In this month’s Enews we consider the announcement of a consultation on self-employed basis periods, draft Finance Bill clauses and guidance on claiming the fifth self-employed Income Support Scheme (SEISS) grant. With HMRC updated guidance on salary sacrifice, ICAEW urging VAT reforms specifically for property, the latest statistics on furlough, pension scams and public trust in charities, there is a lot to update you on.
Consultation launched on self-employed basis period reform
HMRC has recently launched a consultation on how basis periods can be reformed for income tax for the self-employed.
The consultation seeks to gather views on how best to implement a proposal to simplify the rules under which profits of an unincorporated trading business are allocated to tax years using basis periods. The consultation also includes suggestions regarding transitional rules for moving to the new system.
HMRC aims to simplify the system before Making Tax Digital (MTD) for income tax is implemented.
The proposals affect the self-employed and partnerships with trading income. It mainly affects unincorporated businesses that do not draw up annual accounts to 31 March or 5 April and those that are in the early years of trade.
HMRC stated that it would like to gather views on the matter from businesses, advisers, tax software providers and representative bodies.
Internet link: GOV.UK Basis period reform – consultation
The government has published draft Finance Bill clauses
The Government has published draft clauses for the next Finance Bill, which broadly cover pre-announced policy changes.
The government is committed, where possible, to publishing most tax legislation in draft for technical consultation before the relevant Finance Bill is laid before Parliament.
The consultation will close on 14 September 2021.
Internet link: GOV.UK Draft Finance Bill 2021-22
Claiming the fifth self-employed Income Support Scheme (SEISS) grant
HMRC has issued guidance on claiming the fifth and final self-employed Income Support Scheme (SEISS) grant.
Unlike previous SEISS grants the amount of the fifth grant available is determined by how much a self-employed individual’s turnover is reduced.
The fifth grant is 80% of three months’ average trading profits capped at £7,500 for those self-employed individuals whose turnover has reduced by 30% or more. Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months’ average trading profits, capped at £2,850.
Claims must be made by 30 September 2021. It is the taxpayer who must make the claim, an accountant or agent cannot submit the claim on their behalf.
Before making a claim taxpayers must:
- work out their turnover for a 12-month period starting from 1 April 2020 to 6 April 2020
- find their turnover from either 2019/20 or 2018/19 to use as a reference year.
HMRC advises taxpayers will need to have both figures ready when they make their claim.
A taxpayer can calculate their turnover for 2020/21 in a number of ways:
- by referring to their 2020/21 self assessment tax return if this has already been completed
- checking the figures on their accounting software
- reviewing their bookkeeping or spreadsheet records that detail their self-employment invoices and payments received
- checking the bank account they use for their business to account for money coming in from customers
- by asking their accountant or tax adviser for help in calculating the figures. However accountants and agents are unable to make the claim on the taxpayer’s behalf.
Claiming the fifth SEISS grant is not straightforward so please contact us for advice on determining your turnover figures or eligibility.
Internet link: GOV.UK SEISS5
ICAEW urges HMRC to scrap exemptions to simplify VAT rules
In response to HMRC’s consultation on simplifying the rules relating to land and property, the Institute of Chartered Accountants in England and Wales (ICAEW) has urged HMRC to abolish all VAT exemptions and remove all VAT options.
The ICAEW stated that the VAT rules regarding land and property are ‘unnecessarily complex’ and stand to benefit from ‘significant simplification’. The Institute also highlighted the need for a more fundamental review of VAT exemptions.
In its response, the ICAEW also argued that abolishing exemptions would remove the difficulties for businesses posed by partial exemption. It suggested that all land and property transactions should be subject to VAT at the standard rate or reduced rate, other than those relating to domestic property, which should remain zero-rated. This would help to remove many of the complexities associated with the current rules, the ICAEW said.
In regard to the removal of all VAT options, the ICAEW commented: ‘Any option, whether it be to tax or exempt a transaction, creates complexity and uncertainty, as there are then two possibilities for the VAT liability of what is essentially the same type of supply.’
