If you or any of your employees are working from home due to Coronavirus because your workplace has closed or you are following advice to self-isolate then you may be able to deduct some of the costs of home working as a taxable expense.

The rules around expenses and whether or not they are taxable differs depending on the type of equipment, service or supply used and so we have covered the main categories below:

Mobile phones and SIM cards (no restriction on private use)

If your company provides a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.

Broadband

If you or your employee already pays for broadband, then no additional expenses can be claimed, but if a broadband internet connection is needed to work from home and one is not already available, then the broadband fee can be reimbursed and is non-taxable.

The broadband must be provided primarily for business use and any private use must be limited.

Laptops, tablets, computers, and office supplies

Where any of these items are used for business purposes and not significant private use, these are non-taxable. Where an employee has bought office equipment or supplies and wishes to be reimbursed, this is taxable and should be reported via PAYE Settlement Agreement.

Electricity or heating

Employees are entitled to a payment or reimbursement of up to £4 a week (increasing to £6 a week from 6 April 2020), which is non-taxable. This is intended to cover additional household expenses incurred when your employee is working from home.

Where a claim exceeds this amount then an employee should check with you beforehand to see if you will make these payments and you should keep receipts.

Employer-provided loans

A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan. Those loans with a value less than £10,000 in a tax year are non-taxable.

Temporary accommodation

If your employee needs to self-isolate but cannot do so in their own home, you can reimburse hotel expenses and subsistence costs, these are taxable.

Use of a private vehicle for business

Employers can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.

If you do not pay mileage allowance, your employee can claim tax relief through their Personal Tax Account.

Reporting expenses to HMRC

Any expenses or benefits which are related to Coronavirus can be reported via a PAYE Settlement Agreement, which will allow you to settle tax and National Insurance contributions on any expenses or benefits, even though the responsibility would usually be on your employee, or on both you and your employee. This applies to Coronavirus related items only, for example, a new desk can go onto a PAYE Settlement Agreement.

Where you are already including benefits in kind in your payroll reporting, you can continue to report expenses and benefit this way, or they can be reported through P11D returns.

It is important to keep a record of all expenses claimed, although you do not have to report of every instance of private use to prove a claim for exemption.

Any non-taxable expenses or benefits should not be reported to HMRC.

What is it?

The Self- Assessment payment on account that is ordinarily due to be paid to HMRC by 31 July 2020 may now be deferred until January 2021.

Am I eligible?

If you are due to make a self-assessment payments on account on 31 July 2020 then you are eligible for the deferment. The deferment is intended to assist self-assessment taxpayers who are suffering hardship as a result of the coronavirus.

The deferment is optional and any persons still able to pay their second self-assessment payment on account on 31 July 2020 should still do so.

How do I access it?

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment of your July 2020 payment on account until January 2021.
HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of coronavirus and have outstanding tax liabilities.

When can I access it?

On 31 July 2020, when your self-assessment payment on account ordinarily due to be paid on that date, may be deferred until 31 January 2021.

As well as posing a threat to physical wellbeing, COVID-19 (Coronavirus) is having an impact on client’s finances.

Many of our clients are able to work from home but those who are unable to, are asking whether they are able to claim 80% of their salary, up to a maximum of £2,500 per month, under the measures announced by the Chancellor, Rishi Sunak.

It is important to note that as a Director you are both an employee and an office holder of your limited company. You are not classed as self-employed.

It is our understanding, at this time, that if you are not carrying out any work for your limited company, under the Job Retention Scheme, you will be able to claim 80% of your salary, up to a maximum of £2,500 per month. It is important to note that this will only apply to the existing salary element of your income and not to any dividends you may receive. We must however stress that the detail of this is not yet available and it is therefore subject to change. Further updates will follow as and when we are made aware of the practicalities.

Please visit here for the latest developments.

Hoping you keep safe and well.
Best regards,
Cogent Accountants Limited

The Government’s tax and financial authorities have been accused by the House of Lords of delivering “rough justice” in it‘s approach to the Off-Payroll tax rules.

HMRC and the Treasury were called before the Finance Bill Sub-Committee hearing to explain why the IR35 rules appeared to be forcing genuinely self-employed workers into false employment.

Throughout the hearing, representatives from HMRC and the Treasury failed to provide convincing responses to the question posed to them by the Lords, including queries over the widespread misclassification of contractors, HMRC’s unrealistic compliance cost forecasts, and unsubstantiated estimates of existing IR35 non-compliance.

Throughout the meeting, which was held ahead of the subsequent delay to IR35, the Lords were eager to understand HMRC’s reaction to the predicament that ‘deemed employees’ have been placed into.

