PAYE payment and furlough eligibility extensions

Companies that have cash flow difficulties and are unable to meet their PAYE liabilities as a result of the coronavirus crisis may be able to defer their payments.

HMRC is urging anyone worried about any payments to contact them to discuss the options available.

That could include a payment extension. It is understood that if required the taxman will defer PAYE bill payments for up to three months, where the business is adversely impacted by coronavirus.

This is not an automatic deferral. However, WNJ has successfully applied for a PAYE payment extension on behalf of one of its clients.

Applying for a payment extension might also be an option for businesses struggling to pay other taxes which aren’t automatically deferred under the government’s coronavirus support measures, including Corporation Tax and CIS.

The government has also announced that during the outbreak the annual interest on deferred tax payments will be waived.

HMRC has also set up a dedicated helpline. For more details visit: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/coronavirus-covid-19-helpline

Meanwhile, the government has extended the start date for eligibility for furlough to March 19 from the original February 28 date, meaning that 200,000 more people can benefit from the scheme.

Under the scheme employers can claim a grant covering 80 per cent of the wages for a furloughed employee, with a cap of £2,500 a month.

To qualify and to protect against fraudulent claims, individuals originally had to be employed on February 28, 2020.

But following a review of the delivery system and to ensure the scheme helps as many people as possible, new guidance has confirmed the eligibility date has been extended to March 19, 2020 – the day before the scheme was first announced.

Employers can now claim for furloughed employees that were employed and on their PAYE payroll on or before March 19, 2020.

The employee must have been notified to HMRC through an RTI submission notifying payment in respect of that employee on or before that date.

A HMRC spokesman said: “This change makes the scheme more generous while keeping the substantial fraud risks under control and is expected to benefit over 200,000 employees.”

It has also been confirmed that the scheme is set to be fully operational next week with the online portal going live on April 20.

More information on the scheme is available here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

New insolvency measures unveiled

New insolvency measures to prevent companies unable to meet debts due to the impact of coronavirus from going out of business have been announced.

The Business Secretary has said he will make changes to allow companies undergoing a rescue or restructure process to continue trading, giving them “breathing space” that could help them avoid insolvency.

It will include enabling companies to continue buying much-needed supplies, such as energy, raw materials or broadband, while attempting a rescue.

And it also involves temporarily suspending wrongful trading provisions retrospectively from March 1 2020 for three months for company directors, so they can keep their businesses going without the threat of personal liability.

Business Secretary Alok Sharma said the measures would, “reduce the burden on business, giving bosses much-needed breathing space to keep their workers employed and their companies going.”

Mr Sharma also announced that the government would introduce legislation to ensure those companies required by law to hold Annual General Meetings (AGMs) will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus.

Companies will temporarily be extended greater flexibilities, including holding AGMs online or postponing the meetings.

This measure follows an announcement that companies would automatically and immediately be granted a three-month extension to the filing of their accounts following a fast-track online process.

More than 10,000 businesses have already successfully applied for the extension.

The government previously consulted on changes to the corporate insolvency regime and announced plans to introduce new insolvency restructuring procedures in August 2018. The new legislation will implement these plans.

Current insolvency rules stipulate that directors of limited liability companies can become personally liable for business debts if they continue to trade when uncertain about whether their businesses can continue to meet their debts.

Relaxation of these wrongful trading rules will reassure directors that the difficult decisions they have to make about the future viability of their business will not have to be unduly influenced by the exceptional circumstances which are entirely beyond their control.

Matthew Fell, chief UK policy director at the Confederation of British Industry, said: “The temporary suspension of wrongful trading provisions, along with other measures, will give much needed headroom for company directors to enable otherwise viable businesses to use the government’s support package and weather this crisis.”

Coronavirus Job Retention Scheme – an update

HMRC has revealed more information about how the Coronavirus Job Retention Scheme (CJRS) will work.

An online service is set to be launched next week to allow businesses to make a claim – the taxman has revealed they will not be able to claim by telephone.

HMRC says the new online portal will open on April 20 and it is contacting businesses to advise them what they need to do.

CJRS will allow employers to claim 80 per cent of the wages of staff that they have furloughed – up to a maximum of £2,500 per employee wage costs (https://wnj.co.uk/job-retention/).

Once the portal is up and running, businesses, and agents that are authorised to act on behalf of clients for PAYE matters, will be able to make a claim.

WNJ’s team will be available to support its clients through the process, either directly, if authorised, or indirectly.

Please confirm to payroll@wnj.co.uk if you wish to instruct us to access the HMRC portal directly on your behalf and process the grant claim.

