VAT Deferral & Tax

15.04.20 Adviser Live: COVID-19 Tax Update

Thank you to everyone who joined us earlier for our third webinar. Please find a recording of the webinar below.

Tax reliefs when working from home

The Chartered Institute of Taxation has published a useful guide to employer payments and employee claims for tax relief when people are working from home on a temporary basis during the COVID-19 crisis. These reliefs were all available before the pandemic, however they are particularly relevant in the current situation, and in some circumstances HMRC have changed the way the expense or benefit can be reported.

These are some of the points explained in the guide:

• Where a COVID-19 related expense or benefit is taxable HMRC indicate that an employer can settle the tax and NIC due via their PAYE Settlement Agreement (PSA) rather than the employee (and employer) having to account for tax via payroll and P11D systems. This will allow employers to make a decision as to whether a particular expense or benefit is taxable at a later date rather than when the expense or benefit arises.
• The provision by an employer to an employee of a maximum of one health-screening assessment and one medical check-up in any year is exempt from tax.
• A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan. Loans provided with a value less than £10,000 in a tax year are non-taxable.
• Employers can pay employees who use their cars for business purposes a mileage allowance payment of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.
• The provision by an employer to an employee of PPE, for example hand-gel or face masks, at the employer’s workplace is not taxable. It is not currently clear whether a tax liability arises where an employer provides employees with PPE for a journey to and from work by, for example, public transport.
• The reimbursement by an employer to an employee of the cost of purchasing stationary, for example, stamps, notepads and items of equipment for use by the employee in the performance of the duties of their employment is not taxable.
• The reimbursement by an employer to an employee of the cost of purchasing office equipment, for example computers, printers etc is taxable. HMRC say that the tax due can be reported and accounted for via the employer’s PAYE Settlement Agreement (PSA).
• The provision by an employer to an employee of one mobile phone and SIM card including any line rental is exempt from tax, unless any of these can be converted into money by the employee, irrespective of whether there is any private use (ie there is no restriction on private use).
• If employers do not reimburse additional costs, employees could potentially make a claim for Income Tax relief on the additional costs.
• Up to £6 per week can be paid to employees tax free for additional homeworking costs (from 6 April 2020) without justification needed from HMRC.

VAT Deferral
HMRC have announced that a deferral will apply to VAT payments due from 20 March 2020 until 30 June 2020. They have announced that all UK businesses are eligible, and no applications will be required to get the relief as this will be an automatic offer, meaning that businesses will not need to make a VAT payment during this period.

Taxpayers will be given until the end of the 2020 to 2021 tax year (i.e VAT quarters ending on or after 31 March 2021) to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

The deferral relates only to the payment of the return, and therefore the return should be filed on time as usual.

HMRC have announced that customers who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return. Please note that no interest will be charged on the VAT deferral.

Useful Links

Difficulties paying HMRC: https://www.gov.uk/difficulties-paying-hmrc
VAT deferral scheme: https://www.businesssupport.gov.uk/vat-deferral/

Self-assessment July Payments on Account Deferred
Any personal tax payments on account due to be made by 31 July 2020 have also been automatically deferred and will be due by 31 January 2021. Again, no application to HMRC is required. No interest or penalties will be due.

HMRC Coronavirus Helpline
Telephone: 0800 015 9559
Monday to Friday, 8am to 8pm
Saturday, 8am to 4pm

The government has set up this phone line for businesses who are unable to pay upcoming PAYE or corporation tax liabilities, so they can inform HMRC and set up a payment plan. HMRC are being supportive at present, so if you think this may be something you need to do for imminent debts (PAYE in particular) then it is a good idea to give them a call. When calling you should try to have your PAYE or Corporation Tax reference number in front of you and to be ready to outline your future cash flow, and when you think you will be able to make repayments. If you need any assistance or need to know where to find these numbers, please get in touch with your usual Scrutton Bland contact.

Off-payroll working in the private sector (IR35)
Also on 17 March, the Chief Secretary to the Treasury, Steve Barker, said in a statement to the House of Commons that the start date for the new IR35 tax rules would be deferred to 6 April 2021.

Time to Pay (TTP)
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. Please note that interest may be charged by HMRC on any amounts deferred.

If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 024 1222.