Taxation and trusts update; Fascinating facts about self-assessment, COVID-19 impacts on benefits and expenses and more.

• FCA is warning consumers of the risks of investments advertising high returns based on cryptoassets
• Fascinating facts about self-assessment
• Another budget rumour
• COVID-19: Impacts on benefits and expenses
• Financial Ombudsman Service: Backlog of cases
• Scotland makes only minor income tax changes for 2021/22
• Yet another budget rumour
• OTS review considers the pre-population of tax returns
• More than 10.7 million submitted their self-assessment return on time
• Tax and NI rates and thresholds for 2021/22
• FCA action on bank branch closures

 

 

FCA is warning consumers of the risks of investments advertising high returns based on cryptoassets

(AF4, FA7, LP2, RO2)

The Financial Conduct Authority (FCA) has issued a news story warning consumers of the risks involved with investing in cryptoassets.

As is well known cryptoassets are considered high-risk investments and given that many firms advertise these to generate high returns, it is vital for consumers to fully understand what they are investing in and the regulatory protections that apply.

Consumers can find out more about which cryptoasset activities the FCA regulates here.

Firms offering these products should ensure they comply with the regulatory requirements and are authorised by the FCA where required.

Broadly, the FCA’s concerns include consumer protection, price volatility, product complexity, charges and fees and the way these products are marketed.

Although the FCA advises that consumers should be wary if they are contacted to invest quickly and are promised high returns – the FCA’s ScamSmart pages includes more information on how consumers should protect themselves from fraud - consumers should check if the firm used is on the Financial Services Register or list of firms with Temporary Registration. If they are not listed then consumers should ask the firm whether they are entitled to carry on business without being registered with the FCA and, if they are not, the FCA suggests that consumers should withdraw their cryptoassets.

Please see the FCA’s cryptoassets pages for more information.

Source: (https://www.fca.org.uk/news/news-stories/fca-warns-consumers-risks-investments-advertising-high-returns-based-cryptoassets)

FCA News: FCA warns consumers of the risks of investments advertising high returns based on cryptoassets – dated 11 January 2021.

Fascinating facts about self-assessment

(AF1, RO3)

HMRC has issued a press release sharing some little known facts about self-assessment.  HMRC’s seven self-assessment facts are:

• 96,519 people filed their tax return on 6 April 2020, i.e. the first day of the tax year;
• it’s the 20th anniversary of self-assessment internet filing;
• in January 2011, 3.4 million taxpayers filed their self-assessment return online - this has increased to an estimated 5 million in January 2021;
• this year’s deadline is on a Sunday – this has not been the case since 2016;
• last year, the busiest online filing day was 31 January with 702,171 returns completed;
• the peak hour for filing last year was between 16:00 to 16:59 when 56,969 customers filed;
• HMRC has increased the self-serve Time to Pay threshold to £30,000 to help self- assessment customers spread the cost of their tax bill, although interest will be applied to any outstanding balance from 1 February 2021.

Source: (https://www.gov.uk/government/news/fascinating-facts-about-self-assessment)

HMRC Press release: Fascinating facts about Self Assessment – dated 18 January 2021.

Another budget rumour

(AF1, RO3)

Could the Chancellor be about to tackle property taxes?  The Sunday Times recently ran a story suggesting that Rishi Sunak was examining the replacement of Council Tax and possibly also Stamp Duty Land Tax (SDLT) with a new property tax. This would almost certainly not be something for 3 March, but it could be a possibility down the line. Any such reform would not be easy.

The Office for Budget Responsibility (OBR) puts the amount to be raised by Council Tax in 2020/21 at £38.1bn, making it the fifth largest source of Government receipts. Council Tax is a devolved tax, meaning Scotland and Wales have their own variants (with different bands) and Northern Ireland has retained the rates system. Thus, if the Chancellor made changes, he would only have the power to do so in England.

