Taxation and trusts: July inflation numbers, CGT reform and new CGT statistics and more

• July Inflation Numbers
• Potential implications from CGT reform
• Statistics on non-domiciled taxpayers in the UK
• New help for mortgage customers
• PAYE matters impacting employer clients
• Footballer’s image rights: Increase in investigations
• New CGT statistics: Do they make a CGT rate rise more likely?
• Autumn budget delay?
• The second stage of SEISS is now open for applications

 

July inflation numbers 

The rate of CPI inflation in July rose 0.4% to 1.0%.

The CPI for July showed an annual rate of 1.0%, a jump of 0.4% from June and markedly higher than market expectations of an unchanged rate, according to Reuters. Across June to July prices were up 0.4%, whereas they were flat over the same period last year.

The CPI/RPI gap widened to 0.6%, with the RPI annual rate rising from 1.1% to 1.6%. Over the month, the RPI was up 0.5%. The July RPI is an important number as it sets the rate of rail fare increases for the following year, at least for those still using that form of public transport.

The Office for National Statistics (ONS)’s favoured CPIH index was up 0.3% for the month to 1.1%.

The easing of lockdown restrictions meant that the number of items in the CPIH ‘shopping basket’ that were not available to consumers in the UK fell from 67 (or 13.5% of the CPIH basket by weight) in June to just 12 (1.3%) in July. The ONS highlights the following as the more significant of the moves across the month in the areas it could monitor:

Upward

Clothing and footwear: The largest upward contribution came from clothing and footwear, where prices overall fell by 0.7% between June and July 2020, compared with a fall of 2.9% between the same months in 2019.

Ordinarily, prices for clothing and footwear experience a larger fall each year between June and July with Summer items going on sale. Throughout 2020, the ONS says it has seen clothing and footwear prices follow a different trend from previous years, with increased discounting at the start of lockdown in March. In effect the sales were brought forward.

For example, the majority of the upward contribution came from women’s garments, where prices fell by 1.7% between June and July 2020, compared with a 4.4% fall between the same two months in 2019. Men’s and children’s clothes had smaller upward contributions to the inflation rate.

Transport: The second-largest upward contribution came from transport. Most of this movement came from fuels and lubricants. Following falls in petrol and diesel prices in February 2020 and since lockdown started – remember the 99.9p litre of petrol? – pump prices have increased as movement restrictions eased. Between June and July 2020, petrol prices rose by 4.9p per litre, to stand at 111.4p per litre, and diesel prices rose by 4.0p per litre, to stand at 116.7p per litre. In comparison, between June and July 2019, petrol and diesel prices fell by 0.9p and 2.3 p, to stand at 127.3 and 132.0 pence per litre, respectively. This month’s rise in petrol prices was the largest monthly increase since between December 2010 and January 2011, when prices rose by 5.4p pence per litre (to 127.4 pence per litre).

There was also an upward contribution from coach and sea fares, where prices rose between June and July 2020 by more than a year ago. However, this was partially offset by small (if academic) downward contributions from air and international rail fares. Air fares rose by 9.4% between June and July 2020 compared with a larger increase of 12.0% between the same two months in 2019.

Furniture and household goods: There was a large upward contribution from the furniture and household goods sector. Overall prices within this broad group of items fell by 0.4% between June and July 2020, compared with a 1.7% fall between June and July 2019. Again, this may reflect the earlier introduction of discounts in 2020.

Health: A small upward contribution came from health, where prices overall rose by 1.0% between June and July this year, compared with a rise of 0.1% a year ago. The effect came almost entirely from private dental examinations and non-NHS physiotherapy sessions, where the ONS found that prices had risen, in part, as businesses make their workplaces COVID-secure.

Alcoholic beverages and tobacco: There was a small upward contribution from this sector as prices across a range of spirits increased by 0.6% between June and July 2020, but fell by 1.4% in 2019. Prices for cigarettes also rose this year but were little changed a year ago.

Housing and household services: This sector had a small upward contribution as average charges for registered social landlord rents rose between June and July 2020, where they were little changed between the same two months a year ago. There was a partially offsetting downward movement from owner-occupiers’ housing (OOH) costs, where charges in England increased this year by less than a year ago.

