Many thousands of former NHS workers have returned to frontline services to assist in the fight against the Coronavirus pandemic. HMRC very quickly issued a note advising that these returning workers were being targeted by unscrupulous promoters of tax avoidance schemes. These schemes are typically offered through umbrella companies and boast the attractive outcome of being able to take home around 85% of your gross pay after all deductions.
The payments from such companies will frequently fall into
two categories. The first will be a
relatively small salary, with the appropriate payslip and proper deductions of
PAYE at source. The second payment will
be higher and described as something other than salary, often being referred to
as a loan, but also perhaps as an annuity, shares or some other credit
facility. HMRC consider this second
payment as disguised remuneration and will raise an enquiry to challenge such
methods of payment. They have frequently
won these challenges, and so returning NHS workers need to be very careful what
they sign themselves up for as they may end up liable for large amounts of
underpaid tax. If they don’t know fully
what they’ve signed themselves up for, they should seek professional advice.
Below is a copy of the relevant HMRC note concerning this:
The UK government has been clear that whatever the outcome of the Brexit trade talks they will not extend the transition period beyond 31 December 2020.
German officials have been reported as saying that EU leaders may intervene in the autumn if no progress has been made, to try and strike a compromise deal.
A clear focus on import taxes and international trade issues is key in preparing for the tariffs and trade requirements with the EU from 1 January 2021.
The final round of Brexit trade talks is taking place and political deadlock means that a nodeal is becoming more likely. The deadlock centres on the UK being required to sign up to EU rules in exchange for tariff free access.
On 12 June, the UK government announced that there would be no extension to the transition period beyond 31 December 2020.
If you have any questions in regards to the above content, please contact Jonathan Main.
As we move out of lockdown, where we have perhaps embraced new ways of working and some wholesale remote working from home, employers may be thinking about adopting working from home (WFH) as a ‘new normal’.
However, the costs and expenses relating to WFH can create issues and the devil is in the detail, with quite a ‘high bar’ to clear for HMRC to accept that home is a workplace and that travel to any of your premises is to a temporary workplace that is not taxable.
have announced the formal withdrawal of the ‘postal concession’ with effect
from 1 December 2020.
is the postal concession?
postal concession was agreed between HM Customs and Excise and the Law Society
in 1991. It allowed conveyancing solicitors to treat property searches
conducted by post as disbursements, so that VAT did not have to be charged by
the solicitor to the buyer of the property.
has this changed?
2017, the law firm Brabners LLP lost a VAT case before the First-tier Tribunal
that online search fees should be treated as disbursements. Following a
consultation process, HMRC have justified the withdrawal of the postal
concession on the grounds that postal and online searches need to be dealt with
on a consistent basis. HMRC also feel that postal searches are largely obsolete
and that the concession serves no useful purpose.
state that further guidance will be issued on the treatment of disbursements
more generally, following withdrawal of the concession on 1 December 2020.
Watch this space!
If you have any questions, please contact Jonathan Main on 07760 166802.
The current global COVID-19 pandemic has shown us just how
quickly the unexpected can happen, and the major impact that it can have.
These times of uncertainty highlight the importance of
protecting what matters to you and your family.
Although state benefits provide some support, few families
want to rely on the state to maintain their standard of living. It is therefore
crucial to keep abreast of the level of your insurance cover.
Over the next few weeks, we will look at the different
types of protection a business owner should consider.
Tax efficient life cover
What is it?
A policy that provides individual life
assurance – for example to a salaried director.
It is provided for the individual and paid for
by the company.
It pays out a tax-free, lump sum on the death
(or in circumstances where a ‘significant illness’ involves retirement) of the
The proceeds go to the employee’s family or
Why have it?
You should have it in order to protect loved ones from
financial worries, should the worst happen. You insure your car so shouldn’t
you insure your most valuable asset – yourself?
It is also a tax efficient benefit which can be offered to
business owners and employees.
Why think about it?
