COVID-19 Relief Clauses added to the Final Bill 2020
The Finance Bill 2020 has now reached its report stage and HM Treasury has published specific epidemic-related relief clauses, together with Explanatory Notes and Tax Information and Impact Notes. We set out below details of this new legislation implementing recent announcements.
We will continue to monitor any relevant development/announcement, therefore please speak to your usual Statura contact should you wish to discuss in more detail the content of this document or indeed the way in which the COVID-19 outbreak is affecting your business.
New Clause 19 and new Schedule 1: Taxation of coronavirus support payments
This clause and Schedule ensure that particular grants to help businesses, employers and individuals (including partners of partnerships) affected by the coronavirus crisis are subject to tax. They are treated as income where the business is within the scope of either Income Tax or Corporation Tax. The rationale for this is that in the case of Income Tax these grants are supplanting people’s income and, in the case of Corporation Tax, are supplanting companies’ revenues.
In particular, these measures
- ensure that HM Revenue & Customs (HMRC) can use its information and inspection powers to check a Self-Employment Income Support Scheme (SEISS) or Coronavirus Job Retention Scheme (CJRS) claim has not been overpaid and that a CJRS payment has been used to pay furloughed employee costs;
- gives HMRC powers to raise an Income Tax assessment on anyone who has received a SEISS or CJRS payment to which they are not entitled, or anyone who has not used a CJRS payment to pay furloughed employee costs;
- gives HMRC powers to charge a penalty where a person deliberately makes an incorrect claim for a SEISS or CJRS payment. It also gives HMRC powers to charge a penalty where a person who has claimed a CJRS payment deliberately does not use it for the costs it was intended to reimburse. The penalty will only apply if the person fails to notify HMRC about the situation within 90 days, or 90 days after the Finance Bill receives Royal Assent if it arose before that;
- gives HMRC powers to make a company officer jointly and severally liable for the Income Tax charge raised in relation to any CJRS payment to which the company was not entitled or any CJRS payment which was never intended to be used to pay furloughed employee costs in certain circumstances. Those circumstances are where the officer is culpable for making a deliberate CJRS claim to which the company was not entitled.
New Clause 20: Protected pension age of members employed as a result of coronavirus
This clause introduces changes to the tax regime applicable to registered pension schemes to ensure that those who have retired but return to employment to support the coronavirus response do not suffer adverse tax impacts by losing their ability to receive pension benefits at an age below the current normal minimum pension age (which is currently age 55).
New Clause 21: Modifications of the statutory residence test in connection with the coronavirus
To help address the impact that the coronavirus pandemic is having on the health of the nation, some organisations and companies may need to bring expertise to the UK from within their workforce who are normally based outside the UK.
Under normal circumstances, the actions and presence of these individuals in the UK could affect their own tax residence status.
The new clause modifies the statutory residence test (SRT) so that any days and ties while individuals are in the UK specifically to work in a specified sector or profession and working directly on coronavirus related activities will be disregarded for the purposes of determining whether they are tax resident in the UK. The disregard will apply to qualifying days in the period from 1 March 2020 to 1 June 2020, i.e. in either tax year 2019-20 or 2020-21
New Clause 22: Future Fund: EIS and SEIS relief
This clause modifies the current rules for the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). These modifications are to ensure that investors in a company who also support the company using a Future Fund convertible loan note will not lose relief on any previous EIS or SEIS investments when that loan is redeemed, repaid or converted. This is necessary because the current legislation contain provisions that withdraw relief in particular circumstances where an investor "receives value" from the company.
New Clause 23: Interest on unpaid tax in case of disaster etc of national significance
In response to the coronavirus pandemic, the Chancellor of the Exchequer announced on 20 March 2020 a policy of deferring the next quarter of VAT payments until the end of the financial year and the next Self-Assessment payments on account until 31 January 2021. The pandemic has caused many businesses to temporarily close or operate within strict government guidelines of social distancing, which has had a direct impact on individuals and businesses. The government is giving this support to ease the burden on individuals and businesses who could be facing cash flow difficulties at this time. The government does not want interest and surcharges for the period of the deferral to be added to the specified deferred VAT and Self-Assessment liabilities.
This clause 23 amends current legislation to enable HM Treasury to specify which payments of tax and other liabilities that are deferred by agreement during a period of national emergency or disaster will not attract interest or surcharges during the period of deferral.
New Clause 24: Exceptional circumstances preventing disposal of interest in three year period
Higher rates for additional dwellings were introduced on 1 April 2016, requiring individuals who buy dwellings while already owning an interest in another dwelling to pay Stamp Duty Land Tax (SDLT) at rates 3 percentage points above the standard rates. An exception to this rule arises when someone replaces their main residence. The higher rates for additional dwellings will not be chargeable if the previous main residence is sold before, or at the same time as, the new main residence is bought. If the previous main residence is sold after, but within 3 years of, buying the new main residence, the person must pay the higher rates, but they may then amend their SDLT return to obtain a refund of the higher rate.
This clause 24 amends the above SDLT higher rates on additional dwellings provisions. It introduces an extension to the 3-year time limit in which to dispose of a previous main residence, and so qualify for a refund of the 3% higher rate, where exceptional circumstances prevent the sale of a previous main residence within that period. It applies only where the 3-year time limit to sell the previous main residence ended on or after 1 January 2020.