Miscellaneous goods and services: This sector made a barely visible upward contribution but is worth noting for its contents. Within the personal care element, men’s haircuts rose by 6.1%, women’s cut and blow dries by 4.5%, and women’s highlighting by 3.9%. The ONS reckons these rises “are likely to be partially because of covering the costs for personal protective equipment (PPE)”. In the overall sector there were offsetting downward movements from other items – hence the small total upward contribution.

Downward

Food and non-alcoholic beverages: There was a small partially offsetting downward contribution from food and non-alcoholic beverages, with food prices falling by 0.3% this year, compared with a rise of 0.1% a year ago. The effect comprised small movements from a variety of product groups, including fruit, vegetables (including potatoes and tubers), fish, meat, and milk, cheese and eggs. There was a partially offsetting small upward contribution from bread and cereals. CPI food and non-alcoholic beverage inflation is now running at 0.8%.

Only one of the twelve broad CPI groups saw annual inflation decrease, while eight categories posted an increase and the remaining three were unchanged. The category with the highest inflation rate remains Communications at 4.3% (up from 3.9%).

Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) rose 0.4% to 1.8%, again underlining the inflation increase was broadly based. Market expectations had been for core inflation to drop by 0.1%, according to Reuters. Goods inflation rose from -0.5% to 0.0%, while services inflation was up 0.3% at 2.1%.

Producer Price Inflation was -0.9 % on an annual basis, unchanged on the output (factory gate) measure. Input price inflation rose 1.0% to -5.7% year-on-year. The main driver here was crude oil and petroleum prices. 

Before these figures emerged, there had been suggestions that inflation might turn negative in August, thanks to the double impact of the VAT reduction on dining out and the Eat Out to Help Out scheme. That now looks unlikely.

Alongside the inflation numbers, the ONS released an analysis of what the inflation numbers would look like were the index ‘shopping baskets’ adjusted for consumption changes during the April-June lockdown period. The ONS’s conclusion was that rates would be just 0.1% higher.

Potential implications from CGT reform

(AF1, RO3)

The number of property transactions completed in

Some potential consequences of any CGT reform flowing from the Office of Tax Simplification (OTS) review of capital gains tax

In an earlier article, we covered the main points of the OTS review of capital gains tax (CGT). 

Importantly, as well as reviewing the operation of the tax, the Chancellor asked the OTS to consider “opportunities to simplify the tax”. Other key pointers as to what changes could be considered are as follows:

From the Chancellor’s letter:

• “areas where the present rules can distract behaviour or do not meet their policy intent”;

and

• “any proposals from the OTS on the regime of allowances exemptions, reliefs and the treatment of losses within CGT, and the interactions of how gains are taxed compared to income”.

From the OTS scoping document, call for evidence and on-line survey:

• “The overall scope of the tax and the various rates which can apply;

• Stand alone owner managed trading or investment companies;

• Interactions with other parts of the tax system;

• The practical operation of principal private residence relief;

• Consideration of the issues arising from the boundary between income tax and CGT in relation to employees.”

Remember, these are just areas for consideration. The OTS makes recommendations – not law.

But remember, the Chancellor had requested the review.

And remember, there is a huge level of public sector borrowing.

So, with all of this in mind and bearing in mind that almost nothing seems to be “off the table” what changes could (stress could, not will) emerge and what could this mean for financial planning strategies for various clients?

Charging capital gains made by individuals to income tax

This would at least double CGT for most taxpayers. By the way, CGT currently yields around £10bn p.a. – see HMRC’s latest statistics here.

Charging capital gains to income tax would be a serious factor to consider in making investment bond/collective comparisons. Taking this change on its own, the “shelter and plan” qualities of investment bonds would be comparatively enhanced. Holding and moving significant investment inside a family investment company (fico) could offer some further deferment opportunities. But of course, the “whole picture” would need to be considered in judging the merits of a fico – including how to extract funds from the fico tax efficiently. It would also reinforce the attraction of ISAs.

