On 7 May 2020, over 250 tax business leaders attended our webinar on the UK tax implications of COVID-19. We provided practical insights on key risks and planning opportunities in order to challenge and strengthen your current tax strategy and thinking.
Watch the recording below to find out how to manage tax risk and compliance effectively, as well as understand the potential changes to tax legislation.
Checklist of key tax risk considerations
We have created a checklist of the key tax risks and planning opportunities to help strengthen your current tax strategy and thinking.
You can use this document as a guide to help you understand key COVID-19 related tax considerations that have arisen within the five areas we discussed in the webinar.
In the webinar above, we discuss how you can support your people through the COVID-19 lockdown, understand tax risks associated with global mobility, employment tax considerations relating to working from home and also hear some of our practical insights into the Coronavirus Job Retention Scheme (CJRS) following conversations with HMRC.
Cash tax management
Given the importance of cash flow management, watch the recording to find out more about how HMRC is supporting businesses in managing their tax obligations including through Time To Pay arrangements and VAT deferrals. We also look at other measures to help you optimise your short- to long-term tax cashflow position.
Financing and treasury opportunities
You will have heard about the funding support packages available from the government, which haven’t been readily accessible to all businesses. As such, a number of finance and tax functions are considering other strategies to manage liquidity and cash needs globally, and tax could have a significant impact on the options here. The video above provides information about the tax implications of your treasury activities and how you could maximise long-term financing opportunities through debt restructuring and hedging.
Corporate planning and governance
As we start moving towards the long term, businesses will need to start turning their attention to their broader corporate tax and risk management strategies. The webinar above highlights how you might be able to manage your wider tax risk and compliance processes to create a more robust tax function.
The international landscape is constantly changing and has had to adapt to the current circumstances. Find out more about what this means for the future of international tax, in terms of OECD developments etc, but also the impact of your international tax position and the opportunities available.
For further information please contact Martin Lambert.
Legislation in respect of the annual allowance that applies to high earners was updated in April 2020. The new rules state that individuals who have ‘adjusted income’ over £240,000 a year will see their annual allowance entitlement reduce by £1 for every £2 over £240,000. The maximum reduction is £36,000. So anyone with an income of £312,000 or more will have an annual allowance of £4,000.
The reduction does not apply to individuals who have a threshold income of no more than £200,000. The definitions of adjusted income and threshold income incorporate a number of different income streams, such as income from other pension plans or from rented accommodation, for example. An individual would need to review their financial affairs to calculate the income levels that their personal annual allowance would be calculated on, and often this involves the use of an independent financial adviser due to the complexity that can be involved.
Generally, it is considered the individual's responsibility to obtain advice and clarifications for this calculation. The employer’s responsibility is simply to provide the basic facts if asked.
We would be more than happy to arrange an initial chat to provide further information regarding how pension salary sacrifice works and the steps that need to be taken to implement it.
There is uncertainty over the impact of furlough on EMI relief and we are seeking clarification from HMRC on this point.
It is not the headcount that counts towards the claim, it is each individual person that can be furloughed. Employers can rotate employees, but they have to be furloughed for a minimum of three weeks each.
Once a claim has been submitted it normally takes six working days for payments to be made. The Chancellor announced on 12 May 2020 that the CJRS will remain open until the end of October.
No. At present, the guidance indicates that you must submit one claim per period and include all furloughed employees in that period. Changes are not permitted once the claim is submitted, however HMRC are looking to develop a process to allow for amendments to be made.
All of these are options to consider according to your particular circumstances. The furlough scheme was intended to prevent redundancies and support organisations to keep their employees through the pandemic. A key characteristic of the scheme is that employees must be furloughed for a minimum of three weeks and must not do any work for the organisation or related companies.
HMRC is considering whether interest should be charged on tax deferred under a time to pay arrangement. You should discuss this with HMRC when agreeing the terms. Note that interest is not charged under the VAT deferral support measure.
To the extent that tax has been deferred and you do not anticipate being able to pay it before the agreed date, you will need to agree a time to pay arrangement with HMRC. The approach will depend upon each business’s circumstances, including the amount of tax concerned, and it is advisable to contact HMRC before the initial deferral period expires. In terms of whether interest will be charged, see the response to the question above.
HMRC has agreed that UK VAT registered businesses with quarterly or monthly VAT payments falling due between 20 March 2020 and 30 June 2020 may either defer the payment until a later date or pay the VAT as normal. If the VAT is deferred, it must be paid on or before 31 March 2021
It depends, and this will be considered on a case by case basis. However, HMRC do have some flexibility in agreeing deferral periods.
Yes – based on our discussions with HMRC, we expect further guidance to be issued shortly.
There is no change that we are aware of. Heightened chances of fraud during this time create more risk for CCO and potentially more chance for challenging audits.
Indirect taxes. In particular, there have been challenges in producing VAT returns and in some customs duty processes.
HMRC will want to ensure adherence to the legislation which hasn’t changed during this period. Processes and procedures are being tested in real time and I believe HMRC will want to determine if governance procedures have been successful or if they have been adapted during this time.
No, unfortunately not. HMRC have not indicated an intention to relax the CIR rules, or any of the corresponding administrative requirements.
You may incur transaction costs as part of raising finance (eg loan arrangement fees) and the tax deductibility of these costs should be considered. It is worth noting that where costs may be deductible under the loan relationship rules, these may be restricted by the Corporate Interest Restriction (or other anti-avoidance provisions governing interest deductibility).
We recommend that such costs are identified and reviewed – and whether these costs could be passed onto other group companies who may be benefitting from the financing raised.
The implementation of Pillars 1 and 2 have been slightly delayed, but the intention is still to brief the G20 with recommendations later this year – with significant changes to be implemented in 2021.
It is worth noting that the European Commission have proposed to defer the DAC 6 reporting deadlines by three months. The impact of this would mean:
- 31 October 2020 as the earliest reporting deadlines for relevant cross-border arrangements implemented on or after 1 October 2020
- 30 November 2030 reporting deadline for historic arrangements since 25 June 2018.
The DAC 6 proposal is subject to ratification and member states buy-in, but it appears highly likely that the deferral will be implemented.
Digital Services Tax (DST) is included in the Finance Bill which has not yet been enacted. It is still expected that this will be enacted retrospectively with effect from 1 April 2020, with no sign of delay – so we do recommend companies with an online presence consider this as soon as possible.