HMRC have published their Employer Bulletin for December 2020. We summarise the key content for you, with links to our detailed guidance on the topics covered. 

Extension to the Coronavirus Job Retention Scheme

  • The Coronavirus Job Retention Scheme (CJRS) has been extended until the end of March 2021 for all parts of the UK.
  • From 1 November, the UK Government will pay 80% of employees’ usual wages for the hours not worked, up to a cap of £2,500 per month.
  • The terms of the scheme will be reviewed in January.
  • You must continue to pay the associated employer National Insurance contributions and any pension contributions from your own funds.

What’s new in the support available?

  • You and your employees do not need to have benefitted from the scheme before to claim for periods after 1 November.
  • There are now monthly deadlines for claims. This means that you may need to submit earlier than you have in previous months. 
    • Use this list of dates to help you submit your claim before it’s too late.
    • You must submit any claims for November no later than 14 December.
  • The full guidance for claims from November onwards, including how you can check if you’re eligible and how to calculate and make a claim online, can be found on GOV.UK.

Publishing employers’ information

  • From February, HMRC will publish the names, an indication of the value of claims and Company Registration Numbers (for those who have one) of employers who make Coronavirus Job Retention Scheme (CJRS) claims that cover periods from December onwards.
  • You can see more on how HMRC will indicate the value of these claims in banded ranges on GOV.UK.
  • Employers can request their details are not published where disclosure of this information would result in a serious risk of violence or intimidation to the employer, an employee, director or member of their household.
  • Details of CJRS claims will be published monthly as part of HMRC’s commitment to transparency and to deter fraudulent claims.
  • Employees will also be able to check if their employer has made a CJRS claim on their behalf through their online Personal Tax Account from February.
  • Employees should talk to their employer in the first instance if they have any questions.

See COVID-19: Coronavirus Job Retention Scheme (CJRS) from 1 November 2020

Job Retention Bonus and Job Support Scheme

  • The Job Retention Bonus will no longer be paid in February 2021, as CJRS will be available at that time.
  • An alternative retention incentive will be put in place at the appropriate time.
  • The launch of the Job Support Scheme has also been postponed. 

See COVID-19: COVID-19: Job Support Scheme (JSS) - on hold and COVID-19: Job Retention Bonus - on hold

VAT Deferral

  • As part of the Winter Economy Plan the Government announced that businesses who deferred VAT due from 20 March to 30 June 2020 will now have the option to pay in smaller payments over a longer period.
  • Instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.
  • You will need to opt into the scheme, and if you do, this means that your deferred VAT liabilities do not need to be paid by the end of March 2021.
  • The VAT deferral new payment scheme will require a direct debit to be set up as part of the digital opt-in process and this must be done by the authorised bank account holder only.
  • HMRC will communicate the details of the scheme and its operation in time for you to complete the opt-in process.
  • If you can pay your deferred VAT, you should still do so by 31 March 2021.
  • You should contact HMRC’s Time to Pay service if you need more help to pay deferred VAT. 

See COVID-19: VAT payments

VAT reverse charge for construction and building services

  • In order to help construction businesses deal with the effects that the coronavirus pandemic has had on them and give them more time to prepare, this reverse charge measure – originally due to be introduced from 1 October 2020 – will now come in on 1 March 2021.
  • A Revenue and Customs Brief was issued in June, giving more information.
  • Every VAT registered construction business will have received a letter in September 2020, advising them to check if they may be liable for the reverse charge. If they are liable, they should start to prepare now.
  • Further information on the scope of the reverse charge and how it will operate can be found in this guidance note.

The key aspects are:

  • It will apply to standard and reduced-rated supplies of building and construction services made to VAT registered businesses, who in turn also make onward supplies of those building and construction services
  • The contractor will be responsible for paying the output VAT due rather than the sub-contractor but can continue to reclaim this amount as input tax
  • The scope of supplies affected is closely aligned to the supplies required to be reported under the Construction Industry Scheme but does not include supplies of staff or workers for use by the customer
  • The legislation introduces the concept of 'end-users' and 'intermediary suppliers'. This covers businesses or groups of associated businesses that do not make supplies of building and construction services to third parties and as such are excluded from the scope of the reverse charge if they receive such supplies. Examples include landlords, tenants and property developers.