Of course, these somewhat simplistic conclusions assume that no consequential amendments are made to other parts of the tax code. And some suggest that the charging of CGT to income tax should be accompanied by the introduction of indexation relief. Interesting.

Removing CGT rebasing on death

This has already been suggested by the OTS in their review of IHT when assets pass IHT free on death.

This would be another negative change in relation to collective investments - especially if the rebasing were removed for all chargeable assets and not just those that pass IHT free on death.

Further changes to entrepreneurs’ relief (now known as business asset disposal relief).

Given the very recent reduction of the lifetime limit to £1m from £10m any further change may be unlikely.

A limitation of the annual exemption

Rather than removal, and especially if capital gains are charged to income tax, then maybe a merger of the personal allowance and CGT annual exemption could take place – possibly resulting in a larger composite allowance.

This could be another factor to take into account in deciding where to site investment funds beyond the “tax no brainers” of pensions and ISAs.

The private residence relief

While its complete removal seems highly unlikely, would some sort of cap (maybe even a cumulative lifetime cap) on relieved gains be possible?

All of the above is just conjecture, but some of it may just become a reality – or not.

We’ll have to wait until later in the year to get an indication of the outcome. Responses on “the principles of CGT” were required by 10 August.  Responses on “technical details and practical operations” are required by 12 October. And then we’ll see …maybe in or connected with the Autumn Statement…but maybe not.

Statistics on non-domiciled taxpayers in the UK

(AF1, RO3)

HMRC has recently released statistics on those claiming non-domiciled status via their self-assessment (SA) returns. The release covers figures for tax year 2007/08 through to 2018/19.

The statistics show:

• In 2018/19, there were an estimated 78,000 individuals claiming non-domiciled taxpayer status in the UK on their self-assessment tax returns, slightly down from 78,700 in the previous year.

• In 2018/19 the number of non-domiciled taxpayers changing status to become domiciled has slowed down.

• It is estimated that non-domiciled taxpayers paid £7,828m in UK income tax, capital gains tax and National Insurance contributions in 2018/19. This is a slight increase from the previous year’s estimate of £7,571m.

• Source: HMRC Statistical commentary on non-domiciled taxpayers – 30 July 2020

Overall, the figures show that in the previous two tax years the number of non-domiciled taxpayers has been falling due to these taxpayers either becoming domiciled or no longer paying tax in the UK.

Those falls are probably explained by the deemed domicile reforms introduced in April 2017 which meant that an individual who was formerly non-domiciled might be deemed domiciled for tax purposes if they were born in the UK and have a UK domicile of origin (Condition A), or if they were resident in the UK for at least 15 of the 20 tax years immediately before the relevant tax year (Condition B).

It also appears that the impact of the deemed domicile reforms has started to stabilise and so the number of non-domiciliaries has remained largely unchanged from the previous year.

Source: HMRC Official Statistics: Non-domiciled taxpayers in the UK – dated 30 July 2020.

https://www.gov.uk/government/statistics/statistics-on-non-domiciled-taxpayers-in-the-uk

New help for mortgage customers

(ER1, LP2, RO7)

The FCA has been working for some time to support mortgage prisoners and it has now published a further statement on mortgage prisoners.  In addition it has published a consultation paper containing proposals designed to support some consumers within the mortgage market.

The statement presents the further analysis the FCA has done on borrowers with inactive firms, including mortgage prisoners, and it outlines further support for consumers who are struggling, including a new dedicated helpline created with the Money and Pensions Service.

The consultation paper sets out in more detail the FCA’s proposals to tackle potential harms that may impact borrowers affected by  by:  

• Making rules that will make it easier for lenders to offer switching options to consumers who are in a closed book within the same financial group as the lender. This would mirror the flexibility that active lenders have, under the FCA’s existing rules, when their existing customers wish to switch.

• Issuing guidance stating that firms should allow borrowers to delay repayment of the capital at maturity on interest-only and part-and-part mortgages up to 31 October 2021, provided borrowers are up-to-date with payments and they continue to make interest payments.

