COVID-19 Coronavirus: Global Tax Update (United Kingdom)

Summary of UK Tax Related Measures in Response to COVID-19

• Coronavirus Job Retention Scheme. Under the coronavirus Job Retention Scheme, all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis. This applies to employees who have been asked to stop working, but who are being kept on the pay roll, otherwise described as ‘furloughed workers’. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from being made redundant. The Coronavirus Job Retention Scheme will cover the cost of wages backdated to March 1st and is initially open for 3 months, but will be extended if necessary. Further information can be found on this Dechert Onpoint.

• Accidental UK Residence Relief. HM Revenue & Customs has declared that people who face impairing their non-UK residence tax status through having to stay in the UK longer than planned because of quarantine measures can apply for special treatment under “exceptional circumstances” regulations. Further information on this can be found on the HMRC manual.

• Time to Pay Facility. All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay Service. In addition, the government is allowing income tax deferral for the Self-Employed under the Self-Assessment System until January 2021.

• Deferral of VAT Quarter. The government has deferred Valued Added Tax (VAT) payments for 3 months to help with cash flow. This is an automatic offer with no applications required. UK Registered businesses will not need to make VAT payments normally due with VAT returns during this period. Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. The deferral will currently apply from March 20, 2020 until June 30, 2020.

• Business Rates. Businesses in the retail, hospitality and leisure sectors in England will not have to pay business rates for the 2020-21 tax year.

• Deferral of Changes to IR35. The government has deferred the effective date of changes to the “IR35” rules (which are, broadly, designed to prevent individuals who are in substance employees providing their services through intermediary vehicles) by 12 months to April 6, 2021, as detailed in this Dechert OnPoint.