As businesses prepare to enter a new year, the Chancellor Rishi Sunak has confirmed a further extension to the Government-backed loans and Coronavirus Job Retention Scheme (CJRS).
In a move that the Chancellor said would provide “certainty for millions of jobs and businesses”, the Government has extended the furlough scheme until the end of April 2021.
Under the latest extension, workers will continue to receive payments equal to 80 per of their wage, while employers will only be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked, and NICS and pensions for hours not worked.
The eligibility criteria for the UK-wide scheme will remain unchanged, meaning that those currently benefitting from the scheme can continue to do so.
The Government has said that by extending the scheme “businesses across the country will have certainty about what support will be available to them”.
The Chancellor had intended to review the furlough scheme in January but is said to have brought this date forward to help businesses plan for the year ahead.
During his announcement, Rishi Sunak also confirmed that he would be extending all of the Government-guaranteed COVID-19 business loan schemes, including the Bounce Back Loan and Coronavirus Business Interruption Loan Scheme, until the end of March 2021.
Applications for these loan schemes, which has seen more than £68 billion in guaranteed loans delivered to businesses, had been due to close at the end of January 2021.
As well as announcing extensions to the current financial support measures, the Chancellor said that he would hold his next Budget on 3 March 2021. This budget will deliver the next phase of the plan to tackle the virus and protect jobs.
If you require support with these business support loans or help administering the furlough scheme, please speak to our experienced team.
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New guidance has been issued by HM Revenue & Customs (HMRC) which alters how the Statutory Residence Test (SRT) for tax will operate as a result of the COVID-19 pandemic.
The latest COVID-19 guidance is likely to affect taxpayers’ ability to move freely into and out of the UK, which could affect their status under the SRT.
The SRT came into effect in April 2013 and allows a taxpayer to work out their residence status for a tax year.
For day counting under the SRT, HMRC has confirmed what it considers exceptional circumstances that would allow a taxpayer to disregard up to 60 days spent in the UK. This includes where a taxpayer is:
Guidance was also issued earlier this year in August, but there has been no extension to the maximum limit to the number of days which can be disregarded, which remains at 60 days, despite the scale of the pandemic.
The existing rules surrounding a “significant break” from overseas work will also remain unaltered, according to HMRC.
Days worked in the UK by a non-resident due to COVID-19 imposed restrictions will also not be taxed for employment income related to periods starting from the day the non-resident intended to leave the UK and the date they eventually left, if:
However, individuals may be required to provide evidence for the above to HMRC. Any days spent in the UK. where the individual worked more than three hours, whilst not taxable, will still count towards the 30 UK work days allowed as part of the SRT.
The Finance Act 2020 has enacted changes to the day count for those non-resident individuals in the UK between 1 March 2020 and 1 June 2020 working on COVID-19 related activities. These activities will not count towards the residence test.
If you are affected by changes to the SRT due to COVID-19 you must seek advice at the earliest opportunity.
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The Chancellor’s statement to Parliament setting out his Spending Review decisions came against a backdrop of predictions from the Office for Budget Responsibility (OBR), which indicated that the UK economy will shrink by 11.3 per cent this year – the largest fall in output for 300 years.
In response, he said that the Coronavirus Pandemic would leave “long-term scarring”, which could mean that the UK’s economic output may not return to pre-pandemic levels until the final quarter of 2022.
Despite the damage to the economy, the Spending Review highlighted that the UK was now experiencing growth and that unemployment had risen slower than expected thanks to the economic support delivered during the last seven months.
Borrowing and public sector spending
Government borrowing will reach almost £400 billion this year, which is around 19 per cent of UK GDP – the highest level in peacetime.
The Chancellor announced a freeze on public sector earnings, apart from around one million NHS workers, who will continue to benefit from a cash increase of £33.9 billion a year by 2023-24.
The Government will also support public workers earning below the UK median wage of £24,000, who will be guaranteed a pay rise of at least £250 next year.
Employment
While the COVID-19 financial support measures may have slowed down the rate of unemployment, it does still continue to rise.
The Chancellor is committing £2.9 billion to fund a new three-year UK-wide programme, which will provide innovative and tailored support to help more than a million long-term unemployed people.
He also confirmed that the Government will increase the National Living Wage (NLW) in line with the recommendations of the independent Low Pay Commission (LPC) and continue to increase the National Minimum Wage (NMW) as well.
From April 2021, the NLW will increase by 2.2 per cent from £8.72 to £8.91. The age threshold for the NLW will also fall from 25 to 23, as per the recommendations of the LPC.
The other Minimum Wage (NMW) rates will also increase from April 2021 as follows:
The Government will also increase the 2021-22 Income Tax Personal Allowance and Higher Rate Threshold in line with the September 2020 CPI figure of 0.7 per cent.
This figure will also be used as the basis for setting all National Insurance limits and thresholds, and the rates of Class 2 & 3 National Insurance contributions, for 2021-22, according to the Spending Review.
Those with pensions should be aware though that the Retail Price Index (RPI) will be reformed to align it with the Consumer Price Index, including owner occupiers’ housing costs (CPIH), from February 2030. This could affect pension pots and investments and may cost savers up to £96 billion, according to some estimates.
Infrastructure spending and levelling-up
During his speech, the Chancellor also announced the creation of an “infrastructure bank”, which will be set up and headquartered in the north of England.
This new organisation will finance major projects across the UK from next spring.
The Government’s investment in economic infrastructure will be £27 billion in 2021-22, which will be part of the Spending Review’s £100 billion total investment next year.
A new £4 billion levelling-up fund will also be created, which will allow local areas to apply for funding for major projects next year.
These projects, the Chancellor announced, would have to have “real impact” and be delivered within the lifetime of the current Government.
Changes to taxation
Despite some fears that the Chancellor may signal his intention to announce tax rises as soon as the Budget next spring, he remained silent on the matter.
Given the complex relationship between taxation and the economic recovery, it is likely that the Chancellor is deferring any decisions until nearer the next Budget.
If you are concerned that announcements made in the Spending Review may affect your business in some way, please contact us.
Businesses across the UK are being reminded of key deadlines and actions for the Coronavirus Job Retention Scheme (CJRS), which are just days away.
The CJRS was extended recently to 31 March 2021 for all parts of the UK. Since 1 November 2020, the UK Government has agreed to pay 80 per cent of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month. Employers are only required to cover the cost of National Insurance and Workplace Pension contributions.
The scheme is open to employees who have previously been claimed for through the scheme before 1 November 2020 and those who have not.
However, in the next few days, businesses that are using the CJRS need to do the following:
In future, all claims for periods starting on or after 1 November 2020 must be submitted within 14 calendar days after the month they relate to – unless this falls on a weekend, in which case the deadline is the next weekday.
For claim periods from 1 December 2020, you cannot claim CJRS grants for any days that your employee is serving a contractual or statutory notice period, including notice of retirement or resignation.
After this date in December, HMRC will also begin publishing the names, an indication of the value of claims and company registration numbers of employers who make CJRS claims. HMRC has said it will write to businesses with details of when this information will be published.
Details of claims will also be available to employees through their online Personal Tax Account for claim periods from December 2020.
It is important that you meet these upcoming deadlines. If you require support with claiming the CJRS, please speak to our team today.
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