Taxation and trusts; Tax relief claims, Legislation update, ATM closures and more.

• Over 50,000 tax relief claims from those working from home
• OTS review of tax-related claims and elections - New report
• Wills and probate legislation update
• The spending review
• Job support scheme, self-employment income support scheme and business grants
• The Self-Employment Income Support Scheme Grant Extension
• Access to cash: ATM closures
• Filing online self-assessment returns
• The latest UK property statistics

 

Over 50,000 tax relief claims from those working from home

(AF1, AF2, JO3, RO3)

Employers are able to pay employees up to a maximum of £6 per week, tax-free, to cover additional costs they may have incurred as a result of working from home. Where employers have not paid their employees the home expenses payment, individuals can claim this tax relief through a new online portal. In excess of 54,800 claims have been made between 1 and 11 October 2020.

The new online portal was launched on 1 October 2020. It allows employed workers to process tax relief on additional expenses where they have been instructed by their employer to work from home to help in stopping the spread of coronavirus. Any employees who have not received the working from home expenses payment directly from their employer can use this portal to receive the tax relief from HMRC instead.

The tax relief is calculated at the rate at which they pay tax, so for employed workers who ordinarily pay the basic rate of tax of 20%, they would receive £1.20 a week in tax relief to help towards their household bills. Any individuals paying the higher rate of tax at 40% would receive £2.40 a week. Over the duration of a full year, this means that employees could reduce the tax they pay by £62.40 (20% taxpayer) or £124.80 (40% taxpayer).

If an application is approved, then the online portal will adjust the individual’s tax code for tax year 2020/21. This means that the employee will then receive the tax relief directly on their salary and will continue to receive the adjustment until March 2021.

The Interim Director General of Customer Services at HMRC, Karl Khan, commented:

“We want everyone to get the money that they are entitled to, so we’ve made the online service as easy to use as we can – it takes just a few minutes to make a claim.”

Employed workers, for example, healthcare workers and care home staff, are also being reminded that they also have the option of claiming tax relief on work-related expenses, including cleaning their work uniforms.

Any employees who clean, replace or repair either uniform or tools, or pay fees and subscriptions for work, can check to see if they are eligible for tax relief on work expenses, and get an instant decision, by applying online directly to HMRC.

For more information please see here.

Source: HMRC Press release: 54,800 customers claim tax relief for working from home – dated 13 October 2020.

OTS review of tax-related claims and elections - New report

(AF1, RO3)

Almost all of the UK’s 1,190 tax reliefs require that the taxpayer makes a claim to receive the relief. The OTS has recommended a number of improvements in a new report ‘Claims and elections review: Simplifying administrative processes’.

Back in February, the Office of Tax Simplification (OTS) published a document setting out the scope of a new review about simplifying claims and elections and the processes involved.

The OTS has now published its report in which it explores ways in which the administrative processes for making claims and elections could be simplified, across income tax, corporation tax, capital gains tax and VAT.

The report makes 15 recommendations, both on general areas that would help to improve the operation of claims and elections across the tax system, and on specific claims and elections where the OTS believes that processes could be simplified, including:

• Increased functionality of the personal tax account and the business tax account (including the forthcoming merged, single digital account), including adding the ability to make more claims and elections within the account and store information about them;

• Changes to employee expenses to improve the process of making a claim, such as expanding digital claims to more types of employee expense, as well as reducing the number of different levels of flat-rate expenses that have to be considered. (According to the National Audit Office, over five million employees each year currently claim tax relief on expenses not reimbursed by their employer);

• Changes to Gift Aid carry back elections to restrict the ability to carry back Gift Aid donations to high-value donations and allow part of such a donation to be carried back and to allow tax returns to be amended within normal timescales to include Gift Aid carryback;

• On capital allowances, a template for businesses to use when making a capital allowances election to agree the value of fixtures, and a simpler mechanism for short-life assets acquired; and

• Improvements to HMRC online forms, such as setting out at the start the information required to complete the form, adding a facility to save and return, adding a free text box and the facility to upload a document where appropriate and, where possible, remove the need for wet signatures.

