[Lauren]

Given all the recent tweaks to government support for workers affected by COVID19 and by the current lockdown, Fiona Holloway, Associate Partner at Claritas Tax, reviews the most recent changes, and finds out where we are now.

You could be forgiven for thinking that you are on some kind of strange job support scheme roundabout. The original Coronavirus Job Retention Scheme (CJRS) had been scaled down from 80% of total pay down to a maximum of 60% (with the employer paying Employers NI and statutory pension contributions), to be replaced by a new Job Support Scheme (JSS) after 31 October. On 22 October the Chancellor discovered that his new JSS did not go far enough to support businesses that were facing tougher restrictions, so a new, more generous JSS (which included the JSS Open and JSS Closed schemes) was unveiled.

But a week is a long time in politics, and just over a week later, on 31 October, Boris’ announcement of Lockdown 2 meant that all Mr Sunak’s hard work devising a new scheme went out of the window, and furlough was back. With effect from 1 November, and for a further month, instead of the reduced amounts on offer, employers were able to access flexible furlough once more, which would pay up to 80% of employees wages up to a monthly maximum of £2,500, with no minimum requirement to work, as for the JSS.

Unfortunately, we didn’t get another week before the next change, as the Chancellor’s next announcement came on 5 November, when it was revealed that the old (new) CJRS at 80% would now continue until 31 March. Quite what that says about how long Lockdown 2 is actually going to last is another unanswered question…

Similar amendments to the schemes for self employed individuals have been made, so to summarise, as at 6 November 2020, the support available is:

New (old) CJRS

Under flexible furlough, the government will pay 80% of wages up to a cap of £2,500 and employers will only pay employer National Insurance Contributions (NICs) and pension contributions in respect of the hours covered by the government grant. Employees can work a proportion of hours, and be paid by their employer, and the government will then cover up to 80% of the shortfall in hours. Employers will also need to cover employer’s NI and pensions on hours worked in the normal way.

Who is eligible for the CJRS?

Employers

• All employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
• The government expects that publicly funded organisations will not use the scheme, as has already been the case for CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements apply to these employers.

Employees

• To be eligible to be claimed for under this extension, employees must have been on an employer’s PAYE payroll by 23:59 30th October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.
• Employees can be on any type of contract. Employers will be able to agree working arrangements with employees.
• Employers can claim the grant for the hours their employees are not working, calculated by reference to their usual hours worked in a claim period. The calculations will broadly follow the same methodology as under the previous CJRS.
• When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
• Employers will need to report actual hours worked, and the usual hours an employee would be expected to work in a claim period.
• For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.

What support is being provided and employer costs:

• For hours not worked by the employee, the government will pay 80% of wages up to a cap of £2,500. The grant must be paid to the employee in full.
• Employers will pay employer NICs and pension contributions, and should continue to pay the employee for hours worked in the normal way.
• As with the current CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
• The government will confirm shortly when claims can first be made in respect of employee wage costs during November, but there will be no gap in eligibility for support between the previously announced end-date of CJRS and this extension.

Self Employed Income Support Scheme (SEISS)

This scheme was first extended on 2 November to match flexible furlough for November, but has now been extended to March in line with the support for employed people. Furthermore:

• Self-employed individuals will now receive 80% of their average trading profits for November, December and January. The changes will ensure that self-employed individuals who temporarily cannot carry out their business or have suffered reduced demand due to the outbreak are supported over winter.
• The grant will be paid out in a single instalment and will be capped at £7,500 (previously £5,600). The window for claiming the grant will open on 30 November which is two weeks earlier than originally planned. The government has already announced that there will be a fourth SEISS grant covering February to April. Further details will be released in due course.

Further information

To be eligible for the grant extension, self-employed individuals including members of partnerships, must:
have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants),
declare that they intend to continue to trade and either:
are currently actively trading but are impacted by reduced demand due to coronavirus, or
were previously trading but are temporarily unable to do so due to coronavirus

More information is available under the following link: financial support for jobs and businesses.