There are few defenders of the English Council Tax system:

• It is based on values as at 1 April 1991, a planned revaluation in 2005 having been abandoned. The three-decade age shows in the banding, with the middle band, Band D, covering properties worth between £68,000 and £88,000. Nationwide’s latest data puts the average English house price at £269,603.
• The 30 year gap since the last valuation point has allowed huge regional disparities to build up, ignored by the frozen bands. Since 1991, Greater London prices have risen by 531% according to Nationwide. At the opposite end of the country, house prices in the North are up 194%.
• The nature of Council Tax is regressive. The levy in the lowest band (Band A with values £40,000 - £52,000) is two thirds of the Band D rate, while the highest level (Band H - £320,000+) is double the Band D rate. Over half the properties in the North East are in Band A, against 3.9% in Greater London. At the top end of the scale, 15.3% of Greater London (and South East) properties are in Bands F-H against 3.0% in the North East.
• Council Tax per head takes another pattern. London had the lowest in 2019 (£448), while the highest was the South East (£643). The North East was £494, while the North West was £507.

Ever since Council Tax replaced the widely criticised Community Charge (aka poll tax) in 1993, successive Governments have been frightened of making any meaningful changes. Indeed, the Council Tax system has been used as a way of back door tax increases and/or imposing austerity. For example, the cap on tax increases without a local referendum (2%) takes no account of inflation. Similarly, Governments have in recent years allowed councils to levy an ‘adult social care precept’. Following the Chancellor’s announcement in the Spending Review, for 2021/22 the precept will mean a Council Tax increase of up to 3% on top of the normal capped increase of up to 2%, i.e. up to 5% in total.

The Sunday Times suggested that the Treasury was looking at an idea beloved of think tanks, a property tax as a fixed percentage of property value. The approach is one way to levy a wealth tax on the family home under a different label. Research by WPI Economics, referred to in the article, showed that on a revenue-neutral basis, a 0.48% charge would be required. Apply that to Nationwide’s house price data and the London payment would average £2,335 per property against £660 in the North.

A further proposal is that the flat rate Council Tax replacement could also be used as a substitute for SDLT. That could have some appeal to the Treasury, as it would replace receipts that fluctuated with the vagaries of the housing market with a much steadier flow of revenue. Based on residential SDLT receipts of £8.422bn in 2019/20, that would imply a combined Council Tax/SDLT replacement rate of around 0.6%.

The abolition of Council Tax, yet alone SDLT, is not going to be announced on 3 March. However, it will be interesting to see whether there are any ‘levelling up’ consultations announced which touch on reform of property tax. 

Sources: Sunday Times 17/1/21, HMRC, Nationwide

COVID-19: Impacts on benefits and expenses

(AF1, RO3) 

HMRC has updated its guidance about taxable expenses and benefits when they are paid to employees because of coronavirus and how to report them to HMRC. HMRC’s guidance is about income tax treatment only. National Insurance contributions (NICs) treatment may vary depending on the individual benefit or expense. Here’s a selection of the content.

Living accommodation

If an employer is providing living accommodation for an employee working at a permanent workplace because of coronavirus, the cost will be taxable.

If an exemption applies, for example, if the employee is a warden of a sheltered housing scheme and is living at the premises, where they are on call outside normal working hours, there will be no tax charge.

If an employee is working at a temporary workplace (for less than 24 months), tax relief is available for employees who are provided with living accommodation when working at a temporary workplace because of coronavirus. The employer should report the cost of providing the accommodation on a P11D as normal, even if the value of the benefit is nil.

Lodging expenses

If the employee cannot return home because of coronavirus the employer may agree to reimburse their subsistence expenses and lodging expenses, for example if they stay in a hotel room. These are taxable and can be reported through a PAYE Settlement Agreement.

Volunteer fuel and mileage costs

To support volunteer work by their employees, an employer may agree to refund fuel costs or fund the costs of volunteer mileage.

