Guide to Home Working – What Can You Claim?
Following advice from the government in response to the coronavirus, more and more businesses have transitioned to allow their staff to work from home. This leads to these businesses incurring new expenses and raises the question of “What costs can we claim?” for many, particularly those that have home workers for the first time.
Before looking at the particular expenses, it is important to note that costs cannot be claimed for furloughed employees, but only those that are carrying out work from the company from home, be it because the office has closed or they are self-isolating. With that in mind, the tax position for some of the more common costs home working is likely to incur is:
Mobile Phones: It is possible to provide each employee with one mobile phone (including SIM card package). This is deductible for the business and does not create a taxable benefit for the employee (regardless of any private use of the mobile).
Broadband: If an employee already pays for broadband, no additional expenses can be claimed. If you were to pay this for the employee, it would create a taxable benefit for them. If an employee does not have broadband at home already, the costs for this can be reimbursed so long as any non-business use is minimal.
Providing equipment (laptops, tablets, computers etc): Provided there is not significant private use of the equipment, there is no taxable benefit to the employee for having use of it.
Purchasing equipment: If an employee is required to purchase equipment (e.g. a laptop) to enable them to work from home, this can be reimbursed by the business. The tax treatment for this is the same regular purchases of equipment. So long as there is not significant private use of the equipment, and it will not be retained by employee after home working has ceased, there is no taxable benefit on the employee.
Electricity and Heating: It is possible to give employees £4 per week (£6 per week from 6 April) to cover the additional costs incurred without any tax consequences. This cost also qualifies as a deduction for the business.
For equipment, to ensure that you are complying with non-significant private use, it is recommended that a policy on this is set and made clear to any employees that private use should be minimal.
If you opt to allow for more than insignificant private use of company equipment, or plan to reimburse your employees over and above the “tax-free” rates, this creates a taxable benefit for the employee. These should be reported through a PAYE Settlement Agreement (PSA), through which the business can settle the tax and NIC that would usually be payable be the employee themselves. This means that the employee is no adverse effect on the employees.
During the pandemic, employers may wish to offer their employees the benefit of a salary advance, or an interest free (or low interest) loan. These are considered employment related loans, and provided the amount loaned is less than £10,000, there are no tax consequences for the employee.
Any loans in excess of this should be subject to the HMRC official rate of interest (currently 2.5% pa).
HMRC have published guidance on all these matters and this can be found here:
Further, important update re the self-employed
We promised you some more detail after yesterday's announcement. Here it is:
Last night Chancellor Rishi Sunak announced the 'Self-Employed Income Support Scheme' to those affected by the impact of COVID-19 which he said was equivalent to the furlough scheme for those paid via PAYE. Here are the key points:
The new grant is available to self-employed individuals or members of a partnership that meet the following criteria:
* Have submitted an Income Tax Self Assessment tax return for the tax year 18/19 and traded in tax year 19/20
* Would be trading currently, if it wasn't for the COVID-19 pandemic
* Intend to continue trading in 20/21 tax year
* Have lost trading/partnership profits due to the COVID-19 pandemic
* Majority of earnings (over half of your income) must come from self-employment
* Having trading (net) profits of up to £50,000, averaged over the last 3 years (less than 3 years if they don't have that history)
If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020 to allow HMRC to assess your eligibility.
You will not be eligible if you have only recently become self-employed, i.e. commenced after 6 April 2019.
What you'll be entitled to if you meet the above criteria:
* You will receive a taxable grant of 80% of the average profits from the tax years applicable
* Up to a maximum of £2,500 per month, the same limit as furlough workers through the Coronavirus Job Retention Scheme
* This will run for the next three months and may be extended, if needed
* It will also be backdated to the 1 March 2020
* Grants will be paid in one lump sum covering all three months, and will start to be paid by HMRC at the beginning of June.
How eligible individuals apply:
* You cannot apply for this scheme yet. HMRC will contact you if you are eligible and invite you to apply online.
* You do not need to contact them before they do so as they are urgently working to get things up and running.
Further update on how to claim for wage costs through job retention scheme
HMRC have released the details of how to claim for wage costs through the coronavirus job retention scheme<https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme>.
The main points are:
* You can claim for employees full-time, part-time, agency and zero hours or flexible contracts
* Employees must have been on your payroll at 28 February 2020
* Scheme will also cover employees who were made redundant since 28 February 2020, if they are rehired
* To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
* The employees cannot work while under furlough, this includes providing any services or generating revenue for the employer
* Employees on reduced hours/pay are no eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract. This means they cannot be paid the reduced wage and 'topped up' to 80%.