You can read the full OTS report here.

The Government recently published its vision for ‘Building a trusted, modern tax administration’ which sets out their ten-year strategy for the future of tax administration. The OTS says that it hopes that the suggestions and recommendations included within its report are considered by the Government in its future work on building a modern tax administration.

Source: OTS Policy paper: OTS Claims and Elections review – dated 16 October 2020.

Wills and probate legislation update

(AF1, JO2, RO3)

Video witnessing of wills

We have previously outlined Government proposals to amend the Wills Act 1837 to stipulate that where wills must be signed in the ‘presence’ of at least two witnesses, their presence can be either physical or virtual.

Legislation temporarily allowing wills in England and Wales to be witnessed by video link came into retrospective effect on 28 September 2020.

The relevant statutory instrument (SI) is the Wills Act 1837 (Electronic Communications) (Amendment) (Coronavirus) Order 2020.

The key passage is in s.2 of the SI, amending s.9(b) of the Wills Act 1837 to insert the following text: ‘For the purposes of paragraphs (c) and (d) [of s.9 of the 1837 Act] in relation to wills made on or after 31 January 2020 and on or before 31 January 2022, “presence” includes presence by means of videoconference or other visual transmissions.

The SI emphasises that it does not affect any grant of probate made or anything done pursuant to a grant of probate before 28 September. Nor does it authorise remote signing on behalf of a testator or the use of electronic signatures or counterpart documents. The explanatory memorandum published with the SI makes clear that the Government considered many other options for reform of will-making in the pandemic, but has chosen not to pursue reforms, such as remote signing, in view of the perceived risks of undue influence or fraud against a testator.

After the temporary legislation expires, wills must return to being made with witnesses who are physically present. The Ministry of Justice’s advice is that remote witnessing should be used only in an emergency when conventional witnessing is impossible, and extreme caution is required when using it. 

The process of video witnessing and subsequent physical signing is quite complicated. The jury is still out on whether, and to what extent, the process is useful and how often it is in fact used.

Online probate applications

We have previously outlined Government proposals to make certain probate applications online mandatory.

The Government has recently announced that, from 2 November 2020, practitioners in England and Wales will have to use its online service for almost all probate applications. This followed consultation which showed that the majority of practitioners broadly supported the online system, although many expressed reservations that the introduction was premature, mainly because of the actual problems of using the system which the Government described as “teething problems” which are now supposedly fixed.

The legislation is in the form of The Non-Contentious Probate (Amendment) Rules 2020, which will come into force on 2 November 2020.

The relevant Rule is Rule 4.4 which now reads: 4.—(1) A person applying for a grant through a solicitor or probate practitioner, other than a grant listed in the Third Schedule, must apply using the online portal unless invited to apply at a registry by that registry.

The above-mentioned Third Schedule lists grant processes which are exempted from the mandatory online application process. These include applications for a grant of administration (where there is no will), an application for a second grant of probate in respect of the same estate, certain cases where multiple applicants are entitled, grants to attorneys where the attorney is not already a registered probate professional and trust corporation applications and certain other more complex situations.

While the new rules for video witnessing have been generally welcomed by practitioners, including the Law Society and STEP, remember that this is just a temporary measure. Also, the Government’s approach to technology is, to say the least, inconsistent and clearly piecemeal. While pushing through the online probate applications process with some haste, there is little sign that the promised review of the process of execution of deeds is making any progress. And, of course, the main issue as far as wills are concerned is that the legislation governing will execution is almost 200 years old and, despite various proposals by the Law Commission to modernise it, or at least allow judges some discretion to recognise the deceased’s intentions which have been expressed but without the strict formalities of the 1837 Act, no real progress in this area has been made.

