We all know that documenting and filing taxes is a complex and often stressful process. Despite our best efforts, some of us may miss deadlines or misrepresent information on our tax returns – leading to HMRC issuing a tax penalty. Whether you’re self-employed or part of a small business, nobody wants the additional stress of paying tax penalties on top of the actual tax and interest.

However, if you can prove that you had a ‘reasonable excuse’ for the action that incurred the tax penalty, then HMRC might agree to amend or waive the fine. You’ll still have to pay any outstanding tax and interest, but a successful tax penalty appeal will reduce the penalty or remove it altogether.

So, what counts as a ‘reasonable excuse’ for late or incorrect tax returns, according to HMRC? How much will you have to pay if you get a tax penalty, and what can you do to avoid getting one?

What are HMRC tax penalties issued for?

There are plenty of common mistakes people make when filing their tax returns that can result in HMRC flagging a problem and issuing a fine. Here are some of the reasons for HMRC tax penalties:

Whether you deliberately misrepresent your situation or genuinely make a mistake by accident, HMRC can and will fine you for not complying with tax reporting and payment rules.

To avoid receiving a Penalty Explanation Letter laying out what you’ve done wrong, you should do your best to file and pay accurately and on time. If you become aware of an issue before receiving one, contact HMRC as soon as possible – this could result in a penalty of reduction.

How much is a HMRC tax penalty?

The penalty you might receive for the reasons above depends on the type of tax, the time period, and the particular fault. For example, if you filed your Self-Assessment Tax Return late by one day, you would receive a fine of £100 (though this doesn’t apply for returns due on 31st January 2022).

HMRC will add £10 per day for missing the deadline by up to 90 additional days. If you fail to pay for 6 months or more, HMRC will also charge £300 or 5% of the outstanding tax – whichever is higher. You’ll also be fined for missing the payment deadline and accrue interest for every passing day.

For Corporation Tax Returns, limited companies will be fined £100 for missing the deadline for filing or payment by one day, then another £100 for failure to pay within three months. If the company still hasn’t filed or paid in six months, HMRC will charge the estimated tax bill plus a 10% penalty.

In the case of undeclared income or inaccurate information, HMRC will calculate the penalty based on the reason and a percentage of the amount of tax due:

Penalties are lower for carelessness than what HMRC could perceive as attempted tax evasion. They may reduce the penalty if you disclose the error and help them to calculate the tax that’s overdue, either by providing documentation or allowing HMRC access to your records.

Bear in mind that HMRC is switching to a late submission points system as they move all taxes to a digital platform, so this could change in the coming years. The new system starts from April 2022 for VAT, but won’t be implemented until 2024-2025 for Self-Assessment Tax Returns.

What’s a reasonable excuse for filing taxes late?

If you receive a HMRC penalty letter, you’ll have the chance to appeal against it. Extenuating circumstances and unexpected life events can strike at any time, so HMRC is likely to be lenient if you have a valid reason for missing tax return deadlines. ‘Reasonable excuses’ might include:

HMRC considers appeals on an individual case-by-case basis, so just because an ‘excuse’ worked for one person doesn’t mean they’ll accept it for another. If you think your excuse is reasonable but don’t see it in the list above, don’t be put off from appealing, as the assessment is up to HMRC.

They still expect everyone to have taken ‘reasonable care’ to make sure everything was submitted accurately – even if you have a tax agent who manages tax returns on your behalf. This means keeping the appropriate records and running the proper software to complete your tax forms.

The important thing is to take steps to correct your mistake and fulfil your tax obligations as soon as possible. The more you co-operate with HMRC, the more likely you are to succeed in your appeal.

What isn’t a reasonable excuse for late filing?

There are many flimsy excuses for failing to comply with tax regulations that won’t hold up against HMRC’s judgement. For example, simply forgetting about the deadline or being generally unaware about tax rules isn’t a good enough reason.

You can’t make excuses like saying that you were too busy, you were waiting for a reminder from HMRC, or the forms were too complicated for you to complete. They expect you to stay on top of your obligations and seek the relevant assistance if you need it.

Similarly, HMRC won’t accept it if you say you couldn’t file or pay because you didn’t have the funds or were waiting on a third party. Their judgement will depend on the circumstances – for example, they might allow it if you couldn’t pay Capital Gains Tax until receiving the sale proceeds.

Illness (of yourself, a partner, close relative, or dependent) will only be considered a ‘reasonable excuse’ if it was unexpected and genuinely affected your ability to complete your tax return before the deadline. If it was a foreseen issue or a relatively mild illness, HMRC will expect you to have made other arrangements to get your submission and payment sorted in time.

