the latest date for furloughing an employee for the first time was 10 June.  HMRC have announced that employees coming off statutory parental leave who are returning after a long period of absence can be furloughed for the first time after 1 July, but only if the employer has previously furloughed employees.

Further detail on the second furlough scheme is expected today, and we will update you on the details next week.  Already it is noted that the new scheme will be more complicated as the costs are shared between the government and the employer which will involve trickier calculations.  This is particularly the case in July where you may have employees returning on part time hours and a furlough claim which still includes employers NI and pension contributions.

The domestic reverse VAT charge for the building and construction industry has been delayed for a 2nd time and will now come into effect from 1 March 2021, instead of 1 October 2020.  This is a big change for the building and construction industry, and we are advising our clients on a one to one basis.  The new timing of the implementation of this scheme could cause cashflow problems for the construction industry as the introduction of the new rules may cause short term cashflow issues, at a time when any deferred VAT payments from the government’s Coronavirus support will also be due by 31 March 2021.

Tax implications of waiving income to support businesses: During the Covid-19 pandemic many people are choosing to give up part of their income to support businesses or their employers, or to donate to charity. Employers, directors and employees have several options if they wish to support a business or employer. These include:

  • Waiving their salary or bonus before they are paid;
  • Waiving the right to any dividend; and
  • Giving salary or dividends back after they have been paid.

Donations can be made to charity through Payroll Giving or via Gift Aid.

HMRC have published a news release to highlight the associated tax implications. The news release is available on the Gov.uk website at: www.gov.uk/government/news/check-the-tax-rules-on-waiving-your-income-or-donating-to-charity


Protect yourself from scams: Stay vigilant about scams, which may mimic government messages as a way of appearing authentic and unthreatening. Search 'scams' on GOV.UK for information on how to recognise genuine HMRC contact. You can also forward suspicious emails claiming to be from HMRC to phishing@hmrc.gov.uk  and texts to 60599.

Schools have been asked by Northumberland Police to make people aware of a number of scams that are springing up regarding Track and Trace. The key points were posted on our website last Monday. To see that click the following link or just go back to our News and Events Page to find the "Scam Alert" topic: https://www.pjarnold.co.uk/news/watch-out-for-track-and-trace-scammers


The 31 July tax deferment opportunity may be read by some as automatic. I believe there is a strong probability that taxpayers will take advantage of the opportunity even though their income has not been adversely affected by the current crisis, or even though their financial circumstances mean that they are able to pay their tax as usual. When life returns to the new version of normal, will they regret having done so and will their advisers regret not having advised them not to? ‘With extremely low rates on interest payable on deposits, is it not better just to pay the tax now and get it out of the way?’

More details regarding the second Self-Employment Support Scheme (SEISS) is expected today, and we will update you next week as usual.

I’ve commented a bit on claiming expenses whilst working from home in previous ‘Thoughts’. It has recently been discussed in a technical journal I was just reading which gave the consensus that HMRC will presume that employers should be actually providing their employees with the all their tools and equipment to carry out work from home. Therefore, think carefully before buying and then claiming back say a printer for home if in fact you have the facility to print to an office printer from home instead.

Keep well,
Tricia

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