Tax Update 04/09

Keep up to date with the key announcements made this past week.

Coronavirus Job Retention Scheme changes

The latest September updates to the Coronavirus Job Retention Scheme have now taken effect.

The updates will see the total contribution provided by the scheme fall from 80% of employees wages to 70% up to a cap of £2,187.50 for furloughed employees who do not work. For a full breakdown of the changes see our previous article

HMRC policy paper on how they will continue to support customers and the economy

HMRC have released a policy paper on how it will continue to support customers and the economy whilst the coronavirus pandemic continues to effect the country.

The document contains information about the support schemes and policy changes that HMRC has implemented and their principles for the next steps around tax collection, benefits payments, compliance checks and debt activity.

Kickstart scheme opens for applications

The new government Kickstart job creation scheme has opened applications for the scheme, which will create hundreds of thousands of jobs for young people will provide 6 month placements that are open to those aged 16-24 and are currently claiming universal credit.

Employers can check if they can apply for a grant through the scheme at this link.

In general the new jobs much be:

  • A minimum of 25 hours per week for 6 months
  • Pay at least the National minimum wage for their respective age group
  • Should not need people to undertake extensive training before the placement
  • Must not replace existing vacancies
  • Must not cause existing employees or contractors to lose or reduce their employment

HMRC announce significant change in position on VAT for compensation payments

HMRC have published updated guidance in a number of its online manuals to reflect its change in position where is comes to VAT interaction with compensation and early termination payments.

The change in position comes following developments in EU case law that have led HMRC to conclude that payments described as compensation are actually consideration for supplies. The changes will see a number of compensation payments be classed as a consideration and thus fall under the scope of VAT these include:

  • Early termination of contracts
  • Payments for breach of contract
  • Liquidated damages

P11D and P11D(b) penalty warning letters issued by HMRC

It has recently been reported by the Institute of Chartered Accountants in England and Wales (ICAEW) that employers and agents who have submitted forms P11D and P11D (b) on time have been receiving penalty warning letters from HMRC.

HMRC offered the following explanations to the ICAEW:

For online filings: processing delays could include, processing delays where information submitted does not match HMRC’s existing records, for example the PAYE reference or company name is different.

For paper filings: HMRC are between six to eight weeks behind their usual schedule as a result of the ongoing coronavirus pandemic. As front line staff have been seconded to other roles, for example the Coronavirus Job Retention Scheme.

HMRC set out reassurances that where forms P11D and P11D(b) were filed by the due date, online or paper, employers do not need to do anything else and should ignore the penalty warning letter.

HMRC will now carry out further checks to determine whether to issues penalties. If P11D and P11D(b) forms were submitted on time and a late filing penalty is issued, employers or agents should appeal immediately.

Source – Lexis Nexis via Tolley Guidance