It provides the opportunity for smaller
companies to offer a death-in-service benefit to its employees (including
Offering life and ‘significant illness’ cover
demonstrates how much your business cares about the well – being of your
employees, which can be useful in both recruitment and retention.
It is an important financial planning solution for:
Often small business don’t have enough employees to be able
to offer a group scheme. However, relevant life cover can be on an individual
basis. Therefore, a small business can take advantage of the tax efficiencies
generally enjoyed by larger companies.
High earning employees
Group schemes are restrictive in the amount of cover
provided, and what is included as ‘salary’. For a higher earner this may not
provide sufficient cover.
As opposed to a Relevant Life
Plan, there are some little known pitfalls with a group life scheme – this is
because a group scheme falls under pension legislation.
Why does that matter?
If the person covered dies, the lump sum death benefit is added to the employee’s pension fund. So, when it comes to calculating the lifetime allowance (currently £1,073,100 tax year 20/21) – this lump sum could make a big difference as anything over the allowance is taxed at up to 55%.
Crucially, benefits from a Relevant Life Insurance Policy won’t count towards either the annual or the lifetime pension allowance.
How does it work?
Sam Jones is a salaried Director of ABC Ltd. He wants to
know that if he dies, his wife Sue and son Josh have no financial worries. He
needs life cover to protect his family; a lump sum of cash from a life policy
will provide that protection.
His company – ABC Ltd takes out a policy on
The plan is put into a Trust with Sue and Josh
Sadly, Sam dies or has a ‘significant illness’*
The Trust makes a claim to the life company
The life policy pays the claim money to the
The trustees then pay out to:
Sue and Josh if Sam has died
Sam himself (in the case of a significant
* which leads to retirement or
And the tax efficiency?
Receives corporation tax relief on the premiums
Pay no employer NI on premiums*
Sam benefits aren’t taxed as an
employment income (no P11D)
He pays no NI on premiums or benefits*
Any benefit would not be included in Sam’s
estate for inheritance tax purposes
Benefits do not count towards pensions annual
or lifetime allowances
the challenges presented to companies during these unprecedented times, many
businesses are taking advantage of the Government’s COVID-19 employment and
loan schemes. Whilst these serve an invaluable role in supporting business,
many companies are nevertheless facing a significant reduction in cashflow,
which could be critical to the viability and health of the business. R&D
Tax Reliefs present an ideal opportunity to boost a company’s cashflow. Whether
you have never claimed under an R&D scheme or have been claiming for many
years, the dedicated R&D team at MHA Moore and Smalley can help.
has been uncertainty over the interaction of R&D and the Coronavirus
Business Support Schemes from the perspective of state aid. Via our national association,
MHA, we have been in contact with HMRC to clarify the position and are able to
advise our clients on the best way forward.
to R&D Tax Reliefs?
UK R&D Tax Incentive Scheme will mark its 20th anniversary this year. The
scope of activities that can qualify for the relief is often wider than
realised and goes far beyond the preconception that R&D must have taken
place in a laboratory setting. Across MHA, we have successfully dealt with
claims ranging from Chocolatiers, to BitCoin Developers to Diesel Engine
Mechanics. If your team have been pushing the boundaries of how-to problem
solve within your industry, it is possible that they have been undertaking
reasonable estimate of operational costs (such as staff salaries, payments to
subcontractors, spend on prototypes and so on), is made by measuring the
intensity of problem-solving activities in response to challenges within a
relief for SME’s provides that 25p or 33p is realised for every £1 of
qualifying expenditure, depending on whether the company was profitable or loss
making (respectively) in the period. Larger Companies must claim under the
R&D Expenditure Credit Scheme, whereby the benefit is roughly 10p for every
£1 identified. Claims can be made up to 2 years after the end of the accounting
period it relates to. The
importance of the R&D Scheme is pronounced in the current climate,
especially for loss making companies, where the losses can be surrendered for
We have developed a highly agile claim
preparation process, which follows best-practice guidelines established with
HMRC, to ensure that in the current climate we can work remotely to efficiently
and safely maximise the value of an R&D Tax Claim. The team have a 100%
success rate with claims submitted, and can submit your claim within 3 weeks
from starting the process.
