A remarkable start to the tax year

24 April: The coronavirus pandemic has ripped up convention in every element of daily life, and the UK tax system has been no exception. Read a round-up of the key announcements, deferrals and changes.

Just a few short weeks ago, the idea of wholesale business rates holidays, the deferment of the IR35 changes and HMRC accepting printed signatures for some inheritance tax forms, would have seemed likely only in another world not just a new tax year. But the start to the 20/21 tax year has been like no other in living memory.

At the heart of developments in the past month have been the government’s measures to support the economy and we saw the word furlough become part of our everyday conversations. The Coronavirus Job Retention Scheme (CJRS) has evolved before our eyes and the government has been in active listening mode, as the payroll cut-off date for eligibility moved from 28 February to 19 March, and the scheme was extended by four weeks to the end of June.

The guidance on the scheme evolved rapidly, moving through five updates by HMRC as comments came in and resulted in additional clarity over: the authorisation of agents to make claims for their clients; the impact of furloughing on tax credits; and eligibility of self-employed directors and off-payroll workers in the public sector.

As it was ramping up to go live with CJRS, HMRC was also issuing guidance on government’s measures to support the self employed. The Self-Employed Income Support Scheme (SEISS) is set to go live in June and will offer small businesses grants of up to 80% of monthly profits (up to £2,500 per month). Last week a second wave of guidance provided more details on how to calculate profits and income, as well as how the scheme will work with universal credit. Find out more by watching our Support through SEISS webinar which went live this week.

Alongside these two key support schemes, a range of other measures took effect at the start of the 20/21 tax year, aiming to help organisations and individuals through the difficulties brought about by the coronavirus pandemic.

A one-year business rates holiday came into effect on 1 April for a swathe of businesses effected by social distancing rules, including: shops; restaurants, cafés, bars, pubs, cinemas, music venues, gyms, spas, sports clubs, hotels and guest houses. Nurseries have also been given 100% relief from business rates for 20/21 which was covered in a separate announcement.

Meanwhile, VAT payments due before 30 June 2020 do not need to be made until 31 March 2021, and self-assessment payments on account due on 31 July 2020 do not need to be paid until 31 January 2021.

HMRC has also given organisations with employees that work internationally an additional two months in which to file their end of year payroll in light of the pandemic. This gives employers until 31 May, rather than 31 March.

In a bid to reassure other firms affected by the widespread travel disruption, HMRC this month updated its guidance on corporate residence confirming that it would be taking a pragmatic approach.

ICAEW’s Angela Clegg, technical manager, SME business tax, confirmed: “HMRC wants to reassure directors that a company will not necessarily become resident in the UK because a few board meetings are held here or because some decisions are taken in the UK over a short period. It has stressed that it will take an holistic view of the facts and circumstances of each case.”

The chancellor, meanwhile, has written to the Treasury Committee to confirm that there will be a relaxation of the statutory residence test for skilled individuals coming to the UK to help the coronavirus response. The temporary rule change means that time spent in the UK between 1 March and 1 June by COVID workers, such as anaesthetists, will not count towards residence tests.

Alongside changes to the tax system to directly support coronavirus measures, there have also been a number of deferrals to changes in tax rules. The extension of off-payroll working rules from public to private sector engagements (changes to the IR35 rules) had been due to come into force on 6 April, but will now not take effect until April 2021.

Those selling residential property in the UK must report and pay capital gains tax within 30 days of completion from 6 April 2020, but HMRC has confirmed that it will not charge late filing penalties where reports are made by 31 July, giving taxpayers more time to familiarise themselves with the rule changes.

Finally, the pandemic is having a significant impact on HMRC’s ways of working, particularly its reliance on communicating by post. For example, it has removed the requirement for an authentication code to be posted to businesses as taxpayers set themselves up for PAYE online services, which means accounts can be set up instantly. It is also allowing email communications in certain circumstances, including the correction of VAT returns and the service of new legal proceedings.

Meanwhile, in light of social distancing rules, HMRC is temporarily allowing printed signatures on inheritance tax forms (IHT100 and IHT400) in certain circumstances where an agent is involved. It has also confirmed that it will no longer be accepting cheques as payment for inheritance tax, and will now be issuing repayments using faster payments services, such as CHAPS or BACS.

If the first few weeks are anything to go by, the 20/21 tax year is going to be eventful.