The claims process for the second grant under the Self-employment Income Support Scheme (SEISS) opened on 17 August.

HMRC has written to those who claimed under the first round, noting that they might be eligible for a second claim, but pointing out that eligibility depends on their business being ‘adversely affected’ by coronavirus on or after 14 July 2020.

On claiming the second payment, taxpayers will be required to confirm that their business has been adversely affected, and HMRC advises claimants to keep records to back up their claim. Claims for the second grant close on 19 October 2020.

The Association of Taxation Technicians (ATT) reports that HMRC issued the first set of coronavirus job retention scheme (CJRS) compliance letters last week as part of the post-transaction review phase of the scheme. The ATT notes that HMRC will be focusing on fraudulent claims rather than cases where the employer has made an innocent error, and intends to publish more details of its approach to compliance in the coming weeks.

Employers who become aware of an error are advised to contact HMRC to correct the position. The deadline for correcting overclaims is the later of:

• 90 days after the date the employer received the grant they were not entitled to;
• 90 days after the date the employer received the grant that they are no longer entitled to keep because their circumstances have changed; and
• 20 October 2020.

Although HMRC had removed much of the detailed guidance for the pre-July version of the scheme from its web pages, archived versions are now available on the National archives website. The older guidance may be helpful for those looking to check their claims for the period from March to June 2020.

HMRC has also published additional examples to help employers calculate claims for flexibly furloughed employees during September and October 2020, and separate updated guidance for employers who are claiming for 100 or more employees under the scheme from 1 July onwards.

A recent ruling that not all vans are vans for tax purposes and are actually cars could give thousands of van drivers and their employers higher tax bills, according to accounting and tax advisory firm Blick Rothenberg.

In a recent tax case involving Coca-Cola, the Upper Tribunal (UT) has held that not all ‘vans’ (in the common sense use of the word) are vans for tax purposes. Specifically, vans such as the VW Transporter Kombi T5 were held to be ‘multi-purposes vehicles’ rather than vans.

Robert Salter, a specialist in expatriate and employment taxes at the firm, said, “Any ‘van’ that is not held to be primarily a ‘vehicle for the transport of goods becomes classified as a multi-purpose vehicle (aka a car), and results in a car benefit charge arising for the employee, where there is any ‘private element’ to the vehicle’s use.”

He added, “This will apply even where private use is very insignificant compared to the wider use of the vehicle. For example, occasional commuting in the vehicle.”

Salter said, “The annual taxable benefit charge that accrues for employees in this regard can be substantial, as it is based on the core (list price) of the vehicle when new and the vehicle’s CO2 emissions level. For example, if a vehicle impacted by this case had an official list price (cost) of £25,000 and had a CO2 charge of 25%, that could create an annual benefit-in-kind charge for the employee of £6,250 – which would create a tax charge for a 20% taxpayer of £1,250.

“Additionally, if the fuel costs of private motoring are also paid for by the employer (even inadvertently), employees can also face a fuel benefit charge based on the car fuel rules rather than the (much cheaper) van fuel benefit rates.”

Salter added, “While HM Revenue & Customs haven’t formally altered their guidance in this area following the UT’s ruling, it is probable that the Revenue will regard this as a major opportunity to gain additional Revenue from the ‘white van man’.

“In addition, their employers will face an additional NIC (employer only) liability of 13.8% on the value of the car scale and car fuel scale tax benefit charges that arise for their affected employees.”

Anyone having difficulty paying their second 2019/20 Self Assessment payment on account can take advantage of automatically deferring the payment until 31 January 2021, HMRC is reminding taxpayers.

The second Self Assessment payment on account for 2019-20 is usually due at the end of July, but the government previously announced it is supporting the self-employed and others by allowing them to defer this payment. This option to defer is on top of additional support for the self-employed through £7.8 billion in grants paid through the Self Employed Income Support Scheme.

The payment on account deferral will give immediate support to businesses and individuals by keeping cash at their disposal during this extraordinary time of uncertainty.

To make this as hassle free as possible customers will not need to contact HMRC to defer their payment on account; they opt into the deferral by simply not paying their tax bill due by 31 July 2020. If no payment is received, HMRC will automatically update their systems to show payment has been deferred and no interest or penalties will be incurred, providing it is paid in full by 31 January 2021. The only action customers may need to take is to cancel their direct debit if they have one set up for their payments on account.

Payments on account are payable by Self Assessment taxpayers by 31 January and 31 July each year, unless:

• their last Self Assessment tax bill was less than £1,000;
• they have already paid more than 80% of all the tax they owe at source, for example through their tax code.

Each payment on account is estimated, based on 50% of the previous year’s Self-Assessment tax bill and they are advance payments towards the current year’s tax bill.

As we move into August, the Coronavirus Job Retention Scheme (CJRS) takes on a new phase with the government making it more flexible.