Is COVID-19 a reasonable excuse for late tax returns?

As you may know already, HMRC has made adjustments to the late filing and late payment penalties for taxes due by 31st January 2022 due to the negative impact of the COVID-19 pandemic on many businesses and individuals in the UK. You can read more about this here.

However, coronavirus is not a blanket excuse for failing to file or pay correctly, and HMRC will still charge interest on late payments. If isolation, shielding, or contracting COVID-19 on or before the due date prevented you from completing your obligations, HMRC might consider this a ‘reasonable excuse’ – but only if you fulfil those obligations as soon as possible.

How to appeal against HMRC tax penalties

When you receive a HMRC tax penalty notice, you’ll usually have 30 days from the date on the letter to appeal against it. The notice should include an appeal form and instructions on how to lodge your appeal, including which supporting information you’ll need to provide.

You can either file an appeal through the Self-Assessment Tax online portal or download the SA370 form, fill it out, and send it to HMRC through the postal service. There are separate forms available for companies appealing for late VAT Returns or Corporation Tax Returns because of IT problems, though you should also have the ability to appeal through your online account.

When you make an appeal, a new impartial HMRC officer will review the penalty decision. If they decide that your excuse is reasonable, they may amend or cancel your tax penalty. You should be notified of HMRC’s decision in the same way you appealed – i.e. online or via post.

Do you need help with handling your tax returns or appealing against a tax penalty? Want to make sure that you don’t end up missing the deadlines and paying the penalty again? Get in touch via info@gbac.co.uk to discuss our tax consultancy services. You can also contact us, GBAC, accountants in Barnsley, on 01226 298298.

HMRC is reminding businesses with turnover below the £85,000 threshold of the steps they need to take regarding changed to Making Tax Digital (MTD) for VAT from 1st April 2022. Up to this point, only VAT registered businesses with turnover above £85,000 had to file returns through MTD.

For VAT return periods starting on or after 1st April 2022, VAT registered businesses need to keep digital records and file returns through approved software. Currently MTD is compulsory for business with annual turnover above the VAT registration threshold of £85,000, but the forthcoming change brings all VAT registered businesses into the MTD regime.

Under MTD, the records that must be maintained digitally include:

The above list is not exhaustive.

Affected businesses must sign up to Making Tax Digital at least five days after the deadline date of their last non-MTD VAT return, and a minimum of seven days before the first MTD VAT return deadline.

Exemption from MTD filing may be available in certain circumstances if it is not reasonable or practicable for them to use digital tools. Cost alone will not be an acceptable reason according to HMRC.

Failure to sign up for Making Tax Digital can result in a penalty being charged.

If you need further advice or assistance in making the change to MTD, including recommendations of appropriate software, we can help. Please contact us, GBAC, accountants in Barnsley, on 01226 298298.

Many small business owners like to keep things in the family, because working with family can be comfortable and fun. After all, you’re more likely to trust a family member than a stranger.

Another benefit of adding a family member to your payroll is the potential to reduce business taxes. Paying a salary to any employee – regardless of their relation to you – is a deductible expense.

This means that turning a family member into a salaried employee could help to reduce your declarable profits, and therefore the amount of tax due on your business income.

There are no rules against hiring family members to work for your privately owned business, but it’s important to pay attention to employment laws and taxes that still apply.

Let’s look into the tax implications of employing a family member and what your legal duties would be as their employer, so you don’t accidentally break the law.

Can you employ family members to reduce taxes?

Yes, you can. If you own a private small business, there are no laws against nepotism (hiring family and friends) – it’s not like it’s a significant public or governmental role.

Your family member doesn’t even have to apply through the usual channels – i.e. responding to a job listing, attending an interview, etc. You can simply create a role and hire them.

However, the job has to be a legitimate role that fulfils a necessary function. For example, employing your spouse as a receptionist, or hiring your teenage child to do some admin.

If your partner is otherwise unemployed or isn’t earning enough to pay Income Tax, this is a good way of using their annual tax-free Personal Allowance (£12,570).

This tax-free income will then join your household income pool to support your family, whereas you wouldn’t benefit from hiring an external employee.

Everything needs to be above board, so any relatives you employ must be registered on your payroll so HMRC can tax their salary appropriately through PAYE.

There should be no special treatment regarding pay or working conditions, and you must still make National Insurance and pension contributions as necessary.

