The Low Incomes Tax Reform Group (LITRG) has warned the self-employed that the government's coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS) grants are chargeable to income tax and national insurance. The LITRG is concerned that people may wrongly assume the funds are exempt from tax.
Meanwhile, HMRC has updated its guidance on the Coronavirus Job Retention Scheme (CJRS) for employers, following Chancellor Rishi Sunak's announcement of changes to the measure.
LITRG warns self-employed that SEISS is taxable
The Low Incomes Tax Reform Group (LITRG) has warned self-employed individuals that the government's coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS) is taxable.
The group is concerned that many may wrongly assume that the SEISS funds are exempt from tax, particularly as they are termed 'grants' by the government. It said that many people may have to pay a third of the grant back in tax and Class 4 national insurance contributions (NICs).
The LITRG said that grants made to the self-employed via the SEISS are likely to be included in claimants' 2020/21 self assessment tax returns. It has also warned self-employed subcontractors in the construction industry to be vigilant in regard to the SEISS grant being paid without tax being taken off.
Commenting on the issue, Victoria Todd, Head of the LITRG, said: 'Many claimants of the SEISS grants might, understandably, use the money as soon as they get it, for example to catch up on liabilities or to meet essential living costs – but they need to think now about budgeting for income tax and national insurance on it.
'The government has announced recently that a second wave of grants will be paid under the scheme in August 2020. We urge HMRC to do as much as it can to publicise that the grants are chargeable to income tax and national insurance to reduce the risk of people being surprised by higher-than-expected 2020/21 tax bills.'
HMRC updates CJRS guidance for employers
On 12 June, HMRC updated its guidance for employers who have furloughed employees under the Coronavirus Job Retention Scheme (CJRS).
From 1 July, employees will no longer have to be furloughed for a minimum period of three weeks. From this date the CJRS will have more flexibility to allow claims on a pro rata basis. Employers will be able to permit employees to work some of the week and be furloughed for the rest.
An employee needs to have been furloughed for at least three consecutive weeks between 1 March and 30 June to be eligible for furlough from 1 July. Additionally, after 1 July, employers will be subject to a cap on the number of CJRS claims they are able to make.
The CJRS changes have effect from 1 July until the closure of the scheme on 31 October.
Parents returning from statutory maternity leave, paternity leave, adoption leave, shared parental leave and bereavement leave are exempt from the CJRS changes. The Treasury recently announced that parents who are returning to work over the coming months will be eligible for the CJRS despite the scheme closing to new entrants on 30 June.
Additionally, from 1 August, the level of the grant will be reduced each month. For August, the government will pay 80% of wages up to a maximum of £2,500 for the hours the employee is furloughed. For September, the government will pay 70% of wages up to £2,500, and for October, the government will pay 60% of wages up to a maximum of £1,875.