* While on furlough the employees wage will be subject to income tax and national insurance.
* If your employees is on sick leave or self-isolating they should get Statutory Sick Pay, but can be furloughed after this.
* If your employee has more than one employer then they can be furloughed for each job.
* Full 80% must be paid to the employee
* All other aspects of employment law continue to apply such as maternity and paternity rights, accrual of holiday pay etc.
* Paid on either the average monthly wage in the year ending 5 April 2020 or March 2019 wage if higher
* For employees starting after 6 April 2019 it is paid on average monthly earnings since starting
How to claim
Employers need to make a claim for wage costs through this scheme.
You will receive a grant from HMRC to cover the lower of 80% of an employee's regular gross wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee's salary beyond this but is not obliged to under this scheme.
A claim will be permitted every 3 weeks. Payments will be made direct to the employer and it will be taxable income of the employer. HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.
Limited Company, Owner Managed Business?
A resume of what you need to know.
If you own your own business, the announcement of the 'Self-Employed Income Support Scheme' to those affected by the impact of COVID-19 was welcome for some but not others. In particular, this will not apply to directors who run their own limited company who are classed as employees. If this is you, read on…
To be the most tax efficient, most directors receive a minimum salary which is topped up with dividends. And as an employee, technically, directors will be eligible for the Job Retention Scheme whereby you can be furloughed and receive 80% of your salary. However, there are two practical problems.
1. Under this scheme directors cannot work: work is classed as providing services or generating revenue (unlike the rest of the self-employed, who can continue to work).
2. Directors would only receive 80% of their salary under PAYE, which is normally at low levels - note dividends are not included!
What other options are there?
Grants - only businesses with premises and receiving Small Business Rates Relief are eligible for a grant of £10,000. This will not be available to any businesses working from home, or with larger premises.
There is a £25,000 grant, but only for those businesses with a property with a rateable value of between £18,000 and £51,000 and it is only available for those businesses in the leisure, hospitality or retail sectors.
These grants are available online via your council website.
Loans - The business interruption loan is available which is available through your bank with an 80% guarantee from the government. There has been some backlash towards some banks however because some of them are still requesting personal guarantees. It is likely that business plans/cashflows will be required to support the application and demonstrate the viability of the business. If you are a M&S client, and given the seriousness of the situation, this is a service we would be happy to assist with at no cost.
All of this means that, very frustratingly, owner managed businesses currently have no significant measures available to them.
What can you do?
In order to survive the next few months, cashflow will be vital.
* Credit control - keep on top of any customers due you money
* If you can work you may want to consider offering a discount for early payment
* Raise invoices as soon as possible
* Speak to your suppliers and ask for increased payment terms, discounts
* Contact your utility provider - are you on the best tariff, any reductions available
* Review all your costs and reduce all that you can
* Furlough staff if necessary
* Look for ways to generate new income
* Speak to your bank re payment holiday for any loans if applicable
* Ask for time to pay for any PAYE due. Use the VAT deferral.
* Request a mortgage holiday
* Review costs - are you on the best tariff for your utilities
* Contact council tax office - councils can defer payments
If you want to chat about how your business has been affected, please do not hesitate to contact us.
Financial Support for the Self Employed (winners and losers)
With public pressure growing, the Chancellor announced this evening the government's plans for supporting those who are self-employed. More details on the support package are sure to follow in the coming days, but the main principle of the measure is that, much like the measures for employees, self-employed individuals will be eligible to receive taxable grants worth 80% of their average monthly profits (capped at £2,500 per month).
The monthly payment will be calculated based on an average of the profits included on the individual's tax returns for the last 3 years. If you have only traded and submitted tax returns for a year or two, then the average for those periods will also be taken into account. For those that have not yet submitted their return for the year ended 5 April 2019, they will have 4 weeks from today to do so in order to be included under the scheme.
Unfortunately, not all self-employed individuals will be eligible for this scheme. Only those with profits up to £50,000 and those whose self-employment profits make up the majority of their income will receive the grant. Additionally, anyone who only became self-employed after 6 April 2019 will not be entitled to any additional support, as it is only those with a submitted 2019 tax return that will be recognised.
HMRC will be in touch directly with those that are eligible to receive the payment, however it is currently expected that this will not happen until early June. In the meantime, those impacted are encouraged to claim universal credits.
