One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions is...
The long-term tax implications on what effect coronavirus will have on the United Kingdom remains unclear. Perhaps we will get some steer in the Budget, scheduled for 3 March 2021 but as the pandemic continues and borrowing hits record highs it appears that there will be tax increases in due course. HM Treasury will also be focused on growing the economy so in the near term, at least maybe, these tax rises will be more muted.
Since the pandemic started, the Government has instituted many measures to help businesses and individuals through this very difficult time. Some of these changes have had tax implications, either directly or indirectly. We have listed below a summary of many of the important measures that have been announced by the Government to help support businesses during the coronavirus pandemic. Many of these measures are due to expire by the end of March but are likely to be extended or replaced by alternative measures as the pandemic showed little sign of abating as we went to press.
Tax deferral and Time to Pay
Support for businesses paying tax and VAT
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. VAT registered businesses had the option to defer any VAT payments due between 20 March 2020 and 30 June 2020. There was no application process required to defer the relevant payment.
However, businesses could still choose to pay any VAT due as normal. If you chose to defer your VAT, the payment was due to be paid in full to HMRC by 31 March 2021. In delivering his Winter Economy Plan to Parliament, the Chancellor confirmed that businesses will also have the option to make 11 smaller interest-free payments during the 2021-22 financial year.
Self-Assessment payment deadlines
Taxpayers that were due to make their second payment on account for the 2019-20 tax year had the option to have the payment due date deferred until 31 January 2021. HMRC has also confirmed that they will waive late online filing penalties until 28 February 2021 for late filers. Taxpayers are still obliged to pay their bill by 31 January 2021. Interest will be charged from 1 February on any outstanding liabilities.
It will also be possible to benefit from a separate additional 12-month extension from HMRC on the “Time to Pay” self-service facility for this payment and also for payments due in January 2021 extending the deadline until January 2022. Interest will be payable on these amounts.
Business rates and grants
The Business Rates retail discount in England was increased to 100% in 2020-21 and expanded to the leisure and hospitality sectors. The rates discount for qualifying pubs was increased to £5,000. Coupled with existing small business rate relief (which provides full relief for businesses using a single property with a rateable value of £12,000 or less), an estimated 900,000 properties, or 45% of all properties in England, received 100% business rates relief in 2020-21.
In addition, businesses who received small business rates relief received a £10,000 grant in 2020-21.
A grant of up to £25,000 was paid to businesses in receipt of the Retail Relief with a rateable value of between £15,000 and £51,000 (subject to state aid limitations). Similar measures are in place in Scotland, Wales and Northern Ireland.
It has also been announced that businesses in England that are forced to shut as a result of the lockdown will be eligible for grants of up to £3,000 per month payable every two weeks. Businesses will be eligible to claim after two weeks of closure.
The amount businesses will be able to claim from their local authority depends on their rateable value:
- Small businesses with a rateable value of or below £15,000 will be able to claim £1,334 per month or £667 per two weeks.
- Medium-sized businesses with a rateable value between £15,000 and £51,000 will be able to claim £2,000 per month, or £1,000 per two weeks.
- Larger businesses will be able to claim £3,000 per month, or £1,500 per two weeks.
On 5 January 2021, a new one-off top up grant for retail, hospitality and leisure businesses worth up to £9,000 per property was announced. These grants are in addition to those previously announced.
Support for employers and employees
The Coronavirus Job Retention Scheme (CJRS) commonly known as the furlough scheme is open to all UK employers to access support to continue paying part of their employees’ salary for employees that would otherwise have been laid off during this crisis. The CJRS was launched at the start of the coronavirus pandemic and was due to end on 31 October 2020. The CJRS has now been extended a number of times and is currently due to end on 30 April 2021 although further extensions seem likely. Since 1 November 2020, employees receive up to 80% of their salary for hours not worked.
A bullet-point summary of the main details of the current CJRS (from 1 November 2020) is set out below:
- People who are unable to work will receive up to 80% of their wages. This payment is subject to a monthly maximum amount of £2,500 per employee (for hours not worked). Employers will have the discretion to top-up the payments if they so wish.
- The scheme applies across the UK, in England, Wales, Scotland and Northern Ireland even where the regions are subject to different lockdown restrictions.
- Employers have to cover employers’ employees’ NIC and pension costs for the hours the employee does not work.
- Flexible furloughing, whereby employers can bring back employees to work part-time is allowed. Employers have to pay employees for the hours they work but can still use the scheme to cover any normal hours where employees are furloughed.
- To be eligible, employees must have been registered on their employers PAYE payroll by 23:59 on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
- Employees employed as of 23 September 2020 and on payroll, who were made redundant or stopped working for the employer afterwards can also qualify for the scheme if they are re-employed and placed on furlough.
- All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
- There are cut-off dates for making a claim that must be adhered to for each month the scheme is used.
- There was no gap in eligibility between the previously announced end date of the scheme on 31 October 2020 and this extension.
The Job Support Scheme and the Job Retention Bonus have both been put on hold until the end of the extended CJRS and may never see the light of day.
Support for the self-employed
The Government also confirmed that there will be additional help for the self-employed. The Self-Employed Income Support Scheme (SEISS) extension will apply for 6 months from 1 November 2020.
The self-employed will receive 80% of average trading profits for November, December and January. This will mean a maximum grant for the three months of £7,500 made available to those who meet the eligibility requirements. The claim window for applying for the grant opened on 30 November 2020.
This level of support is based on similar terms and conditions to the support offered to employees. An additional second grant will be made available from 1 February 2021 to 30 April 2021. The level of this second grant amount is subject to review and will be set in due course.
To be eligible for the scheme, self-employed individuals, including members of partnerships, must meet the following criteria:
- Have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants), and
- declare that they intend to continue to trade and either are currently actively trading but are impacted by reduced demand due to coronavirus or were previously trading but are temporarily unable to do so due to coronavirus.
Government-backed loan schemes
The deadline for applications for all the Government-backed loan schemes and the Future Fund have been extended until 31 March 2021, as announced by the Chancellor on 17 December 2020.
This includes the Bounce Back Loans scheme. The scheme was launched in May 2020 to provide financial support to businesses across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 pandemic. The scheme allows small businesses to borrow between £2,000 and £50,000 and access the cash in most cases within 24 hours of approval.
The loans come with a 100% Government guarantee and businesses can apply for a loan of up to 25% of their turnover. The Government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time. After 12 months the interest rate will be 2.5% a year.
It is also now possible for businesses to ‘top up’ existing Bounce Back Loans should they need additional finance. This applies to businesses who borrowed less than their maximum allowance.
There are also other schemes available including the Coronavirus Business Interruption Loan Scheme (CBILS). Under the scheme, borrowers can apply for up to £5 million in finance in the form of loans, overdrafts, invoice finance, and/or asset finance. The Government will guarantee lenders 80% of the loan value, as well as covering the first 12 months of interest payments and fees.