Coronavirus update 16 – 17 January 2021
January deadlines and updates on the various Coronavirus support schemes
I am sorry that I was not able to send out a full update on the various Coronavirus support schemes in December, but unfortunately work for clients had to take priority. And I am afraid that is my primary message this month, as we approach the tax return filing deadline of 31 January. Hence, this will be my only newsletter this month.
So, this newsletter is relevant for all of our clients and professional contacts, and whilst you may have “parked” some of my previous missives for later study (perish the thought!), I would urge you to read the first two sections concerning our news, and the impact on our work, and then pick up on the other points if they are relevant to you.
THE DIRECT IMPACT OF CORONAVIRUS ON BUSBYS
Right through this pandemic, we have obviously been affected by the restrictions that have been in place, just like everyone else. However, on the whole, we have been able to function fairly well, with most of the team working full time in our office, and Carolyn, Debbie and I have been able to work at home as well. Indeed, we have been far more affected by school closures than the virus itself during the bulk of 2020.
But the most recent lockdown has now had a far greater impact on our ability to fully function. One of our team has recently had Covid, and whilst they were fortunately asymptomatic, they obviously had to isolate for the better part of two weeks. We have also had two scares, but both staff members concerned tested negative. But that still took them away from the office whilst test results were awaited.
However, the closure of schools has had a far greater negative impact on us. Carolyn, Debbie and two other members of the team have young children, all of whom now need to be home-schooled. Zoey Hanks, one of the other team members affected by this, has been primarily engaged on tax return work since she returned from maternity leave, and she has been very frustrated by the difficulties encountered whilst trying to work at home. Sadly, accountants are not key workers!
IMPLICATIONS FOR OUR SERVICE LEVELS THIS MONTH
All of the above has meant that we are severely stretched, and I am today writing directly to quite a number of clients whose tax returns are due at the end of this month, to let them know that we are unlikely to be able to file their tax returns on time. This is certainly the case for all those clients who have not yet provided their tax return information, and indeed we do not expect to complete returns on time for those who did not deliver their information by our cut off date of 4 January. We have also had to write to some other clients who did not deliver their information until December, but for them we are aiming to either file estimated returns, or to otherwise mitigate the impact of late filing.
This also means that we are having to defer all limited company accounts work until February, unless that is required to complete tax returns. Even then, we may not finalise company accounts this month for those affected, once we have established what dividends need to be reported on personal tax returns.
So, I would ask that any requests for help or advice that are not directly related to tax returns (or to the payment of tax on 31 January) be deferred until next month, if at all possible.
And also, we would ask for your patience if you are waiting for your tax return. If you have not had one of our direct messages, that does mean we do expect to complete your tax return this month. But some will, by necessity, be going to clients in the last few days of January (including 30th and 31st, which are irritatingly a weekend this year!), so can we please ask you not to request progress reports before 28 January.
I thank you in advance for your support during this difficult time.
TAX RETURN FILING DEADLINE STILL 31 JANUARY & MITIGATION OF PENALTIES
Firstly, and despite extensive lobbying by our Institute and others, HMRC have refused to extend the tax return filing deadline. So, returns should still be filed by 31 January, if at all possible. If you deal with your own tax return, and have not yet filed it, we would urge you to file a complete and accurate return on time.
However, if this will prove impossible, you can still comply with the deadline by filing the return with estimated figures. You should then file a “repair” as soon as possible after 31 January, once you can complete accurate figures. HMRC have said that this will be acceptable, and we will be doing this for some returns as and when time runs out. Naturally ensure that your estimates are reasonable and do still make sure you include entries for all sources of income. If you omit an obvious source of income, then that could be deemed as careless. It is also more likely to be noticed by HMRC, and that could lead to an enquiry being opened before you have amended the return.
If, ultimately, your tax return is filed late, then HMRC have said that they will still issue automatic late filing penalties. For a personal, trust or estate return, these continue to be £100 per return, but for a partnership or LLP the penalty is £100 per partner, and this is assessed on each individual partner.
One always has the right of appeal against any penalty, and normally the appeal would have to be lodged within 30 days of the penalty notice being issued. One relaxation that HMRC have announced, is that a penalty can be appealed within 90 days this year.
