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Support for businesses through the Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

Eligibility

All UK businesses are eligible.

How to access the scheme

You will need to:

  • designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.

Chancellor Rishi Sunak told Britons they will not face the coronavirus crisis ‘alone’ tonight as he unveiled a huge new coronavirus bailout. He said the government will cover 80 per cent of salaries up to £2,500 a month, with workers staying on the books of employers, and there will be no limit on the total cost. The scheme will be up and running by April 1.

‘For the first time in our history the government is going to step in and help pay people’s wages,’ he said. The massive rescue package was unveiled by Mr Sunak and Boris Johnson at a press conference in Downing Street after furious complaints that they were not doing enough for ordinary people.

IR35 delay added to £330bn virus aid package

Chancellor Rishi Sunak joined the Prime Minister at Tuesday’s Downing Street press briefing to overhaul his £30bn Budget support package just six days after delivering it.

“I promised to do whatever it takes to support our economy through this crisis – and that if the situation changed, I would not hesitate to take further action. That is what I want to begin doing today,” said Sunak.

As well as enhancing and extending many of the measures announced last week, Chief Secretary to the Treasury, Steve Barclay announced in the House of Commons that the government was delaying the roll-out of the new private sector IR35 regime until 1 April 2021.

While a total of £350bn has been committed to support businesses and individuals, the IR35 delay came in response to growing calls for the government to offer support to the self-employed and freelances.

NEW PROCEDURES FOR BUILDERS / SUBCONTRACTORS EFFECTIVE OCTOBER 2019

VAT: NEW ACCOUNTING PROCEDURES FOR BUILDERS / SUBCONTRACTORS

You may have read that new procedures are being introduced on 1 October 2019 which will affect any construction business where the contractor and subcontractor are both VAT registered.

Under current rules, a builder charges VAT in the usual way. This is changing for supplies of both labour and materials between these businesses. The subcontractor will invoice the contractor without charging VAT. The contractor will account for the VAT on their return under what is known as the “reverse charge” procedure. The contractor will not be affected as the notional VAT is included both as a receipt and payment in boxes 1 and 4 on the VAT return (box 7 will still include the net value of the payment).

The reverse charge is based on the rate of VAT that applies for the work in question but only supplies subject to either 5% or 20% that are included. Zero rate supplies are excluded.

OTHER ISSUES TO CONSIDER

Both contractor and subcontractor must ensure that they are registered for CIS and have a valid VAT number.

The subcontractor will specify on his sales invoices the amount and rate of VAT that the contractor needs to declare under the “reverse charge” procedure. Although not required, we feel it would be beneficial to include the contractor’s VAT number on the invoice.

The subcontractor should include wording along the lines of “Reverse charge. Customer to account for the VAT to HMRC”.

HMRC suggests that if there are any doubts about the credentials of a contractor customer, a deposit equal to the amount of VAT not being charged should be collected from the contractor e.g. if they have asked for but not received a VAT number.

We hope this is reasonably clear but if you have any queries please don’t hesitate to contact us.

Making Tax Digital – update

A controversial policy of HMRC has always been that a business using, for example, the cash accounting scheme and spreadsheets to digitally record their expenses had to record every single purchase invoice in a digital format, even though the business might make a single payment to a supplier based on a statement covering perhaps 40 or 50 different invoices.

It would be sensible for the business to just make a one-line entry on the spreadsheet based on the payment total. With the cash accounting scheme, input tax is only claimed when payments are made to suppliers. That policy has now changed.

The latest update from HMRC on 5 May 2019 allows the supplier statements to be used to record expenses for input tax purposes – a big time saving for many businesses that adopt spreadsheet accounting.

 

Making Tax Digital (MTD) is on the horizon for many businesses.

MTD affects VAT first. For return periods starting on or after 1 April 2019, businesses operating over the VAT threshold (currently £85,000) must keep records digitally, using MTD functional compatible software.

That’s essentially software, or a combination of software and spreadsheets, which can connect to HMRC via an Application Programming Interface. VAT submissions will then be made direct from the digital records. Manual input will not be acceptable, although there will be a ‘soft landing’ period of 12 months where HMRC will not impose penalties if digital links do not exist between software programs used for submission.

It will no longer be possible to submit returns through HMRC’s online portal – except for businesses voluntarily registered for VAT. These businesses will not have to comply unless electing to enter the MTD regime.