Taxation and trusts update: Loan charges; Welsh Income Tax; Support packages; Filing company accounts; and Wills

Taxation and trusts

 

• Disguised Remuneration Loan Charge – COVID-19 updates
• Work out if you’ll pay Welsh Income Tax
• Furloughing support extended to end of June
• Coronavirus: FCA warns firms over making Dividends
• Coronavirus: FCA confirms temporary financial relief for customers using credit products
• Coronavirus: New support package for innovative firms
• Coronavirus: Impact of filing company accounts late
• Coronavirus: Help and support if someone dies
• Furlough and Director/Shareholders
• Government's response to calls to relax witnessing rules for wills in England and Wales
• COVID-19: Impact of Government support schemes
• COVID-19: New “Bounce Back” Loan Scheme announced
• COVID-19: New Government funded Life Assurance Plan for NHS, front line and care workers
• Furloughed workers to receive full Parental Leave entitlement

 

Disguised Remuneration Loan Charge – COVID-19 updates

(AF1, RO3)

In light of the Covid-19 pandemic, HMRC has now updated its guidance for individuals who had loans impacted by the loan charge, and who were going to declare a loan charge or settle their disguised remuneration scheme involvement with HMRC by 30 September 2020 (see below). Where these individuals are going to claim a grant through the coronavirus Self-employment Income Support Scheme (SEISS), their grant will be based on either:

• the average profits of the tax years 2016/17 and 2017/18; or
• the profits of tax year 2017/18 if they were not self-employed in the tax year 2016/17.

HMRC’s update advises that for these individuals, their self-assessment tax return for the tax year 2018/19 does not have to be submitted by 23 April 2020 – instead they should file it by 30 September 2020.

(For everyone else claiming the new SEISS, the grant will be based on the average profits over the last three tax years, the last being 2018/19 (or shorter periods, e.g. one year, 2018/19, if three years are not available.) And, if they have not submitted their self-assessment tax return for the tax year 2018/19, they must do this by 23 April 2020.)

The loan charge

The loan charge affects individuals if they used disguised remuneration tax avoidance schemes and they did not repay their loans, or provide HMRC with all the necessary settlement information by 5 April 2019.

The loan charge also affects employers who provided loan funds through disguised remuneration tax avoidance schemes if, by 5 April 2019, their employee or former employee did not repay their loans, or they did not provide HMRC with all necessary settlement information.

Those who provided the necessary information by 5 April 2019, will not need to pay the loan charge on the outstanding disguised remuneration loans that they settle with HMRC by 30 September 2020.

However, the loan charge will affect those who sent all the necessary settlement information to HMRC by 5 April 2019, but where HMRC cannot agree a settlement by 30 September 2020, perhaps because those affected have not responded to subsequent letters on time.

On that point, on 7 April, Penny Ciniewicz, Director General of Customer Compliance at HMRC, wrote to the Chairs of the Loan Charge All-Party Parliamentary Group (APPG), replying to the APPG’s request for a suspension of HMRC customer communications that require a response from customers within 30 days, due to the coronavirus (COVID-19) distancing measures. 

HMRC letter says that its focus is on those customers who provided the information needed to settle their use of disguised remuneration schemes by 5 April 2019, and who can therefore still settle with HMRC and who will not have to pay the loan charge. 

It will continue to write to these customers, providing the information they need, including details of their settlement calculation, revised, where appropriate, to account for the changes to the loan charge announced by the Government [following the above mentioned Loan Charge Review]. HMRC will invite them to respond in 30 days (longer in some cases) to indicate whether they would like to proceed with a settlement, or instead include the loan charge on their 2018/19 tax return. 

However, HMRC adds:

“Customers who need more time to make a decision should let us know, and we will continue to take a reasonable and proportionate approach to such requests. 

The Royal Mail is continuing to provide a service for customers who choose to write to us. Any customers who do not feel comfortable doing so can contact us by email or, if they do not have email or prefer to talk to us, by telephone. Our phone lines are open from 8am to 4pm Monday to Friday for customers to get in touch.”