HMRC has begun running webinars for businesses, for which you can register here. If no dates are showing as available, the webinar recordings will be made available online.

See CIS: Construction Industry reverse charge

Statutory Sick Pay eligibility for those self-isolating or shielding due to coronavirus

  • If your employee is sick or incapable of work, you must pay them a minimum of Statutory Sick Pay (SSP), where they are eligible.
  • If your employee is clinically extremely vulnerable and cannot work because they have received a notification advising them to shield, you can furlough them under the Coronavirus Job Retention Scheme if you are eligible to do so. As a minimum, you must pay them SSP, where they are eligible.
  • You must pay SSP from the first day of your employee’s absence from work if they are self-isolating due to COVID-19. This could be because:
    • They are displaying symptoms of, or have tested positive for, COVID-19.
    • Someone in their household (including linked or extended household) is displaying symptoms of, or has tested positive for COVID-19.
    • They have been notified by the NHS or public health authorities that they have been in contact with someone with COVID-19.
  • Your employee may be required to self-isolate multiple times. Each time they are required to self-isolate “provided all eligibility criteria are met” they must receive SSP for the duration of their absence.
  • Small and medium employers can reclaim up to two weeks of SSP paid per employee for absences related to COVID-19.
  • The get an isolation note service was introduced to reduce pressure on GPs by avoiding the need for employees to contact their GP unnecessarily for evidence relating to self-isolation.
  • HMRC strongly suggest that employers use their discretion around the need for medical evidence where an employee is advised to self-isolate in accordance with public health advice.
  • Employers can check an isolation note is valid by using the check an isolation note service.

See COVID-19: Government support tracker

Messages for employers who operate a childcare voucher scheme

  • Due to the coronavirus restrictions, many employees are now working differently and may not require their usual childcare services.
  • Existing users of the childcare voucher scheme can continue to receive childcare vouchers but may wish to temporarily receive a lower amount so that they don’t build a large stockpile of vouchers over time.
  • You may want to remind your employees that they can reduce their contribution by speaking with you and agreeing to a new lower amount (both the employer and employee must consent).
  • Contributions can be increased again later as and when required and varying the amount will not affect eligibility to the scheme, provided that the normal conditions of the scheme are met.

If your employees receive childcare vouchers via salary sacrifice, check they aren’t better off financially on Tax-Free Childcare

  • Tax-Free Childcare (TFC) supports eligible working parents with the costs of childcare.
  • Across the UK, for every £8 paid into a childcare account, the government contributes an extra £2, up to £2,000 per child (under 12 years old) per year, and £4,000 for children (under 17 years old) who are disabled.
  • Some families who currently use childcare vouchers could be better off on TFC.
  • Therefore, if your employees are currently in receipt of childcare vouchers, they may want to check to see if they might be financially better off on TFC. The hypothetical examples below may help to demonstrate where this is the case, and users can check how much they could receive with TFC.

Tax-Free Childcare Example 1: Family with children aged 2 and 6 years old

  • David and Sarah have two children, Oliver aged 6 and Amelia aged 2.
  • Sarah is employed and receives tax-exempt childcare vouchers through her work via salary sacrifice.
  • David is self-employed and so cannot receive tax-exempt childcare vouchers.
  • Oliver goes to an afterschool club for 38 weeks a year and a holiday club for six weeks of the year. His annual childcare costs are £3,345.28.
  • Amelia is at a nursery for 48 weeks a year with an annual cost of £12,262.56.
  • This makes an annual total for David and Sarah of £15,607.84.
  • As a higher rate taxpayer, Sarah receives a total of £1,484 in tax-exempt childcare vouchers per year, saving £623 in tax and NICs. David receives no relief.
  • On TFC, David and Sarah would receive the full £2,000 top-up for Amelia’s care and £669 for Oliver’s care (per annum). Their total top-up is £2,669.
  • This family would be better off financially on TFC.