In addition, whilst our payroll team has already been processing salaries based on furlough calculations for some clients where applicable, if you haven’t already done so, please can you provide the following information:

• Name and National Insurance number of the employee furloughed
• Details of the furlough claim period
• Confirmation of the business bank account number and sort code

To make a claim themselves, businesses will require the following information:

• PAYE reference number
• Confirmation of the number of employees being furloughed
• The furlough claim period for each employee
• Amount claimed (per the minimum length of furloughing of three weeks). HMRC retain the right to audit all aspects of the claim
• Your business bank account Number and sort code
• Your contact name and telephone number

HMRC says it is expecting phone demand to be beyond its capacity to offer a normal service. The service is designed to be ‘self-serve’, with guidance in place.

HMRC will also be providing further information on its support for businesses and workers over the coming weeks, including more detail on the Coronavirus Self Employment Income Support Scheme.

Jim Harra, First Permanent Secretary and Chief Executive of HMRC, says it is “working at pace” to deliver the service that will allow businesses to make a CJRS claim.

Last week Mr Harra told a virtual Commons Treasury Committee hearing on the impact of the COVID-19 related measures that it was currently testing the new online portal with selected PAYE employers.

HMRC has had to move quickly. The scheme was first announced on Friday March 20 at only the second coronavirus news briefing delivered by Chancellor Rishi Sunak.

Mr Harra said: “We are confident that it will be able to handle the large volume of employers that will use it. It is important that the maximum number will be able to self-serve. We will be issuing guidance next on how to compile claims.”

He said that the only way to get the scheme to work would be to ensure it was driven by self-service, as there could be millions of claims.

Mr Harra added: “Many employers will be familiar with filing online PAYE returns or they will use an agent. Between now and the release of scheme, we will be releasing more detailed guidance.”

The latest guidance on CJRS can be found on GOV.UK by searching for ‘Coronavirus Job Retention Scheme’.

£750million coronavirus funding for frontline charities

Charities across the UK will receive a £750million package of support to ensure they can continue their vital work during the coronavirus outbreak.

The money will help a range of good causes including hospices and charities supporting domestic abuse victims.

Tens of thousands of charities providing vital services will benefit from direct cash grants to ensure they can meet increased demand as a result of the virus as well as continuing their day-to-day activities supporting those in need.

As part of the package of support, £360m will be directly allocated by government departments to charities providing key services and supporting vulnerable people during the crisis.

The second part of the support package is £370m for small and medium-sized charities, including through a grant to the National Lottery Community Fund for those in England.

This cash will support organisations at the heart of local communities which are making a big difference during the outbreak, including those delivering food, essential medicines and providing financial advice.

The latest announcement from Chancellor Rishi Sunak builds on previous announcements of support for charities and businesses, including deferring their VAT bills, paying no business rates for their shops next year, and furloughing staff where possible, with the government paying 80 per cent of their wages.

The Chancellor said: “Our charities are playing a crucial role in the national fight against coronavirus, supporting those who are most in need.

“It’s right we do everything we can to help the sector during this difficult time, which is why we have announced this unprecedented £750m package of extra funding.

“This will ensure our key charities can continue to deliver the services that millions of people up and down the country rely on.”

Government departments will now “work at pace” to identify priority recipients, with the aim for charities to receive money in the coming weeks. The application system for the National Lottery Community Fund grant pot is expected to be operational within a similar period of time.

Chancellor strengthens support on offer for business

Chancellor Rishi Sunak has announced he is now taking further action to support firms affected by the coronavirus crisis.

He is bolstering business interruption loans for small businesses and has announced a new scheme for larger companies.

The move follows concerns that the original scheme he announced to support businesses was moving too slowly and rested to heavily on the judgement of banks over eligibility.

The Treasury says that more than £90 million of loans to nearly 1,000 small and medium sized firms have been approved under the government’s Coronavirus Business Interruption Loan Scheme (CBILS) since its launch.

In order to maximise the support available, the Chancellor is extending the CBILS so that all viable small businesses affected by COVID-19, and not just those unable to secure regular commercial financing, will now be eligible should they need finance to keep operating during this difficult time.

The government is also stopping lenders from requesting personal guarantees for loans under £250,000 and making operational changes to speed up lending approvals.

The government also says it will continue to cover the first 12 months of interest and fees.

The new Coronavirus Large Business Interruption Loan Scheme (CLBILS) aims to ensure that more firms are able to benefit from government-backed support during this difficult time.

It will provide a government guarantee of 80 per cent to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m.

Loans backed by a guarantee under CLBILS will be offered at commercial rates of interest and further details of the scheme will be announced later this month.