Anyway, remember that November is traditionally “Make a Will month”, with many firms and charities offering free or discounted services of will writing. So, this is another opportunity to raise this important subject with your clients. 

Sources:

• STEP News: Government confirms professional probate applications in England and Wales to be moved online – 1 October 2020;
• STEP News: Updates provided by HM Courts & Tribunal Service (HMCTS) in its meeting with STEP, the Law Society, SFE and ICAEW for its regular Probate Service – dated 1 May 2020.
• STEP News: Remote witnessing legislation for England and Wales laid before parliament – dated 10 September.

The spending review

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

This year’s Spending Review will cover only 2021/22.

On Wednesday 21 October, the Treasury announced that this year’s Spending Review will cover only the coming financial year, 2021/22. As we have commented previously, setting a three-year Spending Review this November faced similar problems to the Autumn Budget – too many pandemic related known-unknowns.

The Treasury statement acknowledged as much by saying ‘The government has been clear that we would keep plans for the Spending Review under review given the unprecedented uncertainty of COVID-19’. However, the Treasury says it will still ‘fully fund’ multi-year NHS and schools’ resource settlements and priority infrastructure projects.

The exact date for the Spending Review will be confirmed ‘shortly but it will be in the last weeks of November’. The Chancellor has already commissioned the Office for Budget Responsibility (OBR) to produce the next Economic and Financial Outlook in ‘mid to late November’. Add the two together and it seems probable that an Autumn Statement of some sort will arrive in late November or possibly early December.

This will be the second year that a three-year Spending Review has been deferred in favour of 12 months of pro tem costings. While not an ideal way to plan Government finances, in the circumstances, it is the pragmatic choice.

Source: HM Treasury News story: Spending Review to conclude late November – dated 21 October 2020.

Job support scheme, self-employment income support scheme and business grants

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

New developments announced to the Job Support Scheme (JSS Open and JSS Closed), Self-Employment Income Support Scheme (SEISS) and Business Grants

Job Support Scheme

https://www.gov.uk/government/publications/the-job-support-scheme/the-job-support-scheme

The new details were announced in a Policy Paper published on 22 October.

JSS Open:

For employers who can stay open, but face reduced demand and challenges to keep their employees on the payroll, the JSS, through JSS Open, will give them the option of keeping their employees in a job on shorter hours rather than making them redundant.

In order to claim under JSS Open, the employees of the employer claiming will need to work a minimum of 20% of their usual hours (e.g. “one day a week”) and the employer will continue to pay them as normal for the hours worked. Alongside this, the employee will receive 66.67% of their normal pay for the hours not worked - this will be made up of contributions from the employer and from the Government. The employer will pay 5% of reference salary for the hours not worked, up to a maximum of £125 per month, with the discretion to pay more than this if they wish. The Government will pay the remainder of 61.67%, of reference salary for the hours not worked, up to a maximum of £1,541.75 per month. This will ensure employees continue to receive at least 73% of their normal wages, where they earn £3,125 a month or less.

JSS Closed:

The JSS Closed scheme is for employers who have been legally required to close their premises as a direct result of coronavirus restrictions set by one or more of the four Governments of the UK. This scheme will help affected and qualifying employers by supporting the wage costs of employees who have been instructed to cease work ineligible (closed) premises.

Each employee who cannot work due to these restrictions will receive two-thirds of their normal pay, paid by their employer and fully funded by the Government, to a maximum of £2,083.33 per month, although their employer has the discretion to pay more than this if they wish. The aim is to help protect employee incomes, limit unemployment and retain employer-employee matches so that these premises are able to reopen as quickly as possible when circumstances allow.

Employees may also be entitled to additional financial support, including Universal Credit.

The JSS will be open from 1 November 2020 and run for six months, until 30 April 2021. The Government will review the terms of the scheme in January. Employers will be able to claim in arrears from 8 December 2020, with payments made after the claim has been approved. Neither the employer nor the employee needs to have benefitted from the Coronavirus Job Retention Scheme to be eligible for the JSS.

