As lockdown begins to lift and the Government turns its attention to economic recovery, announcements and updates on COVID-19’s implications for tax have slowed. Notably since our last edition of Tax Matters Digest there has been a welcome delay to the domestic reverse charge for construction services and further details on changes to the Job Retention Scheme (JRS) have been published. HMRC have also written to a number of large businesses that have postponed payment of taxes due to COVID-19 stating that payment is now required for deferred amounts.
The key developments include:
- The Government published further guidance on the extension of the JRS on 12 June 2020. Two articles in this edition of Tax Matters Digest consider what the latest changes to the JRS mean for your business and how to correct overclaims;
- We understand that HMRC have written to a number of large businesses that have postponed payment of taxes due to COVID-19 stating that payment is now required for deferred amounts (excluding liabilities covered by the special VAT deferral arrangements). HMRC go on to say that where Companies are unable to pay they should prepare a formal Time To Pay (TTP) application which should show an evidenced case, other measures taken and a payment plan. Of particular note, it appears that HMRC are most likely to view a TTP application favourably if it contains a proposal for a substantial upfront payment - they have indicated this to mean 70 to 80 percent (or more) of the outstanding liabilities, although we would hope that each case will be dealt with on its merits. Businesses are also expected to prioritise their debt and not pay dividends while expecting to enter into a TTP. Please contact Gavin Little (firstname.lastname@example.org) or Gemma O’Brien (email@example.com) if you would like any help preparing a TTP application;
- HMRC have confirmed that they do not have any plans to provide a blanket filing extension or waive the filing requirements, including iXBRL tagging, for corporation tax returns. HMRC have however recently updated their guidance to explain that where a delay in filing was as a result of the impact of COVID-19 this will qualify as a reasonable excuse meaning any penalty charged may be cancelled or amended;
- HMRC have updated their guidance on crisis-driven changes to trading activities for businesses. This includes guidance on temporary breaks in trading activity, the treatment of income and expenditure, and the treatment of donations of trading stock in response to the pandemic. The tax implications of donations of trading stock are considered further in our separate article;
- On 12 June 2020 HMRC updated their guidance on the Self-Employment Income Support Scheme (SEISS). More details have been published on the previously announced extension of the scheme to provide a second and final grant in August. Some examples have also been added to show when the ‘adversely affected’ criteria are met for the two grants;
- HMRC have announced that the introduction of the domestic reverse charge for construction services will be delayed for a period of five months from 1 October 2020 until 1 March 2021, due to the impact of the coronavirus pandemic on the construction sector. In addition, there will be an amendment to the original legislation, which was laid in April 2019, to exclude from the reverse charge end users and intermediary suppliers that are connected or linked to end users. Such businesses must inform their sub-contractors in writing that they are end users or intermediary suppliers;
- HMRC have confirmed to the Institute of Chartered Accountants in England and Wales that taxpayers who wanted to defer VAT payments under the deferral scheme, but paid as a result of not cancelling their direct debits, may claim a refund. Affected taxpayers can submit a direct debit indemnity claim to their bank, stating that they want to claim a refund under the direct debit indemnity scheme;
- In a Written Ministerial Statement the Government confirmed that HMRC can grant an extension to the three year window for taxpayers seeking a refund of the three percent higher rate of stamp duty land tax for additional properties. This applies in cases where the three year window ended on or after 1 January 2020 and the taxpayer has been unable to sell a previous main residence within that window due to exceptional circumstances outside their control. HMRC have also updated their guidance on how to claim a refund in relation to this;
- HMRC have updated their guidance to confirm that stamp duty reserve tax refunds cannot be processed by post. Until further notice taxpayers should email an electronic version of their refund request to HMRC at:firstname.lastname@example.org; and
- HMRC have confirmed that employers can file their Appendix 4, 7A and 7B end-of-year reports by email during the ongoing pandemic. Appendix 4 and Appendix 7A returns may be sent to email@example.com and Appendix 7B returns may be sent to firstname.lastname@example.org.