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.

During the call, our experts took attendees through how to model quickly and adapt their current tax strategy for the new normal:

Understanding COVID-19 through the lens of regulatory Get support in your area

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.

Download the checklist [ 69 kb ]

Managing people

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.

International tax

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.

FAQ's: What does COVID-19 mean for tax?
Do you have any guidance on salary sacrifice in relation to pensions? What are the key things to be aware of for people with salaries of £200K and tapering of annual allowances?

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.

Has there been any confirmation from HMRC that furlough will not count as a disqualifying event for EMI relief?

There is uncertainty over the impact of furlough on EMI relief and we are seeking clarification from HMRC on this point.

Can you have one person being furloughed, but rotate the person who is taking the furlough week? For example, if you have a team of four, and there isn't enough budget for all of them, but there would be enough if there were only three.

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.

With time to pay for PAYE, how long does the official process take if you need it further than end of June, and how long on average do you think HMRC will extend?

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.

Can I amend my job retention scheme claim later if I want to add more employees?

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.

We do not have enough work to keep all employees occupied – should we put the employees on short hours, make redundancies, or use the furlough scheme?

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.

With time to pay arrangements, I am assuming HMRC will still charge late payment interest. Do you know if HMRC will waive this?

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.

Regarding time to pay, I was told I didn't need to do anything else until HMRC contacted me after the three months. Does that seem right? Also, will whether HMRC charge interest on time to pay arrangements and at what rate?

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.

I was under the impression HMRC were willing to wait for VAT payments to be deferred until the end of the tax year, is this incorrect?

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

Further details >>

What deferral period might I be able to agree under a time to pay?

It depends, and this will be considered on a case by case basis. However, HMRC do have some flexibility in agreeing deferral periods.

Will HMRC be issuing any further guidance on TTP?

Yes – based on our discussions with HMRC, we expect further guidance to be issued shortly.

How are HMRC approaching enquiries and audits in relation to CCO etc at the moment?

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.

Which tax processes are you finding clients struggling with the most?

Indirect taxes. In particular, there have been challenges in producing VAT returns and in some customs duty processes.

From a compliance perspective do we think HMRC’s priorities will be elsewhere or, given the economic outlook, will they look back at this period and scrutinise it even more?

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.

Is there a planned relaxation of the CIR rules and administration as a result of Covid?

No, unfortunately not. HMRC have not indicated an intention to relax the CIR rules, or any of the corresponding administrative requirements.

What about costs incurred in obtaining additional financing, eg from the government – are these deductible for tax purposes?

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.

With the current noise around Covid-19, how much progress do you think will really be made on Pillars 1 and 2 this year?

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.

Now that more businesses are moving to an online presence, should we be worrying about Digital Services Tax?

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.