This consultation will close on 8 September 2020. If the FCA proceeds, the proposed rule changes on intra-group switching will come into effect immediately after the publication of its Policy Statement. If the FCA proceeds with the proposed guidance on maturing interest-only and part-and-part mortgages this will come into effect on 31 October 2020.

Source: FCA News: Statement on mortgage prisoners/consultation on intra-group switching/maturing interest- only and part-and-part mortgages – dated 28 July 2020;

PAYE matters impacting employer clients

(AF1, AF2, JO3, RO3)

HMRC’s latest Employer Bulletin includes useful updates on PAYE matters impacting your employer clients

• The Coronavirus Job Retention Scheme (CJRS) and what employers need to do from August onwards.

• Make sure you’re paying the correct workplace pension contributions.

• New law to ensure furloughed employees receive full statutory redundancy payments.

• Deadline to report the disguised remuneration loan charge – 30 September 2020.

• – are you due a repayment?

• Off-payroll working rules (IR35).

• Applications open for £50m customs grant scheme.

• VAT reverse charge on building and construction services delayed.

• End of VAT payment deferrals period.

• Student Loan Repayments.

• Finance Act 2020 changes to company car tax.

• PAYE Online service for reporting P11D, P11D(b) and P46(car).

• The August electronic payment deadline falls on a weekend.

• Toolkits – helping to reduce errors.

• Paying HMRC.

• Employment-related securities bulletins.

The main items of interest include:

The Coronavirus Job Retention Scheme (CJRS) and what employers need to do from August onwards:

• From 1 August the CJRS no longer funds employers’ National Insurance (NI) and pensions contributions. Employers now have to make these payments from their own resources for all employees, whether furloughed or not. From 1 September, the Government will pay 70% of wages up to a cap of £2,187.50 for the hours furloughed employees do not work. Employers will need to pay 10% of furloughed employees’ wages to make up 80% of their total wages up to a cap of £2,500. The wage cap is proportional to the hours not worked. Employers will continue to pay furloughed employees’ NI and pension contributions.

• The Job Retention Bonus allows employers to claim a one-off payment of £1,000 for every employee they have previously received a grant for under CJRS and who remains continuously employed through to the end of January 2021. To be eligible, the employee must have received earnings in November, December and January and must have been paid an average of at least £520 per month, a total of at least £1,560 across the three months. Employers will be able to claim the bonus after they have filed PAYE information for January 2021, and the bonus will be paid from February 2021. More detailed guidance, including how to claim the bonus online, will be available by the end of September. If employers intend to claim the Job Retention Bonus, they must:

• ensure all employee records are up to date;

• accurately report employees’ details and wages on the Full Payment Submission (FPS) through the Real Time Information (RTI) reporting system;

• make sure all CJRS claims have been accurately submitted and they have told HMRC about any changes needed (for example if they’ve received too much or too little).

Make sure you’re paying the correct workplace pension contributions:

The Pensions Regulator (TPR)’s guidance explains more about how to calculate normal pension contributions for furloughed workers who are returning to work part-time, including where there are salary sacrifice arrangements for pensions in place and what to do if the business is struggling to pay contributions. TPR will continue to monitor employer actions to ensure compliance with ongoing duties. If an employer offers a defined benefit pension for their staff, they’ll also find the latest information about what to do if they have been temporarily suspending or reducing deficit repair contributions for the scheme via the TPR’s  webpage.

New law to ensure furloughed employees receive full statutory redundancy payments:

The Government has introduced legislation which is intended to ensure that employees who have benefited from the CJRS do not lose out on certain entitlements. A number of statutory rights, including redundancy pay, notice pay and compensation for unfair dismissal, will be based on an employee’s normal pay, rather than their furlough pay (potentially 80% of their normal wage).

Deadline to report the disguised remuneration Loan Charge – 30 September 2020:

If any current or former employees have outstanding disguised remuneration loans that are subject to the Loan Charge, the deadline for reporting the details of their loans is approaching. These loans must be reported to HMRC by 30 September 2020 using the online form on GOV.UK, as well as within the 2018/19 tax return. Anyone who wants to spread their outstanding disguised remuneration loan balances evenly across the 2018/19, 2019/20 and 2020/21 tax years will need to do so by 30 September 2020, using the same online form on GOV.UK.

