Category Archives: Help with VAT PAYE CIS and Corporation Tax Help

COVID-19: Ineligible furloughed directors

COVID-19: Ineligible furloughed directors are mostly those receiving a monthly tax-free salary of £719 per month for 2019/20.

This issue relates to claims for Coronavirus Job Retention Scheme (CJRS) grants being rejected as ineligible. The companies affected are those where the directors have operated a payroll for themselves only and opted to receive a monthly tax and national insurance free salary of £719 per month for 2019/20.

COVID-19: Ineligible furloughed directors

Personal Service Companies (PSC)

CJRS ineligibility seems more likely to affect personal service companies where the payroll is run solely for directors and salaries are pitched at the PT level.

Class 1 National Insurance – Primary Threshold

The Primary Threshold (PT) for Class 1 National Insurance contributions determines the level of salary that will not attract PAYE and NI contributions for both the employee and the employer during the tax year. This threshold was set as £719 per month and £8,632 per annum for 2019/20.

COVID-19: Ineligible furloughed directors

The Primary Threshold has been increased to £792 per month and £9,500 for the 2020-21 tax year.

COVID-19: Ineligible furloughed directors

Directors tax planning strategy

A number of company directors adopt the tax planning strategy of paying themselves the PT salary during the year and either topping up this salary through interim dividends or paying a bonus salary in March 2020 to utilise their annual allowance (£12.500 for 2019-20).

Dividends are taxed at a lower rate after deducting the annual dividend allowance of £2,000, The lower rate of 7.5% assumes that total income doesn’t exceed the basic rate tax threshold of £37,500 because after this the tax on dividends becomes punitive.

COVID-19: Ineligible furloughed directors

Annual Employment allowance

In cases where a limited company has 2 or more directors and qualifies for the annual employment allowance, it may still be ineligible for the CJRS grant if it did not utilise any of it’s annual employment allowance before 19th March 2020.

The annual employment allowance is an annual grant to small companies to defray the cost of employers national insurance contributions up to £3,000 for 2019-20 and £4,000 for 2020-21.

Eligibility anomaly for directors

The CJRS guidelines explains that where employees, including company directors, receive salaries that vary during the year, the average salary for 2019/20 will be used to calculate the 80% claim for furloughed workers.

However, it would appear that the average salary in the guidelines is for the period up to February 2020 and not March 2020 which is the final month in the tax year. Therefore directors who ran a final payroll in March 2020 to utilise their annual allowance are left high and dry.

One argument put forward by commentators is that if these directors aren’t paying their taxes during the year how can they expect the tax payer to bail them out now. Maybe, this was the logic of behind the CJRS ineligibility rule. A fair cop.

Nevertheless, for the optimists this may just be a quirk in the computer software which was developed in the record time of 3-4 week. We are currently waiting for the CJRS support team at HMRC to get back to us on this issue within the next 48 hours. Unfortunately, that was promised on Tuesday 21/04/2020 at 10am.

This post on The COVID-19: Ineligible furloughed directors was sponsored by Canalitix.com

COVID-19: Befuddled? We are tax agents

Canalitix Accountants

Canalitix Accountants are tax agents who can guide you through the claims process for Coronavirus Job Retention Scheme (CJRS) and Self Employed Income Support grants.

HMRC has recently reached out to Canalitix Accountants and other UK tax agents to assist businesses with their claims for furloughed staff wages under CJRS.

The CJRS dedicated online claims system is expected to go live on 20 April 2020 and we would welcome the opportunity to assist businesses including company directors and contractors on PAYE with their claims.

HMRC Step by Step Guide for submitting CJRS claims

COVID-19: Befuddled? We are tax agents

Payroll bureau and HMRC file only agents

Payroll bureau and HMRC file only agents cannot access the CJRS dedicated online services.

However, file only agents can assist business with their CJRS claims because they hold information on furloughed staff, such as national insurance (NI) number, salary, employer’s NI and pension contributions.

HMRC Money Laundering Regulations

Contact us

You can contact us via our main website Canalitix.com or using the from the Contact Us menu above: https://canalitix.org/contact-us/

RECAP – Coronavirus Job Retention Scheme

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COVID-19: HMRC Job Retention Scheme Video+

The COVID-19: HMRC Job Retention Scheme Video by HMRC is very comprehensive and worth listening to.

This post on The COVID-19: HMRC Job Retention Scheme Video was sponsored by Canalitix.com

COVID-19: HMRC Job Retention Scheme Video+

COVID-19: Deferral of VAT update

COVID-19: Deferral of VAT update: The government has just announced that businesses now have until 31 March 2021 to pay any VAT deferred as a result of this announcement. In addition, businesses can opt in to the deferral simply by not making VAT payments due in this period.

COVID-19: Deferral of VAT update

The announcement also advised that businesses who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. This can be done online if they’re registered for online banking.

Business taking advantage of this deferral need to cancel their direct debit in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.

However, those who wish to continue paying as normal through the deferral period should do so if the wish.

The good news is that HMRC will continue to process repayment claims as normal but HMRC are still expecting businesses to continue to submit their VAT returns as normal.

This post on COVID-19: Deferral of VAT update was sponsored by Canalitix.com

COVID-19: Job Retention Scheme Update

Today, the COVID-19 Job Retention Scheme Update was announced by the government to provide further clarity on how the scheme will operate.

According to the announcement, the scheme will be backdated to 1 March 2020 and provided staff remain employed throughout the crisis the funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities.

The announcement further explained that the grants will cover 80% of furloughed employees’ (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.

HMRC Step by Step Guide for submitting claims

COVID-19: Job Retention Scheme Update

The cashflow dilemma for employers

The major stumbling block for employers is cashflow to fund the March 2020 payroll because the government is expected to cover 80% of both March and April payrolls at the end of April 2020.  

One option is to take out a business interruption loan or overdraft which is being guaranteed by the government and interest free for 12 months. Unfortunately, some banks are requesting personal guarantees which may deter some directors from considering this option.

Employers may also utilise the COVID-19 Time to Pay Scheme and the VAT Deferral scheme to free up cash resources to pay employees while waiting on the government Job Retention Scheme funds.

However, it is almost predictable that the majority of the business interruption loans and overdrafts secured under the government’s 80% guarantee will go bad and get hived off to the British Business Bank as COVID-19 bad loans.

The government’s 80% guarantee doesn’t equate to free money to employers and directors giving personal guarantees. These loans and overdrafts will have to be paid back by employers for as long as it takes or they will go to the wall.

Therefore, the dilemma is whether employers protect their own future or act in the national interest and provide for their staff during the COVID-19 crisis.

The COVID-19: Job Retention Scheme Update was sponsored by Canalitix.com

VAT PAYE and Corporation Tax Help for Covid-19

The government has promised support for all businesses and self-employed people in financial distress, and with outstanding tax liabilities, such as VAT PAYE and Corporation Tax.

The HMRC’s Time To Pay service has been set up to support business with their tax affairs. Eligibility will be assessed on a case-by-case basis and will be tailored to individual circumstances and liabilities.

Covid-19: VAT PAYE and Corporation Tax Help

HMRC dedicated COVID-19 helpline 0800 0159 559 has been set up for those concerned about being able to pay their tax due