HK Business Forward Update 29 July 2020

This update is written and posted on 29 July 2020 and is likely to quickly become out of date. We will endeavour to update information as it becomes available.

Previous updates and other useful information can be found at our WEBSITE.

With a number of changes/new announcements by Government to the Covid-19 pandemic support for business, we thought it would be appropriate to send an update in advance of our August monthly newsletter.

This month’s update is in the main about additional guidance, conditions and examples re the two main Government support schemes, the job retention scheme and self-employed income support scheme.  Both schemes have second phases, as we have previously reported, with updated guidance released in respect of each, which includes separate guidance on paying back grants made in error, overpayments, penalties for not doing so etc. 

It is clear that the schemes were rushed into “service” at the height of the lockdown, and HMRC’s main focus had been on implementation. These schemes have been around for a while, and now HMRC have more time to monitor and “police” the claims being made, including acting on “whistle-blower” information.



Job Retention Scheme #2 (aka Flexible Furlough)

Commenced at the start of this month, August will be the first month the employer is required to contribute, being responsible for employer's national insurance and/or pension contribution elements. 

The second version of the scheme is more complex, if the employer is opting to use the flexibility of the scheme with employees working part of the month/week and being furloughed for the remainder. HMRC are continuously updating and adding examples to their guidance which can be found HERE. 

The government has also launched a new calculator to help employers with their claims. The calculator will work out how much the employer has to pay their furloughed and flexibly furloughed employees, how much they can claim for employer National Insurance contributions and pension contributions and how much they can claim back. The calculator should be updated to reflect the changes to the scheme over the coming months.  The calculator can be found on this link. 

The Low Income Tax Reform Group also have provided some beneficial guidance and examples on their WEBSITE. 

Yesterday HMRC issued anticipated guidance, regarding employers receiving Job Retention Scheme grants, where they were not eligible for the grant, or an overpayment had been claimed. This guidance confirms that HMRC will charge penalties if the employer does not tell HMRC within the notification period.

The “policing” of the furlough scheme has already commenced, with the arrest of an individual as part of an investigation into a suspected £495,000 furlough fraud. More are expected, as HMRC have received 1,868 reports from workers as of mid-June in relation to potentially fraudulent claims made by their employers.  The number is likely to have increased as a result of employees being made redundant. or where there are cases of employees leaving their employment and claiming constructive dismissal, as they have been asked to work while on furlough

If you overclaimed and have not already repaid the funds, you should notify HMRC within the notification period. The notification period ends on the latest of whichever date applies below:

  • 90 days after you receive the funds you’re not entitled to;

  • 90 days after the day circumstances changed so that you were no longer entitled to keep the CJRS grant;

  • 20 October 2020.

HMRC may charge penalties if you do not deal with an overpayment or a claim in error within the above notification period.  In deciding the amount of any penalty, HMRC will take into account whether you knew you were entitled to the grant when you received it, or you knew when it became repayable or chargeable to tax because your circumstances changed, with penalties of up to 100% being charged.  Further details can be found on their website.

HMRC have also provided a new guide about overclaims and underclaims that explains what to do if you claim too much or not enough, which can be found by clicking this link.

Self Employed Income Support Scheme (“SEISS”)

Per previous updates, the first payment under the above scheme closed on 13 July 2020, with a second payment (defined as final) for qualifying individuals being available from 17 August 2020. The scheme will be available to qualifying self-employed individiuals  and partners of partnerships which have been ‘adversely affected’ by Covid-19 on or after 14 July 2020, if they meet the qualifying conditions. This applies even where a claim for the first grant was not made.

The grant will be taxable and will be worth up to 70% of average monthly trading profits, paid in a single instalment covering three months’ worth of profits and capped at a maximum of £6,570 in total.

Guidance on the scheme has been updated, in particular:

  • What is viewed by Goverment as being adversely affected by Covid-19 has been updated, together with examples here

  • The guidance now states that evidence needs to be retained and available for checking in respect of:

  1. the amount of the grant claimed,

  2. the grant reference, and

  3. evidence of the business being adversely affected by Covid-19. 

  For most this will be easy, as evidence of a drop in turnover should be sufficient.

  • Specific guidance has now been provided where you made a claim in error (due to not being eligible for the grant), where you have been overpaid, or if you would like to make a repayment. This guidance can be here. The deadlines for making the disclosure are grants apaid before 22 July 2020 before 20 October 2020 or if the grant was paid on or after 22 July 2020 within 90 days of receiving the grant.

We will be emailing our clients who believe could be eligible for the grant, however, the claim has to be made by the taxpayer via the HMRC Government Gateway as with the first grant.  Access will not be available until 17th August.

Tax Impact of Government Covid 19 Support Schemes

As the Government support schemes became available, we have been highlighing their tax implications, for example, the SEISS being a taxable grant.  For ease of reference, we have collated this information into one place, covering all support schemes from grants to Government supported loans. See our latest blog below.
Details of all the support schemes available from the Goverement and other resources.


  • Changes to CBILS Rules - Small businesses with fewer than 50 staff and less than £9m in annual turnover will no longer be considered “undertakings in difficulty” which resulted  in them being classed as being in financial difficulty and not eligible for The Government backed loans. The British Business Bank has now changed the CBILS scheme to ensure these types of business now can apply and be considered.
  • Tax Payments and returns – Remember that other than the 31 July payment on account, there are now no automatic deferments for tax payments or returns.  If you can’t pay a tax liability, then the pre-Covid19 process of contacting HMRC and agreeing a time to pay has to take place.
  • Temporary 5% VAT Rate for the Hospitality Sector - Whilst your business may not operate within the hospitality sector, it does mean that greater attention will need to be paid when reclaiming VAT on travel & subsistence and staff entertainment costs. (There is no impact on client entertainment costs as VAT on client entertainment is not recoverable in any case).  We recommend you request a VAT invoice at all times so that you can ensure the VAT entered on your bookkeeping software is correct. If you are unable to obtain a VAT invoice then we recommend reclaiming the VAT at 5% to be prudent.
As ever, matters are still developing and we will endeavour to keep you up to date, flag to you opportunities and signpost to the key details as best as we can via our updates.  A summary of the Government’s support schemes can be found at our website, including a list of non-Government funding opportunities, which we update regularly and can be found HERE.

We know that this is a very difficult time for all businesses and some difficult decisions are having to be made.  We have spoken to many of you and for those we have not, we would like you to know that we are here ready to help if you need us to provide advice, deal with queries, or just be a business sounding board.

Please do not hesitate to contact us if you wish to discuss anything covered in the newsletter or any tax, accounting or business-related matter.

To find out more about Harbour Key, or any of the issues above, visit our website, contact us by email or telephone on 01452 713277.