COVID Grants

Things to consider as COVID-19 support declines

August 31, 2021

Find out how Covid-19 support schemes are changing and what you need to do as an employer or employee to prepare for the new tax year.

How Covid-19 support schemes are changing and what you need to do

Here at TAG Accountants Group, we have been providing our clients and contacts with continual information about issues to consider during the COVID crisis and support available. 

As we move towards the “new normal”, we have provided below some reminders about the imminent cessation of Government support and issues to consider as employees return to the workplace.

September – the end of furlough scheme

The Government is removing the support to employers for furloughed staff via the CJRS scheme at the end of September. The grant claims for employees furloughed during September are 60% of the employee’s usual pay up to a maximum cap of £1,875, with the employer required to contribute to bring the furlough pay up to a minimum of 80%.

You need to ensure that you make your final claims for the month of September by 14 October and make any adjustments by 28 October 2021.

The end of the furlough scheme may be the trigger for many businesses to re-assess their staffing levels going forward. As a result, if you are considering making a permanent reduction in staffing levels then the obvious route is a redundancy programme which will need to be carefully planned and follow prescribed procedures in order to make the process fair and comply with legislation.

Redundancies – deal with them correctly

As well as being aware of the key steps that need to be followed as far as employment law is concerned when it comes to redundancies, it is also important that any payments on termination of employment are treated correctly for the purposes of tax and national insurance. For redundancies, generally, the first £30,000 paid on termination of employment is tax free but the rules are not straightforward, and many employers get things wrong. 

Remember, the £30,000 includes statutory redundancy pay and any enhancement from the employer as well as continuing benefits such as private health insurance. 

Any excess to the £30,000 is subject to income tax and employers’ national insurance. If in any doubt, take advice to ensure your redundancy calculations and tax thereon are calculated correctly. 

Ending of 5% VAT rate for tourism and hospitality

Please note that for supplies made in the tourism and hospitality sector, the temporary 5% VAT rate applied since the start of the COVID crisis ceases at the end of September. The rate then increases to 12.5% from 1 October until 31 March 2022 when it reverts to the standard rate of 20% thereafter.

For businesses operating in the sector, this will mean amending the rates on their accounting software and reviewing prices. Just a reminder that the 20% rate continues to apply to the sales of alcohol.

If deposits and other payments are taken before 30 September 2021 the 5% rate would be applied to that supply as the date payment is taken would be the tax point for the supply.

Updates to working safely guidance from 19 July

It is worth noting that updated guidance on working safely during coronavirus has been issued to coincide with the lifting of restrictions on 19 July. The guidance has been re-categorised into the following six sector-specific guides which can be sourced from the website:

  • construction and outdoor work 
  • events and attractions 
  • hotels and guest accommodation 
  • offices, factories, and labs 
  • restaurants, pubs, bars, nightclubs, and takeaway services 
  • shops, branches, and close contact services. 

There is also a general overview that indicates that the government is no longer instructing people to work from home and businesses no longer need to implement social distancing in the workplace. 

It does, however, warn that businesses still have a legal duty to manage risks to those affected by their business. To do this, businesses must i) carry out a health and safety risk assessment, (including the risk of COVID-19) and ii) to then take reasonable steps to mitigate any identifiable risks. Note that the onus is on the business to decide what mitigations may, in the circumstances, be appropriate. The guidance also states that employers should discuss the timing and phasing of a return with their workers. 

There are sector-specific guides that set out six priority actions for businesses to take from 19 July 2021 to protect staff and customers. These actions are:

  1. Complete a health and safety risk assessment (including any risks from COVID-19) 
  2. Provide adequate ventilation 
  3. Clean more often 
  4. Turn away people with COVID-19 symptoms 
  5. Enable people to check-in at the business venue 
  6. Communicate and train. 

Employers are advised to give extra consideration to workers who are at higher risk by discussing their individual needs and supporting them in taking any additional precautions advised by their clinicians. Consideration should also be given to those facing mental and physical health difficulties.

Tax implications of divorces and separations

It is increasingly apparent that the pandemic has placed incredible strain on relationships with an inevitable increase in the level of divorces and separations.

If you are a part of a couple that is considering separated or divorced, apart from the emotional stress, there are also some tax issues that can have significant implications and are worth being aware of. 

Whilst Income Tax does not automatically cause an issue for separating couples as it is an individually assessed tax, there are other taxes that need to be considered. 

For example, when together, there is no Capital Gains Tax (CGT) payable on any assets sold or gifted between a spouse or civil partner. However, if a couple then separates and does not live together for an entire tax year, or, gets divorced, then CGT may then be payable on assets transferred between them.

Thus, in theory, the optimum time for a couple to separate would technically be at the start of the tax year giving them up to a year to plan how to split their assets most tax efficiently. In the real world, when separating, most couples will not be focussed on any associated tax implications, but that said, given that both sides could benefit, such matters are at least worthy of consideration.

It is also important to seek financial agreement between by both parties. If no agreement can be reached, then a Court application for a ‘financial order’ will usually be made. The couple and their advisers should also give proper thought to what will happen to the family home, any family businesses as well as associated Inheritance Tax implications.

TAG Accountants, your Wolverhampton accountants

As ever, the TAG Accountants team is here to help, so if you need assistance with any of the above issues, please call us in complete confidence on 01902 783172 or alternatively just click HERE to email us via our website and one of our friendly experts will be in touch.

We very much look forward to hearing from you.