The Chancellor said: “We are making great progress on getting much-needed support out to businesses to help manage their cashflows during this difficult time – with millions of pounds of loans and finance being provided to hundreds of firms across the country.

“This is a national effort and we’ll continue to work with the financial services sector to ensure that the £330 billion of government support, through loans and guarantees, reaches as many businesses in need as possible.

The Chancellor also revealed he will be speaking to bank chief executives to discuss how the schemes are working and ensure everybody is playing their part.

There have now been over 130,000 enquiries from businesses across the country for business interruption loans, according to latest figures from UK Finance.

Some 983 businesses have had finance approved, while banks are processing thousands of loan applications – and scheme changes made today will help them approve loans for the smallest businesses as quickly as possible.

Last week, Mr Sunak and the Governor of the Bank of England Andrew Bailey wrote to banks asking them to support small and medium-sized enterprises in any way they can.

This included ensuring interest rates offered to struggling businesses are reasonable and to pass on the benefit of the government guarantee to those borrowing under the Coronavirus Business Interruption Loan Scheme.

Adam Marshall, director-general of the British Chambers of Commerce, said: “Improvements to the Coronavirus Business Interruption Loan scheme will help firms get access to cash more quickly, and the announcement of a new loan scheme for mid-sized companies closes a significant gap in existing support.”

Mike Cherry, national chair of the Blackpool-headquartered Federation of Small Businesses said: “The most immediate issue threatening the survival of millions of small businesses and the self- employed is severely depleted cash flow.

“Time is of the essence and therefore we welcome government action in ensuring that any viable small business that has been negatively impacted by the Coronavirus can now directly access CBILS rather first being offered a bank’s own standard commercial lending product.

“Removing personal guarantees for all commercial loans below £250,000 is also very welcome.

“Taking on debt at the current time is a daunting prospect for many small businesses and the self-employed.
“We look forward to continuing our constructive engagement with government to ensure that debt can be repaid in an affordable way that allows small businesses to recover from this crisis and to thrive again.”

IR35 tax reforms put on hold

The introduction of controversial IR35 tax reforms has been delayed by a year as a result of the coronavirus pandemic.

The decision was announced along with a £330bn financial package for the UK economy that includes a business rate holiday and emergency loans for companies.

It is a delay that will be welcomed in most quarters. Even before the current situation there had been calls for the measures to be put on hold.

There had been growing concern from a number of sectors over the new tax regulations for self-employed workers and the risk of them damaging the economy.

According to some industry bodies the changes will lead to a third of self-employed contractors stopping freelancing over non-compliance fears.

Also known as ‘off-payroll’ the rules allow HMRC to tax sole traders as employees if it deems their working arrangement are akin to regular staff.

Figures show that the rule change will affect some 230,000 contractors in the UK. And sectors heavily reliant on freelancers have raised growing concerns over its impact.

The rules are intended to tighten non-compliance with off-payroll working regulations. They shift responsibility for determining the tax status of contractors from the workers to the end users – in this case, private sector medium and large organisations and charities.

Announcing the delay, the Chief Secretary to the Treasury Steve Barclay said: “The government is postponing the reforms to the off-payroll working rules, IR35, from 6 April 2020 to 6 April 2021.”

He said the suspension was in “response to the ongoing spread of COVID-19 to help businesses and individuals,” but insisted it will still go ahead as planned the following year.”

However, he stressed: “This is a deferral, not a cancellation, and the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company, pay broadly the same tax as those employed directly.”

And that is the important thing to take from the announcement – these reforms are still planned to go-ahead.

And though it has moved down the priority list, given everything else that is happening at the moment, businesses that will be affected still need to plan for next April.

To discuss how the rule changes will affect you please contact me on 01772 430000

Using finance to balance the books

A new report has revealed that balancing the books is the number one use of small business credit as figures show late payments have now topped the £20bn mark.

“Managing cashflow” is the most common use of external finance, according to the latest Federation of Small Businesses’ Small Business Index.

Four out of ten UK small businesses that made successful finance applications in the last quarter used the cash for that purpose rather than investing in their firms.

Less than one in four used finance to update equipment with just 16 per cent using the funds to expand their business.

Earlier research has revealed that the UK late payment crisis is leading to the closure of 50,000 small businesses a year at a cost of £2.5bn to the economy.

And the latest figures from Pay.UK show that the balance of outstanding late payments almost doubled to £23.4bn in 2019.

And that is despite continual and vocal campaigning in recent years to end late payments and “supply chain bullying” and to create a new more positive payments culture.

As FSB National Chairman Mike Cherry says it is troubling that so many external finance applications are driven by concerns over cashflow.