You can read the full letter here.
Sources:

• HMRC Guidance: Report and account for your disguised remuneration loan charge – update re SEISS HMRC – dated 7 April 2020;
• HMRC Correspondence: Letter to the Loan Charge All-Party Parliamentary Group about communications with HMRC customers – dated 10 April 2020.

Work out if you’ll pay Welsh Income Tax

(AF1, RO3)

HMRC has issued guidance which also includes some useful examples on who will be treated as a Welsh taxpayer. This guidance this is in addition to the technical guidance which was issued last year.

Broadly, those who live in Wales throughout the tax year will be treated as Welsh taxpayers, whereas those who live anywhere else in the UK wouldn’t be treated as a Welsh taxpayer, regardless of whether they deem themselves as being Welsh or if they work in Wales.

The position may be different for those who:

• move to or from Wales during the year;
• have more than one home at the same time;
• have nowhere that they can identify as their home.

In summary, those who move to or from Wales during the year will only be treated as a Welsh taxpayer if they live in Wales for longer than anywhere else in the UK during the tax year.

If someone has more than one place which they regard as home, for example, one in Wales and one elsewhere in the UK, they will be a Welsh taxpayer if their main home is in Wales.

For those who cannot identify anywhere as their home, they will be treated as a Welsh taxpayer for the whole tax year if they spend more days in Wales than anywhere else in the UK.

Furloughing support extended to end of June

(AF1, AF2, JO3, RO3)

On Friday 17 April, the Chancellor (following the Thursday extension of the lockdown by at least a further three weeks) extended the financial support arrangements for employers furloughing employees until the end of June.

In all other respects (e.g. needing to be on the Payroll as at 19 March, payments to the employer to be the lower of 80% of pay and £2500 per month, claims from 20 April) the scheme remains unchanged.

More information for employers can be found here and here.

Source: HM Treasury News story: Chancellor extends furlough scheme to end of June – dated 17 April

Coronavirus: FCA warns firms over making Dividends

(AF1, RO3)

On 17 April, the Financial Conduct Authority (FCA) updated its statement on its expectations on financial resilience for FCA solo-regulated firms in light of the coronavirus. It says that, during this time of stress, it expects firms that are prudentially-regulated by the FCA to support the functioning of the economy by planning ahead and ensuring the sound management of their financial resources. This means taking appropriate steps to conserve capital, and to plan for how to meet potential demands on liquidity.

When considering whether to make a discretionary distribution of capital to fund a share buy-back, fund a dividend, upstream cash or meet a variable remuneration decision, the FCA warns firms that it expects them and their boards to satisfy themselves that each distribution is prudent given market circumstances, and consistent with their risk appetite. The FCA says that it would not expect firms to distribute capital that could credibly be required to absorb losses over the coming period. And the FCA adds that it may contact specific firms in relation to this, as relevant.

The FCA’s statement says that capital and liquidity buffers are there to be used in times of stress. Firms that have been set buffers can use them to support the continuation of the firm’s activities. If a firm is planning to draw down a buffer, it should contact the FCA or its named FCA supervisor.

If the firm needs to exit the market, planning should consider how this can be done in an orderly way while taking steps to reduce the harm to consumers and the markets. Firms should maintain an up-to-date wind-down plan that takes consideration of the current market impact of the coronavirus (COVID-19) crisis.

Government schemes to help firms through this period can be part of a firm’s plans for how they will meet debts as they fall due.

If a firm is concerned it will not be able to meet its capital requirements, its debts as they fall due, or if its wind-down plan has identified material execution risks, it should contact the FCA or its named FCA supervisor, with its plan for the immediate period ahead. 

Non-bank lenders subject to IFRS9 are reminded that the standard requires that the forward-looking information used in expected credit loss estimates is both reasonable and supportable. It is essential that the standard is implemented in a well-balanced and consistent way that reflects not only the potential impact of the coronavirus crisis, but also the support provided by governments and central banks domestically and internationally to protect the economy.