For details of what employers should do to report the Loan Charge, please see HMRC’s April 2020 Employer Bulletin.

As a result of the recommendations in the Independent Loan Charge Review, certain voluntary payments (‘voluntary restitution’) made as part of a disguised remuneration settlement with HMRC can be refunded. The voluntary payments that can be refunded are those made on or after 16 March 2016, in relation to loans made in unprotected years. An unprotected year is one where HMRC didn’t take action to protect the year, for example, by opening an enquiry. HMRC has published guidance about which voluntary payments can be refunded and guidance about how the scheme works.

Off-payroll working rules (IR35):

The off-payroll working rules (IR35) legislation for changes to non-public sector organisations is included in Finance Act 2020. The reform will take effect from 6 April 2021, as previously announced. HMRC will re-launch its package of customer education and support later this year, and the next Employer Bulletin in October will include a full timetable for the support available including webinars, updated guidance and helpful communications resources for businesses to cascade to contractors and organisations they engage with.

The Check Employment Status Tax (CEST) tool is already available for organisations and contractors to consider the appropriate employment status for tax for contracts running beyond 6 April 2021. HMRC says that it will stand by the results given by the CEST tool, provided it is used in accordance with its guidance and the information entered is accurate, and remains accurate. This is regardless of when the tool is used ahead of April 2021, and means businesses can already use the tool for engagements that start in April 2021 onwards. HMRC says it will continue to refine and improve the support available ahead of April 2021 based upon customer feedback, but any preparation done now will remain valid for April 2021.

Finance Act 2020 changes to company car tax:

At Autumn Budget 2017, the Government announced that it would bring in legislation reflecting the use of the worldwide harmonised light vehicle test procedure (WLTP) for measuring CO2 emissions for all cars first registered on or after 6 April 2020. The legislation in Finance Act 2020 introduced modified tables of WLTP appropriate percentages (based on emissions) to be used for the purposes of calculating company car tax for the years 2020/21 and 2021/22. The appropriate percentage for zero emission cars first registered before 6 April 2020 (with emissions measured under the previous new European driving cycle (NEDC) testing regime) has also been modified for those years.

To read HMRC’s latest Employer Bulletin, please see here.

Source: HMRC Guidance: Employer Bulletin – August 2020 – dated 12 August 2020

Footballer’s image rights: Increase in investigations

(AF1, RO3)

Freedom of information requests by the UHY Hacker Young Group revealed that 246 professional footballers were under investigation by HMRC during 2019/20, up from 87 in the previous year. And HMRC's overall additional tax collected from investigations into professional football generally was £73.1million to 31 March 2020 - more than double the previous year’s figure of £35.3m.

Hacker Young have suggested that the increase tallies with greater interest in the image rights regularly negotiated by players as an extension to their salary.

Image rights allow a club to use the name and the likeness of a player (as well as the actual individual when appropriate) to market and sell the club’s wares and those of their sponsors.

This income is often paid to a company, an image rights company, or IRC, set up by the player for this purpose, rather than paid as salary to the player, so it is only taxed at the 19% corporation tax rate, rather than the 45% income tax rate which would otherwise be payable by a high earner. The money stays in the company until the individual needs it, for example, they could choose to take it out after they retire. However, there may be further tax to pay when the money is paid out.

While some players would be able to command enormous fees for their image rights and may have a more valuable brand than the club they play for, negotiating image rights has become an increasingly standard practice among players with a lesser name recognition too.

According to Hacker Young, HMRC believes that lots of lesser-known footballers are effectively avoiding tax by getting paid huge sums for image rights that HMRC views as overpriced.

The kind of calculations that would be required to work out the value of a player’s image rights would include the amount of money they could charge for making a public appearance or for endorsing a product, as well as the more traditional totting up around the sale of replica kits.

HMRC’s internal manuals on this topic state ‘…we expect that when entering into agreements that provide the organisation that is the employer of the individuals concerned with rights over the exploitation of each employee’s image for promotional and merchandising purposes, the employer will have proper regard to the commercial revenues that the employer expects to achieve. In order to clearly distinguish between remuneration and image rights we expect the respective agreements to be demonstrably based in commercial reality.’

