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New law clarifies redundancy rights

New legislation applies from 31 July 2020 to ensure that furloughed employees receive statutory redundancy pay based on their normal wages, rather than a reduced amount based on their furloughed pay.

Business owners who are considering their options – to bring back furloughed staff or consider redundancy – are now obliged to consider new legislation that clarifies the amount of redundancy pay is not based on any reduced, furloughed pay, but on employees basic, normal wages.

In a press release issued 30 July 2020, the Department for Business, Energy & Industrial Strategy said:

Throughout the pandemic, the government has urged businesses to do right by their employees and pay those being made redundant based on their normal wage, rather than their furlough pay, which is often less.

The majority of businesses have done so, however, there are a minority who have not.

Today (from 31 July 2020) the government will bring in legislation to protect workers and ensure all furloughed employees who are being made redundant receive their full entitlement.

Employees with more than 2 years’ continuous service who are made redundant are usually entitled to a statutory redundancy payment that is based on length of service, age and pay, up to a statutory maximum.

This legislation, which will come into force from tomorrow (Friday 31 July), will ensure that employees who are furloughed receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate.

They went on to say:

These changes will also apply to Statutory Notice Pay, which is where employees must be given a notice period before their employment ends, varying from at least one week’s notice up to 12 weeks’ notice, depending on how long they have worked for their employer. During this notice period, employees must be paid.

This legislation will also ensure that notice pay is based on normal wages rather than their wages under the CJRS.

Other changes coming into force will ensure basic awards for unfair dismissal cases are based on full pay rather than wages under the CJRS.

Employers should also note that:

• an employee will be entitled to statutory redundancy pay if they have been working for their employer for 2 years or more,

• calculating statutory redundancy pay for employees relies on inputting average weekly pay, alongside other factors such as length of continuous service and the employee’s age. Average weekly pay is usually worked out by adding the pay received over the 12 weeks up to when the employer notifies the employee they are being made redundant and dividing by 12 to get the average. This legislation ensures that employers must treat any weeks an employer spent on furlough over the 12-week reference period as if they were working, and on full (100%) pay

• this legislation does not impact any enhanced redundancy pay that may be stipulated in the terms and conditions of an employee’s individual employment contract, but applies to basic statutory redundancy pay entitlements

• the legislation also covers other employment rights that rely on average weekly pay, including notice pay, unfair dismissal, and short-time working

Obviously, any decisions regarding the process to unwind the furlough scheme need to consider the wider implications for your business. We invite business readers considering their options, and who are undecided on the action they should take, to call, so that we can help you examine your choices, and if necessary, crunch the numbers to flex your existing business plans. 

 

Making Tax Digital – getting prepared

We have been waiting for some time for government to announce an extension to its Making Tax Digital (MTD) program; this they did last week.

What is MTD?

HMRC are keen to digitise the collection of information to calculate your tax liabilities. At present they are reliant on you submitting a variety of tax returns to do this.

MTD means that they will require you to link your data, your accounts information, directly with HMRC’s personal tax account in your name if you are an individual or your company’s tax account if incorporated.

Essentially, your VAT records and other accounts data will be summarised by your accounts software and sent to HMRC electronically once a quarter. In this way HMRC will build a picture of your current trading position and eventually, you will not need to file an annual tax return.

MTD and VAT

Presently, the majority of VAT registered traders with turnover above £85,000 (the present VAT registration threshold) are filing their returns using MTD approved software. From April 2022, this requirement will be extended to include all VAT registered businesses with turnover below the £85,000 threshold.

MTD and income tax

From April 2023, the accounting data of the self-employed and property letting businesses will need use MTD compliant software and file quarterly updates to HMRC. Initially, this will apply to those with business or property income in excess of £10,000 a year.

Many property letting businesses and smaller self-employed traders are used to preparing figures manually for their annual tax return. From April 2023, these traders will need to invest in converting to an approved electronic record keeping process.

Certainly, we are confident that the bookkeeping software we recommend clients use will be MTD compliant. We are currently filing MTD VAT returns and see no reason why this will not be successfully extended to include MTD filing of accounts information from April 2023.

Will be in touch with clients in the coming months to discuss actions that need to be taken in order to comply with these new regulations. Needless to say we will aim to minimise disruption for clients already stretched by COVID disruption.