Further help that has been announced includes:

Mortgage Holidays
Mortgage payment holidays will no longer end on 31st October. Borrowers who have been impacted by coronavirus and have not yet had a mortgage payment holiday will be entitled to a six month holiday, and those that have already started a mortgage payment holiday will be able to top up to six months without this being recorded on their credit file.
The FCA is expected to announce further details.

Business Loans
The deadlines for applications for government-backed loan schemes and the Future Fund have been extended until 31 January 2021 and firms who did not take out maximum allowable loans can ‘top up’ existing Bounce Back Loans should they need additional finance.

Business Grants
Businesses required to close in England due to local or national restrictions will be eligible for the following:

• For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;
• For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;
• For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.

2020 was bad. Make sure 2021 isn’t worse!

While those of a certain age will remember Mystic Meg, unfortunately, there is no crystal ball available that can tell us the contents of next year’s Spring Budget. However, it is probably safe to say that the contents are likely to be tax-raising, to recoup the Chancellor’s COVID-19 spend, rather than giving away tax reliefs.

While taxes are an unavoidable part of life, and times have been tough for many individuals and businesses this year, there are still some things you can do to try and limit the impact of any new tax burdens that may be on the horizon.

If you are thinking of selling investment assets, consider realising those gains now, as indications are that the rates of capital gains tax are likely to be scrutinised, and a rise is far more likely than a drop in rates. Business sales too may currently qualify for the (now reduced) replacement for entrepreneurs’ relief, and it may be prudent to bank the tax liability you know now, rather than wait and see what next year brings. Inheritance tax is also an easy target for the Chancellor, so if you have been contemplating gifting assets to family members, now may be the time to do so, particularly if looking to take advantage of IHT reliefs on things like businesses that have reportedly been on the Chancellor’s hit list for some time. While 2020 was a nasty surprise, take this time to review your affairs to see whether you can take action now to prevent further tax shocks in 2021.

Don’t lose your annual allowances

While 2020 has been a bit of a write-off, that doesn’t mean you should assume you won’t be able to use your annual allowances for the 2020/21 tax year. Most annual allowances renew each 6 April, and if you haven’t used your allowance by 5 April 2021, it will be lost. So what allowances should you be looking at using before they expire?

Personal income tax allowances: Every individual gets £12,500 per year of tax-free income, but there are additional allowances of up to £1,000 for savings income and £2,000 dividend income. These are annual sums, so if your income does not utilise these amounts, they will be lost.

Furthermore, if one party to a marriage (or civil partnership) doesn’t have sufficient income to use their £12,500 personal allowance, particularly pertinent this year, it is possible to transfer up to £1,250 of your personal allowance to the higher-earning spouse, saving up to £250 in tax, as marriage allowance is only available for transfer to a spouse paying tax at the basic rate of income tax.

Capital Gains Tax allowances: On top of a personal income tax allowance, individuals also get an allowance to relieve the first £12,300 of gains per tax year. This is per person, so in some cases, it may be advantageous to transfer some assets to a spouse or civil partner prior to a sale to make use of their allowances too.

Annual ISA investment allowance: You can invest up to £20,000 per annum in a combination of stocks and shares, innovative finance or cash ISA accounts. You may also be eligible to put up to £4,000 of that £20,000 into a lifetime ISA (LISA), but there are restrictions on when you can draw funds from a LISA. If you have a flexible ISA, you can withdraw funds should you need them, but so long as they are replaced before the end of the tax year, they will remain protected in this tax-free wrapper. If you have needed to dip in owing to this year’s unfortunate circumstances, maybe see whether you can replace those funds before the new tax year.

Pension contributions: Broadly, pensions contributions for which you can receive tax relief are capped at £40,000 per annum (unless you are already in receipt of a pension or exceed the income threshold limits), but if you have unused allowances from earlier years, you can carry these forward for up to three years, provided you have sufficient income in the year of contribution to absorb it.

At the other end of the spectrum, anyone can make a contribution of £3,600 (£2,880 net of basic rate tax relief) per year into a pension, even if they have no income. Pension saving can be an efficient way to save for the future, so making use of these allowances while available can be advantageous, although we would always advise you to take professional advice from a financial adviser.