Don’t forget that you’ll also need to have employer’s liability insurance that covers your family employees, and follow all health and safety and employment regulations.

If your business is a limited company, you also have the option of employing an adult relative as a director or shareholder to receive further benefits, such as less-taxed dividends.

Can a family business employ children?

Yes, the owner of a small business is free to employ their child or multiple young family members if they wish – in compliance with the UK’s child labour laws, of course.

Whether you pay them for ad hoc services as a freelancer or take them on board as a part-time or full-time employee, you must pay them an appropriate wage for the work they’re doing.

You can hire a child as young as 13, or an ‘adult worker’ who is 18 years old or above. If the child is at least 16 years old and living outside the family home, they’ll be eligible for earning the National Minimum Wage and may have to start paying National Insurance contributions.

The minimum wage depends on their age, as it rises at 18, 21, and 23. There’s also a separate minimum wage for apprentices under 19 years old or for those in the first year of their apprenticeship.

Children between these ages may be less likely to use all of their Personal Allowance, especially if they’re primarily a part-time or full-time student. Just remember that different rules around wages and working hours apply for ‘young workers’ (under 18) and ‘adult workers’ (18 or over).

How much should a business pay family employees?

Regardless of your relationship to any of your employees, you should be paying each of them the appropriate wages for their role, and paying workers equally for performing the same role.

To benefit from reduced taxes, you must enroll related employees through PAYE. Trying to sneak ‘cash in hand’ payments could be considered tax evasion by HMRC, and you could be fined.

HMRC has no reason to disallow valid deductions, such as paying the ‘going rate’ for genuine work that your family member has done for the business – what HMRC calls ‘equal pay for equal value’.

This obviously depends on the job and the individual’s skill set, but it must add value to the way the business functions – such as billable hours of cleaning, maintenance, bookkeeping, or marketing.

You’ll need to pay their wages into their bank accounts through your payroll system and keep records of these payments, as well as any commission or bonus payments.

If the pay for a family member is unrealistically high for the job in question, such as £100 an hour for answering the telephones, HMRC would consider this to contribute to your personal income as the business owner, which would reduce your deductible expenses and affect your own tax liabilities.

In such a case, you also wouldn’t be able to claim National Insurance contributions relief. If you’re paying a family member a fair wage to work for your business and they earn above the Employment Allowance threshold (currently £120 per week or £560 per calendar month), you could claim back up to £4,000 of National Insurance liability and reduce your business taxes even further that way.

Where to find advice on employing family members?

In summary, creating a job within your private business and employing a family member to fulfil the role can be a tax-efficient way of keeping more cash in the family’s coffers – but only if you do it right and stay on the good side of the law. You can find more information about HMRC’s salary rules for close relatives and dependents here.

This kind of salary arrangement will be more beneficial if you put it in motion at the start of a tax year, so it’s a good time to consider hiring a family member for April 2022–2023. If you need help with setting up payroll services or account management, or you’d simply like some tax advice, please contact the experts at GBAC today.

Give our team call on 01226 298 298 to discuss how we can help you, or send your enquiry by email to info@gbac.co.uk and we’ll be in touch as soon as possible. We’re happy to provide guidance on employing family members and tax deductions as part of our comprehensive services as accountants in Barnsley.

The UK ended 2021 with consumer prices rising by 5.4%, which then hit a 30-year high of 5.5% in January 2022 – the highest inflation rate
since 1992.

For contrast, the previous rate was a mere 0.6% in December 2020, but the Consumer Price Index (CPI) charted a rapid increase over the following 12 to 13 months.

With inflation shooting past 4.8% in the winter of 2021, which hasn’t happened since the global financial crisis in 2008, there’s a lot of talk about a new ‘cost of living crisis’ for Britons.

But why is inflation continuing to increase, and what does it mean for you? Is it all bad news? GBAC – accountants in Barnsley – take a look at the state of inflation in 2022 and how you can expect things to change.

What is inflation?

Inflation is an economic measurement tracking the prices of goods and services for consumers. The inflation rate is recorded once a month, but people often compare it to previous annual rates to gauge changes in their ‘spending power’.

Since inflation rates have previously been low and slow, many of us don’t notice prices creeping up each month. However, prices have been rising so quickly in 2021 and 2022 that consumer wages simply can’t keep up with the increased cost of living.

The Office for National Statistics gathers and publishes data on inflation in the UK every month using the Consumer Price Index (CPI) and Retail Price Index (RPI). It notes the prices of hundreds of common goods, like bread and milk, to track price increases.

