HM Revenue & Customs will need to take into account challenges presented by frequent changes to guidance on U.K. coronavirus support schemes when it exercises new powers of recovery, the Chartered Institute of Taxation said.
HMRC’s guidance has been “constantly evolving, which makes it difficult for people to keep up to date with changes,” the CIOT said in a June 12 response to a 14-day consultation on draft legislation set to be added to the finance bill.
Grants paid under the coronavirus job retention scheme (CJRS), the self-employment income support scheme (SEISS), and other schemes specified in the draft legislation will be taxable. HMRC will have the power to recover payments, by means of a 100 percent tax charge, from anyone who receives a payment to which they are not entitled. There is a provision for penalties in the case of noncompliance.
The CIOT submission raised several technical questions concerning taxation of payments under the CJRS and the SEISS, and it called for a review of a proposed 30-day time limit for notification of liability to the new charge.
“Some of what is being added to the guidance may well impact on claims that have already been made. For example, we understand that HMRC are planning to provide more guidance on what is meant by ‘adversely affected’ by coronavirus for the purposes of working out eligibility for the SEISS,” the CIOT said. Its response coincided with HMRC’s publication of examples intended to illustrate the condition, set out in an HM Treasury direction, that the claimant’s business must have been “adversely affected” by coronavirus.
A person who has already received a payment on the understanding that they were eligible at the time of their claim “may subsequently feel they should not have claimed on the basis of HMRC’s updated guidance,” the CIOT noted, adding that such a person would presumably be advised to make a notification of liability as required in paragraph 12 of the draft legislation.
The CIOT urged HMRC to “take a proportionate and targeted approach” in its compliance activity in the months ahead. “It is essential for the practicalities of how this legislation will operate to be made public as a matter of urgency, not least because of the 30-day deadline,” it added.
HMRC updated on June 12 its CJRS guidance, setting out eligibility for the CJRS; which employees can be furloughed; steps to take before calculating a CJRS claim; calculation of CJRS payments; examples; changes to the scheme starting July 1; making a CJRS claim; and reports to be made to HMRC. It updated guidance on the treatment of expenses and benefits provided to employees during the coronavirus period.
HMRC also updated on June 12 its guidance on eligibility for the SEISS, and how a claimant’s circumstances can affect eligibility.
Some businesses face huge administration challenges, according to Nigel Morris, employment tax director at MHA MacIntyre Hudson. “The furlough scheme is a lifeline for many businesses, but could cause substantial record-keeping problems. Administration of claims will be time-consuming, and employers must get to grips with weekly reporting and the need for multiple claims if their payroll doesn’t follow a calendar month. For sectors like hospitality, defining an employee’s ‘normal hours’ is challenging, as staff shifts and rotas can change on a daily or weekly basis,” he said in a June 15 release.
Sunak Urged to Act Over Gaps in Support
The government must act to help more than 1 million people who have “fallen through the gaps” in financial support, according to the House of Commons Treasury Committee.
Chancellor of the Exchequer Rishi Sunak “has said that he will do whatever it takes to support people and businesses from the economic impact of the pandemic,” committee chair Mel Stride said in a June 15 release. “Overall, [Sunak] has acted at impressive scale and pace. However, the committee has identified well over a million people who — through no fault of their own — have lost livelihoods while being locked down and locked out of the main support programs,” he added.
The committee made a series of recommendations to assist those newly in employment; those newly self-employed; those self-employed with annual trading profits of more than £50,000; directors of limited companies who take a large part of their income in dividends; and freelancers, or those on short-term contracts.
“We received significant volumes of evidence from individuals and organizations concerned about financial hardship because they or their members did not meet the eligibility criteria for support,” the committee’s report said. It urged the government to “find a practical solution to supporting hundreds of thousands of limited company directors who are missing out on support because they pay themselves in dividends.”
Those who do not qualify for the CJRS or the SEISS will be able to access a range of other support, including a strengthened welfare safety net, a Treasury spokesperson told Tax Notes in an emailed statement.
“The swift and targeted action we’ve taken has protected millions of jobs and livelihoods, and our interventions have been rightly welcomed by the committee. Our wide-ranging support package is one of the most comprehensive in the world, with generous income support schemes, billions paid in loans and grants, tax deferrals, and more than £6.5 billion injected into the welfare safety net. All our support is targeted to make sure we use public funds responsibly, helping those who need it most as quickly as possible, while minimizing fraud risk,” the spokesperson said.
“Our unprecedented coronavirus support schemes are protecting millions of vital jobs and businesses across the whole of the United Kingdom — and will help ensure we recover from this outbreak as swiftly as possible,” Sunak said in a June 11 release.
“Under the CJRS, up until May 31 more than 6.4 million jobs were furloughed in England, with more than 628,000 jobs furloughed in Scotland, 316,500 in Wales, and nearly 212,000 in Northern Ireland,” Treasury said. “Under the SEISS, self-employed individuals in Scotland have made 146,000 claims totaling £425 million; 102,000 claims for £273 million made in Wales; [and] 69,000 claims for £198 million in Northern Ireland. From just over 2 million claims in England, the total is nearly £6 billion.”