 

Brexit – get someone to deal with customs for you

It seems fairly likely that we are heading for a no-deal exit from the EU, 1 January 2021. Many smaller businesses that presently import or export goods from and to the EU will need to deal with a complex raft of customs and VAT issues if they continue trade with the EU after this date.

The GOV.UK website has a whole section that promotes the idea that you get someone to deal with customs for you. They have even published a lift of firms, 600 of them, that can act as freight forwarders, customs agents or brokers or fast parcel operators.

Will all the present COVID related issues, it is likely that many businesses will not relish a further list of red-tape chores in order to continue cross-border trade with the EU. In which case, hiring someone to do this for you may be appealing.

A summary of the information posted by government on this topic follows:

Freight forwarders

Freight forwarders move goods around the world for importers. A freight forwarder will arrange clearing your goods through customs. They will have the right software to communicate with HMRC’s systems. You can find out how to use a freight forwarder on the British International Freight Association and Institute of Export websites.

Customs agent or broker

Customs agents and brokers make sure your goods clear through customs. You can hire a customs agent or broker to act as a:

  • direct representative
  • indirect representative

Fast parcel operators

Fast parcel operators transport documents, parcels and freight across the world in a specific time frame. They can deal with customs for you, as part of their delivery. They cannot act on your behalf without written instructions from you. The instruction must show whether they’re acting for you directly or indirectly. HMRC will only ask for evidence of the authorisation if we need it.

Get someone to act directly

You can hire a person or business to act in your name. You’ll be liable for:

  • keeping records
  • the accuracy of any information provided on your customs declarations
  • any Customs Duty or VAT due

If you give clear instructions and they make a mistake, they may become jointly and severally liable. You cannot ask someone to act directly if they’re submitting your declarations using:

  • simplified customs procedures
  • entry in the declarant’s records

When acting directly, even if they have authorisation, they can only submit those types of declarations if you have authorisation.

Get someone to act indirectly

You can get someone to act for you in their own name, this means they’re:

  • equally responsible for making sure the information is accurate
  • jointly and severally liable for any duty or VAT

If they have authorisation, you can get an indirect agent to make declarations using:

  • simplified customs procedures
  • entry in the declarant’s records

You cannot ask someone to act indirectly if you’re declaring goods for:

  • inward processing
  • outward processing
  • temporary admission
  • end-use relief
  • private customs warehousing

Losses and loans

Many businesses in vulnerable sectors may have slipped into a loss making position following lock-down. Some of those businesses may have availed themselves of government backed “soft” loans to provide them with the cash-flow to survive the process.

Even with rigorous planning to reduce costs, furlough employees and benefit from other COVID related grants, businesses that cannot re-establish income streams (sales) will inevitably face the likelihood that outgoings are more than incomings.

The resulting losses will gradually eat away at cash resources – usually funds created and retained from pre-COVID trading activity – and loans may be the only way that affected businesses can hope to ride out the present coronavirus disruption.

Loans, of course, need to be repaid. Even the government guaranteed loans will need to be repaid.

If you find yourself in this position, then being vigilant – and in particular, reviewing monthly accounts – need to move closer to the top of your to-do list.

Companies that rely on loans from third-parties to provide working capital, when they have much reduced turnover, should spotlight their balance sheet. When total liabilities – including loans – are more than total assets the company may be insolvent. If you are consulting with your advisers on a regular basis this will come as no surprise, if you are not in the habit of seeking support from your accountant then pick up the phone.

Self-employed traders with no limitation to their personal liability are in a more difficult position as any potential business insolvency may give creditors recourse to claim against their personal assets including their home. Note, that this recourse – to use a self-employed trader’s home as security – should not apply to certain government backed loans.

A further complication is taxation. Many of the grants received to support all manner of businesses during the pandemic are treated as taxable income. If the grants are subsequently used to defray allowable business costs then no tax should be payable. However, as part of your monthly review it is worth asking your tax adviser to factor in tax considerations.

Clearly, the resumption of normal trading conditions is of prime importance to all businesses. Without a healthy income, businesses will eventually run out of resources and will be forced to close.

The key is to stay vigilant; keep yourself informed. If you are concerned that you need to act based on the contents of this post please get in touch. We can help.

Audiences back in theatres from 1 August

Social distancing will be challenging theatre and other performance arts facilities as they grapple with the news announced last week that indoor performance with socially distanced audiences will be able to take place across the country from 1 August 2020.