Internet link: ICAEW VAT representation
HMRC updates Salary Sacrifice guidance
HMRC has updated the guidance on salary sacrifice.
HMRC has removed the guidance on ‘Salary sacrifice arrangements set up before 6 April 2017’ as the transitional arrangements for calculating the value of the benefit came to an end on 5 April 2021.
A salary sacrifice arrangement is an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit.
Employers can set up a salary sacrifice arrangement by changing the terms of the employee’s employment contract. The employee needs to agree to this change.
The impact on tax and National Insurance contributions payable for any employee will depend on the pay and non-cash benefits that make up the salary sacrifice arrangement.
An employer needs to pay and deduct the right amount of tax and National Insurance contributions for the cash and benefits they provide.
For the cash component, that means operating the PAYE system correctly via payroll.
For any non-cash benefits, an employer will need to work out the value of the benefit.
If an employer sets up a new salary sacrifice arrangement, they will need to work out the value of a non-cash benefit by using the higher of the:
- amount of the salary given up
- earnings charge under the normal benefit in kind rules.
For cars with CO2 emissions of no more than 75g/km, employers should always use the earnings charge under the normal benefit in kind rules.
Please contact us if you are considering setting up salary sacrifice arrangements to ensure these are effective.
Internet link: GOV.UK Salary sacrifice
Data reveals 1.9 million workers remain on furlough
The Coronavirus Job Retention Scheme (CJRS) is being wound down on 30 September 2021 and data published by HMRC has revealed that 1.9 million workers remain on furlough.
The data showed that the number of employees furloughed on the CJRS fell by 590,000 during June. The total number of furloughed workers is 1.9 million.
The data also revealed that younger workers have been leaving furlough most quickly, whilst one in ten workers aged 65 or over were on furlough.
For guidance on claiming CJRS visit: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme
Internet link: GOV.UK CJRS statistics
Pension scams average losses now over £50,000
According to the latest figures from Action Fraud the average loss from pension scams has reached £50,949 this year.
That is more than double the typical figure of £23, 689 reported last year.
Action Fraud said the losses in each case ranged from less than £1,000 to as much as £500,000, and the real figures could be higher as many scams go unreported.
Mark Steward, the Executive Director of Enforcement and Market Oversight at the Financial Conduct Authority (FCA), said:
‘Fraudsters will seek out every opportunity to exploit innocent people, no matter how much they have saved.
‘Check the status of a firm before making a financial decision about your pension by visiting the FCA register. Make sure you only get advice from a firm authorised by the FCA to provide advice, before making any changes to your pension arrangements.’
The FCA highlighted five common warning signs:
- Being offered a free pension review out of the blue
- Being offered guaranteed higher returns
- Being offered help to release cash from your pension, even though you are under 55
- High-pressure sales tactics – scammers may try to pressure you with ‘time-limited offers’ or send a courier to your door to wait while you sign documents
- Unusual investments which tend to be unregulated and high-risk.
More information on how to avoid pension scams is available from the FCA at https://www.fca.org.uk/scamsmart/how-avoid-pension-scams
Internet link: FCA news
Increase in public trust in charities
Public trust in charities has reached its highest level since 2014, according to research published by the Charity Commission.
An independent study showed that people’s trust in charities scored an average of 6.4 out of 10, up from 6.2 a year ago and significantly higher than the low of 5.5 recorded in 2018. The highest figure to date is 6.7 out of 10, recorded in 2014.
The Commission said the uplift may be linked in part to the coronavirus (COVID-19) pandemic, and charities’ visible role in responding to the national crisis, notably in areas such as food poverty and support for NHS workers and other key workers.
Helen Stephenson, Chief Executive of the Charity Commission, said:
‘It is vital that we learn the right lessons from this research. The pandemic has been a momentous event in our collective experience, with charities proving their value time and again.
‘But it has not changed people’s fundamental expectations of charity. More than ever, people need evidence that charities are not ends in themselves, but vehicles for making the world a better place, both through what they achieve, and the values they live along the way.’
Internet link: Public trust in charities 2021: web version