News

The government confirmed that the fourth SEISS grant will be worth 80% of three months’ average trading profits, paid out in a single instalment and capped at £7,500 in total.

The grant will cover the period February to April, and can be claimed from late April. Self-employed individuals must have filed a 2019-20 self assessment tax return to be eligible for the fourth grant.

This means that over 600,000 individuals may be newly eligible for SEISS, including many new to self-employment in 2019-20. All other eligibility criteria will remain the same as the third grant. Further details will be published in due course.

There will also be a fifth and final SEISS grant covering May to September. The value of the grant will be determined by a turnover test, to ensure that support is targeted at those who need it the most as the economy reopens.

People whose turnover has fallen by 30% or more will continue to receive the full grant worth 80% of three months’ average trading profits, capped at £7,500. People whose turnover has fallen by less than 30% will receive a 30% grant, capped at £2,850. The final grant can be claimed from late July. Further details will be published in due course.

Joanne Harris, technical commercial manager at Nixon Williams said: ‘Sole traders have been eagerly anticipating this budget for news on the fourth SEISS grant and will be pleased that the Chancellor has extended the scheme in line with the CJRS. In addition to the confirmation of a 4th grant the Chancellor also confirmed a 5th and final grant that will take us to September. 

‘The government has also opened these grants to the recently self-employed as it now has information from the 2019/20 tax returns. Whilst this is great news for this previously excluded group there are still many left behind, including directors of small limited companies.

‘There was an opportunity in this budget to go further and consider the needs of freelancers and contractors with a limited company set-up, who have essentially been overlooked in terms of appropriate government support so far. The proposal on the table for a Directors Income Support Scheme (DISS) was credible and could have helped millions more people, but the government appears to have ignored this completely.’

Since it was launched in 2020, the Self-Employment Income Support Scheme (SEISS) has helped around 2.7 million self-employed people across the UK.

For employees there will be no change to the terms of the Coronavirus Job Support Scheme which will remain available until the end of September 2021 across the UK. As businesses reopen the government will ask employers to contribute, from July there will be a 10% contribution and then 20% through August and September.

There will be no employer contributions beyond National Insurance contributions (NICs) and pensions required in April, May and June. From July, the government will introduce an employer contribution towards the cost of unworked hours of 10% in July, 20% in August and 20% in September, as the economy reopens.

Furloughed jobs rose from 4 million at the end of December to 4.7 million at the end of January. Since March 2020, the Coronavirus Job Retention Scheme has supported the wages of 11.2 million people.

Kate Palmer, HR advice and consultancy director at Peninsula, said: ‘As the government plans to relax lockdown restrictions, hopefully for the last time, it has remained clear that the pandemic’s ongoing impact on businesses is far from over.

‘A significant aspect of today’s Budget is the extension of the furlough scheme, something that has provided a lifeline to businesses across the country since it was originally put in place in March 2020. The news that it is going on until the end of September will undoubtedly be extremely welcome to many employers, especially those that are still not expecting to open until at least June, such as nightclubs.

‘If all goes to plan, this means that the furlough scheme will remain an option for employers for a few months after restrictions are expected to be lifted entirely on 21 June, which will hopefully help them to slowly bounce back from the major disruption they may have seen.’

John Harding, head of employment taxes at PwC, said: ‘The government has been at pains to stress that it will support businesses in line with the roadmap out of lockdown, so it comes as no surprise that the furlough scheme has been extended to the end of September. The announced arrangements are similar to those in place last summer when the Chancellor reduced the level of support in anticipation of closing the scheme in October 2020.

‘The extension of the furlough scheme, which has already cost in the region of £54bn since it was first introduced 12 months ago, is likely to set back the Exchequer another £10bn. It will be welcomed by many businesses, particularly in sectors of the economy currently slated as being last on the roadmap to emerge from lockdown, who can now see the light at the end of the tunnel. The scheme has provided a lifeline to more than 1.3m businesses.’

The advisory fuel rates that apply from 1 March 2021 have been increased by 1p per mile for petrol and diesel vehicles with engines of 1400-2000cc reflecting a slight increase in fuel prices over the last quarter. The previous rates, effective December 2020, can be used for up to one month from the date the new rates apply.

The rates only apply in the following circumstances:

• reimburse employees for business travel in their company cars; or
• require employees to repay the cost of fuel used for private travel.

These rates cannot be used in any other circumstances. If the rates are used, it is not necessary to apply for a dispensation to cover the payments made.

The advisory electricity rate for fully electric cars is unchanged at 4p per mile. Electricity is not a fuel for car fuel benefit purposes.

When employees are reimbursed for business travel in their company cars, HMRC will accept there is no taxable profit and no Class 1A national Insurance to pay.

Advisory fuel rates from 1 March 2021

Hybrid cars are treated as either petrol or diesel cars for this purpose.

HMRC reviews rates quarterly on 1 March, 1 June, 1 September and 1 December.

The government has also confirmed that the base interest rate will remain at 9%, significantly higher than the average loan interest currently available from commercial lenders.

The threshold for student loan Plan 1 increases to £19,895, and earnings above this threshold will continue to be calculated at 9% interest. This rises from £19,390 for 2020-21.

Plan 2 student loan threshold rises to £27,295, earnings above this threshold will continue to be calculated at 9%, up from £26,575.

