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U.K. Tax Professionals Seek Clarification on Income Support

Posted on Apr. 7, 2020

HM Revenue & Customs has expanded guidance on its new job retention scheme while U.K. professional bodies and business groups await answers to several questions on the income support scheme for the self-employed.

The House of Commons Treasury Committee is set to question HMRC officials on April 8 regarding the economic impact of the coronavirus outbreak and measures designed to protect jobs and businesses. Speaker of the House Lindsay Hoyle has set out temporary measures to enable select committees to scrutinize the government remotely.

Job Retention Scheme Guidance Updated

On April 4 HMRC updated its guidance, first published on March 26, on the coronavirus job retention scheme (CJRS). The updated guidance for employers and employees addresses many of the questions raised since Chancellor of the Exchequer Rishi Sunak first announced the CJRS on March 20.

The revised guidance says the CJRS is designed to “help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the U.K. economy.” But HMRC goes on to say that “all employers are eligible under the scheme and the government recognizes different businesses will face different impacts from coronavirus.”

HMRC will pay grants to employers eligible for the CJRS, covering 80 percent of the salaries of furloughed employees subject to a cap of £2,500 a month. Furloughed employees must have been on the Pay As You Earn payroll on February 28.

The initial guidance said the CJRS would cover salary paid to employees who were made redundant after February 28 and then rehired. However, responding to questions via Twitter on April 3, Sunak said companies that rehire and then furlough employees who left after February 28 “for whatever reason” will be eligible for the grant.

No grant is available in the case of a new employee hired after February 28. BBC News quoted Bryn Robinson from Essex as saying that he changed his job a day too late to qualify for the scheme. He accepted a new job in the motor industry on February 29, but has been told that his new employer’s business will have to close because it is deemed to be a “non-essential” business. “If I changed job a day earlier I would be eligible. It seems a bit unfair,” he said.

“The CJRS allows for those who were on the payroll of a company on February 28 but subsequently left to be put back on payroll and furloughed. This includes those who have resigned to start a new job after February 28. Decisions around whether to offer to furlough someone are down to the individual company,” a government spokesman told the BBC.

Salaried company directors are eligible to be furloughed and receive support via the CJRS, subject to conditions regarding their performance of statutory duties as a director, HMRC’s updated guidance says. “This also applies to salaried individuals who are directors of their own personal service company,” it adds.

Changes in the way cross-border employees work are unlikely to lead to permanent establishment and tax residency changes under existing tax treaties, according to the OECD.

Self-Employment Income Support Scheme

The Chartered Institute of Taxation outlined in a technical note on April 3 several questions raised with HMRC regarding the scope and operation of the self-employment income support scheme. Tax professionals have urged the government to find ways to help self-employed people outside the scope of the scheme.

The CIOT said it awaits HMRC clarification on questions including what is meant by “trading profits” for the purpose of the scheme; how it will be determined whether profits have fallen because of the COVID-19 outbreak; and whether someone who started trading in tax year 2019-2020 might be able to file a 2019-2020 tax return by April 23 and qualify for support.

Many self-employed workers eligible for the scheme will be better off financially than if the crisis had never happened, according to an analysis published April 2 by the Institute for Fiscal Studies. “If self-employed workers see only a small fall in their profits, half will have a family income more than 20 percent above their usual level thanks to the grant. Even if their business dries up completely, a quarter will be financially better off while the self-employment grant program continues than if the coronavirus had never struck,” Institute for Fiscal Studies researchers said in a briefing note.

Commission Approves U.K. State Aid Package

The United Kingdom’s “umbrella” scheme of support for small and medium-size enterprises and large corporates affected by the coronavirus outbreak, set out in a U.K.-wide “national temporary framework for state aid” with an estimated budget of £50 billion, has been approved under the European Commission’s temporary framework, the commission announced on April 6.

Sunak has strengthened the business interruption loan scheme and will introduce a new loan scheme for larger companies, HM Treasury announced on April 3. “We’re pleased [that] the chancellor has taken action to get cash flowing again, responding to feedback that businesses right across the economy were still struggling to access financial support,” Michael Izza, chief executive of the Institute of Chartered Accountants in England and Wales, said in a statement.

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