Where employees are using company cars, their employers may agree to refund the fuel costs (using the Advisory Fuel Rates) of their employees carrying out volunteer work related to coronavirus, for example, delivering medical supplies including PPE. These refunds are a benefit and the employer may settle any tax and NICs on their employee’s behalf by reporting through a PAYE Settlement Agreement.

Employers may also agree to fund the cost of fuel for volunteer mileage related to coronavirus. Volunteer mileage should not be taken into account for the purposes of the car fuel benefit charge for company cars. Any tax and NICs due should be reported through a PAYE Settlement Agreement as a coronavirus-related benefit based on the appropriate advisory fuel rate for the volunteer mileage.

If an employee uses their own car to volunteer the employer can refund them up to the level of the approved mileage allowance rate. This is taxable and should be reported through a PAYE Settlement Agreement as a coronavirus-related benefit. If employers pay their employees less than the approved mileage allowance rate they cannot claim mileage allowance relief.

Paying or refunding transport costs

If employers pay or refund their employees the cost of transport from work to home, this is considered to be a benefit. This is because journeys between an employee’s workplace and home are private journeys. In some circumstances there is an exemption from paying tax on this benefit. For this to happen, all of the following four conditions must be met:

• the employee has to work later than usual, and until at least 9pm;
• this happens irregularly;
• by the time the employee finishes work, either:
• public transport has stopped;
• it would not be reasonable to expect them to use public transport;
• the transport is by taxi or similar road transport.

Employees may regularly travel to work in a car with one or more other employees using a car-sharing arrangement. If this arrangement stops because of unforeseen and exceptional circumstances, which are coronavirus-related, and the employer provides transport or reimbursement of the expense of transport from your employee’s home to workplace, this may also be exempt. The total number of exempt journeys cannot exceed 60 journeys in a tax year.

This is a single limit that applies to the late-night journeys and the failure of any car-sharing arrangement, together. If these requirements are not met, free or subsidised transport is taxable and should be reported through a PAYE Settlement Agreement as a coronavirus-related benefit.

Paying travel and subsistence expenses for employees travelling to temporary workplaces

If an employee was furloughed when they were travelling to a temporary workplace, the period of furlough is part of that period of continuous work. A period of working from home will also be part of the period of continuous work. However, the workplace stops being temporary from the date that attendance there is expected to be more than 24 months. Tax and NICs will then become liable on any payments of travel and subsistence expenses.

Company car ‘availability’

If an employee has been furloughed or is working from home, because of coronavirus, and provided with a company car which they still have, the employer should treat the car as being made ‘available for private use’ during this period even if their employee is:

• instructed to not use the car;
• asked to take and keep a photographic image of the mileage both before and after a period of furlough;
• unable physically to return the car or the car cannot be collected from the employee.

Where restrictions on movement apply because of coronavirus and prevent the car from being handed back or collected, HMRC will accept that a company car is unavailable in the following circumstances:

• where the contract has terminated – from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer;
• where the contract has not been terminated – after 30 consecutive days from the date that the car keys (including tabs or fobs) are returned to the employer or to a third party as instructed by the employer.

The return of keys means that a car cannot be driven in any circumstances even if it is still in the possession of your employee. HMRC says that it also recognises that following relaxation of coronavirus restrictions, it may take some time to collect cars where contracts have been terminated. As long as an employee continues to have no access to the keys until the car is collected from them, HMRC will still regard the car as being unavailable.

Employee Car Ownership Schemes (ECOS)

Employees who have used ECOS arrangements, including a loan from a third party to purchase a car, may have to return the car at the end of the loan period for its value to be assessed as a final settlement of the loan. Due to coronavirus restrictions, if an employee has not been able to return the car to the dealership or factory for its assessment, there may be an income tax charge on the amount of the loan still owing. If the loan period was less than four years, it may be possible for the employee to arrange an extension with the loan provider for a few more months. This will cover the period until the car can be returned and the loan settled. If this is done, HMRC will accept that the arrangements do not give rise to the income tax charge. If, however, the loan is extended beyond four years, an income tax charge will arise.

