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HMRC Furlough Taskforce

Chief executive at HMRC, Jim Harra predicted that the tax authority looks set to recover over £1bn from fraud related to the covid-19 support schemes over the next two years.

If a claim was made knowing that it was wrong, penalties could be harsh.

At a Public Accounts Committee in April about fraud and error, Harra also stated that HMRC had 10,000 fraudulent enquiries open related to the covid-19 schemes. Harra said that they expect to open 20,000 more.

They are enquiring into fraudulent claims and also claims which contained errors.

HMRC will be carrying out a random enquiry programme into claims made through the furlough scheme, the self-employed income support scheme, and the eat out to help out scheme over the next few months in order to gain a valid measure of the level of fraud across the schemes. The results of these enquiries are hoped to be published towards the end of the year.

HMRC has received £100m to finance the HMRC Covid fraud taskforce and this will be spent entirely on covid-19 fraud enquiries.

To date, only five people have been arrested for furlough fraud. That is bound to rise.

HMRC are asking anyone concerned that an employer might be abusing the scheme, or anyone with information about suspected fraud, to contact them online. You would be wise to make sure your own house is in order.

The UK government has spent £340bn on the support schemes introduced at the beginning of the pandemic, approximately £6,700 per household and of this about £54bn of this was spent on the furlough programme.

Cryptoassets are risky warns FCA.

The holding of cryptoassets seems to have become more common as they appear to be gaining more acceptance.

Enthusiasm for cryptoassets is growing with over half of crypto users saying they have had a positive experience so far and are likely to buy more. Fewer people also regret having bought cryptocurrencies.

Sheldon Mills, FCA’s executive director, consumers and competition said: ‘The research highlights increased interest in cryptoassets among UK customers. The market has continued to grow, and some investors have benefited as prices have risen. However, it is important for customers to understand that because these products are largely unregulated that if something goes wrong, they are unlikely to have access to the FSCS [Financial Services Compensation Scheme] or the Financial Ombudsman Service. If consumers invest in these types of products, they should be prepared to lose all their money.’

So far, the public FCA register only lists five cryptoasset firms which have completed all registration checks and have been authorised by the regulator. This leaves 90 firms on the temporary register awaiting FCA approval.

During that period the FCA issued further consumer warnings, stating that investing in cryptoassets is high risk and that investors should be prepared to lose all their money.

The FCA intends to continue working closely with the Treasury and other regulators, including through the UK Cryptoasset Taskforce, to tighten regulations and create an oversight framework for cryptoassets. 

Finance Act 2021- Royal Assent

The Finance Act 2021 has been given royal assent and so enacts measures first announced in Budget 2021 including the three-year loss carry back and 130% super deduction tax relief.

The Act runs to 428 pages of legislation.

Key measures include:

  • The increases in the corporation tax rate to 25% from 2023 from the current 19%
  • The new temporary 130% super deduction first year capital allowances,
  • The temporary extension to the carry-back of trading losses for corporation tax for up to three years
  • A four-year freeze to income tax thresholds.
  • An extension of the temporary 5% reduced rate for hospitality and tourism sectors until 30 September 2021 followed by a temporary 12.5% reduced rate for hospitality and tourism sectors until 31 March 2022.
  • A freezing in the pensions lifetime allowance at £1,073,100 for tax years 2021/22 through to 2025/26
  • The Act also paves the way for a new HMRC penalty regime for late filing of returns; late payment of tax; and VAT late payment and repayment interest.

Premier League clubs tax losses

Premier League clubs generated £4.5bn of revenue during the 2019/20 financial year, according to analysis from Deloitte’s Sports Business Group, a decline of 13% compared to 2018/19 (£5.2bn)

Under normal circumstances, clubs have a financial year-end that aligns with their domestic season. However, the disruption to the 2019/20 football season has resulted in club revenues for that season being spread across the two financial years ending in the summers of 2020 and 2021.

As a result, clubs have seen some of their revenue for the 2019/20 season being deferred into the 2020/21 financial year as matches were delayed from spring into summer of 2020, beyond their 2019/20 year-end and other revenue, primarily matchday revenue and broadcast rebates, permanently lost.

Premier League clubs made a collective pre-tax loss of almost £1bn (2018/19: £200m loss), which is the largest pre-tax loss in Premier League history.

Less than a quarter of the Premier League clubs reported a pre-tax profit.

Overall matchday and broadcast revenue decreased by 13% and 24% respectively compared to the prior year. In terms of broadcast revenue deferred from the 2019/20 financial year into 2020/21, while this will provide a boost to 2020/21 revenues, the gains will be outweighed by the near total absence of matchday revenues for that season.

The decrease in revenue in the 2019/20 season is the result of the Covid-19 pandemic and this will continue to have a heavy impact on the 2020/21 season’s financial results when available.

Covid-19 and benefits in kind

Covid-19 has changed the way that many of us work, and this will impact the benefits and other staff support measures provided by employers. This may have an impact of the benefits that are reported to HMRC this year.

Home working costs

Where employees work from home as part of a home working policy, an employer can pay up to £6 per week (£26 per month) from 6 April 2020 to cover the additional cost of working from home. This is tax free and does not need to be included in the P11D benefits return.

Home-working equipment

There is a specific benefit in kind exemption which applies to ‘employer-provided’ supplies and services in the employee’s home. In order for the exemption to apply, there are two primary conditions which must be met:

  • the sole purpose for the provision is to enable the employees to perform the duties of their employment, and
  • any private use by employees is insignificant.

The employer must arrange and pay for the item (i.e., monitors, keyboards, desks and chairs, etc) and the equipment remains the property of the employer and should subsequently be returned.

If ownership is transferred to employees, a taxable benefit will arise and must be recorded on P11Ds.

There is a temporary extension to this exemption which applies up to 5 April 2021 for equipment purchased by the employee and reimbursed by the employer.

Mobile phone costs

Where the mobile phone has been provided by the business, and the contract is between the employer and supplier, no benefit arises and there are no reporting obligations.

Where employees are using their personal mobile phone:

  • where an employee is claiming for itemised business, the cost reimbursed is not taxable.
  • where an employee is claiming for an all-inclusive fixed rate call plan the cost is taxable – through payroll.
  • where an employee is claiming for business calls over and above the fixed call plan the cost reimbursed is not taxable.
  • where the business use and personal use cannot be determined, the total claim will be taxable through payroll.

Broadband

If an employee needs a broadband connection installed as a result of needing to work from home during the pandemic, and the business arranges this, then the costs can be tax free and not reportable on P11Ds.

For employees that have an existing broadband connection, if the employee can split their bill and claim only for the business use element, e.g., additional data requirements, etc, a reimbursement can be made with no tax implications.

Unused company cars

HMRC ‘s view is that a benefit in kind continues as the car remains available for private use during the Covid-19 lockdown if they are still with the employee (regardless of whether or not the car is actually used. 

Employer-provided Covid-19 testing for employees

The costs of such tests are not to be treated as a benefit liable to tax and NIC. Similarly, the cost of PPE provided to employees relating to their work is non-taxable and need not be reported on P11Ds.

Deadline

The deadline for P11D submissions to HMRC is 6 July 2021.

Questions?

If you have any questions about any of these, you know where to find us. If you prefer, just give me a ring on 07770 738770 or email me at alan.long@thelongpartnership.co.uk.

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