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ICAEW's Tax Faculty's provides a summary of the announcements in the Spring Budget 2021 on the governments COVID-19 support measures: the CJRS, SEISS, tax credits and universal credit.

The two major income support schemes have been extended and there has been some widening of the eligibility criteria. In particular information from 2019/20 self assessment tax returns will be used for establishing eligibility for future Self-employment Income Support Scheme (SEISS) grants. The government estimates that this will help up to 600,000 taxpayers who were not eligible for the earlier grants, but this estimate seems rather high based on the changes announced. The government had been pressed to introduce support for those who do not qualify for the existing schemes (for example, company directors) but did not do so.

The government is conscious of the risks associated with the COVID support schemes and is investing more than £100m in a taxpayer protection taskforce of 1,265 HMRC staff to combat fraud within COVID-19 support packages.

Coronavirus Job Retention Scheme

The CJRS was extended for a sixth time. Instead of ending at the end of April the scheme will remain available until the end of September 2021.

Support will reduce as the economy reopens. Employees will continue to receive 80% of their pay for hours not worked, but employers will have to contribute 10% towards the cost of unworked hours in July and 20% in August and September.

The eligibility for the scheme has also been amended. From 1 May 2021, newly eligible employees, who were employed on 2 March 2021, will be included as long as a payment of earnings was reported on RTI between 20 March 2020 and 2 March 2021.

Self-employment Income Support Scheme

The eligibility criteria for the fourth SEISS grant were confirmed; the Chancellor also announced a fifth and final grant.

The eligibility criteria for these grants have been updated to take into account 2019/20 self assessment tax returns, which must have been filed by 2 March 2021, but are otherwise largely unchanged. Some newly self-employed taxpayers who were not eligible for the first three grants will be eligible for the final two grants.

The fourth SEISS grant has been set at 80% of three months’ average trading profits and is capped at £7,500. HMRC will contact potentially eligible taxpayers in mid-April and applications will be open from late April to the end of May 2021.

The fifth grant has been set at 80% of three months’ average trading profits capped at £7,500 for those whose turnover has reduced by 30% or more. Those with a turnover reduction of less than 30% will receive a grant based on 30% of three months’ average trading profits, capped at £2,850. Applications are expected to open in late July.

HMRC has published a factsheet pending more detailed guidance.

FB 2021 will include a measure to change the tax treatment of SEISS grants which will be subject to taxation for the tax year in which the amount was received. The current position is that all SEISS grants are taxable in 2020/21 but given the extension of the scheme this needs to change.

A measure to allow HMRC to recover grants where an individual is no longer eligible for a SEISS grant following a change in circumstances is also to be included in FB 2021. Further clarification of this measure is required as previously claimants assessed their eligibility when the claim was made and there was no requirement to reconsider eligibility if circumstances changed subsequently.

Tax credits and universal credit

The £20 per week increase to the universal credit standard allowance which was introduced for an initial 12-month period will be extended for a further six months to the end of September 2021 and will be available to new and existing claimants. An equivalent one-off payment of £500 will be made to eligible working tax credit claimants (it is no longer possible to make a new claim for working tax credits). The uplift has not been extended to those claiming legacy benefits such as Employment and Support Allowance.

FB 2021 will include a measure to ensure that these uplifts are not taxable; FA 2020 had inadvertently made them taxable as they are coronavirus support payments.

The following easements introduced at the start of the pandemic will continue:

  • The surplus earnings threshold for universal credit will remain at £2,500 until April 2022 before reverting to £300.
  • The minimum income floor for self-employed universal credit claimants will remain suspended until the end of July 2021 and work coaches will have discretion not to apply it beyond that date in individual cases.
  • The relaxation of the 16 and 30 working hours requirements for working tax credits will continue until the end of September 2021 when CJRS ends. Claimants will be treated as meeting these requirements if their normal working hours have been temporarily reduced as a result of COVID-19.   
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More on Budget 2021

Read the rest of the Tax Faculty's summary of the tax related announcements in the Budget on 3 March 2021.

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