The online service for applications for the self-employment income support scheme (SEISS) is now open.

It is expected that up to 600,000 self-employed individuals will be able to apply for the support scheme.

Claims must be submitted by 1 June 2021.

To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership. Grants are not available if you trade through a limited company or a trust. Trading profits must be no more than £50,000 and at least equal to or more than your non-trading income.

The grant will be set at 80% of three months’ average trading profits. There will also be a fifth grant in due course.

There is no requirement that an earlier SEISS grant has been claimed to be able to claim the upcoming fourth grant.

You must keep any evidence that your business has had reduced activity, capacity or demand due to coronavirus at the time you made your claim or that your business is temporarily unable to trade.

HMRC will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate and there is a penalty system in place.

If an amendment to a tax return on is submitted after 3 March 2021 and this lowers the amount for which you are eligible, HMRC must be informed within 90 days.

Do you know your Inheritance Tax liability?

In a recent survey 52% of those aged 55 plus did not know what their IHT will be when they pass away and 31% revealed they have never even checked the rules on IHT and how it applies to them personally.

IHT receipts have increased substantially over the last decade hitting £5.2bn for the 2019/20 tax year.

IHT used to be called the voluntary tax as, with careful planning, there are many simple and legitimate ways to reduce an exposure to this tax.’

The Chancellor announced in March 2021 a freeze on tax-free allowances. Both the nil rate band (NRB) and residence nil rate band (RNRB) are fixed at £325,000 and £175,000 until April 2026.

The freezing of these allowances and increasing property values is likely to push more peoples’ estates over the threshold and into paying IHT at 40% of the excess over the nil band. That means that if your joint estate is worth £1m, you could have a potential liability, probably only on the second death of £140,000. If you are on your own, this could go up to £270,000.

The five-year freeze on IHT is expected to bring in £985m in extra IHT revenue, meaning more than 36,000 estates a year are expected to pay IHT by 2026, up from around 25,000 estates currently. The change was described by the government as a measure to ‘reduce administrative burdens’ for those having to deal with IHT, but I think we know the real reason.

Charging VAT on Dog Food

Dog food can be a problematic area. The regulations allow zero rating for animal feeding stuffs but excludes pet food that is canned, packaged or prepared.

• Canned – Pet food that is preserved or supplied in a sealed can.
• Packaged – Pre-packed for retail sale in any sealed bag, carton or other container of 12.5 kg or less.

Note that if it has been put in a plain paper or polyethene bag then this is not packaged.

• Prepared – Animal feed that has been specially mixed or processed for pet consumption including cereal or seed mixes specifically for pet species.

However, fresh, frozen or chilled meat products should not be classed as pet food simply because they are for feeding dogs even if they are packaged. To be standard rated as pet food they have also to be prepared in such a way as to specialise them to pets (i.e., more than mincing and dicing) or be held out for sale specifically for pet dogs.

As the law excludes pet foods from zero rating, the other question is whether dogs are always pets, and those cases that have been heard in tribunal have decided that not all dogs are pets. Some working dogs such as racing greyhounds require a very specialised diet but other working dogs such as sheep dogs may just require greater quantities rather than special food.

Where a dog food product is held out for sale specifically for pet dogs or prepared in a way that specialises it for the pet market this will be standard rated.

Where dog food products are formulated and marketed for working dogs only, with no indication that they are also suitable for pets these can be zero rated.

So, frozen minced meat (for dogs) would be zero rated, but the cooked product would be standard rated as pet food.

UK Government launches £5bn Project Gigabit

In a move to improve UK broadband access, the government has announced the first phase of the £5bn infrastructure Project Gigabit. The first development in the project will see more than one million hard to reach homes and businesses receive ‘next generation gigabit broadband.

The new broadband connections will offer available speeds of up to 1,000 megabits or one gigabit per second and are designed to help with the recovery from the pandemic and with growth and levelling up in these areas of the UK.

Up to 510,000 homes and businesses in Cambridgeshire, Cornwall, Cumbria, Dorset, Durham, Essex, Northumberland, South Tyneside and Tees Valley will be the first to benefit and contracts for these first areas will be offered out in the spring with ‘spades in the ground’ in the first half of 2022.

This will be followed in June 2022 with connection projects for 640,000 premises in Norfolk, Shropshire, Suffolk, Worcestershire, Hampshire and the Isle of Wight.

The plans also state that £110m will be spent to help connect 7,000 rural GP surgeries, libraries and schools to the new broadband.

HMRC needs to ramp up checks on furlough fraud

The Treasury Committee has conducted a hearing with the National Audit Office about the reasons for fraud related to bounce back loans and the furlough scheme.

One of the major areas of concern raised by MPs was the level of fraud related to the furlough scheme.

Areas of concern relating to the furlough scheme that were identified:

1.  employers overstating the furlough scheme by inflating number of staff, number of claims.
   1. claiming the money and requiring staff to carry on working.
   1.  organised crime, ether coercing employers to make claims or through agents, false agent arrangements with tax agents.

For SEISS the controls are a lot tighter and so the opportunities for fraud are much more limited.

HMRC works on the assumption of 5-10% fraud on furlough scheme, and 1-2% for SEISS.

Like all fraud, whistleblowing is one of best ways to identify fraud. There’s been a big investment in extra compliance staff at HMRC and that has taken some time to bring people in.

HMRC has always made clear to employers that they need to keep records and will be carrying out compliance checks. Most recent figures showed that HMRC were going to check 10,000 companies and more funding was announced in the Budget.

While furlough fraud is one issue affecting the pandemic support package, there are also concerns about abuse of bounce back loans with estimates that between 35% and 60% of bounce back loans may not be repaid.