Salary sacrifice

Changes in circumstances because of coronavirus are accepted as a lifestyle change which allows salary sacrifice arrangements to be reviewed. If an employee chooses to amend a salary sacrifice arrangement because of coronavirus, the employer must make sure the change is reflected in the terms and conditions of their employment. The rules on salary sacrifice changed in April 2017 and for most arrangements entered into before 6 April 2017, new benefit valuation rules now apply. The transitional rules apply for a longer period where the benefit is:

• the provision of a car with emissions of more than 75g CO2/km;
• provided living accommodation;
• the payment of school fees.

The new rules will not apply to these types of benefit until 6 April 2021, unless employees vary or renew their arrangements. An arrangement is not regarded as being varied if the variation of the arrangement is only directly in connection with coronavirus.

You can read the full guidance here.

Source: HMRC Guidance: How to treat certain expenses and benefits provided to employees during coronavirus (COVID-19)– dated 19 January 2021.

Financial Ombudsman Service: Backlog of cases 

The Financial Ombudsman Service adjudicates on disputes between financial services companies and their customers.

Following the Treasury Committee’s evidence session with the Financial Ombudsman Service on 9 November 2020, there has been a considerable amount of correspondence between Mel Stride, Chair of the Treasury Committee and Caroline Wayman, Chief Executive and Chief Ombudsman at the Financial Ombudsman Service.

Commenting on the correspondence, Mr Stride said:

“The impact of coronavirus appears to have had a significant impact on the effectiveness of the FOS, with over 56,000 cases open for more than six months and over 23,000 open for more than two years.”

“As the Committee expressed in our recent evidence session, there are concerns about the FOS’ budget. It costs the FOS on average £960 to resolve a case, against the case fee of £650, and it’s funding its expenditure through its reserves.

“The Committee will want to explore these and other issues in detail around the time that the FOS publishes its final budget in the spring. We will be inviting Ms Wayman and Baroness Manzoor, FOS Chair, to provide evidence.”

According to the Financial Ombudsman Service website, once the case handler has completed their investigation, they will give the complainant an initial assessment of their case, and, typically, this part of their process takes up to 90 days. A very complex complaint, or where either party disagrees with the initial assessment and asks for final decision, may mean it takes longer.

However, on 22 January Ms Wayman set out the following information to Mr Stride on service levels:

Time it takes	2020/21 so far (as at 30/11/20)	2019/20
Cases resolved in 3 months	40%	56%
Cases resolved in 6 months	69%	74%
Cases resolved in 9 months	82%	84%
Cases resolved in 12 months	89%	90%

And, according to the BBC, on 29 January Mel Stride said, on BBC Radio 4's Today programme, that COVID had put a strain on the service, with staff having to work from home and cope with other organisational factors, but that many businesses faced the same kind of pressures and were dealing with them. He reportedly said: "It cannot hide behind those kind of issues." and "This is an organisation that needs to sharpen up." 

According to the BBC, Ms Wayman responded that there had been 65,000 more cases than they had anticipated, yet they had dealt with close to their pre-pandemic expectations. She said some cases had come straight into the Financial Ombudsman Service inbox because financial services companies had understandably prioritised other issues at the start of the pandemic, and that the industry now needed to "play its part" by ensuring complaints were looked at properly and in a timely fashion.

The impact of COVID-19 on complaint handling at businesses

The Financial Conduct Authority (FCA) has set out its expectations for financial businesses’ complaint handling at this time, including what businesses should do in relation to handling and prioritising complaints. It has said that it expects businesses to continue to explain to consumers how to complain, and to continue to handle complaints fairly. However, where consumers do make a complaint, they may not hear back from financial businesses within the eight weeks the FCA’s rules usually require (or the 15 business days for payment services and e-money complaints). The FCA has asked that consumers show patience at this time if they do not receive a final response to their complaint within the usual eight weeks.

