While the UK’s lockdown has begun to ease, many businesses and individuals continue to be severely impacted by the ongoing COVID-19 pandemic. Since our last edition of Tax Matters Digest, we have seen further announcements from both the UK Government and the European Commission on relaxing tax deadlines and extending additional support to taxpayers, most notably with a welcome extension to the Job Retention Scheme (JRS). This article provides an overview of new developments from the last two weeks.
- To the relief of many businesses the Chancellor of the Exchequer announced on 12 May 2020 that the JRS, which was due to end in June, will be extended to 31 October 2020. HMRC also updated their JRS guidance on 14 May. Please see our separate article for further details, in particular on changes to the JRS that come into effect from August, and the practical implications for employers;
- Across the Channel, the European Commission has proposed a welcome deferral of reporting deadlines under the EU mandatory disclosure rules (DAC 6) for up to three months. Our separate article examines the proposal;
- The European Commission has also announced the postponement of the VAT e-commerce package by six months. The new rules will apply as of 1 July 2021 instead of 1 January 2021, giving Member States and businesses more time to prepare for the new VAT e-commerce rules;
- The Self-Employment Income Support Scheme (SEISS) opened for claims, earlier than originally planned, on 13 May 2020. HMRC have updated their guidance with further information on eligibility, how to make a claim and how the grants are calculated;
- The Government has announced that it will temporarily guarantee business-to-business transactions currently supported by trade credit insurance, in order to support businesses at risk of having their credit insurance withdrawn and ensure premiums do not rise to unaffordable levels. The guarantee will be temporary, targeted to cover COVID-19 economic challenges, and it will provisionally last until the end of 2020.This will be delivered via a temporary reinsurance agreement with insurers;
- HMRC have updated their guidance on what constitutes a ‘reasonable excuse’ when appealing against a penalty, to confirm they will accept COVID-19 as a reasonable excuse if a taxpayer misses a payment or filing deadline. In such cases the taxpayer must explain to HMRC how they were affected by COVID-19 in their appeal and the return, or payment must still be made as soon as possible. In addition, specific guidance has been published confirming that COVID-19 is a reasonable excuse for late filing in relation to country by country reporting, DAC 6 and Common Reporting Standard/Foreign Account Tax Compliance Act (FATCA) reports;
- HMRC have confirmed they will allow a three month extension for taxpayers to appeal, or seek a review of any HMRC decision arising in February onwards, where COVID-19 is cited as the reason;
- HMRC have confirmed that in cases where a VAT liability has been deferred due to COVID-19 (for the period of 20 March – 30 June), the VAT deferred will not be constituted as a ‘liability owing’ to HMRC and, therefore, any R&D tax credits or R&D expenditure credits owed to the business will not be offset against the deferred VAT liability. However, this is not the case in respect of other outstanding tax liabilities, including any debt in respect of VAT owed to HMRC which arose outside of the permitted deferral period, and any other tax which is paid late under a ‘Time to Pay’ arrangement with HMRC;
- For businesses that need to submit Senior Accounting Officer (SAO) certificates HMRC have confirmed that if a certificate does not have a ‘wet’ signature, then it would only be acceptable if HMRC were able to confirm that it was submitted electronically by the SAO. This would require obtaining validation that the SAO filed/submitted the certificate personally i.e. the SAO having sent an e-mail containing a PDF certificate;
- HMRC have announced that they will temporarily extend the deadline for businesses to notify them of an option to tax land and buildings (for VAT purposes) from 30 to 90 days. This will apply to decisions made between 15 February and 31 May 2020;
- The Government announced a new temporary income tax and national insurance exemption where employees acquire home office equipment as a result of the coronavirus outbreak and are subsequently reimbursed by their employer. In order for this exemption to be available the equipment must be obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and the provision of the equipment would have been exempt from income tax by virtue of ITEPA 2003, section 316 had it been provided directly to the employee by or on behalf of the employer. In summary this means that any private use by the employee, their family or household is not significant; and the employer’s sole motive in making the reimbursement is to enable the employee to carry out the duties of their employment. We understand that the regulations will be laid shortly and will have effect for reimbursements made from 16 March 2020 until the end of 2020/21;
- Following the UK’s recent announcement of a temporary domestic zero rate of VAT for Personal Protective Equipment (PPE), HMRC have updated their Health guidance VATHLT2021 and VAT Notice 701/57 (Health professionals and pharmaceutical products). These confirm that “VAT is charged on the importation of goods at the same rate as if the goods had been supplied in the UK so the temporary zero rate will also apply to relevant imports”;
- To help investors withdraw funds from their Lifetime ISA (LISA), the withdrawal charge has been temporarily reduced from 25 percent to 20 percent. Regulations giving effect to the temporary reduction in the withdrawal charge between 6 March 2020 and 5 April 2021 will be laid shortly;
- The Government announced the postponement of the next business rates revaluation which had been due to take place in 2021 in a bid to reduce uncertainty for businesses;
- The Scottish Government announced it is temporarily extending the time period for selling a previous main residence in order to claim repayment of the Land and Buildings Transaction Tax Additional Dwelling Supplement from 18 months to 27 months, where the effective date of the purchase of the new main residence fell within the period beginning with 24 September 2018 and ending 24 March 2020. The draft legislation includes a power to further extend the 27 month period, and the period in which the new main residence was purchased, if necessary and due to COVID-19, by way of secondary legislation. At this stage no such announcements have been made in respect of the rest of the UK, although it should be noted that the period in England and Northern Ireland (for SDLT) and Wales (for LTT) to claim a refund in similar circumstances is already 36 months;
- HMRC have published further guidance on the optional deferral of income tax payments due to be paid by 31 July 2020. The guidance makes it clear it is aimed at taxpayers finding it difficult to make the second payment on account by 31 July due to the impact of coronavirus. It also confirms the Government’s previous announcement that no late payment interest or penalties will be charged where taxpayers choose to defer payment provided it is subsequently paid on or before 31 January 2021;
- A new discretionary grant fund of £617 million has been announced by the Government to accommodate certain small businesses previously outside the scope of the existing business grant funds scheme. This will be administered by local authorities and targeted at businesses with fewer than 50 employees to help with ongoing fixed property costs; and
- HMRC have confirmed that they are not currently able to accept payments of inheritance tax made by cheque. HMRC’s guidance sets out alternative electronic methods of making payment.
Finally, governments in other jurisdictions have also continued taking action to support businesses in their territories. Keep track of the COVID-19 tax developments around the world at our dedicated page.