Newsletter issue - May 2021
Off-payroll working
The extension of the off-payroll working rules to medium-sized and large organisations finally took effect on 6 April. The responsibility for making an employment status determination for each engagement where the worker's services are provided through an intermediary now rests with the client receiving the services, i.e. the engager/hirer for affected entities.
The rules now apply to all public sector clients and, from 6 April, private sector companies that meet 2 or more of the following conditions:
- the annual turnover of more than £10.2 million;
- the company has a balance sheet total of more than £5.1 million;
- the company has more than 50 employees
There is a simplified turnover test for non-company entities - the rules apply if the annual turnover exceeds £10.2 million. The tests are made by reference to the financial period ending in the previous tax year, e.g. for a company with a year end of 31 March, it will be the period ending 31 March 2021 that determines the company's size for 2021-22.
Upon reviewing an engagement, the client must issue a Status Determination Statement to the worker (as well as the agency, or other person or agency the contract is with) informing them of the decision as well as the reasoning for it. The worker may disagree, in which case the client must review the decision and respond within 45 days, informing them whether the original determination has changed or not. The rules are complex, and reference should be made to the published guidance.
Note that small businesses are unaffected and do not have to assess their workers' employment status, though they will need to monitor their size regularly if they are growing. Once they meet the criteria for a medium-sized organisation, they will need to comply with the rules from the start of the tax year following the end of the calendar year when they met the conditions.
Coronavirus
The portal for making a claim for the fourth coronavirus SEISS grant opened toward the end of April. Eligible businesses should have been contacted by HMRC to inform them of their personal claim date - if a business is not contacted by 30 April, they should contact HMRC using the SEISS helpline - 0800 024 1222.
The personal claim date is the earliest date the business can make a claim. These have been staggered to help reduce a bottleneck on the system. The portal will remain open until 1 June. The claimant will need to confirm they meet the criteria for the grant, which means that they:
- traded in the tax years 2019-20 and 2020-21;
- are currently trading but are impacted by reduced demand due to coronavirus, or have been trading but are temporarily unable to do so due to the pandemic;
- intend to continue to trade; and
- reasonably believe there will be a significant reduction in their trading profits.
They must also have submitted their tax return for 2019-20 no later than 2 March - even if HMRC accepts they have a reasonable excuse for the late filing. If the 2019-20 tax return is subsequently amended, the claimant must notify HMRC if the change means that the entitlement to SEISS grant 4 is reduced by more than £100.
In addition to the support measures, April saw the easing of a number of lockdown restrictions. Non-essential retailers are now permitted to open. Other businesses, such as pubs, hotels, gyms, etc. are subject to different rules depending on which part of the UK they are located in. Links to information specific to each country can be found here.
HMRC also announced that, due to the anticipated increase in appeals against late filing penalties for 2019-20 returns, authorised agents can use a time-limited bulk appeals service, allowing them to submit appeals for up to 25 clients on a single form. The service will be open for 6 months. However, clients that are dealt with by the High Net Worth unit cannot be included, and must appeal on an individual basis in the usual way.
Call for evidence on EMI
The enterprise management incentive (EMI) is a tax-advantaged share option scheme that allows companies to grant options over shares to key employees. The main advantage of the scheme is that the employee will pay an exercise price set at the date of the option (usually the market value), with the hope that the shares will have increased in value by the time the option is actually exercised. Usually, where less than market value is paid for employment related securities, the difference is subject to income tax. However, if the options are exercised correctly under EMI no income tax arises, and instead any growth in the share value above the exercise price is taxed to CGT when the shares are eventually sold.
The government has now issued a call for evidence from organisations and individuals, seeking answers to a number of questions to establish how the scheme is working, and whether (and how) it should be expanded so that more companies can use it. The closing date is 26 May 2021. Responses to the queries raised need to be sent to emiconsultation@hmtreasury.gov.uk.
Trust registration
HMRC was due to upgrade the Trust Registration Service by March 2021 in order to allow non-taxable trusts to register. This is necessary due to the UK's implementation of the EU Fifth Anti-Money Laundering Directive. The deadline for registration following the update was due to be 12 months later, i.e. 10 March 2022. However, the redesign completion will now not take place until the summer. HMRC have therefore issued a statement saying that the requirement to register will be moved back to the first anniversary of the delivery date of the updated service.
Engagement letters
Many accountants make use of the templates and guidance on engagement letters from their professional body. The ICAEW has updated its guidance on tax-related matters in a number of areas, but most notably on VAT following the introduction of the Northern Ireland protocol. There have been amendments to other areas as well. Practitioners that use the ICAEW's templates and guidance should refer to the engagement letter section on the website accordingly.