Lord Forsyth said: “The result is that the person doing the work is finding that their income is substantially reduced, and this is at a time in the economy where income is already going to be substantially reduced due to Coronavirus. Perfectly honest people will have that cost deducted from their revenue. That is the point.” After being asked about what the Government was doing to support contractors affected by the rule change, Lindsey Whyte, personal tax, welfare and pensions director at the Treasury, was unable to offer anything of relevance.

The Lords also raised the issue of blanket bans on the engagement of limited company contractors, which has been common in the public sector and that has allowed some employers to reduce their compliance requirements and risk.

When questioned on the issue, and the consequent impact on contractors being forced into umbrella and Pay As You Earn (PAYE) arrangements, representatives from HMRC and the Treasury said that their arrangements were “commercial decisions” made by the organisations in question. In response, Lord Forsyth said: “It might be a commercial decision, but it’s as a result of the change that you’ve made. You’re imposing a change that results in contractors’ commercial relationship being destroyed.”

In response, HMRC Off-Payroll reform programme director, Cerys MacDonald said: “The legislation is very clear that this practice is unlawful, and we do expect businesses to take reasonable care in those individual assessments.”

During the hearing, the Lords also questioned the effectiveness, transparency and fairness of the client-led status disagreement process.

Lord Forsyth asked: “How will you do that if the company, as a matter of policy, has decided they’re not going to deal with that?”

HMRC and the Treasury were also questioned about concerns over non-compliance and the actual revenue that would be raised from the change in the rules.

“The Lords clearly understood that the Off-Payroll Tax dishes out “rough justice”, concluded Lord Forsyth.

Trump’s former physician, Dr Ronny Jackson, has said that in order to help the president lose up to 15 pounds, he hid vegetables in his food.

Dr Jackson said that alongside introducing exercise machines at the White House, he used to put cauliflower in the US president’s mashed potatoes in his failed efforts to help him lose weight.

Despite Trumps own claims that his time on the golf course could be classed as exercise, Dr Jackson tried to help the president shed between 10 and 15 pounds.

Dr Jackson said: “The exercise stuff never took off as much as I wanted it to. But we were working on his diet. We were making the ice cream less accessible; we were putting cauliflower into the mashed potatoes.”

Trump was the oldest incoming US president at the age of 70 and had to have a cognitive test as part of his first medical check-up.

Following the test, Dr Jackson said: “I feel very confident that he has a very strong and a very probable possibility of making it completely through his presidency with no medical issues.”

To make sure our team remain safe and to ensure we continue to provide continuity of service throughout this challenging period, we decided on Monday to ask all Cogent staff to work remotely for the time being as per Government instructions.

Thanks to our use of the latest technology, our team can operate remotely, which means that the support and services that you receive will continue to remain as smooth as possible throughout this time.

Our office main number will continue to operate as normal.

Please be assured we will continue to work with you through this challenging time.

Please stay safe and well.

The Team at Cogent

Please note due to the impending Easter break and holiday commitments, our offices will be closed on the following days over the next couple of weeks:

• Thursday 9th April
• Friday 10th April (Good Friday)
• Monday 13th April (Easter Monday)
• Wednesday 15th April
• Thursday 16th April

We will be open for business as usual on all other dates.

We thank you in advance for the understanding.

This month…

Harold Wilson said “a week is a long time in politics”.

The Budget confirming that the Off-Payroll legislation would indeed be going ahead from 6th April 2020 was only on the 11th March.

But yet by the17th March, the Chief Secretary to the Treasury Stephen Barclay announced in Parliament that the legislation would be deferred to April 2021. Deferred, NOT cancelled as he pointed out three times.

Yes Steve (may I call you that), we understand that the word deferral means something is not cancelled, but thanks for making that clear to us all.

The Lords in their inquiry to the Off-Payroll proposed legislation grilled HMRC and the Treasury and were very annoyed about the lack of flexibility on delaying this legislation at a time when business would be reeling from Coronavirus issues.

One would have hoped that on Budget Day they would have realised this was not the correct direction.

However, due to the involvement of the Lords and the unfortunate progress of the virus, common sense eventually prevailed.

I would like to helpfully point out to Steve (we’re old friends now) who has taken up this new role only recently in February 2020, that the legislation in question is ‘Off-Payroll’ NOT “Off-Roll-Payroll” as he repeated twice in his announcement on 17th March.

Involvement in too many ‘roles’ may give the appearance that you’re not on top of your brief and it was a roll of the dice that brought you to the new job!!

But having said all that, what the Treasury has now done will have a major impact on the contracting industry which in most cases should see all contractors being able to continue to work through their personal companies as up to now.

However, as the deferral came at such a late stage, it is possible that some end clients may still decide that they want their contractors to work PAYE through the agency or an umbrella company.

I would stress this is not a tax decision as there will now be no Off-Payroll legislation until April 2021. However, some end clients may decide commercially that having gone through a tortuous process of IR35 assessment, they now don’t want to work with limited company contractors any longer.

