July 2021 Tax Update

Upcoming Deadlines

P11d are due to be submitted to HMRC (and provided to relevant employees) by 6 July. HMRC can apply to the Tribunal to issue a penalty of £300 per form for late submission. If the failure continues, further penalties of £60 per day can be applied. Class 1A NICs is due to be paid to HMRC by 19 July (or 22 July if paying electronically).

Furlough changes

Up to 30 June the government has provided funding up to 80% of an employee’s wages (up to a maximum of £2,500), the employer could pay the difference to 100% if they so choose.

From 1 July the government’s support reduces to 70% (maximum wages of £2,187.50) and the employer must pay the difference to ensure the minimum payment the employee receives is 80%.

Government support is further set to reduce to 60% (maximum £1,875.00) from 1 August until the end of September (when the furlough scheme is scheduled to end) at which point employers must top up the wages to 80%.

Pension contributions and national insurance payments must continue to be made by the employer throughout.

Director disqualification

As government support for businesses starts to ease R3 has released a guide to help company directors spot the signs of financial distress and provides advice on how to resolve any issues. The guide offers explanations into how the insolvency and restructuring framework and profession can help to rescue viable businesses. It also covers the duties and responsibilities of company directors and the significant importance of these responsibilities being met.

Failure by a director to fulfil their fiduciary duties to the company and its shareholders may lead to an investigation by the Insolvency Service.

According to figures published by UHY Hacker Young, the number of company directors disqualified by the Insolvency Service fell by 24% in the last year.

It is possible that this is a result of a failure by the Insolvency Service to investigate directors as a result of the Government’s measures to reduce the number of insolvencies (rather than any comment on a change in the overall honesty and integrity of this small number of directors).

Directors can be disqualified for actions such as attempting to defraud HMRC, falsifying records or transferring money out of a business when it was insolvent. Added to this is the mounting speculation that directors took out government-backed CBILS and BBLS with no intention of paying them back – potentially resulting in billions of pounds lost to the Exchequer.

If found guilty of fraud, a director can be banned for up to 15 years and could face jail time. Directors may also be banned from setting up a near identical business after dissolution, so they cannot continue trading while leaving creditors and HMRC unpaid.

G7 Global Tax Reform

The G7 has agreed to back an international agreement on which would see multinationals pay minimum corporate tax rate of 15% in each country they operate.

Finance ministers agreed the principles of a two pillar solution to tackle the tax challenges arising from an increasingly globalised and digital global economy:

1. The largest and most profitable multinationals will be required to pay tax in the countries where they operate, not just where they have their headquarters.
2. 15% global minimum corporation tax operated on a country-by-country basis, creating a more level playing field with a view to deterring tax avoidance.

The proposals will be discussed in further detail at the G20 meeting this month.

Evictions – residential and commercial

The government ban on eviction notices has been lifted allowing landlords to serve notice and call-in bailiffs on residential tenants who have not paid rent. Up until the end of May, landlords had to provide six months’ notice to tenants owing less than six months’ rent. This has now been reduced to four months.

Where tenants owe more than four months rent there is a shorter notice period although in each case the landlord is not permitted to force the tenant to leave their home without a court order.

From 1 August, the notice period will reduce to two months where there are less than four months of arrears. The government has stated that ‘Subject to the public health advice and progress with the roadmap, notice periods will return to pre-pandemic levels from 1 October’.

The treatment for businesses renting commercial property is different and the ban on evictions has been extended to 25 March 2022 in an effort to support businesses facing financial hardship due to the limitations of ongoing lockdowns.

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