Principles of Tax: COVID-19 and tax
COVID-19 has affected some of the areas the TC Principles of Tax that CA Students cover in their course.
We are currently living through some unusual circumstances. No doubt you have wondered about the tax implications of COVID-19?
Some of the areas which we look at in Principles of Tax at the Test of Competence level of the ICAS syllabus which have been affected include employment, stamp duty and IHT. Let's consider some of the items arising in each area separately.
Employment
Many people will still be working from home to minimise the requirement for people to take public transport and be in crowded office environments. Something you may or may not be aware of is that if you are required to work from home it is possible to make a claim to HMRC to recover some of the expenses incurred in doing so.
You cannot claim relief if you choose to work from home and you are only permitted to claim for expenses which pertain to work. Some examples might include the cost of any work-related telephone calls or the extra cost of utilities for your work area. You may not claim for expenses which you use for both private and business use and the examples HMRC provide here include rent and broadband access.
Perhaps the most straightforward mechanism for claiming expenses of this nature is to submit an online P87 form via the government gateway. From 6 April 2020 the amount which can be claimed is £6 per week. No records are required if you make this claim.
Alternatively, if the expenses are significantly higher than this it might be worth the time to retain records of the expenses incurred and make a higher claim, which you may be required to substantiate if HMRC request details.
Stamp Duty
Anyone buying property in England will benefit from the temporary reduction of the stamp duty rates from 8 July 2020 and currently set to end on 31 March 2021. The temporary rates are as follows:
| Property or lease premium or transfer value | SDLT rate |
|---|---|
| Up to £500,000 | 0% |
| The next £425,000 (portion from £500,001 to £925,000) | 5% |
| The next £575,000 (portion from £925,001 to £1.5million) | 10% |
| The remaining amount (portion above £1.5million) | 12% |
The special rules for first time buyers are replaced by the temporary measures shown above. The 3% higher rate for purchases of additional residential dwellings applies on top of the temporary reduced rates.
For any new leasehold sales/transfers the nil rate band which applies to the “net present value” of any rents payable is also increased to £500,000 for the same period.
Inheritance Tax
Inheritance Tax is also an area that has been affected with HMRC advising that they are looking at some of the following items:
- Accepting digital signatures
- Not accepting cheque payments
- Potentially longer turnarounds for repayments
- Considering options for electronic submission of returns.
Some of these areas are looked at in a little more detail in our May 2020 article on the HMRC Update on IHT and COVID-19.