So, it is important that every contractor who has had an inside IR35 determination speaks to their end client to confirm that will void their determination and continue to pay the limited company on a gross invoice basis.

We’re thrilled that for the vast majority of our clients, this last minute deferral will mean they will carry on working through their limited company as they have done up to now and we hope that in the year’s grace that has been given, all organisations work constructively to creating a vastly improved and fair IR35 assessment process for the long term future.

Victor Korman
Managing Director
Cogent Accountants

In response to the COVID-19 pandemic, the Government has taken the decision to postpone the controversial IR35 reform for a year until 6th April 2020.

This gives contractors another 12 months to decide on their approach when working in the private sector.

Prior to the latest announcement by Steve Barclay, the Chief Secretary to the Treasury, contractors had given up hope of change after the Chancellor confirmed in the Budget that the Off-Payroll working rules would be introduced on 6th April 2020 as planned.

During his speech to the Commons, Barclay insisted that the Government has every intention of rolling the IR35 changes out next year.

He said: “This is a deferral in response to the ongoing spread of COVID-19 to help businesses and individuals.

“This is a deferral, not a cancellation and the Government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company pay broadly the same tax as those employed directly.”

In response to the announcement, Andy Chamberlain, Director of Policy at IPSE said: “The Government has done the sensible thing by delaying the changes to IR35 in the private sector.

“These changes have already undermined the incomes of many self-employed businesses across the UK. However, they would have done even more serious damage if they had gone ahead as planned.

“It is right and responsible to delay the changes to IR35 for at least a year during the Coronavirus crisis, to reduce the strain and income loss for self-employed businesses.”

COVID-19 seems to be the genuine reason for the delay, but many experts have said that the campaign by contractors, and even more so, the refusal of contractors to be shoved into inside IR35 contracts may have convinced the Treasury to take action.

The potential loss of a third of the contractors used by companies due to the changes may also have had an impact at a time where those in the sector already face challenges as businesses look to cut costs.

Those contractors campaigning for the abolition of the IR35 reforms have clearly made a significant contribution already in getting the Government to listen, enlisting the House of Lords and some MPs to their side.

Now they have another opportunity to try and prevent or perhaps amend the legislation again so that it takes into consideration the concerns of contractors.

There are calls for contractors to unite now to bring about change, while also preparing for a potential introduction of IR35 Off-Payroll reforms next year.

Budget summary

When Philip Hammond delivered the last Budget 499 days ago, in the midst of the Brexit negotiations, he could not have imagined that the next Budget would be dominated by the spread of a lethal contagion.

Nor is it likely that he thought Rishi Sunak – then a relatively inconspicuous junior minister – would be the one delivering it, with Mr Hammond having resigned and lost his seat in Parliament in the meantime.

Even a few weeks ago, there was little reason to expect that Mr Sunak, by then promoted to Chief Secretary to the Treasury but still largely unknown, would deliver the Budget on the date announced by then-Chancellor, Sajid Javid.

It was only when Mr Javid resigned suddenly in February – becoming the first Chancellor not to deliver a Budget since Iain Macleod, who died a month after his appointment by Ted Heath in 1970 – that Mr Sunak was propelled into the limelight.

This left him just weeks to prepare the first Budget since October 2018 and so the first since Boris Johnson became Prime Minister, the first since the Conservatives regained a majority in Parliament, the first since Brexit and of course the first since covid-19 began its lethal spread.

The scale of the task facing a man still in his thirties could hardly be overstated, as several of his Parliamentary colleagues entered self-isolation.

Being the first Budget following the General Election, we had a little more idea of what the Chancellor was likely to say, given the content of the Conservative Manifesto and December’s Queen’s Speech. Reforms to Entrepreneurs’ Relief, Research and Development (R&D) Tax Credits and National Insurance Contributions (NICs) all featured prominently in the manifesto and so were widely-tipped to be addressed in the Budget.

Recent days had also seen promises of record investment in infrastructure, as well as help for businesses and individuals affected by covid-19.

Yet, despite these clear indicators, a nation gripped by fears of an epidemic, sharp falls on the markets and the Bank of England’s dramatic dawn move to slash interest rates to 0.25 per cent injected significant uncertainty into the proceedings.

After rising to the top of Government largely undetected, the unexpected Chancellor was the centre of attention in equally unexpected circumstances when he was called to speak by the Chairman of Ways and Means, following Budget day tradition.

• Covid-19 response
• Economic overview
• Business
• Personal taxes, pay and duties
• Transport, infrastructure and the environment
• Conclusion

Covid-19 response

With covid-19 having brought about panic on the global markets as recently as Monday, it was no surprise that the Chancellor began his statement by addressing the economic impact of covid-19.

Describing the economy as “sound” and the public finances as “robust”, he predicted supply-side disruption to the economy and repeated previous forecasts that as many as a fifth of the workforce could be absent at any given time.