Already Claiming R&D Tax Relief?
Claim processing time – Our MHA association
has been in regular touch with HMRC during the lockdown, and the latest
guidance indicated that HMRC has brought in additional resources to maintain
their standard processing window in getting 95% of SME submissions through
within 28 days.
Interaction of R&D Schemes with Coronavirus Business Support
Funding – it is important to note that the SME R&D Tax Relief
Scheme is denoted as State Aid. Furthermore, the recently introduced Employment
Retention Scheme and Coronavirus Business Interruption Loan Scheme are also
denoted as State Aid. Under EU rules, two forms of State Aid cannot subsidise
the same piece of work. Consequently, if claims are being made under the
Government’s COVID- 19 schemes, an R&D claim must be made under the less
generous R&D Expenditure Credit (RDEC) Scheme.
is important to remember that although the Coronavirus Business Support Funding
may have been claimed only for a portion of the accounting period, if it did
indeed subsidise a cost involved in an R&D project, then the entire project
must be claimed under the RDEC Scheme. It may be possible to demonstrate that
R&D activities had ceased for the duration of the lockdown (and hence when
the govt support was claimed), however the facts would need to support this.
factor to consider is the definition of ‘de minimis’ aid, where the funding
does not exceed more than EUR 200,000 over a 3-year period. The portion of the
project subsidised through de minimis aid is claimed under the RDEC Scheme,
whilst the remainder can be claimed under the more generous SME Scheme if
applicable. Whatever the circumstances, it will be very important for companies
to note which projects were live during the claim period and whether they
interacted with any such funding. It has been confirmed that the VAT deferment
Scheme should not affect R&D Tax Claims. The EU is currently looking into
the suspension or modifications of conventional State Aid rules for Coronavirus
Business Support Funding based schemes within member states, and our team is
keeping a close eye on these developments.
Who remembers Budget 2020? – The Government had proposed three key
changes that affected R&D Tax Claims as below:
As a measure to prevent the abuse of the R&D Tax Relief
Scheme, the Government had run a consultation with industry, where our
colleagues at MHA MacIntyre Hudson provided feedback, on the introduction of a
cap to cash credit payments for loss making claimant companies. This cap was
proposed as being three times the total PAYE & NIC contributions made by
the company in the claim period. The industry highlighted that whilst such as
measure might prevent ‘shell’ companies from making claims, it would unfairly target
start-ups, where directors do not reward themselves salaries. As a result, the
Government have delayed the introduction of this cap to the cash credit to 1st
April 2021, subject to further consultation with the industry on how to
identify companies that have a genuine UK footprint in terms of development
The RDEC credit rate was increased from 12% to 13%, resulting in
an effective benefit rate increase from 9.7% to 10.5%
Although the use of extensive data sets in testing and development
within software projects continues to increase, there is no current mechanism
within R&D Claims to qualify the costs of these. In response, the
government is running a consultation on treating the costs of acquiring these
data sets as a consumable item.
And last but not the least…
predict that although the current lockdown has a stranglehold on the economy,
many companies are looking to the future. Our role is to provide you with
critical advice on how R&D projects could be structured to provide the
maximum benefit both now and in the future.
get in contact with our R&D Tax Specialists please email firstname.lastname@example.org and a member of the
team will get in touch.
There has, of course, been a huge increase in employees working
from home as a result of the Coronavirus outbreak. The employer may have closed
their premises, or employees may be following advice to self-isolate.
