Reforming statutory sick pay

Following its summer 2019 consultation entitled “Health is everyone’s business: proposals for reducing ill health-related job loss”, the government has now published its response which takes into account the impact of the coronavirus pandemic on work and health. The response confirms that the government:

  • will not be proceeding with the consultation proposal to introduce a new right for non-disabled employees to request work or workplace modifications on health grounds – note that the existing duty on employers to make reasonable adjustments for disabled staff under the Equality Act 2010 will remain in place
  • will be taking forward its manifesto commitment to encourage flexible working and to consult on making it the default unless employers have good reasons not to – that consultation will be published “in due course”
  • will develop a national information and advice service for employers on health, work and disability, with material designed to help manage common health and disability events in the workplace
  • has asked the Health and Safety Executive (HSE) to work on developing non-statutory guidance to support disabled people and those with long-term health conditions to remain in work (and the HSE will also explore introducing statutory guidance in this area)
  • will not be implementing the range of measures proposed to reform statutory sick pay (SSP) at this stage because “now is not the right time to introduce changes to the sick pay system”. However, the government does acknowledge that several important questions posed in the consultation on the future of SSP require further consideration, so reform in this area is still possible in the future
  • is exploring extending fit note certification to a wider group of healthcare professionals
  • intends to introduce digital certifying of fit notes (to remove the current requirement for them to be signed in ink) and create a new interactive version of the fit note which will provide advice and support for suggested workplace adaptations/modifications to encourage work and health discussions between patients and employers
  • will test a subsidy scheme to enable SMEs and self-employed people to access quality occupational health (OH) support and will work with key stakeholder organisations to explore how it may be able to support innovative ideas that increase the purchasing of OH by SMEs and the self-employed
  • will continue to promote and raise awareness of the Access to Work programme.

Who counts as CIS contractor or sub-contractor?

The Construction Industry Scheme (CIS) is a set of special rules that affect tax and National Insurance for those working in the construction industry. Businesses in the construction industry are known as 'contractors' and 'subcontractors' and will need to be aware of the tax implications of the scheme.

Under the CIS, contractors are required to deduct money from a subcontractor’s payments and pass it to HMRC. The deductions count as advance payments towards the subcontractor’s tax and National Insurance liabilities.

Contractors are defined as those who pay subcontractors for construction work or who spent more than £3m on construction a year in the 12 months since they made their first payment.

Subcontractors do not have to register for the CIS, but contractors must deduct 30% from their payments to unregistered subcontractors. The alternative is to register as a CIS subcontractor where a 20% deduction is taken or to apply for gross payment status when the contractor will not make any deductions and the subcontractor is responsible to pay all their tax and National Insurance at the end of the tax year.

The CIS covers most construction work carried out in the UK, including jobs such as:

  • site preparation
  • alterations
  • dismantling
  • construction
  • repairs
  • decorating
  • demolition

Exceptions to the definition of construction work includes professional work done by architects and surveyors, carpet fitting, scaffolding hire (with no labour) and work on construction sites that’s clearly not construction. The CIS does not apply to construction work carried on outside the UK.

Who pays Inheritance Tax?

Inheritance Tax (IHT) is commonly collected on a person’s estate when they die but can also be payable during a person’s lifetime on certain trusts and gifts. The rate of IHT currently payable is 40% on death and 20% on lifetime gifts.  IHT is payable at a reduced rate on some assets if 10% or more of the 'net value' of their estate is left to charities.

Funds from the estate of the deceased are usually applied to pay IHT. If there is a will, it is usually the executor who deals with paying any IHT due to HMRC. IHT can be paid from funds within the estate, or from money raised from the sale of the assets. The deceased may also have used a life insurance policy to fund the payment of some / all the IHT due.

There is a nil-rate band, currently £325,000 below which no IHT is payable. In addition, there is an IHT residence nil-rate band (RNRB) which relates to a main residence passed down to a direct descendent such as children or grandchildren. The RNRB of £175,000 (where available) is on top of the £325,000 IHT nil-rate band.

The recipient of gifts from the deceased may be personally liable to IHT if the deceased gave away more than £325,000 in the 7 years before their death. These lifetime transfers are known as 'potentially exempt transfers' or 'PETs'. The rate of IHT gradually reduces over the 7-year period becoming exempt from IHT after 7 years have passed.

Some gifts will typically be tax-free from the time they are made such as regular gifts made from excess income, the first £3,000 worth of gifts each tax year and gifts between spouses and civil partners.

Tax-free gains on gifts to spouse or charity

In most cases, there is no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated based on the original cost when the asset was first owned by the spouse or civil partner.

There are a few exceptions that couples should be aware of when the relief does not apply. This relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.

There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than was paid for it and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.

Turnover defined for 5th SEISS grant

HMRC has published new guidance to help the self-employed calculate their turnover for making a claim under the 5th Self-Employment Income Support Scheme (SEISS) grant. The final date for making a claim for the 5th grant will be 30 September 2021. 

The figures will be used to compare turnover in the pandemic year from April 2020 – April 2021. The turnover for the ‘pandemic’ year can be calculated starting on any date from 1 to 6 April 2020 for a period of 12 months. For example, from 1 April 2020 to 31 March 2021 or from 6 April 2020 to 5 April 2021.

HMRC states that you can:

  • refer to your 2020 to 2021 Self-Assessment tax return if you’ve completed it
  • check your accounting software (if you use any)
  • go through your bookkeeping or spreadsheet records that cover your self-employment invoices and payments received
  • check the bank account you use for your business to account for money coming in from customers
  • ask your accountant or tax adviser (if you have one)

COVID-19 support payments such as previous SEISS grants, and local authority or devolved administration grants should not be included in the turnover figure. 

