March Summary

In this month’s issue:

The Budget
The VAT deferral new payment scheme
Uber v Aslam
Updated furlough scheme
Updated SEISS grants
The Recovery Loan Scheme
New Personal Service Company Rules Start in April

The Budget

The Budget was held on Wednesday 3 March. It seems like an age ago.

This was to some extent a holding budget with no major tax changes this year. There will be some increases in the future but with the pandemic and lockdown still in force it is not time to start raising taxes to recover the costs.

The main highlight is that furlough pay and self employed grants are continuing until September 2021. (see below).

A more detailed analysis was sent out with our budget e-mails and there are also various articles available on our web site.

The VAT deferral new payment scheme

The VAT deferral new payment scheme is open for all businesses who deferred VAT due between 20 March and 30 June 2020 and still have payments to make, or who are unable to pay in full by 31 March 2021. This includes those on Payment on Account and Annual Accounting schemes.

Apply now to spread these payments over a number of months − the later you join the fewer instalments are available to you. Join from 19 March 2021 to benefit from the maximum number of 11 instalments.

You can join the scheme online without the need to call HMRC. To find out more information, including the things you need to do before joining, go to GOV.UK.

Uber v Aslam

The long running Uber v Aslam saga has finally come to an end. The Supreme Court has confirmed that Uber drivers are workers rather than self-employed contractors. Drivers are entitled to basic employment rights such as the national minimum wage, paid holiday and rest breaks.

The statutory definition of a worker includes employees and anyone else who works under ‘any other contract…whereby the individual undertakes to do…personally any work…for another party’ provided the other party isn’t a client or customer of the individual (which would make them genuinely self-employed).

Uber and other gig economy cases have shown that written contracts can mask an entirely different state of working affairs. Instead of looking at the individual’s contract with the business, the Supreme Court said the starting point should be the statutory definition.

In this case, the evidence showed that Uber exercised significant control over drivers in relation to the work, from the car they drove, the price a customer paid and whether drivers could accept or decline work. That control made the drivers workers. A genuinely self-employed person could make these choices for themselves. The contracts were designed to mask the true relationship to Uber’s advantage.

Please not however that there is a difference between a worker and an employee. Workers tend to be on zero hours contracts and are not obliged to receive work or to carry it out if offered. There are other differences so if you are not sure about a situation then please contact us for guidance.

Furlough scheme

The coronavirus job retention scheme (CJRS) was due to end on 30 April 2021, but the Chancellor has extended this scheme in its current form until 30 June 2021. Employers will be able to claim 80% of the employee’s usual wages for periods for which the employee is furloughed.

Under revised furlough scheme from 1 July 2021 the employer must continue to pay furloughed staff 80% of their normal wages, but will only be able to claim 70% of the wage cost from HMRC. For pay periods from 1 August 2021 the employer will be able to claim only 60% of the employee’s wages, see table:

The amount of the CJRS claim will continue to be capped at £2,500 per employee per month for pay periods up until 30 June, but from that point it reduces. The employer must pay all of the employer’s class 1 NIC and any employer’s pension contributions due on those furloughed wages. The employee must also continue to receive at least 80% of their normal pay for all periods they are furloughed.

Employees can be on flexible furlough, so working part of the week or month and be on furlough for the rest of their normal working hours.

SEISS grants

The long awaited fourth self-employed income support scheme (SEISS) grant has now been revealed to be set at 80% of average trading profits, capped at £2,500 per month for three months to 30 April 2021, as maximum of £7,500. The portal to apply for this grant will open in late April.

The big difference for this grant will be that the average trading profits will include profits reported for the tax year 2019/20. Also it is only available to taxpayers who have filed their 2019/20 SA tax return by midnight on 2 March 2021. This will allow those who became self-employed in 2019/20 to claim a SEISS grant for the first time, if they have already submitted their 2019/20 tax return.

However, those new traders must still be trading now in 2021, or their business must be temporarily closed due to coronavirus restrictions. The taxpayer must declare, as part of the SEISS application, that they intend to continue to trade in 2021. This is particularly tough for individuals who started trading in 2019, but who were left with no government support in 2020, but still won’t qualify for SEISS support if the business could not survive into 2021.

There will also be a fifth SEISS grant payable for the three months to 31 July 2021, also up to a maximum of £7,500.

There will be a complex turnover test to qualify for the full grant. Only those businesses where turnover (not profits!) have fallen by at least 30% will get the full grant calculated at 80% of average trading profits. Other businesses whose turnover has fallen by less than 30% will receive a grant based on 30% of average profits, capped at £2,850. The portal to claim this grant will open in late July.

In all cases the SEISS grant must be claimed by the taxpayer themselves (you!), we, as your agents, cannot claim it on your behalf. This is because you must use your own government gateway to access the claims portal.

You are reminded that all the SEISS grants are taxable income so they will need to be declared as income for the tax year in which they are received.

The Recovery Loan Scheme

The government have already announced a longer repayment period for Bounce Back and CBIL loans. From 6 April 2021 a new Recovery Loan Scheme will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million to give them confidence in continuing to provide finance to UK businesses. The scheme will be open to all businesses, including those who have already received support under the existing COVID-19 guaranteed loan schemes.

The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance up to £10 million per business once the existing COVID-19 loan schemes close, providing support as businesses recover and grow following the disruption of the pandemic and the end of the transition period.

Once received, the finance can be used for any legitimate business purpose, including growth and investment. The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launches on 6 April and is open until 31 December, subject to review. Loans will be available through a network of accredited lenders, whose names will be made public in due course.

New Personal Service Company Rules Start in April

The "off-payroll" working rules that apply to certain workers supplying their services to clients via their own personal service companies start from 6 April 2021.

Under this new regime end user businesses will be required to determine whether that individual would have been treated as an employee or not if directly engaged. This will be a significant additional administrative burden on the large and medium-sized businesses to whom the new rules apply. This is a complex area based on different decisions by the courts and HMRC suggest that end user organisations use the CEST (Check Employment Status for Tax) online tool on their website to help with the determination. The end user business is then required to issue the worker with a Status Determination Statement setting out the reasoning for their decision, a copy of which is also given to any agency supplying the worker if relevant.

The determination notifies the agency that PAYE and NIC should be deducted from payments to the worker’s personal service company. That information should be passed down the labour supply chain if other entities are involved, and the ultimate fee payer is liable for making the tax and NIC deductions. If HMRC are unable to collect the tax from the fee payer, the liability will pass up the labour supply chain thus encouraging the end user organisation to carry out due diligence to limit their exposure.

The CEST tool has been shown to be providing some false positives showing employment where there is none in certain circumstances. Whilst it is an indicative tool a “worker” will need to know how to challenge a notice from their “employer” if they receive a notification and feel it is unjustified. There are time limits that have to be stuck to which can cause problems if missed.

Please contact us if you need assistance in complying with the new rules.

I wish you the best for the next month.

If you have any queries you can book a free 15 minute zoom meeting with me.

Also there is the client zoom drop in session which continues for clients at 11.00am every Wednesday.

Zoom meeting details:

Meeting URL: https://us02web.zoom.us/j/83879726978
Meeting ID: 838 7972 6978