He says: “This really shouldn’t be the case – you wouldn’t dream of doing your weekly shop and telling the cashier that you’ll pay for it in 100 days, but corporations take this approach to small businesses in droves.

“The uncertainties facing big businesses over the past few years will have no doubt increased the temptation to use small firms as free credit lines. We need to put that attitude to bed, for good.”

He adds: “We fought hard for a package of late payment reforms under the last administration. Frustratingly, it was put on ice due to the general election. We’ll be working closely with the new small business commissioner to resurrect it.”

There is also more work to be done to make smaller businesses aware of all the finance options available to them.

It’s also worth looking once again at ways businesses can avoid bad debt problems. Here are some top tips. We’ve published them before but they are worth returning to:

  1. Know your client. When you take on a new customer check them out, get to know their financial situation, and their track record of payment. If they’ve left a previous supplier find out why. Take your time and be thorough.
    The Small Business and Enterprise Act 2015 and the Payment Practices and Performance Regulations were launched in April 2017. Larger companies are now required to publish twice-yearly the average time they take to pay invoices and the percentage not paid in the agreed terms. Suppliers can use the Payment Practices Reporting website (Check-payment-practices.service.gov.uk/export), to learn more about the reality of engaging in business with a larger firm.
  2. Get a signature. It is important to have proper Terms of Business in place. They should deal with payment terms in clear and precise terms – and set out your rights of remedy if payment is defaulted. Make sure your customers know your terms and get a signed acknowledgment from them that they have read and understood them fully. It pays to get help and advice when you are drafting them to make sure that your terms are enforceable.
  3. Chase debt early. Act with speed if you suspect a customer is in trouble. It can make all the difference in recovering what’s owed to you. Even if just one invoice is overdue consider if it’s in your company’s best interests to continue to work for them. You do not want to rack up the debt.
  4. Put procedures in place to recover bad debt. It’s vital that you have processes in place to chase what is owed to you. Some SMEs outsource this and it can be very effective for smaller businesses, putting distance between them and their client. A systems-based process is vital to this, and experts will chase unpaid debts all the way to court action and enforcement if needed. It’s important to have this process in place because poor cash flow can threaten the future of your company.
  5. Consider court of insolvency procedures. These are the formal steps you can take if all else has failed to get what you are owed. Again, look which is the best route to take – and one that gives you a realistic prospect of getting your money. If you get a successful judgement you still need to enforce it.

To discuss any issues raised by this article please contact me on 01772 430000

IR35 – the concern grows

New Chancellor Rishi Sunak has been urged to suspend the looming IR35 new tax regulations for self-employed workers or risk damaging the economy.

According to some industry bodies the change will lead to a third of self-employed contractors stopping freelancing over non-compliance fears.

Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), told the City AM newspaper that the new regulations would “have disastrous consequences for the wider economy”.

He said: “The changes to IR35 due in April are a clear and imminent danger not only to contractors, but also the businesses that engage them and the wider economy.”

The disquiet over the April changes has also seen protests by hundreds of freelance workers outside Parliament.

Also known as ‘off-payroll’ the rules allow HMRC to tax sole traders as employees if it deems their working arrangement are akin to regular staff.

Figures show that the rule change will affect some 230,000 contractors in the UK. And sectors heavily reliant on freelancers have raised growing concerns over its impact.

Tej Parikh, chief economist at the Institute of Directors, told the Financial Times newspaper: “Many firms remain unprepared for the legislation, given its complexity.”

The recruitment industry is also concerned. The Recruitment and Employment Federation has called for delay until 2021 and for the Chancellor to “pause and think again on IR35 changes”.

Chief executive Neil Carberry said: “The extension of IR35 into the private sector, as it currently stands, will punish ethical businesses, harm workers and provide the environment for non-compliance to thrive.”

As part of a review into changes to the operation of the off-payroll working rules, announced earlier this yar, the taxman has made an announcement to give business more time to prepare.

Earlier this month HMRC said changes to the operation of the off-payroll working rules will only apply to payments made for services provided on or after April 6 2020.

The announcement came ahead of the publication of the review. In a statement HMRC said: “A common issue raised over the course of the review has been businesses’ concerns over what payments the rules apply to and from when.

“The government has listened and taken action early to give businesses certainty and more time to prepare to ensure the smooth and successful implementation of the reforms that come into force in April.

“The rules, also known as IR35, will now apply only to payments made for services provided on or after April 6 2020.

“Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out.

“It means organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020, supporting businesses as they prepare.”

It added: “The off-payroll working rules have been in place since 2000. They are designed to make sure that an individual who works like an employee, but through their own limited company, pays broadly the same Income Tax and National Insurance contributions as those who are employed directly.”

