News & Updates

We were told that the second SEISS grant (SEISS-2) would be the final grant. But the Chancellor has announced the provision of two more SEISS grants to help support the self-employed over the six months from November 2020 to April 2021.

The third grant: SEISS-3, will be calculated at 20% of average monthly profits, based on the same profit figures used for the earlier grants, ie the self-employed profits reported on tax returns for 2016/17 to 2018/19.

However, there are some further conditions for the SEISS-3 grant:

• The trader must be were eligible for the previous SEISS grants;
• The trader must be actively trading when claiming the SEISS-3 grant; and
• Business sales must have been reduced due to the covid-19 pandemic in the period from 1 November 2020 to the date of the claim.

The SEISS-3 grant will be capped at £1,875 for three months, working out at just £625 per month.

A fourth grant: SEISS-4 will be payable for the period February to April 2021. We don’t know how much that grant will be or what the cap will be. The qualifying conditions for the SEISS-4 grant are likely to be similar to those for the SEISS-3 grant.

The profits used as the basis for the SEISS-4 grant will also be the average annual profits derived from tax returns for 2016/17 to 2018/19.

The 5% rate of VAT applies from 15 July 2020 to 12 January 2021, in the hospitality and tourist sectors. This reduced VAT rate broadly covers; restaurant meals or take-aways, hotel and similar accommodation, and entrance to tourist attractions.

Many businesses that serve food also sell items which are still subject to the standard rate of VAT, such as alcoholic drinks, snacks, and takeaway sandwiches which are zero rated. Their tills may have difficulty in coping with two or three rates of VAT on one order, so you need to help such clients calculate the correct amount of VAT to pay over to HMRC.

The VAT treatment of “meal deals” can also be complicated, as there are potentially three different ways of recording the VAT due, see VAT Notice 700/22, para 4.3.2 example 3. Where the meal deal includes hot food such as a pizza the reduced rate will also apply. Make sure your clients are correctly recording the VAT on such meal deals.

The 5% rate only applies to food eaten on the premises or hot takeaways, so catering contracts, where the food is eaten at another venue, are standard rated (see VAT Notice 709/1). If the caterer uses the flat rate scheme for small businesses, she can benefit from the lower flat rate percentage of 4.5%.

The reduced VAT rate on admission fees for attractions doesn’t cover admission charges for sporting events. HMRC has now clarified that the 5%VAT rate doesn’t apply to admission to sporting facilities and well as sporting events. Thus, bookings to use a tennis court or five-a-side football pitch are still subject to 20% VAT.

On 1 October we outlined the new Job Support Scheme (JSS) which is due to come into effect on 1 November 2020. The new Expanded Job Support Scheme for closed businesses (local JSS) will also apply to wages paid from 1 November, but it is really just another furlough scheme.

The local JSS will only apply where the business premises are closed to customers as a direct result of coronavirus regulations, whether those closure rules have been set by the national UK Government or by one of the devolved administrations. However, businesses that continue to trade by providing a delivery or takeaway service can use this scheme.

To qualify an employee must be furloughed for a period of at least seven days, during which they should do no work for the employer. The employee must have been on the payroll on or before 23 September 2020 and included in an RTI return for that employer by that date. The employee cannot be placed on notice of redundancy or be made redundant while the employer is claiming a grant for him or her.

The employer will have to pay the employee at least two thirds of their usual wage (to be defined) for the furlough period plus the normal employment costs of NIC and workplace pension contributions. The employer can pay higher wages if they wish, but they can only reclaim 66.67% the usual wage from HMRC, capped at £2,100 per month. HMRC will not repay the employer’s NIC costs or employer’s pension contributions for the worker.

Unlike the grants under the CJRS, grants for both forms of the JSS will only be paid once HMRC has received the RTI return for the period that shows the wages have been paid to the employee. The portal for making claims under both strands of JSS will open on 1 December.

As a means to combat fraud HMRC will publish details of the businesses who take up grants under either JSS. This will allow employees to see if their employer has applied for funding for their job.

The Kickstart scheme will pay 100% of the employment costs (including employer’s NI and pension contributions) of new employees for up to 25 hours per week, for six months. That sounds too good to be true, so what’s the catch?

The scheme has been designed to discourage claims from small businesses who may not be providing a real job to a young person who needs it (eg taking on their niece in order to claim the grant).

The basic conditions of the Kickstart scheme are:

• The job applicants must be aged 16 to 24, be claiming Universal Credit and be at risk of “long-term employment”.
• The DWP chooses the applicants for the jobs and sends them to the employer.
• The job placement must be for at least six months, and for a minimum of 25 hours per week.
• The new job must not replace existing or planned vacancies, or cause existing employees or contractors to lose or reduce their employment.
• The employer must show how it will help the young employees develop basic skills, set goals, and look for long-term work.
• The grant funding is paid in arears after the individuals’ pay has been reported through RTI.
• The grant funding is taxable for the employer, but will be fully off-set by the employment costs.
• The employer’s application must be cover at least 30 job placements.

This last condition appears to rule out small employers with fewer than around 50 employees. However, if the employer joins a representative group of employers it can be part of a kickstart application for at least 30 job placements on behalf of that group.

The group of employers could be made up of businesses in one location, such as in the same shopping centre or business park. Alternatively, a trade body may organise a group application for its members. The Government also suggests that group applications could be submitted by local authorities or registered charities.

One of the other conditions to qualify for a SEISS grant is that the individual submitted a tax return for 2018/19 reporting self-employed income. If this return was not received by midnight on 23 April 2020 no SEISS claim was possible.

This may have spurred many taxpayers to submit their 2018/19 SA returns without further delay. However not all SA tax returns include self-employed profits, and there may still be a large number of 2018/19 returns outstanding which are accruing penalties.

The £100 penalty for being one day late with a tax return is well known, but there are also penalties of £10 per day for each day the return is more than three months late, capped at £900.

For the 2018/19 SA return these daily penalties would have accrued from 1 May to 30 July 2020, in the middle of the pandemic. HMRC has decided not to collect the daily penalties for late 2018/19 tax returns in recognition of the difficulty many people had in completing tax returns in that period. Also, to impose the daily penalties HMRC need to give notice to the taxpayer, which in many cases will not have happened.

The further penalties due for tax returns which are over six months late, or 12 months late, will still apply.

Where the business is required by coronavirus regulations to close its premises, it can claim a grant from its English local authority for periods the premises are closed, if that lasts for at least two weeks. The grants will be paid based on the rateable of the building and issued every fortnight as follows:

Different levels of local authority support may be provided in Scotland, Wales and Northern Ireland.

The government-backed Bounce Back Loan Scheme will now remain open for applications until 30 November 2020, but many banks are only considering applications from existing customers. The terms of this scheme have also been made more flexible to suit growing businesses; the repayment period can be set to up to ten years, and the lender should offer payment holidays and interest-only periods on request.

The application period for loans under the Coronavirus Business Interruption Loan Scheme (CBILS), has also been extended to 30 November. If a business initially applied for a CBILS loan of up to £50,000, that facility can be transformed into a Bounce Back Loan if the borrower applies before 4 November 2020.

Another funding source for growing businesses is the Coronavirus Future Fund. This is available to match equity investments in the business from private investors. Applications are open until 30 November 2020, although the gov.uk website still says the scheme closed on 30 September.