Tax-Free Childcare Example 2: Family with children aged 6 and 10 years old

  • Tarun and Ameena have two girls (Gita and Heema) aged 6 and 10.
  • Tarun is employed and receives tax-exempt childcare vouchers through his work via salary sacrifice.
  • Ameena’s employer does not offer a childcare voucher scheme.
  • Both Gita and Heema go to an afterschool club for 38 weeks of the year and also attend a holiday club for seven weeks of the year.
  • Tarun and Ameena’s total annual childcare costs are £5,301.60.
  • As a basic rate taxpayer, Tarun receives £2,915 in tax-exempt childcare vouchers per year, saving £932 in tax and NICs.
  • On TFC, Tarun and Ameena can receive a top-up of £1,060, compared to the savings of £932 through the voucher scheme.
  • This family would be better off financially on TFC.

Note: In these examples, it is assumed that a year’s worth of childcare is 48 weeks.

See Tax-Free Childcare and Childcare and childcare vouchers

Virtual Christmas Parties

  • Due to the coronavirus restrictions, you may be unable to host your usual Christmas Party for your employees.
  • HMRC are pleased to confirm that the annual parties’ exemption (s.264 ITEPA 2003) will apply to the costs associated with virtual parties in the same way that it would for traditionally held parties.
  • Therefore, subject to the normal conditions of the exemption being met, the expenses of hosting a virtual event, including providing entertainment, equipment and refreshments principally for enjoyment or consumption by your employees during the event, will be exempt.
  • For annual parties or similar annual events, no liability to Income Tax arises provided the cost of the annual event does not exceed £150 per head, and that the event is available to employees generally.
  • Please note that the exemption is not limited to Christmas parties, therefore it will still apply if you decide to postpone your party or function, as long as the function takes place within the current tax year and is within the £150 limit.
  • Further information on the annual party exemption including examples can be found at EIM21690 and EIM21691.

See: COVID-19: the virtual office party and Staff parties and annual functions

Disguised remuneration settlements – 2020 terms

Disguised Remuneration Repayment Scheme 2020

  • As a result of the independent review of the loan charge, the Government accepted the recommendation that HMRC should repay certain voluntary payments made to settle tax on loans no longer subject to the loan charge.
  • The recommendation was implemented through the Finance Act 2020 and HMRC published a Scheme and guidance that showed how repayments would be calculated and administered.
    • After publication, it was discovered that the Scheme did not work effectively for all customers.
  • HMRC have therefore made some changes to the original Scheme, which has now been updated along with the guidance. If you have already applied for a refund, you do not need to apply again.
  • The updates to the Scheme will not change whether you are eligible for a repayment or waiver.
  • Any amounts that are eligible for repayment or waiver will be decided based on your specific circumstances, and HMRC will tell you once they have made a decision. 

See Disguised Remuneration Zone

Time is running out to get your business ready for Brexit transition

  • HMRC is contacting businesses in Great Britain who move goods between Great Britain and the EU, urging them to get ready for new trading rules with Europe.
  • HMRC know businesses are facing complex pressures this winter as a result of COVID-19, but everyone in Great Britain who trades with EU countries will be affected by new customs and tax rules from 1 January 2021.
  • If you plan to trade with businesses in EU countries from 1 January 2021, you need to take these actions now:
    • Check when you need to make customs declarations: from 1 January 2021, you will need to make declarations for all goods you import and export. If you import goods that are not controlled, you may be able to delay making declarations for up to 6 months.
    • Get ready to make customs declarations: if you plan to trade with EU countries in January or February, HMRC recommend getting a contract in place with a customs intermediary now. This is especially important if you’re exporting or if you’re importing controlled goods as you will not be able to delay your declarations.
    • Make sure your supply chain is ready.
  • You can find all of HMRC’s letters to VAT-registered traders about preparing for new trade arrangements with Europe from 1 January 2021 on GOV.UK. 

More support offered through the Customs Grant Scheme

HMRC has made changes to the Customs Grant Scheme to allow more people to access the funding and help ensure they are ready to trade with the EU after the transition period ends. For more information, see here

Merchandise in Baggage rules when travelling to and from the EU

If you are travelling abroad after 1 January 2021 for business purposes, there are some changes to rules you will need to be aware of when bringing commercial goods into and out of the UK.