Sources:

• Parliament: Treasury Committee has “concerns” with Financial Ombudsman Service – dated 29 January 2021.
• BBC: Financial Ombudsman 'must sharpen up' amid rising cases - dated 29 January 2021.
• FCA News: Coronavirus and consumers’ complaints – updated 31 July 2020.

Scotland makes only minor income tax changes for 2021/22

(AF1, RO3) 

The Scottish Government presented its Budget for 2021/22 on 28 January. It was a somewhat contingent Budget because:

• The SNP does not have a majority in the Scottish parliament and, as has happened before now, may need to tweak its proposals to get a Budget passed; and
• The Scottish Budget was meant to take place after the UK Autumn 2020 Budget, which was deferred to 3 March. Thus Kate Forbes, the Cabinet Secretary for Finance, said in her speech that her Budget “…may require significant revisions to the spending plans” after 3 March. That comment suggests she does not want to alter the income tax changes, which in any case are small.

 

The main points to emerge were minor changes to the income tax system:

• The starter (19%) and basic (20%) rate bands will rise in line with inflation (0.5%);
• The higher rate (41%) threshold will this year also rise in line with inflation, after being frozen since 2018/19. However, this might not survive the parliamentary process; and
• The additional rate threshold (46%) will stay at £150,000.

The proposed 2021/22 tax bands are:

Band Name	Tax Rate %	Taxable Income £
		2020/21	2021/22
Starter	19	0 - 2,085	0 - 2,097
Basic	20	Over 2,085 - 12,658	Over 2,097 - 12,726
Intermediate	21	Over 12,658 – 30,930	Over 12,726 – 31,092
Higher	41	Over 30,930 - 150,000	Over 31,092 - 150,000
Top	46	Over 150,000	Over 150,000

When looking at this table, there are several factors to consider: 

• These rates and bands only apply to non-savings, non-dividend income. For dividends and savings income, Westminster-set rates and bands apply.
• Westminster also fixes the personal allowance (currently set at £12,570 for 2021/22 according to details in the Spending Review), which Scotland adds in when publishing its tax bands. Thus, the basic rate (20%) band ends at £25,296 in the Scottish tables.
• The starting rate band provides just £20.97 of tax savings at most - £2,097 @ 1%. Once again, we will say it hardly seemed worth the effort.
• The Scottish higher rate (41%) threshold will (parliament agreeing) be £43,662 against a rest-of-the-UK (RoUK) figure of £50,270 (at 40%) for 2021/22 (again based on the Spending Review).
• According to Kate Forbes, the scales mean that “… all Scottish taxpayers will pay slightly less Income Tax in 2021/22 than in 2020/21, based on their current income. Furthermore, based on …assumptions about the UK Budget on 3 March 2021, 54% of Scottish taxpayers will continue to pay less tax than if they lived in other parts of the UK in 2021/22.” There is an obvious corollary for the remaining 46%, a proportion that was 44% in 2020/21. It must also be said that for many taxpayers the bulk of their tax saving will be due to the £70 increase in the personal allowance, a figure decided by Mr Sunak, not Ms Forbes.
• The gap between the Scottish and RoUK higher rate thresholds mean that the earnings band in which full National Insurance contributions and Scottish higher rate tax is payable (with an effective total marginal rate of up to 53% [41% +12%]) will widen marginally to £6,608 (£50,270 - £43,662).
• For somebody earning £50,000 (the 2020/21 UK higher rate threshold), the net result is that in 2021/22 their Scottish income tax bill will be £9,008 against £7,486 in the rest of the UK, a £20 reduction in the gap from the current tax year.

There is also a change to the Land and Buildings Transaction Tax, with the temporary increase in the nil rate band to £250,000 ending on 31 March 2021 and the previous bands returning (i.e. a £145,000 nil rate band with £175,000 applying to first-time buyers).

It will be interesting to see whether the higher rate threshold increase survives.

