Opinion Former Article

Budget 2020: Sick pay refunds and other changes help employers and employees but the government must refund businesses quickly

The government has today announced support for small and medium-sized businesses and employers to cope with the extra costs of paying COVID-19 related Statutory Sick Pay (SSP) by refunding eligible SSP costs. The government has also recognised that its existing systems are not designed to facilitate such employer refunds for SSP and intends to set up a repayment mechanism for employers over the coming months.

Colin Ben-Nathan, Chair of the CIOT’s Employment Taxes Committee, commented:

“We welcome the measures to support people who are unable to work because of COVID-19, and the announcement that small and medium-sized employers will be able to reclaim SSP paid to employees who are unable to work because of COVID-19.

“However, some small businesses and employers will undoubtedly have cash flow issues and find it difficult to pay SSP during this time. We assume that the government will build on existing systems whereby employers can usually reclaim 92% of employees’ Statutory Maternity (SMP), Paternity, Adoption and Shared Parental Pay (103% for small employers) through the PAYE tax real-time reporting system and we would urge the government to establish the systems needed to refund SSP to eligible employers in a matter of weeks not months.

“The existing SMP process allows businesses to apply online to be paid in advance where the business cannot afford to pay eligible employees and the new process for SSP should also allow businesses in financial difficulties to obtain similar advance funding to pay eligible SSP.”

Budget 2020 also included some welcome increases for all employers and employees, including:

An increase in the maximum claimable Employment Allowance from £3,000 to £4,000 from April 2020. The Employment Allowance allows qualifying businesses, charities and community amateur sports clubs to offset their liability to employer Class 1 National Insurance Contributions (NIC) up to the above figure.
An increase in the (NIC threshold at which Class 1 NICs start to be paid by employees. From 6 April 2020 the threshold is increased from £8,632 to £9,500.
An increase in the maximum flat rate income tax deduction available to qualifying homeworking employees to claim, or for employers to reimburse tax-free to such employees, to cover additional household expenses from £4 per week to £6 per week.

Colin Ben-Nathan added:

“The increase in the homeworking expenses flat rate deduction may seem modest but many employees value the flexibility of working from home and this increase also underpins support for flexible working. In the present circumstances, where increasing numbers of people are being encouraged to work from home, it can also be seen as part of the Government’s overall response to COVID-19.”

Notes for editors

1. Support for those affected by COVID-19 - https://www.gov.uk/government/publications/support-for-those-affected-by-covid-19.

2. The Chartered Institute of Taxation (CIOT)

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries. The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.

The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact: Hamant Verma, External Relations Officer, 0207 340 2702 HVerma@ciot.org.uk.

Out of hours contact George Crozier 07740 477374 gcrozier@ciot.org.uk

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