Firms that are prudentially regulated by the Prudential Regulation Authority (PRA) should consider the PRA’s requirements and discuss their concerns with them. Those firms should also keep the FCA notified of any significant developments.

Source: FCA News: FCA’s expectations on financial resilience for FCA solo-regulated firms – statement update – dated 17 April 2020.

Coronavirus: FCA confirms temporary financial relief for customers using credit products

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

The Financial Conduct Authority (FCA) has confirmed a package of targeted temporary measures to help people with some of the most commonly used consumer credit products. The measures include firms being expected to:

• offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by coronavirus;

• allow customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account, up to £500 charged at zero interest for three months;

• make sure that all overdraft customers are no worse off on price when compared to the prices they were charged before the recent overdraft pricing changes came into force; 

• ensure consumers using any of these temporary payment freeze measures will not have their credit file affected.

For more information, please see here.

Source: FCA News: FCA proposes temporary financial relief for customers impacted by coronavirus – dated 9 April 2020.

Coronavirus: New support package for innovative firms

(AF2, JO3)

The Chancellor has announced further action to support UK businesses that drive innovation and development and are affected by the Coronavirus crisis.

The package, which is headlined to be £1.25 billion, is made up of the following:

• A £500 million investment fund – the Future Fund - for high-growth companies impacted by the crisis, made up of £250 million funding from Government and £250 million from the private sector; and

• £200m of accelerated, and £550m of new, targeted support for SMEs focusing on research and development through the Innovate UK’s grants and loan scheme.

The Future Fund

Delivered in partnership with the British Business Bank and launching in May, the fund will provide UK-based companies with between £125,000 and £5 million from the Government, with private investors at least matching the Government commitment. These loans will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if they are not repaid. To be eligible, a business must be an unlisted UK registered company that has previously raised at least £250,000 in equity investment from third party investors in the last five years.

The Government is committing an initial £250 million in funding towards the scheme, which will initially be open until the end of September. The scale of the fund will be kept under review.

A business will be eligible if it:

• is based in the UK;

• can attract the equivalent matched funding from third-party private investors and institutions; and

• has previously raised at least £250,000 in equity investment from third-party investors in the last five years.

Full eligibility criteria will be published shortly.

The Future Fund will launch in May 2020. Further details about this scheme and its operation will be published in due course.

In the meantime, the Government has published headline terms here.

Innovate UK’s grants and loan scheme

Innovate UK, the national innovation agency, will accelerate up to £200 million of grant and loan payments for its 2,500 existing Innovate UK customers on an opt-in basis. An extra £550 million will also be made available to increase support for existing customers and £175,000 of support will be offered to around 1,200 firms not currently in receipt of Innovate UK funding. The first payments will be made by mid-May.

Sources:

• HM Treasury News story: Billion pound support package for innovative firms hit by coronavirus – dated 20 April 2020.
• HM Treasury Guidance: Apply for the coronavirus Future Fund – dated 20 April 2020

Coronavirus: Impact of filing company accounts late

(AF2, JO3)

There are approximately 4.3 million companies on the Companies House register, and all companies must submit their accounts and reports each year.

The deadline for filing a company tax return with HMRC is usually 12 months after the end of the accounting period it covers. A flat-rate penalty is charged, under FA98/SCH18/PARA17, if this deadline is missed.

Under Section 442 Companies Act 2006:

• a private company must usually submit a copy of its accounts and reports to Companies House within nine months of the end of its period of account;

• a public company must usually submit a copy of its accounts and reports to Companies House within six months of the end of its period of account.

Under normal circumstances, companies that file accounts late with Companies House are issued with an automatic penalty.

However, businesses will now be able to apply for a three-month extension for filing their accounts and those citing issues around COVID-19 will be automatically and immediately granted an extension.

Full guidance on applying for an extension can be found here.