  • You must complete a declaration when entering or leaving the UK if you are carrying goods to sell or use by a business with a value not exceeding £1,500 (€1,000 for Northern Ireland), not weighing more than 1,000kg and not classed as excise or restricted goods.
  • You can do this either by an online declaration up to five days of arriving in or leaving the UK or make a declaration by going to the red channel or red phone point when going through customs.
  • For commercial goods exceeding £1,500 (€1,000 for Northern Ireland) in value or weighing more than 1,000kgs, or if you are carrying excise or restricted goods, you or your customs agent must make a full customs declaration. 

Cash control rules when travelling to and from the EU

With effect from 1 January 2021, new requirements will come into force on the UK borders.

  • Currently, declarations are required when cash of €10,000 or more is brought into the UK from any country outside the EU, or taken out of the UK to any country outside of the EU. These requirements will continue to apply in Northern Ireland.
  • From 1st January, declarations will be required when cash of £10,000 or more is brought into or taken out of Great Britain from any country including European countries.

Guidance for employers on reporting PAYE information in real-time when payments are made early at Christmas

  • This is a reminder that last year HMRC introduced a permanent easement on reporting PAYE information in real-time, as some employers pay their employees earlier than usual over the Christmas period.
    • This can be for a number of reasons, for example during the Christmas period the business may close, meaning workers need to be paid earlier than normal.
  • If you do pay early over the Christmas period, please report your normal (or contractual) payday as the payment date on your Full Payment Submission (FPS) and ensure that the FPS is submitted on or before this date.
    • For example: if you pay on Friday, 18 December 2020 but the normal /contractual payment date is Thursday 31 December 2020, please report the payment date on the FPS as 31 December and ensure the submission is sent on or before 31 December.
  • Doing this will help to protect your employees’ eligibility for Universal Credit, as reporting the payday as the payment date may affect current and future entitlements.
  • The overriding PAYE reporting obligation for employers is unaffected by this announcement and remains that you must report payments on or before the date the employee is paid, i.e. payday.

See PAYE RTI reporting: Christmas exception to the rules

Change of Payroll ID

  • Where there is a change of payroll package or payroll ID, any new Payroll ID should be unique and must be different if the employee has more than one job.
  • Do not reuse previous Payroll IDs for existing or new employees.
  • This also applies if you change payroll software and the new software does not let you continue with the same payroll ID.
    • Set the Payroll ID change indicator when reporting and enter ‘old’ and ‘new’ Payroll ID.
    • If the old Payroll ID is not supplied this may create a duplicate record.
  • Where the old Payroll ID is not supplied HMRC can use the financial information on the Full Payment Submission to aid matching during the year where the financial information cumulates with the previous period’s information.
    • In the first period at the start of the tax year the financial information does not aid the matching process because there is no previous period in the tax year.

If you engage or supply contractors, there are some important tax changes

  • In less than 100 working days the way you pay contractors may change.
  • Changes to the Off-payroll working rules (IR35) come into effect on 6 April 2021.
  • If you engage contractors who work through their own limited company or other intermediary and you are a medium or large-sized non-public sector organisation then you need to take action to prepare. HMRC are providing education and support to help you do this.
  • If you supply contractors who work through their own limited company or other intermediary and you are an employment agency, you need to understand the changes and may need to take action. HMRC are providing education and support to help you do this.
  • As part of HMRC's programme of education and support, they are running a series of webinars. As well as webinars giving an overview of the rules, watch out for dates for topic-based webinars, including on international supply chains. 
  • HMRC have recently published an updated contractor factsheet which they recommend is shared with contractors. 

See Personal Service Company (PSC) tax

Student and Postgraduate Loans: Occupational pension and Off-payroll working rules

Student or Postgraduate loan (PGL) deductions should not be deducted from the following:

Occupational pension payments

  • You should not deduct Student Loan or PGL from an occupational pension you pay to a former employee.
  • You should select the “Occupational pension” indicator shown on the employee’s Full Payment Submission (FPS) to let HMRC know that the payment relates to an Occupational pension.
  • If you have:
    • Deducted Student Loan or PGL by mistake and have selected the Occupational pension indicator, HMRC will send you a generic notification message or may call you to tell you to take corrective action.
    • Selected the Occupational pension indicator by mistake you should unselect it.