The Chancellor said that the Government is launching a response to the potential economic impact of covid-19, worth as much as £12 billion and comprising three parts.

First, he said that the Government will provide the NHS with whatever funding it needs to be able to deal with the consequences of covid-19.

Second, he said that the Government will act to support the finances of people who cannot work as a consequence of covid-19, including those who are self-isolating. As had previously been indicated by ministers, Statutory Sick Pay (SSP) will be paid from day one, while the self-employed and people working in the ‘gig economy’ will gain quicker access to benefits, such as Universal Credit.

Third, the Chancellor announced a package of measures to protect businesses from the economic impact of covid-19. Businesses with fewer than 250 employees will have the cost of paying SSP to employees who are absent owing to covid-19 for up to two weeks reimbursed by the Government.

Meanwhile, there will be deferred tax arrangements available for businesses and self-employed individuals, a temporary Coronavirus Business Interruption Loan Scheme, worth up to £1.2 million per business, and business rates will be suspended for a year from April for those with a rateable value below £51,000 in the retail, leisure and hospitality sectors.

The Government will also provide a cash grant of £3,000 to each business eligible for the small business rates relief, worth £2 billion in total to the UK’s 700,000 smallest businesses.

Economic overview

In an indication of how covid-19 is dominating the agenda, the Chancellor was 20 minutes into his hour-long Budget before he began addressing the state of the economy.

He said that growth is predicted to be 1.1 per cent this year, albeit not taking into account the likely impact of covid-19.

Annual output is forecast to reach 1.8 per cent in 2021-22, before falling to 1.5 per cent in 2022-23 and 1.3 per cent in 2023-24.

Meanwhile, inflation is expected to be 1.4 per cent this year, rising to 1.8 per cent 2021-22.

Public sector borrowing will rise this year to 2.1 per cent of GDP, to 2.4 per cent and 2.8 per cent in the following years.

Business

Reports in several newspapers in the last month had led people to speculate about whether Entrepreneurs’ Relief might be scrapped altogether by the Chancellor.

In the end, he opted not to, while saying that he was sympathetic to those behind such calls.

Instead, he opted to retain Entrepreneurs’ Relief but to reduce the lifetime allowance from £10 million to £1 million with immediate effect.

As expected, the Chancellor froze Corporation Tax at 19 per cent, instead of pressing ahead with the previously planned cut to 17 per cent.

The Chancellor said that he will increase the Employment Allowance by a third to £4,000 from April, cutting the tax bill for almost half-a-million small businesses.

Meanwhile, he said the rate of R&D Tax Credits would rise from 12 per cent to 13 per cent and that the Government will consult on whether qualifying costs should include investments in data and cloud computing.

Following on from his announcement about business rates concerning covid-19, the Chancellor also said that the whole system of business rates will be reviewed this year.

He reaffirmed the Government’s commitment to raising the National Living Wage to two-thirds of median earnings by 2024 – expected to be around £10.50 an hour.

Personal taxes, pay and duties

There were few rabbits in the Chancellor’s proverbial hat when it came to personal taxes, pay and duties, with most of the key announcements having been trailed in advance.

These included increasing the NICs threshold from £8,632 to £9,500 – a measure that was included in the Conservative Manifesto.

Another announcement that had been trailed ahead of the Budget was the scrapping of the five per cent rate of VAT on women’s sanitary products.

Duties on spirits, beer, cider and wine will be frozen, while fuel duty will be frozen for the tenth year running.

Moving to pensions, the Chancellor said that the tapered annual allowance thresholds will be increased by £90,000 to £200,000. At the same time, people on the highest incomes will see the minimum amount the annual allowance can reduce to fall from £10,000 to £4,000.

The lifetime allowance for pensions will rise in line with the Consumer Prices Index in 2020-21 to £1,073,100.

Non-UK residents will be faced with a two per cent Stamp Duty Land Tax (SDLT) surcharge from April next year, in a move HM Treasury says is intended to control house price inflation.

Transport, infrastructure and the environment

One of the biggest areas of spending in the Budget was transport and infrastructure, with the announcement of £600 billion for roads, rail, broadband and housing over the next five years, with £2.5 billion to fix potholes over this period.

The Chancellor said that a £1 billion fund would be created to remove all unsafe combustible cladding from public and private housing in buildings taller than 18 metres.

In another announcement that is sure to have caught the eyes of many businesses, he said red diesel will be scrapped in two years for all sectors, apart from farmers and the railways.

Conclusion

With 2019 having been the first year since 1900 in which no Budget had been delivered and much having happened since the last one in 2018, there was plenty for the Chancellor to say that will impact upon entrepreneurs and small businesses in particular.

In total, the measures announced represent £30 billion of extra Government spending, which he said would “support British people, British jobs and British businesses”.

Link: Budget 2020