As a result, a company will often be delivering its accounts to Companies House after the 12-month deadline for submitting its corporation tax return to HMRC. In this situation, provided the company has a return period that coincides with a period for which it is required to deliver accounts to Companies House, no flat-rate penalty is chargeable if the company delivers its return to HMRC by this later date.

For example:

• Company E, a private company, makes up accounts for the accounting period ended 30 June 2019.

• A notice to deliver specifying the period 1 July 2018 to 30 June 2019 is served by HMRC on 1 August 2019.

• Companies House allows an extension of three months to the period for delivering accounts, extending the deadline from 30 April 2020 to 31 July 2020.

• The filing date for the company tax return is 30 June 2020 (12 months after the end of the corporation tax return period).

If the company delivers its corporation tax return to HMRC by 31 July 2020 (13 months after the end of the period of account, as allowed by Companies House), it will not incur a fixed penalty.

FA98/SCH18/PARA19 strictly requires the company tax return period and the period of account to be the same. In practice, the provision should be applied to any accounting period that forms part of a longer period of account, where the date for filing the accounts with Companies House is later than the date for filing the tax return with HMRC.

For more information, please see here and here.

Source: HMRC Manual update: CTSA: Penalties for late returns - Companies Act extension – dated 21 April 2020.

Coronavirus: Help and support if someone dies 

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3,RO4, RO5, RO7, RO8)

The DWP’s latest guidance, published on 22 April, covers what to do after a death, bereavement benefits, and arranging or attending a funeral during the coronavirus (COVID-19) outbreak:

1. A step by step guide provides information on what to do after a death: What to do when someone dies.

When the death is registered, the Tell Us Once service allows someone to tell all relevant Government departments about the death in one go, either online or by phone.

2. The following financial help and benefits may be available:

• Help with funeral costs – for those on a low income who get certain benefits. The amount will depend on the individual’s circumstances. However, it will not usually cover all of the costs of the funeral. Funeral expenses payments increased from £700 to £1,000 from 8 April 2020 for eligible benefit claimants.
  
  For those who do not get any benefits, the DWP points to other help to pay for the funeral;

• Bereavement Support Payment – for the spouse or civil partner of the person who died, where that spouse or civil partner is under State Pension age;

• Guardian’s Allowance – for someone bringing up a child whose parents have died.

In addition, those on a lower income following the death of their partner, may be entitled to benefits. The benefits calculator is available to check what is available and how to claim. 

3. There are restrictions in place during the coronavirus outbreak which will affect the type of funeral that can be held.

• The funeral can usually only take place after the death is registered. The DWP suggests that the funeral director will be able to give more advice about what is possible, and has provided a link to arranging a funeral and finding a funeral director, or contacting your local council to arrange a funeral.

• Whilst the DWP’s guide doesn’t provide specific details on the restrictions in place which will affect the type of funeral that can be held, Public Health England’s guide to managing a funeral during the coronavirus pandemic provides some information on who should attend a funeral and on social distancing for mourners. 

Sources:

• DWP Guidance: Coronavirus (COVID-19): help and support if someone dies – dated 22 April 2020;
• Public Health England: COVID-19 - guidance for managing a funeral during the coronavirus pandemic – dated 19 April 2020.

Furlough and Director/Shareholders

(AF1, RO3)

It has been reported over the weekend of 25^th/26^th April that Mel Stride, Conservative Chair of the Influential Select Committee, has urged the Chancellor to look again at the plight of owner/managers of SMEs who “remunerate” themselves wholly, mainly or partly through dividends.

It has been well reported that, self-evidently, they cannot access financial support through the Self Employment Income Support Scheme (SEISS) and if they furlough under the Job Retention Scheme (JRS) they can only carry out statutory duties and cannot do work they would normally do to generate commercial revenue or provide services to or on behalf of their company. And even if they do furlough (and adhere to those conditions) the grant can’t be claimed under the JRS in respect of dividends. So, for most, the amount that can be claimed is likely to be relatively small.