The rules are intended to tighten non-compliance with off-payroll working regulations. They shift responsibility for determining the tax status of contractors from the workers to the end users – in this case, private sector medium and large organisations and charities.

HMRC says that the purpose of the review being carried out is “to address any concerns from businesses and affected individuals about how the rule changes will be implemented”.

It will also assess whether any additional support is needed to ensure that the self-employed, who are not in scope of the rules, are not impacted.

If you have any questions about your status, please contact me on 01772 430000

Will the Budget be good for your business?

The countdown is on to March’s Budget – the first since Boris Johnson’s general election victory – and the big question is what it will mean for business in the post-Brexit world?

New Chancellor Rishi Sunak has already indicated that when he stands up to deliver his speech it will be very much focused on the Conservative’s campaign messages of levelling up the economy and “unleashing the country’s potential”.

To that end we may see some headline making pronouncements on infrastructure projects and regional investment – which may be good news here in the North West of England.

Any positive announcements on improving east-west communication links – particularly on Northern Powerhouse Rail – would be a massive boost for the region’s economy.

Small business owners will also be looking with interest to see what measures it will contain for them. And which of the Tory’s manifesto pledges are turned into action.

During the campaign the Conservatives committed to aiding small business through a range of measures, including helping firms with spiralling labour costs.

The party also said it would end the late payment crisis by introducing a reform package put on pause by the election. That would be widely welcomed by small business.

Hard-pressed businesses operating in the high street will be looking for movement on business rates – including a “fundamental” review of the current system at the earliest opportunity.

The Tories committed themselves to no increases in the rates of income tax or national insurance. They have said VAT will also remain at the current rate and that is likely to remain the case.

When it comes to corporation tax the possibility of a fall is remote. It is more likely to stay at 19 per cent after plans to cut it to 17 per cent were put on hold shortly after Boris Johnson’s victory.

There may be some announcements in respect to business property relief and entrepreneur’s relief. The Tories’ manifesto promised to “review and reform” the latter.

One controversial move being predicted by some commentators surrounds pension tax relief – which has been a core incentive in encouraging people to save for their retirement.

There has been speculation that the Chancellor is looking to strip higher earners of their 40 per tax relief, equalising everybody at 20 per cent or possibly levelling rates at 30 per cent.

That would see an £80,000 earner putting £15,000 a year into their pension losing £3,000 if the rate drops to 20 per cent. Analysts say the move would raise £10bn a year for the Treasury.

There have also been reports that the freeze on fuel duty could end – with the first hike in a decade. Again, that would be a controversial change in policy from a Tory government.

To discuss any aspect of this article and any tax issues please contact me on 01772 430000

Sorry, a hamster ate my post!

Who says that the taxman hasn’t got a sense of humour? In the run up to the January 31 self-assessment deadline HMRC has decided to share with us the strangest excuses and expense claims received over the past decade.

And the list of bizarre excuses for missing the deadline, coupled with what can only be described as questionable expenses claims, certainly raised a smile in the WNJ office.

HMRC’s top 10 most bizarre excuses and questionable expenses claims of the last decade, in reverse order, are:

• caravan rental for the Easter weekend
• I was up a mountain in Wales, and couldn’t find a post box or get an internet signal
• my dog ate the post … again
• claiming £4.50 for sausage and chips meal expenses for 250 days
• my hamster ate my post
• I’ve been cruising round the world in my yacht, and only picking up post when I’m on dry land
• a music subscription so I can listen to music while I work
• pet food for a Shih Tzu ‘guard dog’
• a DJ was too busy with a party lifestyle – spinning the deck….in a bowls club
• my mother-in-law is a witch and put a curse on me

Needless to say, all the excuses and expenses listed above were unsuccessful.

Angela MacDonald, HMRC Director General of Customer Services, says: “Each year, we try to make it as easy and simple as possible for our customers to complete their tax returns and the majority make the effort to do theirs’ right and on time.

“But we still come across some unusual excuses and expenses, which range from problems with a mother-in-law to yachts set on fire.

“We always offer help to those who have a genuine excuse for not submitting their return on time. It is unfair to the majority of honest taxpayers when others make bogus claims.”

The penalties for late tax returns are:

• an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
• after three months, additional daily penalties of £10 per day may be charged, up to a maximum of £900
• after six months, a further penalty of five per cent of the tax due or £300, whichever is greater
• after 12 months, another five per cent or £300 charge, whichever is greater

There are also additional penalties for paying late of five per cent of the tax unpaid at 30 days, six months and 12 months. Interest will be charged on all late payments.

To discuss any tax issues you may have, please contact me on 01772 430000