As an example, if inflation was 1% and a loaf of bread previously cost £1, it would now cost £1.01. When inflation jumps above 5%, as it did in January 2022, that same loaf would suddenly cost £1.06. This may not seem like much at first, but small increases across the board can soon add up.

Recently, you may have seen or heard campaigner Jack Monroe on social media, TV, or radio talking about the current effects of inflation
on the cost of basic supermarket goods, and how it hits lower income groups the hardest.

Unfortunately, this isn’t limited to just the UK. Over in the US, inflation rates have already soared above 7% – the highest since the 1980s – and inflation in the Eurozone also saw a record-breaking peak of 5.1% as of January 2022.

Why is inflation rising?

As most people are aware, the COVID-19 pandemic has caused a lot of damage to the economy, putting an increasing strain on businesses and consumers alike. The higher demand for goods and shipping disruptions combined to cause shortages that drove prices up, with Brexit contributing to supply chain problems between Europe and the UK.

Both the pandemic and Brexit have also resulted in widespread staff shortages. In order to attract more workers by paying higher wages, some employers ended up raising the prices for their products and services. This led to higher costs for everything from food and drink to furniture.

January is usually the best month for bargains due to post-Christmas sales, but 2022 saw the lowest discounts for clothes and footwear since 1990. Eating out and travelling have also become more expensive, with transport costs relating to cars, flights, and fuel contributing to inflation the most.

Unfortunately, staying at home isn’t likely to save you money, as the ‘home sector’ is the second largest contributor to rising inflation. This includes the costs of housing, electricity, water, and other fuels, with energy bills practically doubling for millions of people with variable contracts.

Here are the main components of inflation in 2022, in order from largest to smallest:

As the prices of essentials continue to surge, analysts are predicting that the UK inflation rate will surpass 7% this spring – the highest since 1991, when inflation hit 8.5%. The energy price hike and tax increases due in April are likely to squeeze budgets even further.

How will rising inflation affect me?

Inflation isn’t necessarily a bad thing, as it can encourage the production and purchase of more commodities. However, when inflation is vastly outpacing wage growth, as it is now, overall spending power is drastically reduced – meaning the average person can afford less than before.

The way inflation rates in 2022 will affect your finances depends on your individual circumstances, but it definitely means fewer luxuries for most. For low income earners already struggling to make ends meet, the impact could be severe. Here are some of the ways inflation may affect living costs:

With all this doom and gloom, you might wonder if there’s actually any good news relating to UK inflation. Well, there are some – the price of petrol has fallen after surging in autumn 2021, and the National Living Wage is increasing by 6.6% in April 2022 for the lowest-paid workers.

Due to labour shortages in many industries, such as lorry drivers, wages in these sectors are rising more than others, so it’s possible to find a job that reduces the inflation gap in some cases.

Some economists are hopeful that the inflation spike
will be short-lived, even with the expected escalation at the start of the new tax year in April. The Bank of England believes that inflation will settle down and decrease to their target level of 2% in the next 2 years.

How can I protect my finances against inflation?

While the UK government considers monetary policy changes that might help to reduce inflation if it persists, it’s up to individuals to take stock of their own financial situation, including living costs and spending habits. Many will have to cut back on leisure and luxury purchases.

For those making investments, including pensions, bonds, dividends, and stocks, rising inflation may decrease the value of your savings and holdings. Real estate and mortgage costs are also likely to increase, affecting new buyers and certain existing homeowners.

Things like this are why financial planning, including tax-year-end planning, should always take inflation into account. If you would like help reviewing your spending, taxes, and savings, why not consult the experienced accountants at GBAC?

You can get in touch with us by calling 01226 298 298 or emailing info@gbac.co.uk
to discuss our services and find out how we can help you protect your finances in the face of inflation.

Following a consultation in November 2018 and a statement in the March 2021 Budget, the controversial business rates loophole for second homes will soon be closing.

The UK government is cracking down on owners who avoid paying council tax and claim business rates relief on their second homes, without actually letting them out to holidaymakers.

Local authorities in popular destinations like Cornwall and the Lake District have been losing millions of pounds as tax-dodging second home owners leave their holiday residences sitting empty.

The rules regarding business rates relief for second homes will be changing from April 2022 in Scotland and April 2023 in England – so let’s take a look at how this could affect you.

What was the business rates loophole for holiday homes?