The Treasury has previously said it is problematic to distinguish the dividend income that directors take from their own companies from dividends earned on other investments, such as shares – making it difficult to design a scheme that targets company directors.

At the Committee, Mr. Stride questioned whether this was the case. He (effectively) challenged the Treasury by questioning whether their current position is founded on an official belief that they see dividends as part of tax planning and lowering tax bills. and, as a result, they are less sympathetic to it. He made the point that whether or not that is the case “That is just a view that is out there.”

Andy Chamberlain, Director of policy at the lobby group the association of Independent Professionals and the Self-Employed (IPSE) also made the point that while there may be the general perception that taking dividends is a way of avoiding, or paying less, income tax/national insurance, the source of the dividend is profit that will have been subject to corporation tax at 19% and that the tax rates on dividends have increased.

Mr. Stride said the Committee would “pursue” an idea suggested by IPSE for the Treasury to provide emergency funds to company directors through a “pay now, claw back later” model.

Such a system, it seems, would rely on directors self-reporting their average dividend income, and obtaining a similar measure of support to the 80% of income that self-employed and employers claiming through the JRS for employees can access. However, presumably following some form of auditing, if HMRC later found out that a director had inflated the figures, they would be entitled to reclaim it with penalties attached.

Mr. Chamberlain added that, according to recent Office for National Statistics (ONS) stats, there are 710,000 limited company directors “…getting very little by way of support when compared to some other groups”.

There will be many who will be really interested to see if this latest reported pressure yields any positive response from the Chancellor.

Source: Treasury Committee Oral evidence: Economic impact of coronavirus, HC 271 – dated 21 April 2020

Government's response to calls to relax witnessing rules for wills in England and Wales

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

In late March we highlighted the problems with will execution during the current social distancing/self-isolation period, namely the difficulties with complying with the English law requirement that two witnesses are necessary for a will to be legally valid.

We also reported that the Law Society and the Ministry of Justice were discussing ways to reduce formalities required for the signing of wills and to make it quicker to register for lasting powers of attorney (LPAs).

Solicitors for the elderly and the Society of Trust and Estate Practitioners (STEP) were also asking for temporary legislative measures to help them deal with the current problems, both on wills and powers of attorney. These involve reducing the number of witnesses and other solutions such as video witnessing.

Among the options for wills are: an Australian-style approach which would give judges more flexibility when deciding what constitutes a will; a European-style system where testators could write wills by hand without witnesses; and a process where wills could be witnessed electronically.

A suggestion has also been made that legislation could be introduced that mirrors the process of will making for those in the armed forces under Section 11 of the Wills Act 1837 which allows for members of the armed forces to draw up a will quickly when they do not have the time, resources or capabilities to comply with formalities otherwise needed. They are able to make either a written or an oral will, and, if written, there is no requirement for witnesses to its execution.

Well, we have now heard from the Ministry of Justice in response to the above suggestions. Unfortunately, it is not what we had been hoping to hear in that there is no suggestion as yet what, if any, reform will actually take place, other than what the Government has rejected, namely the extension of the above-mentioned section 11.

Parliamentary under-secretary Alex Chalk told the House of Commons last week that 'the constraints of the COVID-19 situation must be balanced against the important safeguards in the law to protect elderly and vulnerable people in particular against undue influence and fraud'.

Responding to a parliamentary question, Chalk pointed to the fact that privileged wills are a ‘convention restricted to people making wills when on active military service where the normal formalities cannot be observed, but which do not equate to the current civil circumstances.’

However, while emphasising that having two independent witnesses provides safeguards for testators, Chalk stated that the Government is still reviewing the case for reform of England and Wales law on making wills, given the current circumstances. Other reform measures will be considered, along with longer-term changes to the law along the lines suggested by the Law Commission of England and Wales in its work on wills (the Law Commission report on Making a Will is now on the back burner), and in its recent report on the electronic execution of documents.

It has been widely reported that many more people are either updating or making wills and executing LPAs.

Many practitioners have been struggling to find the best way to help these clients achieve a valid will and LPA without violating the self-isolation rules.