Further guidance on the steps that employers need to take to calculate and make a claim to the JSS will be published by the end of October.

Further eligibility criteria for JSS Open and JSS Closed:

The eligibility criteria for employers to claim under JSS Open are broadly as for the JSS (but with employees working a minimum of 20% of their normal hours rather than 33%) but for larger employers with 250 or more employees their a relatively complex additional “financial impact “ conditions to satisfy. These are set out in detail in the policy paper. JSS Open applies to all employers and/or employees being claimed for under the JSS, whether the employer is claiming the JSS Open grant or the JSS Closed grant.

Importantly, the Government expects that large employers (250 or more employees) and their corporate groups using the scheme will not make capital distributions whilst claiming the JSS grant. This includes:

• Dividends;
• Charges;
• Free or other distributions;
• Any equivalent payment that a partnership may make to its partners.

The Government does not plan to make this expectation a contractual or legal condition of the scheme but encourages business to reflect on their responsibilities and that taxpayers should be able to rely on public money only being claimed where it is clearly needed.

An employer can claim the JSS Open and JSS Closed grant at the same time for different employees. An employer cannot claim for a single employee under both schemes at the same time.

To claim under the JSS Closed scheme in addition to the general JSS eligibility criteria, employers are eligible to claim JSS Closed if their business premises at one or more locations has been legally required to close as a direct result of coronavirus restrictions set by one or more of the four Governments of the UK. This includes premises restricted to delivery or collection only services from their premises and those restricted to provision of food and/or drink outdoors.

Businesses premises required to close by local public health authorities as a result of specific workplace outbreaks are not eligible for this scheme.

Employers are only eligible to claim for periods during which the relevant coronavirus restrictions are in place. Employers will not be able to claim JSS Closed to cover periods after restrictions have lifted and the business premises is legally allowed to reopen. They may then be able to claim JSS Open if they are eligible.

This is not a complete list of all the conditions for eligibility for JSS Closed and further guidance will be published by the end of October.

Claims under JSS Open and JSS Closed:

Employers will be able to claim from 8 December, covering salary for pay periods ending and paid in November. Subsequent months will follow a similar pattern, with the final claims for April being made from early May. More detail about this process will be published in guidance by the end of October 2020.

Agents who are authorised to do PAYE online for employers will be able to claim on their behalf.

The self-employed income support scheme grant extension

https://www.gov.uk/government/publications/self-employment-income-support-scheme-grant-extension

Some improvements to the scheme were announced on 22 October.

As it now stands the SEISS Grant Extension provides critical support to the self-employed in the form of two grants, each available for three month periods covering November 2020 to January 2021 and February 2021 to April 2021.

1. Who can claim

To be eligible for the Grant Extension self-employed individuals, including members of partnerships, must:

• have been previously eligible for the SEISS first and second grant (although they do not have to have claimed the previous grants);

• declare that they intend to continue to trade and either:

• are currently actively trading but are impacted by reduced demand due to coronavirus;

• were previously trading but are temporarily unable to do so due to coronavirus.

2. What the Grant Extension covers

The extension will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period.

The first grant will cover a three-month period from 1 November 2020 until 31 January 2021. The Government will provide a taxable grant covering 40% of average monthly trading profits (originally proposed to be 20%), paid out in a single instalment covering three months’ worth of profits, and capped at £3,750 in total.

The Government are providing broadly the same level of support for the self-employed as is being provided for employees through the JSS.

The second grant will cover a three-month period from 1 February 2021 until 30 April 2021. The Government will review the level of the second grant and set this in due course.

The grants are taxable income and also subject to National Insurance contributions.

3. How to claim

HMRC will provide full details about claiming and applications in guidance on GOV.UK in due course.

Other Business Grants

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/928760/BUSINESS_GRANTS_FACTSHEET.pdf

The Chancellor also announced specific help for hospitality and leisure businesses in tier two areas.