We'll update you with more information as soon as we've looked in depth at what the Chancellor has said and what it might mean for you.
Extra three months to file your accounts.
The government has announced that businesses are to be given an extra three months to file their accounts with Companies House to let them prioritise responding to the coronavirus pandemic.
Under the measures, which came into force today, any company that applies for an extension to file their results citing Covid-19 will automatically and immediately be granted an additional three-months.
Useful links at Fife Council
Fife Council have updated their website to include a set of articles and links to help businesses at this trying time. It looks like this:
And you can access it here:
On Friday 20th March 2020 Chancellor Rishi Sunak announced a sweeping range of measures to be introduced over the coming days, weeks and months. Here is a summary of the main measures he announced:
* Government to pay 80% of wages for employees temporarily not able to work, up to £2,500 per employee per month. The payment will be in the form of a grant available from HMRC, available by the end of April (backdated to 1 March 2020). MORE DETAILS HERE.
* For the self-employed, a deferral of personal tax payments due on 31 July 2020, payments deferred until 31 January 2021. This is an automatic offer with no applications required. No penalties or interest will be charged in the deferral period
* No VAT payable by any business in the quarter to June 2020, with any amount deferred being due by the end of the 20/21 tax year. All businesses are eligible and it is an automatic offer with no applications required. Vat refunds and reclaims will be paid by HMRC as normal. VAT returns should still be submitted, any direct debits should be cancelled.
* The government's Coronavirus Business Interruption Loan Scheme will be interest free for 12 months rather than the initial 6 months, available from Monday (also available to large and medium sized businesses). Coronavirus Business Interruption Loan Scheme (CBILS) - British Business Bank British Business Bank<https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/> . You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.
* Increase in Universal Credit Standard Allowance of £1,000 for the next 12 months.
* Working tax credit basic element increased by £1,000 for the next 12 months.
* Housing Benefit and Universal Credit to be enhanced so that the local housing allowance will cover 30% of market rents for renters.
* Increase in benefits for self-employed, suspending minimum income floor thereby allowing self-employed access to Universal Credit equivalent to SSP for employees.
Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees' salary for those employees that would otherwise have been laid off during this crisis.
All UK businesses are eligible.
How to access the scheme
You will need to:
* designate affected employees as 'furloughed workers,' and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
* submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
If you need advice, please don't hesitate to call us. You can also see the full summary of the government's actions to date here.
This morning, U.S. Treasury Secretary Steven Mnuchin announced via Twitter: that at President Trump’s direction, we are moving Tax Day from April 15 to July 15.
All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.
We expect the IRS will issue official guidance today or Monday, officially extending the deadline.
Individuals and small businesses can also delay paying any federal income tax payments up to $1 million and $10 million, respectively, until July 15, 2020. At this time, we don't know if the IRS will increase the tax payment limitations.
Getting more time to pay
As a result of the coronavirus outbreak there may be a strain on your business to meet its financial obligations. However, in order to ease the burden it may be possible for you to request a Time to Pay (TTP) arrangement with HMRC. A TTP arrangement will provide your businesses with some additional breathing space during these uncertain times to enable you to settle your existing tax liabilities. For many businesses, this could be invaluable.
More specifically, a TTP will allow you to settle your current tax liabilities in monthly instalments which are agreed with HMRC. Typically, this means you can spread your payments over a period up to 12 months, depending on your financial circumstances. In order to set up the TTP you will to contact HMRC on 0800 0159559, at which time they will talk you through your business’s current financial position and set a monthly amount that you both agree that would be manageable for you.
Before you contact HMRC you’ll need to know:
HMRC will ask you about:
As you can imagine the HMRC helpline may well be busy when you telephone but please persevere!
The following steps will be put in place to support businesses during the 2020-21 financial year:
• a 100% rates relief for retail, hospitality and leisure sectors on properties with a rateable value of between £18,000 and £51,000.
The finance secretary will also write to all local authorities urging them to respond positively to requests from rate payers for payment deferrals for a fixed period.
Support for businesses who are paying sick pay to employees
Small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
Employers with fewer than 250 employees will be eligible
Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
Support for businesses through the Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch next week to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.
Support for businesses paying tax
All businesses and self-employed people in financial distress and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559. More information is available here.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim. Does your insurance include this? Please check with your insurer or broker.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
The business helpline number is 0300 303 0660. The helpline will be open Monday to Friday 8.30am to 5.30pm – Currently, no further information is available but it looks like this might be in place next week.