This article provides some answers to questions posed during episode 6 of ICB TV
Questions to which we have previously provided answers in early articles have not been covered again. Questions specifically relating to payroll queries were covered by Payroll expert, Ian Holloway, in episode 8 of ICB TV. This includes all questions raised on behalf of childcare providers who have been told they will receive the next term’s funding but not sure how they stand with staff furloughing.
We have still not found out if agents will be able to access the various portals.
VAT questions
If a client was due to pay VAT on 7 May and doesn't pay, then a refund is due in the next quarter. These amounts won’t be offset, but the refund could be used to pay the earlier return to avoid this being carried over to be paid later. When looking at the part payment of VAT returns, HMRC has a ‘time to pay’ policy which could be requested to cover cash shortfalls. As far as we are aware, the grants are not subject to VAT under the FRS but please do check with HMRC for a definite answer.
The Economic Resilience Fund offers loans for Welsh businesses not covered by other help that has already been announced. Further information can be found here.
Furloughing
Do you know whether somebody who has been furloughed can work as a freelancer at the same time? This is likely to be possible, but they must be available to work if called back by their first employer as the intention to trade and carry on employing people is the basis of the grant.
Employees can be taken in and out of furlough, but it has to be for a minimum of three weeks and cannot operate on a percentage basis. It can be more than three weeks if needed
Director’s furlough
A sole director can furlough themselves provided they are not undertaking any income generation work. This means they can still run the payroll and carry out other tasks that a director must legally complete. If a director has paid themselves in a single amount during the past year, it will be taken into consideration for the 80% calculation. If the payment happens at the end of March, then the March 2019 figure will be used. It has been established that the calculation would be purely the amount that has gone through PAYE and will not include dividends.
One question was asked about a director continuing to work but only to process refunds due to cancelled holiday bookings - I assume this can be done as it is not income-generating.
Calculation of pay and holidays
Full time employees can take 5.6 weeks holiday a year. The furlough situation does not change this and hence the holiday should still accrue. However, the rules have been relaxed to say that holiday entitlement can be carried forward for a period of up to two years to enable businesses to operate efficiently once they are ‘back to normal’.
Minimum wage
We believe it has been agreed (at present) that the National minimum wage increase due this month will not be counted towards the 80%. However, there is nothing to stop the employer from paying the increased amount and covering the extra themselves.
Self-employment
The grant of 80% is based on taxable profit after reliefs and allowances, and if this is at least 50% of total income, regardless of the source we believe. This seems to include capital allowances (according to a tweet from HMRC sent in by a Member). The personal allowance is not counted as that is available to everyone (subject to normal rules and conditions). It has not covered what happens if for one of the three years the profit is less than 50% due to a dip in the figures. Some questions have asked if the previous self-assessment returns can be amended retrospectively to remove capital allowances. It is not always a good idea to amend a return unless there are very specific reasons, but at present, it seems unlikely that there would be time for the changes to go through for the grant calculation (but…).
A reminder that the individual must have submitted a self-assessment return for 2018/19 and still be trading in 2019/20. Any dates outside this will not qualify and submitting a ‘fast’ 2019/20 return will not count.
It is not yet clear, and probably too early to discuss how to split the grant across two trading years that might end on 31 March or 5 April as to accruing across two years. If individuals wish to submit their 19/20 tax returns quickly because they are due a tax rebate due to CIS deductions, then it might be possible to submit estimated figures and adjust later, but as the grant is taxable then this might cause a problem with claiming the refund which would be too high. If they are on cash accounting, then the whole of the grant would go into 20/21 anyway.
It has also been determined that property income is not included as it’s not considered to be trading.
Those who traded for part of 18/19 will still be eligible if they have submitted the return, but it is not clear if it would be 80% of their trading or if it will be pro-rata’d.
Universal Credit
Individuals have been encouraged to apply for Universal Credit whilst waiting for their grants – nothing has been said about possible repayment of this when the grant is received, or income-generating work starts again. We also believe that normal rules apply with regards to savings and income, depending on who is resident in the relevant home.