English councils will be funded to give monthly grants of up to £2,100 to 150,000 hotels, restaurants and B&Bs. Devolved nations will be given the equivalent funding for other nations, under the “so-called” Barnett Formula.

Sources:

HMRC Policy papers: Self-Employment Income Support Scheme Grant Extension / The Job Support Scheme – dated 22 October 2020

HM Treasury News story: Plan for Jobs: Chancellor increases financial support for businesses and workers – dated 22 October 2020.

Access to cash: ATM closures

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

Guidance from the Financial Conduct Authority (FCA), applicable from 21 September, requires banks, building societies and credit unions to keep the FCA informed of any plans for branch or ATM closures, or conversions of a free-to-use ATM to pay-to-use, in good time before any final decision is made.

Subsequent to that, on 15 October, the Treasury published a Policy Paper ‘Access to Cash - Call for Evidence’.

This Call for Evidence sets out the Government’s aims for protecting access to cash throughout the UK. It seeks views on:

• how the Government can ensure the UK maintains an appropriate network of cash withdrawal and deposit-taking facilities over time through legislation, including the potential role of cashback;

• the factors affecting cash acceptance; and

• whether the Government should give a single regulator overall statutory responsibility for maintaining access to cash.

However, in the meantime, the Post Office has announced that it is to cut a third of its cash machines in the next 18 months, with 600 ATMs to be shut by March 2022. The Post Office has reportedly said that the ATMs set for closure are little-used and have other free cash facilities close by.

Currently, the Post Office does not run any of the cash machines at its branches; they are operated by the Bank of Ireland, which is pulling out of the business. That has prompted the review, which will mean closing 600 ATMs, while the Post Office has said it will spend £16m to maintain and upgrade other machines.

Sources:

HM Treasury Policy paper: Access to Cash - Call for Evidence - dated 15 October 2020.     

BBC News: Post Office says a third of its cash machines will close – dated 26 October.

Filing online self-assessment returns

(AF1, AF2, JO3, RO3)

There are fewer than 100 days to go before the online 31 January self-assessment deadline and just a few days for paper returns!

HMRC recently released a press release reminding ‘customers’ to complete their self-assessment tax returns early.

As a reminder, you are required to complete a self-assessment return if you:

• have earned more than £2,500 from renting out property;

• have received, or your partner has received, Child Benefit and either of you had an annual income of more than £50,000;

• have received more than £2,500 in other untaxed income, for example, from tips;

• are a self-employed sole trader whose annual turnover is over £1,000;

• are an employee claiming expenses in excess of £2,500;

• have an annual income of over £100,000;

• have earned income from abroad that you need to pay tax on.

Those who miss the deadline face a minimum £100 penalty, with further penalties added thereafter.

Source: HMRC Press release: Just 100 days left for self -assessment – dated 23 October 2020. - https://www.gov.uk/government/news/just-100-days-left-for-self-assessment)

The latest UK property statistics 

(AF4, FA7, LP2, RO2)

The latest UK property statistics from HMRC show that the provisional seasonally adjusted estimate of UK non-residential transactions in September 2020 is 9,160, which is 18.7% higher than in August 2020.

Given what the world has faced this year with the pandemic, it was of no surprise that residential transactions decreased significantly. However, the numbers have now started to gradually increase, which is good to see, and likely to have been impacted by the stamp duty holiday announced by the Chancellor in the Summer Statement.  This temporarily increased the threshold at which no SDLT is payable from £125,000 to £500,000 from 8 July 2020 to 31 March 2021.

The figures also show that the provisional seasonally adjusted estimate of UK residential transactions in September 2020 is 98,010, which is very similar to September 2019, at only 0.7% lower, and 21.3% higher than August 2020.

Source: HMRC National Statistics: Monthly property transactions completed in the UK with value of £40,000 or above – dated 21 October 2020.