Tax measures to help individuals cope with the financial impact of COVID-19
27th April 2020
ax partners at the Guildford office of Smith & Williamson, the professional and financial services group, discuss measures announced by the government to help individuals cope with the financial impact of COVID-19.
Though the primary concern may be public health, it is natural for individuals to be concerned about how current circumstances will impact their finances.
It is in the Government’s interests to support taxpayers and businesses through this crisis, who will in turn support the economy once restrictions are lifted. Various tax and other financial support measures have been announced in recent weeks.
Deferring tax payments
If you have a tax payment that you will struggle to make, you should contact HMRC to discuss a deferral as soon as possible. We can do this for our clients. HMRC has set up a dedicated helpline to support businesses and the self-employed whose finances are affected by COVID-19, including the option to agree Time To Pay (TTP) arrangements where appropriate. TTP arrangements can also be made for personal tax payments on the normal helpline (second link below).
A TTP arrangement involves an extended payment deadline, normally collecting regular instalments of tax over the extension period. The extension is rarely more than one year. Penalties are waived if the TTP deadlines are met, though interest generally applies. The Government has confirmed that, if a business or self-employed individual has administrative difficulties in contacting HMRC or paying tax, it will explore cancelling late payment penalties and interest.
July tax payments deferred
The self-assessment income tax payments due in July have all been deferred automatically until January 2021. No interest or penalties will be applied. Originally, this measure was announced as only applicable to the self-employed, but it does cover all those with July income tax payments.
The guidance states that the deferral is optional, and that if you are still able to pay your second payment on account by 31 July you should do so.
VAT payments deferred
VAT payments due between 20 March and 30 June 2020 have been deferred to assist the cashflow of UK businesses. This deferral applies automatically, but the Government will process VAT reclaims and refunds as normal. The deferred VAT will need to be paid by 31 March 2021.
UK tax residence
Some individuals who are normally non-UK tax residents may find that, due to travel or other restrictions arising from the pandemic, they spend more time in the UK than planned. Days spent in the UK can usually be ignored, up to a maximum of 60 days, if the individual’s presence in the UK is due to exceptional circumstances beyond their control. The individual also needs to leave the UK as soon as circumstances permit to qualify for this exception.
The Government has published new guidance on the interaction of COVID-19 and exceptional circumstances.
The guidance confirms that circumstances are considered exceptional if you:
- are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus;
- find yourself advised by official Government advice not to travel from the UK as a result of the virus;
- are unable to leave the UK as a result of the closure of international borders, or
- are asked by your employer to return to the UK temporarily as a result of the virus.
Separately, the Chancellor has announced that any time spent in the UK by individuals working on COVID-19-related activities will not count towards the residence tests. This will initially be for the period 1 March to 1 June 2020, but the duration will be kept under review.
The measure is designed to support those who wish to come to the UK to combat COVID-19, from anaesthetists through to engineers working on ventilator design and production.
Off-payroll working rules deferred (IR35)
New rules requiring businesses to assess whether or not contractors should be treated as employees have been deferred for a year to 6 April 2021.
Job retention scheme – wage reimbursement
The Chancellor has offered businesses help with paying the wages of employees who would otherwise be laid off. If the scheme criteria are met and an employee is ‘furloughed’, HMRC will reimburse 80% of their wage cost, capped at £2,500 per month, plus employer’s NICs and minimum auto-enrolment employer pension contributions on that sum.
The guidance also now confirms that individuals can furlough employees such as nannies, who are paid through PAYE.
The job retention scheme portal opened on 20 April, so these grants can now be claimed.
Income support for the self-employed
Those who are self-employed, and have lost income due to COVID-19, may also be eligible for a taxable cash grant from the Government. The self-employed will be permitted to continue trading while claiming the support. This is broadly available to those with trading profits under £50,000, and will be up to 80% of average monthly earnings, capped at £2,500 per month.
Only those who were shown as self-employed on their 2018/19 tax returns will be eligible. Individuals who were late filing their 2018/19 tax returns had until 23 April to file if they wished to claim income support. The scheme will run for three months initially, and payments are expected to be made in June.
The Government has announced a raft of non-tax measures to support businesses and these include:
- measures to ease access to and increase eligibility for benefits, including sick pay;
- increases in certain benefits;
- rates relief for many businesses, along with linked grants and loans (interest free for up to a year); and
- ‘mortgage holidays’ for up to 3 months for homeowners, or landlords of tenants, who are experiencing financial difficulties due to COVID-19.
More detail on some of these measures can be found on the Government website here.
Claire Perrett, Partner, Business tax services
Edward Emblem, Partner, Private client tax services