Many firms are embracing the use of technology to help take instructions. Some clients can be easily interviewed over Skype, Facetime, Teams, Webex or Zoom or other video calling means. The advantage of this is that you have visual contact with the client which can help determine their capacity, their understanding of the discussion and whether there is evidence of undue influence.

It is also possible to record these interviews, with the client’s permission, which could be useful at a later date. A draft will can be prepared for the client to execute.

Many clients will be in self-isolation or practicing social distancing, which means that the clients must not let you in the property or come to your office. So, how do you deal with the requirement for two witnesses being physically present?

The obvious thing is to stand either side of a window (assuming the client is in a house) and witness the testator signing the will. Then collecting the document (through the said window) and signing it as witnesses on the other side of the window whilst the testator watches. This does not help those in blocks of flats, obviously.

One firm of solicitors has been offering a novel method whereby a client drives up and parks their car outside their office, two  members of staff come out (this assumes the office is still open), the client signs the will in his or her car with the window open and the witnesses watching and then adding their signatures. This will also amount to a valid execution.

Let's hope the Government comes up with proposals for simplification soon.

COVID-19: Impact of Government support schemes

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

Ahead of announcing the new Bounce Back loan scheme the Chancellor summarised (in his update to the House of Commons on Monday 27 April) the impact of some of the main Government support schemes to date.

He said:

“We should be in no doubt about the seriousness of the economic situation.

The Office for Budget Responsibility have published a scenario showing that the coronavirus will have very significant impacts both at home, and in the global economy.

More than 1.5 million new claims have been made to Universal Credit.

Over 4 million jobs have now been furloughed.

Survey evidence suggests a quarter of businesses have paused trading.”

He went on to say:

“Our plan to help businesses means the following:

• almost half of all business properties in England will pay no business rates this year

• almost 1 million business premises can now receive cash grants of up to £10,000 or £25,000

• over 2 million businesses have been offered a VAT deferral, saving an average of £30k

• another 2.7 million people will be able to defer their self-assessment payments

• almost 60,000 people and businesses have put time to pay arrangements in place with HMRC

• up to 2 million employers will be able to access the Statutory Sick Pay rebate, up to £48,000 per firm

• over £14 billion of lending has been issued through the Bank of England’s financing facility

• over 20,000 Coronavirus Business Interruption Loans have now been approved

• and, of course, all of this is on top of our furlough scheme, with payments now arriving.

Taken together, our plans are protecting millions of people and businesses across our country, through a set of interventions in the economy on a scale we’ve never attempted before – and they are working.”

Source: HM Treasury Oral statement to Parliament: Chancellor’s statement to Parliament – dated 27 April 2020.

COVID-19: New “Bounce Back” Loan Scheme announced

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

In his address to the House of Commons on Monday 27 April the Chancellor said:

“I know that some small businesses are still struggling to access credit.

They are, in many ways, the most exposed businesses to the impact of the coronavirus; and often find it harder to access credit in the first place.

If we want to benefit from their dynamism and entrepreneurial spirit as we recover our economy, they will need extra support to get through the crisis.

Some businesses will not want to take on more debt; which is why our focus has been on cash grants, tax cuts and tax deferrals. But for others, loans will be part of the answer.

So today, we are announcing a new micro loan scheme, providing a simple, quick, easy solution for those in need of smaller loans.”

In summary:

• the loan will be easy to apply for, through a short, standardised online application. The loan should reach businesses ‘within days’.

• the scheme will provide a 100% Government guaranteed loan for businesses for 25% of their turnover, with a minimum loan of £2,000, up to a maximum of £50,000.

• the Government will fund interest and fees for the first 12 months of the loan.

• no repayments will be due during the first 12 months.

• the scheme will launch for applications on Monday 4 May. Firms will be able to access these loans through a network of accredited lenders.

• the Government will work with lenders to ensure loans delivered through this scheme are advanced as quickly as possible and agree a low standardised level of interest for the remaining period of the loan.

