In Tax Insights this quarter, we focus on some of the measures which come to the aid of taxpayers following the impact of COVID-19 and give you a quick update on the progress of the Finance Bill 2020.
We’ve also recently welcomed Anita Kasseean, a specialist in environmental law, to Blake Morgan. In this issue, Anita has written an article about cleaning up contaminated land where she covers some environmental tax reliefs and credits you should be aware of.
Share Options Schemes
Don’t forget to remember!
A reminder first and foremost that the deadline for the filing of annual returns for employment-related securities (ERS) issued during the tax year 2019-20 is 6 July 2020. This is done on-line through the ERS portal.
Please don’t forget that the requirement relates not just to tax-advantaged options, but also to non tax-advantaged options and stand-alone share acquisitions.
HMRC will accept COVID-19 as a reasonable excuse for missing the deadline, but you should try to meet your obligations as soon as possible.
In its June bulletin on ERS matters, HMRC have sought to put minds to rest on some of the matters which will have concerned scheme participators.
Enterprise Management Incentive Scheme (EMI)
HMRC are looking into these schemes to assess any impact and they will report back in due course.
In the meantime, HMRC can still be contacted for valuations. Where a valuation has been granted but the grant of options has been delayed due to COVID-19 then:
- any EMI valuation agreement letters already issued, where the 90 days expires on or after 1 March 2020, can be automatically treated as being extended by a period of 30 days
- any new EMI valuation agreement letter issued on or after 1 March 2020 will be valid for 120 days.
Save As You Earn (SAYE)
Scheme participants who are unable to make their contributions because they have been furloughed or are on unpaid leave during the COVID-19 pandemic should note that HMRC will extend the payment holiday terms. This will be in addition to current delay provision already allowed in the SAYE prospectus. The further delay will not lead to the cancellation of the contract and the 3 and 5 year maturity dates will be pushed out in line with this additional delay.
SAYE contributions can be deducted from payments made to employees through the Coronavirus Job Retention Scheme (CJRS).
Share Incentive Plan (SIP)
SIP contributions can be deducted from payments made to employees through the Coronavirus Job Retention Scheme (CJRS). SIP participants can stop their deductions from their salary, but if they do this as a result of COVID-19, they will not be allowed to make up missed deductions.
Company Share Option Plan (CSOP)
Employees and full-time directors who qualified at the time of grant of their options under a CSOP scheme prior to COVID-19, but who are now furloughed will continue to qualify.
The full ERS Bulletin 35 can be viewed here.
Reclaim of corporation tax in exceptional circumstances
It is recognised that COVID-19 will impact on the trading output of businesses and the consequences of that suppressed trading activity will take time to filter through into the results of those businesses. As a result, on 16 June 2020, HMRC confirmed that companies may, where circumstances are exceptional, make a claim for the repayment of corporation tax.
In its Corporation Tax Manual HMRC gives the following example:
“Officers may, however, consider Section 59DA claims made before the end of AP2 in exceptional circumstances where, for example, the expected allowable tax losses will be so great in AP2 that they are likely to comfortably exceed any relevant income in AP2 and the amount of taxable profits of AP1 that relate to the repayment claim.”
Companies will be required to provide full evidence including forward looking reports provided to the board of directors.
Cleaning up contaminated land – tax reliefs and credits you should know about
The costs of remediating contaminated land can be high, and could significantly affect a developer or investor’s decisions in relation to a site. Land Remediation Relief (LRR) is an incentive that encourages the redevelopment of land affected by contamination, and derelict sites. It is something developers and investors should be aware of, as it is often overlooked.
The LRR allows companies to claim a deduction in corporation tax for certain types of revenue and capital expenditure incurred in remediating certain contaminated or derelict sites. For example, it covers expenditure incurred in bringing derelict land back into use and removing naturally occurring arsenic, radon and Japanese knotweed from land. In certain circumstances, companies can deduct up to 150% of the qualifying clean-up cost when calculating their taxable profits.
If you are a developer or a property investor, the availability of this relief should be factored into your cost considerations. Retrospective claims for LRR can also be made, subject to certain conditions and time limits being met.
There are a number of exceptions to the availability of the LRR. For example, it is not available if your action or omission caused the contamination or if you are connected to the polluter and the polluter still has an interest in the land. So, if a company acquires a contaminated site and adds further contamination, or, if you are a tenant and your landlord caused the contamination, LRR is not available.
Separate to LRR, a ‘land remediation tax credit’ may also be available to a company that suffers new or increased losses because of expenditure on remediation. Companies may be entitled to a tax credit of up to 16% of the qualifying land remediation loss. The tax credit can be set off against the company’s liability to corporation tax
If you would like further advice on how you may be able to benefit from the Land Remediation Relief or the land remediation tax credit, please contact our Environment Team.
Update on the progress of Finance Act 2020 through the House of Commons
At the time of writing, various provisions of the Finance Bill 2020 had been debated and agreed. These include provisions relating to:
- Inheritance tax
- Stamp duty and stamp duty reserve tax on unlisted securities transferred to connected persons
- VAT and call-off stock arrangements
- HMRC’s priority for debts on insolvency which we wrote about in our April BM Tax Insights
- Joint and several liability of company directors
- Amendments to General Anti-Avoidance Rule (GAAR)
- HMRC officer administrative functions
- Returns relating to LLPs not carrying on business with a view to making a profit
- The preparations for the new tax in relation to plastic packaging
- The extension to the implementation of the Off-payroll working rules.
What you might have missed
The last few months have been busy from a writing point of view and we have published a significant amount in an effort to keep you as up to date as possible. Below you will find links to some COVID-19 related articles issued since our last Blake Morgan Tax Insights in April.
- COVID-19: Update on the Coronavirus Job Retention Scheme and the Self-Employment Income Support Scheme
- Home office expenses exemption – COVID-19
- COVID-19: Temporary measures introduced by HMRC’s Stamp Office
For more information on the Government’s COVID-19 response and all the measures introduced since the start of the pandemic, including the tax measures, please see our COVID-19 Business Fact Sheet available on our COVID-19 hub.
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