The idea that an audience can be socially distanced is mind boggling, adds a whole new dimension to the rush for refreshments and use of facilities in the interval.

The Prime Minister’s announcement on the topic is reproduced in part below.

Audiences adhering to social distancing will be able to return to indoor theatres, music and performance venues from 1 August.

The announcement marks a major step in getting the arts and cultural sectors fully back up and running and follows the government’s announcement of £1.57 billion of funding for the arts, culture and heritage sector earlier this month…

The Department for Digital, Culture, Media and Sport is working with the sector on pilots of performances with socially distanced audiences that will inform final guidance for venues in the run up to August 1. These include the London Symphony Orchestra at St Luke’s, London with a variety of further events in the coming weeks.

This announcement marks the move to stage 4 of the government’s 5-stage roadmap for the return of professional performing arts. Under the new regime, audiences, performers and venues will be expected to maintain social distancing at all times.

Guidance for the performing arts, published earlier this month, also sets out further measures to support the safe return of audiences, including:

  • Reduced venue capacity and limited ticket sales to ensure social distancing can be maintained
  • Tickets will be purchased online and venues encouraged to use e-tickets to reduce contact and help with track and trace
  • Venues should have clearly communicated social distancing marking in place in areas where queues form and adopt a limited entry approach
  • Increased deep cleaning of auditoriums
  • Performances should be scheduled to allow sufficient time to undertake deep cleaning before the next audience arrives
  • Performers, conductors, musicians must observe social distancing wherever possible

Singing and the playing of brass and wind instruments in groups or in front of an audience is still currently limited to professionals only.

This guidance will be for organisations in England. Organisations in Scotland, Wales and Northern Ireland should adhere to the advice of the devolved administrations at all times.

  1. guidance will be updated as the evidence develops around singing, wind and brass instruments, and the wider public health context. The five stages of the phased return to professional performing arts is as follows:
  • Stage One – Rehearsal and training (no audiences and adhering to social distancing guidelines)
  • Stage Two – Performances for broadcast and recording purposes (adhering to social distancing guidelines)
  • Stage Three – Performances outdoors with an audience plus pilots for indoor performances with a limited distance audience from July 11. We will now also work with the sector to get small pilots started as soon as possible and will set out further details in due course
  • Stage Four – Performances allowed indoors / outdoors (but with a limited distanced audience indoors)
  • Stage Five – Performances allowed indoors / outdoors (with a fuller audience indoors)

Employers face difficult choices

The furlough scheme has enabled employers to defer decisions about their workforce – who to retain, who to let go – but as from the beginning of August 2020, employers will be obliged to meet the furlough costs on an incremental basis.

Another change this month, July 2020, is that employees can be invited back to work on a part-time basis. Where this is actioned, the costs of the part-time activity will need to be met by the employer and the government will continue to cover the out of work, furloughed costs. 

In his Summer Statement last week, the Chancellor, Rishi Sunak, offered another incentive to employers to retain furloughed staff after the formal Coronavirus Job Retention Scheme closes 31 October 2020.

Aptly called the Job Retention Bonus, the new incentive promises to pay employers if they retain employees for the period November 2020 to January 2021. The bonus will amount to £1,000 for each qualifying employee retained in this way.

The bonus will apply to furloughed employees who remain continuously employed through to the end of January 2021. Employees must earn above the National Insurance Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced by the end of July 2020.

Whether the additional enticement to retain staff will delay decisions on head-count remains an unknown, but as large-scale redundancies announced recently demonstrate the outlook for the jobs market is looking bleak, especially for those involved in sectors badly affected by the lock-down process.

Planning is required

What is evident, is that decisions will require careful planning. Government incentives will need to be considered but are incidental to the over-riding need to quantify the likely scale of future sales, costs, profitability, cash-flow and solvency.

Employers will need support to plan and we can help. If you are still undecided about your options as we tentatively emerge for lock-down, please call so that we can help you consider your options. 

Time to dust-off your gym shoes and swimming togs

The government announced further easing of lock-down restrictions last week. Outdoor pools can reopen to the public from 11 July, followed by indoor gyms, pools and leisure centres on 25 July 2020.

In a recent press release they said:

The Government has outlined the measures that will allow outdoor pools to reopen from 11 July and indoor gyms, swimming pools and sports facilities to reopen from 25 July, ensuring millions of people can get back into more sport and fitness activities.