Whilst the new scheme is clearly designed for small businesses, there seems to be a current lack of clarity around some of the detail.

You can read the full announcements here and here.

Note that the new scheme will run alongside the existing Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS). The above announcement, also mentions that the Government is taking additional steps on the CBILS to ensure that lenders have the confidence they need to process finance applications quickly, including removing the per lender portfolio cap for the Government guarantee, and changing the viability tests that so that all banks will need to assess is whether a business was viable pre COVID-19.

Source: HM Treasury News story: Small businesses boosted by bounce back loans – dated 27 April 2020. 

COVID-19: New Government funded Life Assurance Plan for NHS, front line and care workers

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

In summary, under the new life assurance scheme launched for eligible frontline health and care workers during the coronavirus pandemic, families of eligible workers who die from coronavirus in the course of their frontline essential work will receive a £60,000 payment.

The scheme recognises the increased risk faced by staff during the crisis and will cover coronavirus related deaths of workers in frontline health and adult and children’s social care roles during the outbreak. It will cover staff who provide hands-on personal care for people who have contracted coronavirus or work in health or care settings where the virus is present.

Bereaved family members will receive a £60,000 lump sum worth roughly twice the average pensionable pay for NHS staff, with the cost met by the Government.

This will cover full, part-time or locum NHS and public health workers, including GPs, dentists, retired staff and second and final year students taking up paid frontline roles.

Within social care, the scheme will cover employees of publicly funded care homes, home care, directly employed carers including personal assistants and frontline child and family social workers.

The scheme is aimed at those who die from coronavirus during the course of their essential and lifesaving work. This includes those providing direct care as well as cleaners and porters who continue to carry out vital duties in these care environments.

The scheme is time-limited, providing cover for the duration of the pandemic. This is measured as the period for which the NHS workforce provisions in the Coronavirus Act 2020 are in force (which took effect on 25 March) but claims for deaths occurring before this will be considered. At the conclusion of the emergency response, the Secretary of State will give notice to close the scheme. The coverage of the scheme is broadly drawn across health and care sector employers given the variety of roles and locations, but eligibility is work-related.

Employers will be asked to initiate claims on behalf of the individual’s families and claims will be verified and processed by the NHS Business Services Authority, who will work with employers to ensure claims are handled swiftly and sensitively.

The scheme will cover frontline NHS staff and social care workers in England. Funding will also be provided to devolved administrations to support similar schemes in Scotland, Wales and Northern Ireland. Wales is implementing the same scheme and arrangements are being considered in Scotland and Northern Ireland.

You can read the full press release on this new guarantee on death in service benefits for frontline health and care staff here.

Although the announcement was short on more detail it is assumed that the payments will be in addition to any death benefits paid under pension arrangements and will not generate any direct or indirect tax benefit. 

Source: Department of Health & Social Care Press Release: New guarantee on death in service benefits for        frontline health and care staff during pandemic – dated 27 April 2020. 

Furloughed workers to receive full Parental Leave entitlement

(AF1, AF2, AF3, AF4, ER1, FA2, FA4, FA5, FA7, JO2, JO3, JO5, LP2, RO2, RO3, RO4, RO5, RO7, RO8)

The Department of Work and Pensions (DWP) recently issued a press release to confirm that furloughed workers who are planning to take paid parental leave will be entitled to pay based on their usual earnings rather than a furloughed pay rate.

For these purposes, full earnings will apply to Maternity Pay, Paternity Pay, Shared Parental Pay, Parental Bereavement Pay and Adoption Pay

Entitlement to Statutory Maternity Pay, as well as the other forms of Parental or Adoption Pay, are currently calculated through someone’s average earnings over an eight week assessment period. For Maternity Allowance, entitlement and the rate payable is determined by looking at average earnings over a 13 week period.

The changes will ensure those intending to take family-related leave following the birth, adoption, or death of a child will not be penalised as a result of being furloughed in the wake of the impacts of COVID-19.