Payments subject to PAYE under the Off-Payroll Working rules

  • Organisations are not responsible for deducting Student Loan and or PGL for workers engaged through their own companies.
  • The worker will account for Student Loan and or PGL obligations in their own tax return.
  • If you have:
    • Deducted Student or PGL deductions and have selected the 'Off-payroll worker subject to the rules' indicator, HMRC will send you a generic notification message or may call you to tell you to take corrective action
    • Selected the “Off-payroll worker subject to the rules” indicator by mistake you should unselect it. The indicator should only be used for contractors who provide their services to the public sector and have been determined to be inside the Off-payroll working rules. From April 2021, the indicator should also be used for contractors who provide their services to medium and large-sized non-public sector organisations and are determined to be inside the rules.
  • It is necessary to check the worker’s FPS to ensure that the:
    • Student loan and or PGL deduction entries are correct.
    • Occupational Pension and the Off-Payroll worker subject to the rules indicators have not been selected incorrectly. 

Scottish Student Loans

  • On 6 April 2021, the Scottish Government is introducing a new plan type for Scottish Student Loans known as Plan 4.
    • The Plan 4 threshold will be £25,000.
    • Student Loan deductions will be calculated at 9% on earnings above the Plan 4 threshold.
  • Scottish borrowers, who drew down their loan from the Student Award Agency for Scotland (SAAS), are currently repaying their loans under the Plan 1 threshold.
    • Eligible borrowers will switch to Plan 4 from 6 April 2021.
  • The introduction of Scottish Student Loans will result in SL1s being issued to employers for existing borrowers impacted by the change and will be in addition to the usual bulk issue of SL1s at the start of each tax year.
    • You should apply this change to your payroll software and action on your first FPS submission after 6 April 2021.
    • If your employee is not moved to Plan 4, they will over repay their Student Loan.
  • There will be no action required for Plan 1 borrowers who did not draw down their loan from SAAS.
  • Guidance will be updated to reflect the changes. 

Starter Checklist

  • The Student Loans section of the Starter Checklist has been updated and streamlined to include Scottish Student Loans (Plan 4) and will be published in March alongside the existing one, for use for new employees from 6 April 2021.
  • It is important that employers complete the starter checklist accurately when they take on a new employee. 

Tax avoidance: don’t get caught out

  • On 26 November 2020, HMRC launched the ‘Tax avoidance: don’t get caught out’ campaign targeted at contractors who may be approached by people or businesses marketing tax avoidance schemes, or who may be faced with a scheme under third party recommendations or by searching on the Internet.
    • A contractor can be self-employed, a worker or an employee if they work for a client and are employed by an agency.
  • Tax avoidance involves bending the tax rules to try to gain a tax advantage that was never intended. It usually involves contrived transactions that serve no purpose, other than to artificially reduce the amount of tax that someone has to pay. HMRC wants to encourage contractors not to be tempted by tax avoidance schemes which promise higher take-home pay, as it may cost them more in the long run.
  • Tax avoidance schemes can create life-changing tax debts for people who are tempted into them without understanding the risks they carry. Tax avoidance also deprives our vital public services of the funds they need to carry out critical support work.
  • The ‘Tax avoidance: don’t get caught out’ page contains useful guidance and personal stories for contractors to educate themselves about the dangers of tax avoidance schemes and how to identify them. 

Mini Umbrella Company Fraud

  • Every business which either places or uses temporary labour should be aware of the potential dangers posed to their business by Mini Umbrella Company (MUC) fraud in their supply chain.
  • Not only can a fraudulent supply chain lead to reputational and financial damage to your business, but your workers may not receive all they’re entitled to. MUC fraud also significantly reduces tax payments to HMRC including PAYE, National Insurance and VAT.
  • As an end-user or provider of temporary labour it is your responsibility to be clear about who ultimately pays the workers and how they are paid. This is the only way to protect your business from becoming entangled in MUC or other supply chain frauds.
  • Most MUC arrangements are considered to be fraudulent, so make sure you spot the warning signs to protect your business.