This ‘pandemic’ year turnover should then be compared to a previous year's turnover, known as the ‘reference’ year. For most self-employed the turnover reported in 2019-20 should be used as the reference year. However, this is not always the case and if 2019-20 was not a normal year for the business in question, the turnover reported in 2018-19 can be used. 

Self-employed persons whose turnover, as set out above, has fallen by more than 30% will continue to qualify for the 80% grant, capped at £7,500. Those with decreases in turnover of less than 30% will be restricted to a 30% claim, capped at £2,850. When making a claim, the online service will ask for turnover figures and compare them. The claims service will then tell the applicant if they can claim the higher or lower grant amount.

The SEIS scheme is only open to those self-employed with annual profits of less than £50,000 and who receive at least half their income from self-employment.

Continuous employment defined

When a new employee is added to the payroll it is the employers' responsibility to ensure they meet the employees’ rights. One of the issues that must be considered is the employees’ length of continuous employment. Continuous employment is calculated from the first day of work without a break.

The length of continuous employment gives certain rights to employees, including maternity pay, flexible working requests and redundancy pay.

Infrequent breaks in normal employment still count towards a continuous employment period. These are:

  • sickness, maternity, paternity, parental or adoption leave
  • annual leave
  • employment overseas with the same company
  • time between unfair dismissal and an employee being reinstated
  • when an employee moves between associated employers
  • military service, for example with a reserve force
  • temporary layoffs
  • employer lockouts
  • when a business is transferred from one employer to another
  • when a corporate body gets taken over by another because of a legal change

Any days that an employee is on strike do not count towards continuous employment, but the days are not treated as a break.

Tax Diary August/September 2021

1 August 2021 – Due date for Corporation Tax due for the year ended 31 October 2020.

19 August 2021 – PAYE and NIC deductions due for month ended 5 August 2021. (If you pay your tax electronically the due date is 22 August 2021)

19 August 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 August 2021. 

19 August 2021 – CIS tax deducted for the month ended 5 August 2021 is payable by today.

1 September 2021 – Due date for Corporation Tax due for the year ended 30 November 2020.

19 September 2021 – PAYE and NIC deductions due for month ended 5 September 2021. (If you pay your tax electronically the due date is 22 September 2021)

19 September 2021 – Filing deadline for the CIS300 monthly return for the month ended 5 September 2021. 

19 September 2021 – CIS tax deducted for the month ended 5 September 2021 is payable by today.
 

SEISS – more red tape

Government support to the self-employed through the Self-Employment Income Support Scheme (SEISS) is due to end on 30 September 2021. A fifth and final grant covering the period May 2021 to September 2021 will be opened to claims from late July for those who have suffered a significant reduction in trading profits. To qualify for the grant, average trading profits must be £50,000 or less and non-trading income cannot exceed 50% of total income.

The grant will see those whose turnover has fallen by 30% or more continuing to receive the full 80% grant (capped at £7,500) whilst those whose turnover has fallen by less than 30% will receive a 30% grant (capped at £2,850). This is a change from the previous SEISS grants where there was only one grant available to qualifying applicants.

HMRC is in the process of contacting eligible taxpayers to notify them of their personal claim date. Taxpayers will be able to make claims from this date up until the claims service closes on 30 September 2021.

Most taxpayers claiming the fifth SEISS grant will be required to provide turnover figures to make a claim. The turnover figures will be used to compare the 'pandemic year' with a 'reference period'.

Newly self-employed people, who had previously been excluded from claims because they commenced their trade during the 2019-20 tax year, are eligible to claim the fifth SEISS grants if their tax return for 2019-20 was filed by midnight 2 March 2021. They must also have traded or intended to trade in 2020-21 and intend to continue doing so.

HMRC is also warning taxpayers to be on the lookout for SEISS-related scams and to only respond to correspondence that is verified to be legitimate.

New COVID-19 vaccination guidance for employers

Public Health England has published a new guide for employers on COVID-19 vaccination. The guide encourages employers to support the government’s COVID-19 vaccination programme and it covers the following subjects:

  • why supporting vaccination of employees against COVID-19 is important
  • what employers can do to support the vaccination of their workforce
  • resources to help employers promote vaccination to their workforce.

In particular, the guide links to the previously published employer toolkit (which has now been updated) on supporting employees to get the COVID-19 vaccine. The toolkit can be downloaded as a zip folder and comprises an employer briefing sheet, posters, email signatures, a Q&A document, web banners and other resources.

National Minimum Wage reminder for summer staff

We would like to remind any students and seasonal staff that work part time, for example in a summer job, to ensure they are being paid the National Minimum Wage (NMW). All workers are legally entitled to be paid the NMW. This includes temporary seasonal staff, who often work short-term contracts in bars, hotels, shops and warehouses over the summer. 

HMRC helped some 155,000 people recover more than £16 million in pay which was due to them. HMRC is reminding workers to check their hourly rate of pay, and to also check any deductions or unpaid working time. The most common causes of minimum wage underpayment are deductions and unpaid working time such as travelling time between work locations and training time.

The current National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2021. The NLW is the minimum hourly rate that must be paid to those aged 23 or over. The hourly rate of the NMW (for 21-22 year olds) is £8.36. The rates for 18-20 year olds is £6.56 and the rate for workers above the school leaving age but under 18 is £4.62. 

Employees that are not being paid correctly can make an official complaint through GOV.UK or contact the ACAS Pay and Work Rights Helpline on 0300 123 1100.