Before July, employees that were placed on furlough could not undertake work for you. Originally, the scheme was only for employees who were not working, and while on furlough, an employee could not undertake work for or on behalf of the organisation.

What is flexible furlough?

From 1st July, businesses have the flexibility to bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim under the CJRS for hours not worked. This new flexibility will help businesses with reopening and help boost the economy.

The government will continue to pay 80% of furloughed employees wages for any normal hours that they do not work, up until the end of August, and 70% and 60% thereafter as per the wind down timeline. But the important thing to note here is that the employer will have to pay employees for the hours that they do work.

For example, if a furloughed worker returns to work for two days per week, they will need to be paid as normal by their employer for these two days, while the government would cover the other three days.

Employers will decide the hours and shift patterns their employees will work on their return, and so employees can work as much or as little as the business needs, with no minimum time that they can furlough staff for.

Any working hours arrangement agreed between a business and their employee must cover at least one week and be confirmed to the employee in writing. You must keep a written record of the agreement for five years and keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working).

What if employees are unable to return to work?

If employees are unable to return to work, or employers do not have work for them to do, they can remain fully furloughed and the employer can continue to claim the grant for their full hours under the existing rules.

From 1st July, employers will only be able to claim for employees who have previously been furloughed for at least 3 consecutive weeks any time between 1st March 2020 and 30th June 2020.

Is there an exception?

An exception to this however is where you have employees returning from statutory parental leave after 10th June who you wish to furlough for the first time. An employee returning from statutory parental leave after 10th June can be furloughed for the first time provided that:

• You have previously submitted a claim for any other employee in your organisation in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June

• The employee you wish to furlough for the first-time started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and has returned from that leave after 10 June

• The employee was on your PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020

Self-employed individuals, and employers, have 90 days to inform HMRC that they have over-claimed the SEISS or CJRS grants and repay any excess before penalties apply.

Any incorrect CJRS grant claims in which the employer has overclaimed the amount due can be corrected in a later CJRS claim. If the employer has submitted their final CJRS claim there is a facility to repay HMRC online which has been in place since 26 June.

If the employer has under-claimed the CJRS grant, the extra amount of grant due needs to be set-up directly by HMRC, and the employer should not adjust the amount claimed in a later CJRS claim.

A CJRS grant should be repaid to HMRC if the funds were not used within a reasonable period to reimburse the employer’s costs relating to furloughed employees, such as furloughed wages, employer’s class 1 NIC and employer’s contribution to a workplace pension.

SEISS repayments

The self-employed income support scheme (SEISS) has always lagged behind the furlough grant scheme (CJRS), and the applications for the second SEISS grants will open on 17 August.

The HMRC guidance says it will work out if the trader is eligible for a SEISS grant and contact them to invite them the trader to apply. However, HMRC can’t check the three current-period conditions for the SEISS grant:

• Whether the trade has been adversely affected by the coronavirus pandemic
• If the individual traded in 2019/20 (if the tax return for that year hasn’t been submitted)
• Whether the trader intends to continue to trade in 2020/21

If any of those conditions are not met the SEISS grant has been incorrectly claimed, the trader needs to tell HMRC as soon as possible and repay the overpaid amount.

You can’t tell HMRC about the overclaimed grant on behalf of your client, as the disclosure must be made using the same government gateway user ID and password that was used to claim the original SEISS grant.

The self-employed income support scheme (SEISS) has been extended to self-employed new parents who took time out to have children.

The government confirmed this month that self-employed new parents are entitled to the SEISS grant if their trading profits sank in 2018/19 due to a pause in their career to care for newborns within the first 12 months of birth.

Self-employed parents will have to meet the eligibility criteria under the SEISS, where claimants would have to have traded in 2018/19 with profits making up at least half their income.

The parental SEISS grant also includes parents who have adopted during this period and so didn’t trade for a period within the first 12 months of adoption.

To prove their eligibility for the grant, parents have the choice to use either their 2017-18 or both their 2016-17 and 2017-18 self-assessment returns.

The confirmation comes as self-employed workers have until 13 July to claim the first SEISS grant. Then, self-employed workers who are still adversely affected due to the coronavirus will be able to claim the second and final grant from 17 August.

As the Chancellor confirmed on 29 May, SEISS 2.0 will cover a further three months, but at the reduced level which is equivalent to 70% of the taxpayer’s annual average profits.

The second self-employed grant comes with a greater emphasis on whether a business has been ‘adversely affected’ after 14 July – the definition of the term has been debated amongst tax professionals.

In the guidance released on 12 June, HMRC used examples of businesses ‘adversely affected’ as one which has either temporarily stopped trading or has been scaled back due to the coronavirus pandemic. Three possible causes listed in the guidance include supply chain has been interrupted, fewer or no customers or clients, or staff were unable to work.