But what are the tax implications of the various items that employers
provide to employees in this situation? And can any be provided / paid tax
of the key items – and the associated conditions – are considered below. There is an important new
exemption for Coronavirus-related reimbursed home office expenses.
principles would not be relevant to employees who have been furloughed under
the Coronavirus Job Retention Scheme and therefore are not working.
principles around some other key benefits changes arising from coronavirus, as
well as homeworking costs for self-employed individuals, are considered further
Mobile phones and SIM cards (no limit on private use)
Must be only one per employee
Connection needed to work from home
Wasn’t already provided
Must be for business use
Private use limited
Connection was already provided
Reimbursed expenses for home office equipment purchased by the employee
Equipment obtained solely to enable employee to work from home during the Coronavirus outbreak
Would have been non-taxable if provided directly by the employee (see below)
Only temporary – from 16 March 2020 to the end of tax year 2020/21
Reimbursed expenses which don’t meet the conditions of the new exemption
Can potentially be reported on PAYE Settlement Agreement (PSA)
Home office equipment Provided by employer
Mainly business use
No significant private use – based on employee’s duties and the need for them to have the items for their job, not time spent
Laptops, tablets, desktops etc Office supplies
Provided by employer
Mainly business use
No significant private use – based on employee’s duties and need for them to have the items for their job, not time spent
Laptops, tablets, desktops etc Office supplies
Reimbursed expenses for IT / office equipment bought by the employee
Can be reported on PAYE Settlement Agreement (PSA)
Additional household expenses
Electricity, heating etc
Can be paid or reimbursed
£4 per week up to 5 April 2020
£6 per week from 6 April 2020
Employees should check with the employer if they will accept claims above these amounts and should keep relevant receipts
Salary advance / hardship loan
Value of less than £10,000 in a tax year
Reimbursed accommodation / subsistence
expenses for employees who are self-isolating but cannot do so in their own home
Employee using own vehicle for business
Approved mileage allowance payments
Up to 10,000 business miles – 45p per mile
After that – 25p per mile
Cost £50 or less to provide
Not cash or cash voucher
Not reward for performance
Could be flowers if somebody is unwell or self-isolating
Some other benefits changes arising from coronavirus
Salary sacrifice – the government guidance on the Job Retention
Scheme is that coronavirus counts as a ‘life event’ that could warrant
off-cycle changes to salary sacrifice arrangements.
Child benefit – families that were not previously eligible for
child benefit (due to the tapering of the benefit where the annual income of
one parent is £50k+) may become eligible if their income has fallen due to
coronavirus. Claims can only be retrospective for a maximum of 3 months.
Self-employed homeworking costs
needs to be a reasonable method for apportioning costs between business and
private use, for example based on the number of rooms or homeworking time.
Costs which can potentially be claimed on a proportionate basis are:
Mortgage interest or rent
Internet / phone use
Flat-rate simplified expenses can be used as an
alternative to actual costs. This method is available to self-employed sole
traders and business partnerships that have no companies as partners.
Individuals must work 25 hours or more a month from home.
flat rate does not include phone or internet expenses, which must be claimed
based on the business proportion of actual costs.
Hours of business homeworking
Flat rate per month
Find out more
If you have any queries on any of the above or would like to discuss how we can assist further, please contact a member of the tax team.
Businesses in the North West are being urged to make use of existing tax incentives to help them boost cashflow and overcome the coronavirus crisis.
Tony Medcalf, a tax partner at North West-based accountants and business advisors MHA Moore and Smalley, believes businesses should not forget the value of the support that was already on offer before the crisis.
He said: “The government has announced some outstanding
business support measures since the pandemic came to light, and many businesses
are making good use of measures like loans, grants and payment holidays.
“For example, business may look to bring
forward existing tax claims by changing their accounting period, claim tax allowances
for investment in new plant and machinery, or apply for tax relief for research
and development activity.
“Cashflow can be the difference between life
and death for the business, so business owners should be speaking with their
professional advisors as soon as possible to make sure they capitalise on all the
the firm has reminded businesses furloughing workers to ensure they remember that
payments received under the Coronavirus Job Retention Scheme (CJRS) are classed
as taxable income.
added: “While, businesses can
use the CJRS to continue paying their furloughed employees, they should
remember the grants claimed back from government are considered as income on
the company’s balance sheet and will be classed as taxable for the purposes of