Under the current rules, people could register their second homes as a business property to avoid paying higher council tax rates. Instead, they could claim small business rates relief, meaning they could pay no property tax at all if their second home has a rateable value of less than £12,000.

To take advantage of this tax loophole, second home owners merely had to declare their intention to let the property commercially for 140 days a year. They didn’t have to make realistic efforts to attract tenants or holidaymakers, or provide any evidence that they’re actually letting the property.

This means that hundreds, if not thousands, of second home owners could be abusing the system – pretending to be a small business providing holiday lettings, while the second home really sits empty when they aren’t there themselves. This leads to unfair consequences for the local communities.

Local authorities are losing valuable income from this council tax avoidance, which should be helping to fund public services in the area. Under-investment and empty housing can drive people out of their communities, contributing to a housing shortage as prices go up and populations fluctuate.

When are business rates changing for holiday homes?

To combat these issues and support local businesses, the government is tightening the rules around business rates for second homes. From 1st April 2023, second home owners will now have to prove that the property was available to let as ‘self-catering accommodation’ for at least 140 days out of the tax year, and was actually rented out for at least 70
of those days, to qualify for business rates.

Under the new system, the Valuation Office Agency
will assess properties to determine whether they should pay council tax
or business rates. Owners of second homes need to provide evidence such as websites or brochures advertising the holiday let, and details of bookings such as receipts.

If a second home owner claims to be letting the property out but can’t supply any proof, they’ll be switched to council tax instead. While this is likely to be far more expensive, as council tax rates are the same for second homes as they are for primary residences, it’s good news for local economies.

For accounting purposes, business rates consider occupancy per night. So, for example, a booking from a Thursday evening to a Saturday morning would only count as 2 of the 70 days – counting the Thursday night and Friday night only. Allowing friends or family to use the second home for free won’t count towards the 70-day minimum, though ‘reasonable discounts’ may be acceptable.

What about business rates for new lets?

Unfortunately, there will be no special rules introduced for newly available lets or purpose-built lets. This means that these properties will be liable for council tax until they meet the business rates criteria. So, the owner will have to pay council tax until they can prove that they’ve been letting the property for 70 days and have made it available for holiday rentals for 140 days out of that tax year.

As accountants and tax advisers will know, new second homes won’t be eligible for a business rates assessment until the 141st day
of availability. While the changes won’t come into effect in England until April 2023, it’s worth starting to plan and prepare now if you intend to let out a second home.

Need help with tax relief for your second home?

Running a second home can be costly, so it makes sense for owners to make some extra income by letting out their holiday home as a small commercial business. Second home owners who operate legitimate holiday lettings shouldn’t be affected by the change other than supplying paperwork.

However, if you own a second home and claim business rates relief, but aren’t sure how this move will affect you, then you should have an expert review your property before the end of next March. For example, the tax consultants here at GBAC
can gladly help you assess and plan for the next year.

Give us a call on 01226 298 298 today, or email us at info@gbac.co.uk
to discuss your second home.

If you’re the type of person who leaves things to the last minute, you might not be thinking about tax-year-end planning. However, the 2021-2022 tax year will be ending on Tuesday 5th April 2022.

With no Spring Budget this year and the Easter holiday not falling until 15th April, there’s nothing standing in the way of your preparations for the end of this tax year and the start of the next one.

You still have several weeks to get your tax affairs in order and take advantage of the available tax allowances. The sooner you start, the better – so here are some key factors you need to consider.

Pension planning

Pension contributions are one of the few methods of receiving income tax relief whilst also reducing your taxable income. This is important when your taxable income can determine all your benefit and tax relief allowances.

It’s worth regularly contributing as much as you can afford to your pension pot. Not only will you be setting money aside to support yourself in your eventual retirement, but you’ll also have something to pass on to your family when you’re gone.

The annual pension contribution cap for UK residents under 75 years old is £40,000 or 100% of your earnings – whichever amount is lower. This is a gross pre-tax figure, so the maximum net payment is likely to be around £32,000.

No tax relief is available for pension contributions if you’re over 75 years old, and the allowance is tapered for higher earners under 75. If your annual income is more than £240,000, your pension contribution allowance will be reduced by £1 for every £2 above this.

The pension contribution lifetime allowance is frozen until April 2026, so you can contribute a maximum of £1,073,100. However, many people aren’t aware that you can actually ‘carry forward’ your pension allowances for up to three years.

This means that if you contributed less than £40,000 in previous tax years, you could add your unused allowances to your current annual limit and extend the total capacity. If you are able to do this, you have until 5th April 2022 to use your allowance from the 2018-2019 tax year.