HMRC expects clubs to be able to demonstrate this commercial reality, and suggests they may consider keeping records covering:

• consideration given by the Board of Directors to the active use of image rights as a benefit to the commercial activities of the employer, whether to seek new agreements, reviews of the outcome of existing agreements, and the possibilities for increased value additional to rights existing under the employment contract;
• a business plan for promotional activities involving the exploitation of image rights and the outcome of reviews of performance against that plan, including details of actions taken if the employer is not realising a commercial return from an image rights agreement;
• negotiation of the terms of each image rights agreement to demonstrate consideration on an individual basis and to reflect any differences between the exploitation of image rights within and outside the UK;
• details of independent advice received regarding the valuation of the image rights, or internal analysis of value based on previous experience;
• due diligence regarding the image rights company and any advice provided to the employee regarding the establishment of an image rights company;
• records of activities performed and any subsequent discussions about the performance of services under the image rights agreement and actions taken.

New CGT statistics: Do they make a CGT rate rise more likely?
(AF1, AF2, JO3, RO3)

Last month the Chancellor asked the Office of Tax Simplification (OTS) to carry out a review of capital gains tax (CGT) for individuals and small businesses. As we explained at the time, CGT is one area where the Government’s hands are not (theoretically) tied by a manifesto pledge to hold tax rates. It is also a part of the tax system which has been subject to regular regime changes – it was a Conservative Chancellor that set CGT at income tax rates back in 1988.

Recently HMRC issued its latest set of statistics on CGT, with data up to the 2018/19 tax year. Much of the recent years’ data is provisional as finalised figures take time to emerge. Nevertheless, there is plenty for the Chancellor and the OTS to consider in these numbers:

• CGT amounted to £9.5bn in 2018/19, of which £8.805bn (92.7%) was payable by individuals and £0.733bn (7.3%) by trusts. The current Office for Budget Responsibility (OBR) central scenario projection for 2020/21 CGT receipts (the bulk of which relates to 2019/20 gains) is £10.5bn. This falls to £7.6bn in 2021/22 due to stock market declines in 2020/21.

• The CGT tax take from individuals almost quadrupled in the ten years to 2018/19. For trusts the figure increased by about 150% over the same period.

• The number of taxpayers has increased over that ten-year period, but by no means as rapidly (the graph scales hide this). Individual taxpayer numbers rose from 133,000 to 256,000 while trustee numbers increased from 13,000 to 20,000. The corollary is that average CGT payments per taxpayer have increased sharply.

• The relatively small population of CGT payers – less than 1% of income tax payers – shrinks to miniscule levels when shares of tax are considered. The chart below highlights this – just 5,000 CGT payers (2% of the total number) account for 54.4% of the tax paid. Their gains were a minimum of £2m and the average CGT rate they paid was 15.15%.

The fresh data highlight why the Chancellor took Budget action against entrepreneurs’ relief (ER - now business asset disposal relief) in March. Just over a quarter of CGT in 2018/19 came from ER-qualifying disposals. The relief was claimed by 46,000 taxpayers on £27.7bn of gains. This was the highest amount of gains and tax since the introduction of ER, although not the highest number of claimants. Five years earlier, in 2013/14, 41,000 taxpayers claimed relief on £16.0bn of gains. 

CGT at present raises roughly twice as much for the Exchequer as IHT, but with much less noise. As the data show, unless the Chancellor chooses to lower the annual exemption, an increase in tax rates will hit only about a quarter of a million taxpayers. However, the effectiveness of any change will, to a great extent, depend upon the reactions of that top 5,000 who provide over half the total CGT revenue.

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

It was reported in the Financial Times (FT) on 11 August that Rishi Sunak is weighing options to shelve his Autumn Budget — billed as the defining economic moment for Boris Johnson’s Government — if Britain is hit by a big second wave of coronavirus.

Mr Sunak’s allies say he wants to get on with setting a path to recovery in his Autumn Budget, which is due to allocate spending for the rest of the parliament and set out a plan to repair tattered public finances.