Sources: Scottish Government 28/1/21

Yet, another budget rumour

“We promise not to raise the rates of income tax, National Insurance or VAT. This is a tax guarantee that will protect the incomes of hard-working families across the next Parliament.”

So said the Conservatives’ 2019 election Manifesto. At the time many economists criticised the pledge as dangerously restricting the scope of the Chancellor to deal with unforeseen events. However, as the Triple Lock on pensions has shown, once politicians have boxed themselves into a fiscally foolish corner, they can find it virtually impossible to escape.

On February 2 the Financial Times carried a report that Rishi Sunak had agreed with Boris Johnson to keep to the tax triple lock pledge in place despite Treasury pressure to abandon it. As the FT noted, the Chancellor had cover for breaking the Manifesto promise as the same document had also said “We will proudly maintain our commitment to spend 0.7 per cent of GNI on development, and do more to help countries receiving aid become self-sufficient.”, a pledge that was dropped (to 0.5%) at the time of the Spending Review.

 

As the pie chart above shows, ruling out rate increases on income tax, VAT and/or National Insurance contributions (NICs) means putting limits on extracting more from three areas that together contribute 63% of tax revenue. However, it does not mean that no changes can be made to those taxes.

For example, the VAT threshold for businesses (already frozen at £85,000 for five years from April 2017) could be reduced or income tax allowances and bands could be frozen (albeit a 0.5% increase is already promised for 2021/22). Income tax reliefs could be cut back – the obvious example being on pension contributions. The trouble is all these actions are not as simple (or often as rewarding to the Exchequer) as the £5bn-£7bn a year that 1% on the rate of any of the triple locked trio would raise. 

If the FT’s report is true, it raises the likelihood of increases to taxes already in the spotlight, such as capital gains tax and corporation tax. We might also see a new tax introduced that looks like income tax or NICs, but with another label, like ‘Pandemic Recovery Levy’.

Sources: Financial Times 02/2/21 OBR EFO November 2020

OTS review considers the pre-population of tax returns

(AF1, RO3)

The Office for Tax Simplification (OTS) is an independent adviser to Government on tax simplification; it does not implement changes - these are a matter for Government and for Parliament.

In January, the OTS published a review exploring the smarter use of data on taxpayers and their activities – pre-population of tax returns, including with data from third-parties – to reduce the need for taxpayers and agents to submit additional information that HMRC either already holds or could verify itself. The OTS has now published a call for evidence to inform its new review.

It has also provided a couple of examples:

1. Instead of millions of individuals having to provide to HMRC details of potentially taxable income and gains on their investments, the review will consider whether it could instead be uploaded by their investment or wealth management company and reflected in their online tax account or self-assessment return.
2. Many people who are eligible to claim relief from higher rates of tax for charitable donations or pension contributions do not currently do so. This review will consider whether this information could instead be reported to HMRC on the individual’s behalf by a third party and be pre-populated into their return or claimed through the online tax account, and the potential benefits and drawbacks of such an approach.

The OTS welcomes the view of both individuals and their agents about the types of data it would be most useful to have in the online tax account or pre-populated in tax returns, as well as any difficulties, benefits or other considerations that the OTS should take into account in this review.

The OTS is also seeking the views of those, such as financial institutions, charities, pension providers and others that could potentially provide HMRC with customer data on their behalf. 

You can read the full Call for Evidence here.

The OTS has asked for written responses to be sent to ots@ots.gov.uk by 9 April 2021. If anyone would like to meet online with the OTS to discuss the review, then please contact the OTS at ots@ots.gov.uk by 12 March 2021.

This consultation closes at 5pm on 9 April 2021, after which the OTS intends to publish a report outlining its findings, in summer 2021.

Source: OTS Open consultation: Making tax easier through smarter use of third party data – dated 27 January 2021.

More than 10.7 million submitted their self-assessment return on time

(AF1, RO3)

HMRC has issued a press release stating that more than 10.7 million people submitted their 2019/20 self-assessment tax returns by the 31 January deadline.