Inheritance tax planning

Now we know that the Chancellor isn’t introducing any major Inheritance Tax (IHT) reforms, you have a reliable framework for IHT planning. The IHT threshold is still frozen at £325,000 until 2026, and the standard IHT rate remains at 40%.

This high tax can come as a shock for grieving family members inheriting your estate, so it’s worth doing whatever you can to reduce your estate’s taxable value. This includes using all the tax reliefs available to make things easier for your beneficiaries.

The annual Inheritance Tax gifting allowance allows you to gift up to £3,000 a year tax-free. You can ‘carry forward’ an unused allowance for one year only, but these allowances apply per person – meaning a couple could give away up to £12,000 tax-free.

If you haven’t already and plan to do this, you’ll have until 5th April 2022 to gift your full allowances for the 2019-2020 and 2020-2021 tax years (totalling a maximum of £6,000 per person).

You can also make small gifts of up to £250 for as many people as you like each tax year – as long as none of them are also recipient of your £3,000 gifting allowance. There’s no ‘carrying forward’ for these donations, though, so you have to use them within the year.

Other ways to reduce your taxable estate value and help your family include regularly making small financial gifts, such as setting up Junior ISAs for grandchildren or paying for family holidays. This can be a complicated area, though, so you might want to seek professional advice.

Capital gains tax planning

As with Inheritance Tax, the Chancellor has already made the public aware of Capital Gains Tax (CGT) changes. The CGT-free allowance is staying at £12,300 per tax year and CGT rates are also remaining the same, which makes year-end planning easier.

Capital Gains Tax is one of the most complex, so many people fall into the CGT trap of either not paying what they owe or paying more than they should. To make sure you don’t get caught in these traps, be sure to use your CGT allowances to the full by 5th April 2022.

You’re only liable for Capital Gains Tax when you sell an asset, or multiple assets, and make a total profit of £12,300 or more. Taxable asset sales could include real estate, stocks and shares, or valuables like antiques and jewellery.

For profits above the CGT threshold, the CGT rate depends on your level of Income Tax. If you’re a basic-rate taxpayer, you’ll be charged 10%, while higher-rate taxpayers will be charged 20%. When selling property specifically, the respective rates are 18% and 28%.

If you want to reduce your CGT bill, there are ways to be smarter about your annual allowances:

Like Inheritance Tax, you can’t carry your annual Capital Gains Tax allowance forward, so you have to use it before the end of the tax year. However, you could sell an asset before the end of this tax year, then sell another after 6th April 2022 to use both annual exemptions in succession.

Make the most of your annual tax allowances

If you need expert assistance with your personal finances, don’t wait until the very last moment to benefit from year-end planning. Some decisions take time to make and may also require collecting important data first – such as pension figures or asset values.

In many cases, tax relief allowances can’t be carried to the next year if you don’t use them – so you must use them or lose them. It’s vital to act now and seek advice on shaping your financial future by the end of the current tax year on 5th April 2022.

Here at GBAC, we offer professional tax consultancy services for individuals and businesses. We also provide probate services covering IHT and estate planning. If you believe you could benefit from our tax-year-end support, please get in touch on 01226 298 298 or at info@gbac.co.uk.

When an employer covers Statutory Sick Pay (SSP)
for an employee, this isn’t usually recoverable. However, the UK government ran a Statutory Sick Pay Rebate Scheme (SSPRS) until 30th September 2021 to allow small/medium businesses to claim back SSP for employee absences due to COVID-19.

Following the spread of the Omicron variant in December, the government is reintroducing the SSPR Scheme from 21st December 2021. Employers can submit retrospective claims from January 2022.

If you’re an employer with a small to medium business and the Omicron wave caused your staff to take sick leave during this time, read on to find out if you’re eligible for a Statutory Sick Pay rebate.

What does the Statutory Sick Pay Rebate Scheme cover?

When small-to-medium employers face higher than usual levels of staff sickness due to the spread of COVID-19, they can claim up to two weeks of SSP per employee. While standard SSP only applies from the fourth qualifying day off, the scheme will pay from the employee’s first qualifying day off.

A ‘qualifying day’ is a day which the employee was scheduled to work on, but they had to call in sick for coronavirus-related reasons. If an employee was off sick from 21st December 2021 due to having COVID-19 or self-isolating under NHS guidance, you can reclaim the employee’s SSP through HMRC.

