Against the backdrop of the Coronavirus outbreak the UK Government has announced a range of extraordinary measures to help individuals and businesses through the coming months. Peter Webb, our International Tax Manager, details what’s been announced so far:
Residence – relief for days in the UK spent because of “exceptional’ circumstances
If you are not UK resident you are limited to the number of nights you are able to spend in the UK without being classed as resident again. You can exclude any days spent in the UK due to ‘exceptional’ circumstances, and HMRC have now confirmed that this provision will apply if you:
- Are quarantined or advised by a health professional or public health guidance to self-isolate in the United Kingdom as a result of Coronavirus
- Find yourself advised by official Government advice not to travel from the United Kingdom as a result of the virus
- Are unable to leave the United Kingdom as a result of the closure of international borders, or
- Are asked by your employer to return to the United Kingdom temporarily as a result of the virus
As things stand the maximum number of days that can be deducted is 60 and you must leave the UK as soon as the exceptional circumstance ends.
Income Tax – deferral
If you are self-employed or are a partner in partnership your Income Tax will be paid through self-assessment rather than at source from your earnings. The Government have confirmed that the next payment on account due on 31 July 2020 will not need to be paid until 31 January 2021; a deferral of six months.
A word of caution; this is only a deferral of the payment meaning three payments will all be due on 31 January 2021. Those payments consist of your deferred 31 July 2020 payment, any additional tax payable for the 2019/20 tax year as well as the first payment on account towards the 2020/21 tax year.
The deferral only applies to the self-employed and partners; if you make payments on account because of your investment income (for example if you have a buy-to-let property) your next payment will still be due on 31 July 2020; it won’t be deferred.
Off payroll working – deferral
The IR35 “off payroll working” rules seek to prevent consultants offering their services through companies which allows them to pay lower rates of tax and National Insurance on their earnings. The rules apply to the public sector and are designed to ensure that if a consultant is in reality an employee they will be taxed in the same way as employees.
On 11 March 2020 Rishi Sunak confirmed that these new rules would apply to the private sector from 6 April 2020 as originally planned. Less than a week later he deferred the implementation of the widening of the IR35 rules to the private sector until April 2021.
This is a welcome deferral which at least gives everyone affected a little more time to plan for these complex new rules.
In a move aimed at protecting people’s jobs the UK Government will pay the wages of employees unable to work due to COVID-19. The payment will cover 80% of salary for staff who are kept on by their employer, up to a maximum of £2,500 a month.
Business rates holiday
All retail business will benefit from a ‘holiday’ from paying business rates for one year. This was originally announced as a relief that would apply to businesses with a rateable value of £51,000 or less but has now been extended to all retail businesses.
Financial support for businesses
From 23 March businesses are now able to access support to keep operating in the face of the global economic emergency brought on by Coronavirus. The Coronavirus Business Interruption Loan Scheme provides government-backed loans of up to £5 million to small and medium businesses. The Bank of England’s Covid Corporate Financing Facility provides an easily accessible way to raise working capital for larger firms.
VAT – deferral until June
VAT registered businesses pay any amount due every quarter. Now any payments due between 20 March 2020 and 30 June 2020 will be deferred until the end of the 2020/21 tax year. This effectively provides a temporary working capital facility for many businesses but isn’t a relief – the payments will still need to be made, just at a later date.
A significant range of steps have been announced for both individual taxpayers and businesses. It’s worth noting that some of these simply mean the amounts no longer need to be paid but others defer payment to a later date.
It is important to keep a track of what’s happening in your own personal or business situation. For example, the ICAEW has advised businesses to keep a record of losses incurred as a result of the crisis, so that relevant reliefs can be claimed as needed.