Around 1.8 million are still expected to file a self-assessment return. However, they will not incur a late filing penalty provided they file by 28 February.

Interest will be charged in cases where individuals owed tax but did not make a payment by 31 January unless they set up a Time to Pay arrangement (or other payment arrangement where tax due exceeded £30,000) with HMRC. If individuals do owe tax, they should aim to pay any outstanding balance as soon as possible or arrange a payment plan. The payment plan needs to be set up no later than 60 days after the due date for payment – so anyone affected should act fast, and certainly before 3 March to avoid a 5% late payment penalty.

Source: (https://www.gov.uk/government/news/107-million-tax-returns-filed-by-31-january-deadline)

HMRC Press release: 10.7 million tax returns filed by 31 January deadline – dated 1 February 2021.

Tax and NI rates and thresholds for 2021/22

(AF1, RO3)

HMRC has published a useful summary of rates and thresholds for 2021/22.

This useful summary can be found here. It covers:

1. PAYE tax and Class 1 National Insurance contributions
2. Tax thresholds, rates and codes
3. Class 1 National Insurance thresholds
4. Class 1 National Insurance rates
5. Class 1A National Insurance: expenses and benefits
6. Class 1A National Insurance: termination awards and sporting testimonial payments
7. Class 1B National Insurance: PAYE Settlement Agreements (PSAs)
8. National Minimum Wage
9. Statutory Maternity, Paternity, Adoption, Shared Parental and Parental Bereavement Pay
10. Statutory Sick Pay (SSP)
11. Student loan and postgraduate loan recovery
12. Company cars: advisory fuel rates
13. Employee vehicles: mileage allowance payments

Note that the income tax rates and thresholds listed are subject to confirmation at the 3 March Budget, and the Scottish income tax rates and thresholds listed are subject to parliamentary approval. 

Source: HMRC Guidance: Rates and thresholds for employers 2021 to 2022 – dated 02/02/2021.

FCA action on bank branch closures

(AF1, AF2, JO3, RO3)

The FCA has asked banks to reconsider branch closures during coronavirus lockdown.

In September 2020, the Financial Conduct Authority (FCA) published guidance on branch closures and ATM closures and conversions. After that, on 15 October, the Treasury published a Policy Paper ‘Access to Cash - Call for Evidence’.

Since then some banks and building societies have informed the FCA that they are either going ahead with branch closures already announced, or announcing new branch closures during the current lockdown. 

The FCA says that it is concerned that these activities could have significant consequences for customers. It may be harder than usual to reach all customers under the current restrictions and engage with them on closure proposals effectively (for example, small businesses that are temporarily closed). Some customers may need to access in-branch services to help them prepare for closures but may be unable to do so. Customers may also need additional help to access online banking and in making payments. The FCA wants firms to review their plans against its existing guidance and ensure that they continue to comply with its Principles for Businesses, which require firms to treat their customers fairly, and communicate with them in a fair, clear and not misleading way and to exercise particular care in connection with vulnerable customers.

On 28 January, the FCA asked firms to consider the impact of branch closures on customers. Where firms consider it is appropriate to continue with plans during this period, the FCA expects them to have considered its guidance and be able to demonstrate how they’ve taken the concerns and expectations set out in this statement into account. If firms are considering new closures or advancing those previously announced during this period, the FCA expect them to:

 

• communicate with customers in a way that is clear, fair and not misleading to inform them of the closure proposals. Particular consideration should be given to the best way to make sure vulnerable and hard-to-reach customers are aware of the proposals and are able to contact the firm. 
• give customers clear information about how the firm can help them access alternatives during this period of national restrictions, for example support to use online banking.
• where appropriate, engage with customers to understand their needs and properly consider how they will be affected by the proposals.

 

It remains to be seen what impact, the FCA’s request will have.

Source: FCA News: FCA asks banks to reconsider branch closures during coronavirus lockdown – dated 29 January 2021.