If a COVID-related absence began before 21st December 2021, unfortunately, you can only claim for the period of sick leave from this date onwards. The SSP rate is currently £96.35 per week, meaning you could claim back almost £200 per employee for every COVID absence lasting up to two weeks.

Even if you already claimed an SSP rebate for a specific employee under the previous scheme, you can make a fresh claim for the same employee under the new scheme if their absence qualifies. It’s possible to make multiple claims for the same employee, but only for a collective total of two weeks.

Which employers qualify for the Statutory Sick Pay Rebate Scheme?

To be able to claim a Statutory Sick Pay rebate, you must be a UK-based employer with no more than 250 employees on 30th November 2021. You must also have a working PAYE system in place on or before this date. Even if you have less than 250 employees, the maximum number you can claim an SSP rebate for is the exact amount under your employment on 30th November 2021.

You can only claim for staff absences due to COVID-19 from 21st December 2021 onwards. Claims can only be for a maximum of two weeks, even if the employee was off work for longer than this. You must have already paid the absent employee their SSP before you can attempt to claim it back.

The SSPR Scheme includes all kinds of employment contracts, including full-time, part-time, flexible or fixed term, and casual agency workers. However, self-employed people cannot use the Statutory Sick Pay Rebate Scheme. Employees still need to self-isolate for four days to be eligible for SSP, but if COVID is the reason for their claim, then they should also be paid for those four qualifying days.

How can businesses claim a Statutory Sick Pay Rebate?

Eligible employers can make retrospective SSP rebate claims from 14th January 2022 after paying SSP to their employees on sick leave due to COVID. When you make a valid online claim, you should receive the SSP refund within six working days. An authorised PAYE agent can manage this for you.

To submit an SSPR claim, you’ll need the Government Gateway ID for your PAYE Online account. The information you’ll be required to submit includes

The claim date must be on or before the date that you paid the SSP, as the scheme works based on arrears. Claim periods can overlap if you have to apply multiple times. Since employees can currently self-certify for up to 28 days, you won’t need a ‘fit note’ for them to prove that they have COVID-19.

To comply with the SSPR Scheme, you must keep records of your SSP rebate claims for three years from the date of payment. Your records must include the dates of employee absence, which were qualifying days, their National Insurance Number, and their COVID-related reason for being off sick.

You can keep these records however you like, whether they’re stored digitally or printed on paper, as long as HMRC can access them in the event of a dispute over SSP. Similarly, you’ll need to retain a copy of the state aid declaration from your SSP claim summary until at least 31st December 2024.

When is the deadline for the Statutory Sick Pay Rebate Scheme?

It’s important to submit your SSPR Scheme applications
as soon as possible, if you’re eligible, as this is only a temporary scheme. The government has not stated an end date for this round of the service yet, but they are keeping it under review. The previous iteration ran from 13th March 2020 to 30th September 2021, but the new scheme could be closed at any time as soon as legislation is passed.

If you need help with the Statutory Sick Pay Rebate Scheme, why not use an agent offering payroll services
to take care of PAYE-related issues on your behalf? When you authorise us as a payroll officer, GBAC will make sure all the details are correct and that claims are submitted in good time. Please contact us by calling 01226 298 298 or emailing info@gbac.co.uk to speak to our team.

After receiving Royal Assent on 15th December 2021, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act
enforces greater investigative powers for the Insolvency Service. First announced back in 2018, these new powers are only just coming into effect now.

Previously, the Insolvency Service could only investigate current directors of firms becoming insolvent. Now it has the power to look into directors after the dissolution of a company. Rather than escaping their debts, the service can disqualify directors if they find evidence of misconduct.

Which new powers does the Insolvency Service have?

Unfortunately, some directors abuse the dissolution process to avoid paying their company’s debts. This is known as ‘phoenixing’ – when a director dissolves their own company to evade liabilities, then goes on to become a director elsewhere. They may even repurpose their business assets and use them to start another company, all while dodging their responsibilities to pay previous creditors.

‘Phoenixism’ is an even bigger concern for the government these days, because some directors may use this method to avoid paying back COVID-19 business support loans. This has been a big factor in signing off on these new powers. Not only can the Insolvency Service look into companies entering insolvency, but it can also investigate former directors of dissolved companies, and even active ones.

‘Gross misconduct’ covers many director behaviours, not just failing to pay debts. Activities that the Insolvency Service may investigate include misappropriating company assets, taking money from the business for personal use, pursuing unwarranted financial risks with creditors’ money, and defrauding creditors. If it finds evidence of wrongdoing, the director will face legal consequences.