The threshold for Scottish student loans, known as Plan 4 loans, starts at £25,000, with the same interest rate of 9% applied.

Postgraduate loan repayments start at £21,000, with earnings above this threshold continuing to be calculated at 6%.

The full details are set out in HMRC Student and postgraduate loan start notice (SL1/PGL1).

It is important that you:

• check your client’s online account for student loan and or postgraduate loan start and stop notices, if the email or correspondence address has changed let HMRC know as soon as possible;
• take the correct action to start student and or postgraduate loan (PGL) deductions as soon as possible; and
• record the deductions correctly on the employee’s full payment submission.

This ensures that the employee does not pay any more or less than necessary.

If your client receives a student loan and or PGL start notice (SL1/PGL1) from HMRC, it is important that you:

• use the correct loan/plan type; and
• check the start date shown on the notice and take deductions from the next available pay day.

If the earnings are below the student loan and/or PGL thresholds, update the employee’s payroll record to show they have a student loan and/or PGL and file the start notice. Deductions should continue until HMRC tells your client to stop.

Student and postgraduate loans and off-payroll working rules

Organisations are not responsible for deducting student loan and or postgraduate loans (PGL) for workers engaged through their own companies.

The worker will account for student loan or PGL obligations in their own tax return.

Scottish student loans

As mentioned in Agent Update 81, the Scottish government is introducing a new plan type for Scottish student loan borrowers, known as Plan 4 from 6 April 2021.

This change will impact employers across the UK, not only those located in Scotland, it will be any employers who have employees paying back their loan from the Student Award Agency for Scotland (SAAS).

A separate stop notice, SL2 will not be issued for this change.

The new plan will be operated by employers in the same way as plan types 1 and 2. If you need to make student and or postgraduate loan deductions from 6 April 2021, you will need to know which plan or loan type to use. This could be Plan 1, Plan 2, Plan 4 and or PGL. An employee may repay Plan 1 or Plan 2 or Plan 4 and PGL at the same time.

The starter checklist has been updated to reflect this new plan type and will be available on www.gov.uk before of the start of the new tax year.

HMRC guidance will be updated to reflect the changes.

In order to take advantage of the new payment scheme businesses will need to have deferred VAT payments between March and June 2020, under the VAT Payment Deferral Scheme. They will now be given the option to pay their deferred VAT in equal consecutive monthly instalments from March 2021.

Businesses will need to opt-in to the VAT Deferral New Payment Scheme. They can do this via the online service that opens on 23 February and closes on 21 June 2021.

The new payment scheme is part of a wider government package of support, worth more than £280bn, which is helping to protect millions of jobs and businesses during the pandemic.

So far around £34bn has been injected into the UK economy following the half a million businesses who deferred their VAT payment last year. The new payment scheme will continue to help the economy recover by enabling businesses, impacted by the pandemic, to manage their business cash flow at a critical time.

Payments can easily be set up via the new payment scheme portal. Businesses can spread their payments with two to 11 equal monthly instalments, interest free. Payments can start from March 2021 and the earlier businesses opt-in the more instalments are available to help spread the cost and provide further support.

Deferred VAT can be paid in two to 11 consecutive instalments starting in March, April, May or June 2021, without adding interest.

Payments can be made by direct debit.

Eligible businesses that are unable to use the online service can ring the HMRC Coronavirus Helpline on 0800 024 1222 to join the scheme until 30 June 2021.

Jesse Norman, financial secretary to the Treasury, said: ‘The government has provided a package of support worth over £280bn during the pandemic to help protect millions of jobs and businesses.

‘This now includes the VAT Deferral New Payment Scheme, which will help provide businesses with the breathing space they may need to manage their cashflows in the weeks and months ahead.’

HMRC has confirmed to ICAEW how usual hours should be calculated. The answer is not the logical one, but it aligns with the published guidance.

On 18 June, ICAEW’s Tax Faculty highlighted the confusion on how to calculate usual hours for partially furloughed employees for claims under the second iteration of the Coronavirus Job Retention Scheme (CJRS V2).

Key to getting the answers HMRC expects from its furlough grant claim calculator, are the hours that employers feed in.

For the period of the claim the employer must enter:

• usual working hours, and
• actual working hours.

The difference between these is the furloughed hours on which the grant claim is based.

HMRC has now confirmed that the following approach is the correct one, as applied for July 2020 to Steve who works 35 hours a week and is paid on the last working day of each month:

HMRC’s published guidance gives instructions for working out an employee’s usual hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, as follows:

“You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

“To calculate the number of usual hours for each pay period (or partial pay period)”:

The answer, confirmed by HMRC, is 155 usual hours in July for Steve.

HMRC has confirmed that the guidance to software developers which gave alternative answers is out of date although the Tax Faculty understands that it has not actually been withdrawn or superseded.

The common sense answer, which you would get if you look at a calendar and count the hours, is 161 hours for July (23 working days Monday to Friday days x 7 hours), but HMRC has confirmed that this is wrong.

Following HMRC’s guidance means that for many employers the grant they receive will be slightly less than they may have expected if they were working on an employee returning to work for a percentage of their usual working week.

However, the legislation covering the implementation of the CJRS has been published and, as with earlier debates about working versus calendar day calculations, HMRC is sticking to its position.