But one ally said: “While it’s very likely to happen, there is an element of uncertainty. If we have a series of local lockdowns and a second spike, it’s not clear that would be the right time for a Budget.”

In the event the Budget was postponed — probably until Spring 2021 — Mr Sunak would be expected to produce a “mini-spending review” in the Autumn, allocating spending to departments for just a single year.

Carl Emmerson, deputy director of the Institute for Fiscal Studies, said there were good reasons to hold a Budget in the Autumn, since the Office for Budget Responsibility (OBR)’s March forecasts were clearly out of date and the Chancellor might want to announce further measures to support the recovery.

However, Mr Emmerson said it could make sense to put the full three-year spending review on hold, given the extent of uncertainty over the economic outlook.

Financial planners should be in a position to have an informed response to their clients in relation to what the future may hold for taxation. Being current and informed is a key component in driving all important trust. The Budget is likely to be an important “anchor point” for when future tax plans become (even a little) clearer.

Of course, the Chancellor has an exceptionally difficult and delicate tightrope to walk between fiscal responsibility and commitment to the recovery. We have already seen (through the VAT cut to 5% for hospitality, hotels and attractions) the primary importance that economic and fiscal stimulus plays in Government policy. Any tax increases (related to future Government debt repayment) are only likely to be contemplated (in the near term at least) if they are not expected to harm the consumer and business-driven economic recovery.

The rest of this year (and beyond - let’s not forget Brexit in all of this) is likely to be very very interesting, and not a little challenging.

Source: FT: Sunak weighs delaying Autumn Budget on second coronavirus wave – dated 11 August 2020.

The second stage of SEISS is now open for applications
(AF2, JO3)

According to the Treasury, over 2.7 million claimants have benefited from the first stage of the Self-Employment Income Support Scheme (SEISS) - with the Government providing £7.8 billion of grants.

Eligible claimants will now be able to receive a second and final grant worth 70% of their average monthly trading profits.

The SEISS requires claimants to have traded in 2018/19 with their profits making up at least half of their total income. They must also have submitted a self-assessment tax return on or before 23 April 2020 for the 2018/19 tax year. They must also have traded in the tax year 2019/20, and intend to continue to trade in the tax year 2020/21. They cannot claim the grant if they trade through a limited company or a trust.

To make a claim for the second grant their business must have been ‘adversely affected’ due to coronavirus () on or after 14 July 2020.  The Government has now published new guidance giving examples of how a business might have been adversely affected.

Adversely affected is typically when the business has experienced lower income or higher costs due to coronavirus. There is no minimum threshold over which the business’ income or costs need to have changed.

Anyone who makes a claim for the SEISS grant will have to:

• keep records of how and when their business has been adversely affected;
• confirm to HMRC that their business has been adversely affected by coronavirus.

HMRC suggests the following records should be kept as evidence:

• business accounts showing a reduction in turnover or increase in expenditure;
• confirmation of any coronavirus-related business loans they have received;
• dates their business had to close due to lockdown restrictions;
• dates the claimant or their staff were unable to work due to coronavirus symptoms, shielding or caring responsibilities.

A business could be adversely affected by coronavirus if, for example:

• the proprietor is unable to work because they:
• are shielding;
• are self-isolating;
• are on sick leave because of coronavirus;
• have caring responsibilities because of coronavirus.

• they’ve had to scale down, temporarily stop trading or incurred additional costs because:
• their supply chain has been interrupted;
• they have fewer or no customers or clients;
• their staff are unable to come into work;
• one or more of their contracts have been cancelled;
• they had to buy protective equipment so they could trade following social distancing rules.

Note that if the business recovers after they’ve claimed, their eligibility will not be affected.

HMRC has provided links to examples below, covering the following situations:

• if they are able to work within the social distancing rules;
• if they are unable to find work due to the impact of coronavirus;
• if they were not able to work as normal before 14 July 2020;
• if they were not able to work as normal on or after 14 July 2020;
• if they had significantly fewer customers due to social distancing rules or had to buy protective equipment;
• had contracts cancelled due to the impact of coronavirus.