What is Mini Umbrella Company Fraud?

  • The MUC model is an employment intermediary model which presents an organised crime threat to the UK Exchequer.
  • The fraud is primarily based around the abuse of two Government incentives aimed at small businesses – the VAT Flat Rate Scheme and the Employment Allowance. But this type of fraud can also result in the non-payment of other taxes such as PAYE, National Insurance and VAT.
  • MUC fraud is not limited to specific trade sectors and can be found in supply chains whenever temporary labour is used.
  • In its simplest form, the MUC fraud model involves splitting up a workforce into hundreds or thousands of small limited companies set up solely to enable the fraud.
    • The workforce is generally a temporary workforce who historically would have been paid by an employment agency or an umbrella company.
  • The structuring of the MUCs is facilitated by a promoter business (sometimes also known as an outsourcing business) which may have other linked businesses to support the operation.
  • The creation of the MUCs and the complex layers of businesses within the supply chain help to facilitate the fraud.
  • For employees, who are often oblivious to these arrangements, the use of this model can result in the loss of some employment rights. Workers in MUCs are usually unaware of who their employer is and they can be moved regularly between MUCs to help maximise profits from the fraud.

How you can spot Mini Umbrella Company fraud and protect your business?

  • There is not a standard MUC fraud model and arrangements are constantly evolving as organised criminals try to hide their fraudulent activities from HMRC.
  • However, there are some common features which businesses might come across during their regular due diligence checks.
  • Information from sources such as the Companies House register might help to spot warning signs when completing the quarterly Employment Intermediary Reports or the Key Information Document for Workers.
    • Unusual company name: Often multiple companies are set up around the same time which have a similar or unusual name. These companies will often be registered at an address which does not seem suitable for the types of business activities.
    • Unrelated business activity description: Do the nature of the business activities described in the Companies House entries seem compatible with the services provided by the workers?
    • Directors being foreign nationals: Often foreign nationals are appointed as directors when a MUC is formed or they can replace a temporary UK resident director after a short period of time. Usually, the directors will have no prior experience in the UK labour supply industry.
    • Unusually high movement of workers: Are workers moved between different employers who meet the above criteria for being MUCs on a fairly frequent basis?
    • Very short-lived businesses: The individual MUCs have a fairly short lifespan (often less than 18 months) before being allowed to be dissolved by Companies House as a result of their failure to meet their filing obligations. New MUCs will then take their place in the supply chain. You should notice this as you may find that you need to issue a new Key Information Document to workers on a fairly regular basis.

As the MUCs sit low down in the supply chain it may be challenging to spot them. HMRC advises businesses to remain vigilant, especially where the employer of the worker is not the Umbrella Company they may have a contract with.

It is important for businesses to consider the credibility of the supply, payment arrangements and other surrounding circumstances to help safeguard themselves from financial, operational and reputational risks. Guidance on undertaking robust due diligence can be found here: The supply chain due diligence principles

What is HMRC doing about Mini Umbrella Company fraud?

  • Mini Umbrella Company fraud creates an uneven playing field for those employment agencies and businesses who follow the rules.
  • HMRC’s Fraud Investigation Service is using both its civil and criminal powers to challenge those who are involved and facilitating this type of fraud.
  • HMRC has recently made a number of arrests in relation to MUC fraud and has also taken steps to deny the right to recover input tax in cases where it has established that a business in the supply chain knew, or should have known, that there was fraud.
  • HMRC is working with trade bodies and other Government Departments to raise awareness of the MUC fraud model and its risks more widely.
  • HMRC is also currently undertaking a programme of activity to establish the levels of due diligence being undertaken by employment agencies and end-users who use temporary labour. As part of this programme, HMRC plans to issue advice on the levels of due diligence expected by businesses to help prevent them becoming a victim of the fraud.

Reporting concerns

If you have concerns about a supplier or engager of labour or associated activities, contact the HMRC hotline on: 0800 788 887 (open 8am to 8pm every day). For more details see how to report fraud to HMRC. 

External link 

Employer Bulletin: December 2020 

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