In previous years, appeals have only be successful where they have been exceptional grounds for late filing, for example severe illness, or the death of a very close relative. However, this year, in another relaxation, HMRC have stated that Covid-19 is a valid reason for appeal. Specifically, they have said:
“We know that some customers will not be able to file on time because of the impact of the pandemic on them or their tax agent. These customers should get their returns in as soon as they can. We will not penalise people who need more time. We will accept pandemic-related personal or business disruption as a reasonable excuse. If their return is late due to pandemic-related delay on the part of an agent, this will also be a valid reasonable excuse.”
Naturally, all of our clients who provided their tax return information by our deadline of 4 January, will be protected by the last sentence. As stated above, we have been adversely affected by the pandemic, particularly in the last few weeks, and in normal years, we have always filed tax returns on time where clients supply their information by the first working day after the Christmas/New Year break. This is a very welcome relaxation of the rules.
TAX PAYMENT STILL DUE BY 31 JANUARY & TIME TO PAY ARRANGEMENTS
As all self-assessment taxpayers will know, 31 January is also the tax payment deadline. This year, the following will become due:
- The second payment on account for 2019/20 (which was originally due on 31 July 2020), if still unpaid. Remember that you were able to defer this, interest free, until the end of this month.
- Any balancing payment due for 2019/20.
- The first payment on account for 2020/21.
And do not forget that 31 January is a Sunday – so do aim to pay by 29 January to ensure your payment arrives on time.
As I write this, there has been no announcement deferring the due date, and I would now be surprised if this were to change. So, if any of the above tax is unpaid on 1 February, then interest will start to accrue on a daily basis. The interest rate is only 2.6% per annum, so it is not penal, and will often be less than a commercial overdraft or loan interest rate. But for businesses, interest on tax paid late is not tax deductible.
However, if either of the first two items remain unpaid at 27 February, then there will be an automatic surcharge levied, which is equal to 5% of any 2019/20 tax that is still outstanding at that date. There has been no announcement saying that the pandemic can be viewed as a reasonable excuse for late payment.
Whilst the third item will not be subject to any late payment surcharges, do remember that it is quite permissible to make a claim to reduce payments on account, where you have a reasonable belief that your tax liability for 2020/21 will be lower than the liability for 2019/20. We feel sure that many people will have lower profits and investment income than last year, but the self-employed should bear in mind that:
- Any SEISS grants that you have received are subject to tax and national insurance.
- Any local government grants that you have received are also part of trading profits.
- And the above items will be taxed in the year of receipt, regardless of your accounting year end. See the last item in Newsletter 15 – https://www.busbys.co.uk/Coronavirus_Update_15/
So, if you are unable to pay all of the tax due by 27 February, and wish to avoid the late payment surcharge, then you must make a “time to pay” arrangement. HMRC are offering an automated instalment plan for debts up to £30,000 over a maximum period of 12 months, but one has to sign up to a direct debit arrangement. If you wish to apply for this, go to https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments. If your debt exceeds £30,000, please also follow this link, but you will need to call the Self-Assessment Payment Helpline on 0300 200 3822. But do bear in mind that interest will still be charged.
Please also note that you cannot enter a time to pay arrangement until after your tax return is filed and processed. You then have 60 days after the due date to enter into the arrangement; whilst that gives you until 31 March to apply in almost all cases, in practical terms you should apply before 27 February to avoid the late payment surcharge.
However, HMRC have confirmed that you cannot enter an automated time to pay arrangement unless:
- You have no tax returns outstanding.
- You have no other tax debts
- And you have no other HMRC payment plans set up
In these cases, you would need to call the SA payment helpline – see above. Additionally, some people may have older debts – e.g. they have not paid anything on account for 2019/20, even though the first payment on account was due on 31 January 2020. It is unclear whether a time to pay arrangement can be set up for debts that are now more than 60 days old – you may have to call the helpline if this applies to you.
I am afraid that we are unable to directly assist with time to pay arrangements, not least because we cannot authorise a direct debit mandate or give payment undertakings on your behalf.