The guidance, published by the Department for Digital, Culture, Media and Sport, has been compiled with input from the trade body ukactive, the Sport and Recreation Alliance, Sport England and other sports bodies, and in consultation with Public Health England and the Health and Safety Executive.

It includes advice for providers of pool, gym and leisure facilities on cleaning, social distancing, and protection for staff to help venues get back up and running safely.

It also supports the re-opening of sports halls which are vital to the return of play for many sports, including badminton and volleyball. Guidance produced by National Governing Bodies will complement the government guidance and help ensure indoor sports can be played safely from July 25.

Venues must ensure they can enable customers, staff and volunteers to maintain social distancing before, during and after participation.

Measures to ensure the safety of the public and the staff and volunteers who manage these facilities include:

  • Limiting the number of people using the facility at any one time, for example by using a timed booking system;
  • Reducing class sizes and allowing sufficient time between each class to avoid groups waiting outside during changeover;
  • Ensuring an appropriate number of people are in a swimming pool at any one time;
  • Spacing out equipment or taking some out of service to maintain social distancing;
  • Enhanced cleaning and providing hand sanitizer throughout venues;
  • Considering how the way people walk through their venue could be adjusted to reduce contact, with queue management or one-way systems;
  • Ensuring adequate ventilation;
  • Encouraging the use of outdoor spaces for individual, team or group activities, making sure to comply with the latest restrictions on public gatherings;
  • Exercise or dance studios should have temporary floor markings where possible to help people stay distanced during classes;
  • Customers and staff should be encouraged to shower and change at home wherever possible, although changing rooms will be available.

Today’s announcement follows a recent visit by government, Sport England and public health officials, led by Deputy Chief Medical Officer Professor Jonathan Van-Tam, to a series of ukactive member sites. This allowed officials to see first-hand how the sector is preparing to reopen safely.

This guidance is for gyms, swimming pools and indoor sports facilities in England. Those in Scotland, Wales and Northern Ireland should refer to guidance from the devolved administrations.

 

Its tax payment time again

If you submit a self-assessment tax return you may need to consider your options as any second payments on account for 2019-20, are coming due for payment 31 July 2020. In a nut-shell you have three options:

 

Defer payment until 31 January 2021

As part of his support for taxpayers during the present disruption, Rishi Sunak has given you the opportunity to defer payment of the July instalment until 31 January 2021.

This is generous, but readers should be cautious as this is not a cancellation of amounts due. If you do defer your July payment you will need to plan your cash flow carefully, as the total self-assessment tax (and possibly NIC) due 31 January 2021 will include:

  • The deferred July 2020 payment
  • Any balance of tax due for 2019-20, and
  • The first payment on account for 2020-21.

If you do defer, HMRC have confirmed that they will not charge interest or penalties as long as amounts due are paid on or before 31 January 2021.

 

Make the July 2020 payment

The deferment is an option. If you have already reserved funds you may prefer to pay the tax and reduce amounts due January 2021.

Reduce tax due 31 July 2020

A third option you could consider is applying to reduce payments on account for 2019-20 and therefore reduce the amount payable 31 July 2020? You can do this if the following applies.

The payments on account – due 31 January and 31 July 2020 – are for the tax year 2019-20. Until your tax return is filed for 2019-20, these payments on accounts will be based on figures for the previous tax year, 2018-29.

If your profits for 2019-20 are lower than those for 2018-29, then you can elect to reduce payments on account for 2019-20.

Accordingly, if you feel that your business profits or other income assessable during 2019-20 were lower than those for 2018-19, then we should consider this option.

Summer Statement 8 July 2020

The Chancellor, Rishi Sunak continued with his campaign to support the business and jobs community today, 8 July 2020, as firms engage with the disruption caused by the coronavirus outbreak and the measures taken to control infection.

The main thrust of his announcements during his Summer Economic update concerned his nominated Plan for Jobs 2020, details are listed below.

He also announced measures to support the hospitality and tourism industry including a novel voucher scheme and a temporary reduction in VAT. Again, details are provided in the following update.