What are the Insolvency Service sanctions for director misconduct?

As the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act allows the Insolvency Service
to investigate former directors of dissolved companies, those found guilty of misconduct can be held accountable regardless of when the misconduct occurred. The service may ban a fraudulent director from holding another director position at any company for 2 to 15 years.

In severe cases, including repeat behaviour or breaking of a ban, the Insolvency Service can take the director to court for prosecution. The Business Secretary could also seek compensation through such court cases, giving defrauded creditors an opportunity to recover their losses. Any director found resuming activities could risk going to prison, or becoming personally liable for company debts.

Rather than aiming at large corporations, the legislation is targeting small to medium enterprises who may be tempted to ‘game’ the system. Whereas directors may have gotten away with ‘phoenixing’ before, perhaps even multiple times, the retrospective investigatory powers will eventually catch them out. They will hopefully be an effective deterrent for current directors.

Will these changes to the Insolvency Service affect business rates?

Alongside targeting former directors, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act also affects business rate appeals. Companies cannot use COVID-19 as the basis of a ‘material change of circumstances’ business rates appeal. However, the government is providing a £1.5 billion business rates support fund through local authorities for certain sectors.

For more information about this Act, consult the UK Parliament website or the government’s official online press release. Should you need professional assistance with corporate finance, including company formations, mergers, and succession planning, then get in touch with GBAC. Our skilled accountants in Barnsley are just a phone call or email away via 01226 298 298 or info@gbac.co.uk.

Though the government’s ‘Plan B’ didn’t require business closures when it came into effect in December, the limits on socialising and other COVID-19 restrictions still led to dramatic losses for the hospitality and leisure sectors over the festive season. To help businesses recover from the effects of the Omicron variant, a new support package was announced on 21st December 2021.

Since 7th January 2022, the government has been distributing millions of pounds of funding to councils across England. Thousands of businesses can apply for grants of up to £6,000 per premises, plus other discretionary funding from their local authorities. Applications will close on 18th March, so read on to find out more about the COVID-19 grants available and how businesses can apply.

Which coronavirus support grants are available in 2022?

This Omicron business support scheme is providing almost £700 million in targeted grants for hospitality and leisure premises in England. The size of the grant depends on the Rateable Value of the premises, with the maximum being £6,000 for properties with an RV of more than £51,000.

The government is also temporarily reintroducing the Statutory Sick Pay Rebate Scheme (SSPRS), allowing businesses with less than 250 employees to reclaim the costs of up to two weeks’ Statutory Sick Pay per employee from 21st December 2021, for any absences due to the Omicron variant.

Additionally, local authorities in England will receive part of the £102 million for discretionary funding. Check the website for your local council to see if you could be eligible for a discretionary grant. The Culture Recovery Fund is also receiving £30 million to support theatres and museums.

Who is eligible for this COVID-19 business support package?

In order to be eligible for an Omicron hospitality and leisure grant, businesses must be solvent ratepayers – meaning no administration or striking-off notices – and also meet these conditions:

Examples of eligible businesses in these sectors include restaurants, hotels, bars, cinemas, event venues, and amusement parks. It excludes takeaways, gyms, and residential dwellings. Check with your local authority for the specific definition requirements to see whether your business qualifies.

Those eligible for the new Omicron business grant
will receive the following payments (according to the Rateable Value of the premises from 30th December 2021):

Depending on your local authority, the closing date for applications may be as late as 18th March 2022 – but all payments must be made by 31st March 2022. The grant will then fall within the 2021 tax year, so you must declare it and any other COVID-19 funding you receive on your tax returns.

In some cases, eligible businesses may receive grants automatically, but it’s worth checking whether you need to register to apply. Many authorities allocate grants on a ‘first come, first served’ basis, so you don’t want to leave it too late and find out that the funding has run out by the time you apply.

What are the tax implications of COVID-19 business support grants?

If a business receives a grant, HMRC will consider this taxable income. So, if you receive a COVID-19 grant payment before 5th April 2022, then this will count towards your taxable income for the tax year from April 2021 to April 2022. It’s your responsibility to declare grant income on tax returns.

However, tax may not be due on grant income if your business doesn’t make an overall profit. If your business could benefit from advice on grant eligibility and tax liability, get in touch with the expert tax consultants
at GBAC. Give us a call on 01226 298 298 or send us an email at info@gbac.co.uk
to discuss your requirements, and our team of accountants in Barnsley
will do their best to assist you.