UPDATE ON GOVERNMENT SUPPORT SCHEMES
SEISS – 3rd Grants
The third Self Employed Income Support Scheme grant can still be claimed, if you have not already done so, but please ensure that you make your claim on or before 29 January, as the scheme closes on that date. Remember that you must make the claim – we cannot do it for you. See Newsletter 15 for more details - https://www.busbys.co.uk/Coronavirus_Update_15/ - and particularly note the qualifying criteria, which must be complied with at the time you apply. So, if you were not adversely affected by Covid in November (and therefore did not apply), you can apply now, if the third lockdown has adversely affected you.
The government has confirmed that there will be a fourth grant covering February to April 2021. Application details will be announced once the current scheme closes. The amount has not been confirmed yet either – hopefully, it will remain at 80% in line with the CJRS extension.
On the other hand, the Chancellor has confirmed that the Coronavirus Job Retention Scheme will continue until 30 April, and claims can be made at the rate of 80% of the employee’s gross salary, subject to the maximum claim of £2,500 per month per employee. Employer’s NI and employer pension contributions still have to be borne by the employer.
Most of the rules set out in Newsletter 14 (https://www.busbys.co.uk/Coronavirus_Update_14/) have not altered, and in particular do remember that claims must not be submitted by 14th of the following month. But there was one change that took affect on 1 December 2020 – claims can no longer be made in respect of any employees who have been given notice to end their employment.
However, HMRC have announced one very important and welcome relaxation of the rules concerning employees who are unable to work due to childcare commitments. The Chief Executive of HMRC said om 6 January that:
If an employee asks to be furloughed because they have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school or childcare facilities closing, you or your clients can place them on furlough and claim for them under the CJRS.
And the flexible furloughing arrangements are still in place, so now it will be a lot easier for employers to make claims in respect of these employees, especially if they are still able to do some work. That would seem to be the case, even if the employer would really like them to be working full time.
On top of this, HMRC have confirmed again that employers can also treat time spent on furlough (flexibly or full time) as holiday, subject to employment law requirements on notice. Please also remember that employers must top up their employee’s pay to the normal full rate if the employee is taking holiday.
VAT deferral – new payment scheme
As you will hopefully recall, businesses were permitted to defer the VAT that was due last spring until 31 March 2021. The Chancellor announced in November that affected businesses may now pay this in 11 instalments, interest free. Not clear why they went for 11 months, but perhaps the first payment will not need to be made until May 2021; they have said that the debt must be fully repaid by March 2022. The details for this scheme have not yet been published.
Reduced VAT rate
Traders who have benefited from the 5% VAT rate since 15 July 2020 (primarily the hospitality and tourism industries – see https://www.busbys.co.uk/Summer_Newsletter_2020/ for further details), will hopefully be aware that the reduced rate will continue to apply to the end of March. It was originally scheduled to end on 12 January. Sadly, the income that those businesses can generate now is going to be severely reduced (or eliminated) by the rules relating to the third lockdown, so one hopes that the Chancellor will extend this reduction when he presents his budget on 3 March.
Direct support grants
These resumed when the second lockdown came into force, and businesses that qualified for the initial grants in the spring of 2020 were invited to apply again. The initial grants in November ranged from £2,001 per 42-day period of restrictions for the smallest businesses (rateable value of £15,000 or less) up to £4,500 for the largest qualifying businesses. The grants that are now being paid in respect of the third lockdown range from £4,000 to £9,000 for closed businesses, and again, eligible businesses are invited to apply directly.
As before, the grants are administered by local councils, and as the application processes vary considerably between councils, we have not needed to help clients with these, this time round. In any case, it must be the responsibility of each business to apply – we cannot do this for you. But do please remember that these grants are taxable, as are all forms of direct government support.
The deadline for Bounce Back loans and the larger CBILS loans has been extended to 31 March, and these are certainly worth considering if you have borrowed money commercially since the pandemic started. Likewise, the mortgage holiday support facility has also been extended to 31 March. To look up details of all forms of government support, look at https://www.gov.uk/business-coronavirus-support-finder and complete the questionnaire to see what you may be eligible for.
Once again, I apologise for the length of this newsletter, but hopefully I have covered all of the main points that are relevant to our clients during this third lockdown. If you need any more guidance on any of the above, please do not hesitate to contact us….in February!