In an attempt to boost the flagging property market Stamp Duty is being temporarily reduced in England and Northern Ireland. Separate announcements on this topic are awaited for Scotland and Wales who have their own Stamp Duty regimes.
Details of these announcements follow:

1. Job Retention Bonus: employers that bring back an employee that was furloughed, and continuously employ them through to January 2021, will be paid a £1,000 government bonus per employee retained. Employees must be seen to be gainfully employed during this period and be paid at least £520 a month, on average, from November 2020 to January 2021. All furloughed employees returned to employment in this way will be available for the £1,000 bonus.

2. Kickstart scheme: this new scheme will cover the wages (plus associated costs) of new jobs created for any 16 to 24-year-old – at risk of long-term unemployment – for six months. These will have to be new jobs, of at least 25 hours a week and paid the National Minimum Wage. Employers will need to offer kickstarters training and support to find a permanent job. Employers can apply to be part of this new scheme from next month – August 2020 with first jobs starting in the autumn. Government has made an initial £2bn available for this scheme, but there is no cap on the number of places made available.

3. Apprenticeships: for the next six months government will pay employers to create new apprenticeships. The amount payable will be £2,000 for each apprentice. A new bonus to take on apprentices aged over 25 has also been announced. This will amount to £1,500 per appointment.

4. Green jobs initiatives: as an incentive to create jobs in the green jobs’ market a number of new grants have been announced. From September 2020, homeowners and landlords in England will be able to apply for a grant to make their home more energy efficient. The £2bn Green Homes grant will cover at least two-thirds of the cost up to £5,000 per household. For low income households these grants will cover all costs up to £10,000. There will also be a further £1bn allocated to make public buildings greener.

5. Boost for the housing market: Presently, in England and Northern Ireland (different amounts apply in the regions) no Stamp Duty Land Tax is payable on residential property purchases below £125,000. From today – for a temporary period to 31 March 2021 – this threshold is increased to £500,000. It is projected that this will reduce the average stamp duty bill by £4,500. Regional variations may apply. Purchasers buying a second residential property will still have to pay the 3% Stamp Duty Land Tax for property purchases up to £500,000.

6. VAT reduction for hospitality and tourism: for the next six months VAT charged on food, accommodation and attractions (such as eat-in or takeaway food in restaurants, cafes, pubs, cinemas, theme parks and zoos) will see VAT reduced from 20% to 5%. This will apply from 15th July 2020 until 12th January 2021.

7. Eat Out to Help Out discount: for the month of August 2020, meals eaten at any participating business Monday, Tuesday or Wednesday, will be 50% off up to a maximum discount of £10 per head including children. To access the discount businesses will need to register and can do so through a website to be opened next Monday, 13 July 2020. Businesses will be able to claim the money back weekly with the money in their bank accounts within 5 working days.

As we manage the cautious steps to emerge from lock-down, still wary of COVID-19, the new incentives announced by Rishi Sunak today should be welcomed.
As more details emerge on the various schemes announced today they will be published accordingly.

Which businesses can reopen 4th July 2020

As the town of Leicester demonstrates, the recent announcement that many businesses would be able to reopen since 4 July 2020, depends on local conditions. Rates of infection in Leicester are causing concerns and consequently, local businesses were unable to reopen.

However, for the rest of England (regional variations may apply for Scotland, Wales and Northern Ireland) all businesses can reopen apart from those listed below:

Businesses that will remain closed

  • Nightclubs
  • Casinos
  • Bowling alleys and Indoor skating rinks
  • Indoor play areas including soft-play
  • Spas
  • Nail bars, beauty salons and tanning salons
  • Massage, tattoo and piercing parlours
  • Indoor fitness and dance studios, and indoor gyms and sports venues/facilities
  • Swimming pools including water parks
  • Exhibition or conference centres must remain closed for events such as exhibitions or conferences, other than for those who work for the business or organisation who run the venue.

It has also been announced that cafes, restaurants and shops that are self-contained and can be accessed from the outside, will still be permitted to open.

Track and Trace

As part of government initiatives to control the spread of the COVID virus, track and trace is an important element. Accordingly, businesses are requested to keep a record of customers and visitors for 21 days, in a way that is manageable for your business, and assist NHS Test and Trace with requests for that data if needed. This could help contain clusters or outbreaks. Many businesses that take bookings already have systems for recording their customers and visitors – including restaurants, hotels, and hair salons.

Government has requested that if you do not already do this, you should do so to help fight the virus. They will also work with industry and relevant bodies to design this recording system in line with data protection legislation. Details will be issued shortly.