The U.K. government will examine a proposal to extend income support to company directors, Chancellor of the Exchequer Rishi Sunak said, having indicated that any change may not be announced until the March budget.
Many directors of small limited companies are among those “who will ultimately be paying” for HM Treasury’s coronavirus support schemes, Conservative member of Parliament Andrew Murrison told Sunak January 11 during a House of Commons debate on the economy.
Murrison said a version of the directors’ income support scheme (DISS), proposed by tax specialist Rebecca Seeley Harris of Re: Legal Consulting Ltd., the Federation of Small Businesses, the ForgottenLtd campaign, and the Association of Chartered Certified Accountants, could “help prevent hard-working lynchpins of our economy, [receiving] modest incomes taken as dividends, falling through the cracks.”
The government will always give fair and due consideration to proposals received, Sunak replied. Financial Secretary to the Treasury Jesse Norman has received the DISS proposal, “and of course we will go through it in detail,” Sunak said.
The U.K. budget scheduled for March 3 is “the appropriate place” to consider any possible changes, Sunak said earlier. Anneliese Dodds, Labour’s shadow chancellor, had pointed out that Sunak's short statement on the economy contained “nothing for those people who have been excluded from government schemes right from the very start.”
Sunak said all the government’s “major avenues of support” had been extended “through to the spring.” On January 8 Treasury published a summary of the existing economic support and said on Twitter that the “comprehensive” package was “continuing to protect jobs and help businesses and individuals through the outbreak.”
‘Running on Empty’
The DISS proposal is based on the self-employment income support scheme and would draw on details of trading profits and directors’ remuneration submitted by a business in its corporation tax return.
Sunak’s response regarding the proposal was “really good news,” Seeley Harris, an employment status specialist, told Tax Notes. “Time is of the essence here. As with the self-employment income support scheme, my advice would be, ‘Don’t let the perfect be the enemy of the good.’ These businesses have waited months for something, and they are running on empty,” she said.
“The DISS is workable and no more open to fraud than” the self-employment scheme, Seeley Harris said. The controversy over gaps in support “has shown up significant problems with the whole structure” of the taxation of earnings received from self-employment, off-payroll working, personal service companies, and the gig economy, and “the whole structure needs a re-think,” she added.
Significant Harm
The coronavirus pandemic has already caused significant harm to the U.K. economy, Sunak said. “The scale of the impact bears repeating. GDP fell by 18.8 percent in the second quarter of 2020, and while the economy grew as the country opened up over the summer, it remained 6.7 percent smaller than it was before the crisis,” he noted.
The Office for Budget Responsibility’s November 2020 forecast showed GDP falling again in the final quarter of 2020, and “it forecast the largest fall in annual output for over 300 years,” Sunak added. “Even with the significant economic support we have provided, over 800,000 people have lost their jobs since February,” he noted.
While the new national restrictions announced on January 6 are necessary to control the spread of the virus, they will have a further significant economic impact, Sunak said, adding that “we should expect the economy to get worse before it gets better.”
Tax Return Deadline
Separately, the Low Incomes Tax Reform Group is urging people to complete their self-assessment tax return for 2019-2020 online by the usual January 31 deadline or risk a penalty.
“HM Revenue & Customs resisted requests from various professional bodies to either extend [the deadline] or not to charge the £100 [late filing] penalty automatically this year, despite the pressures faced by some individuals and accountancy firms because of the COVID-19 pandemic,” the group said in a January 11 statement.
“HMRC says it will accept pandemic-related disruption as grounds to appeal the penalty if that is the reason for the late filing,” the group said. As of January 4 HMRC had received 6.6 million tax returns out of a total 12.1 million returns due, it noted.
“We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of COVID-19, we will accept that they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that,” an HMRC spokesperson told Tax Notes. “Support is in place for those who may struggle to pay, with customers able to spread their payment liabilities of up to £30,000 over 12 months.”