The High Income Child Benefit Charge has been in for a few years now.  If the higher earner in your household earns over £60,000, then you are not eligible to claim child benefit, and if your income is between £50,000 and £60,000 then an element of the child benefit is repaid via your tax return.

This has meant that many households have stopped claiming child benefit, as they see little point in claiming it, only for it to be paid back again via self-assessment.

In the current climate, with the furlough scheme in place and income levels falling for the self-employed, many individuals will see their income levels go down. Individuals placed on the 80% Furlough scheme who previously earned £60,000 (or just over) will now be receiving under £50,000 and may become eligible to claim child benefit.

A claim for child benefit can only be back dated for three months so you will need to decide if you want to start claiming again for this tax year by the end of June to get maximum benefit.

For the 2020/21 tax year child benefit rates are £21.05 per week for your first child and £13.95 per week for subsequent children. A family with two children could therefore be entitled to £1,820 a year.

If you do make a claim and at the end of the tax year your income exceeds £50,000 but is less than £60,000 you will be required to submit a tax return and repay a proportion of the benefit received. The amount repayable is 1% for every £100 earned over £50,000. Once you earn over £60,000 the full amount will be repayable via your tax return.

An assessment therefore does need to be made as to whether this is worth claiming again -but it could provide you with much need cashflow in the next few months.

Here is the link for more information https://www.gov.uk/child-benefit

If you want to discuss you own position with regard to child benefit, then please do get in touch.

More guidance was added over the weekend to the Job Retention Scheme, in particular in relation to the issue of directors and furloughing.

The full guidance can be found here, but here is my update on what has now been added:

• Salaried company directors may be furloughed
• Once furloughed, as for other employees, they cannot do any work for the company that would make money for the company, or provide services for the company.
• They can continue to carry out their statutory obligations as a director – this would include filing accounts, opening post, paying bills etc.

  To quote the guidance “they should not do any work of a kind they would carry out in normal circumstances to generate commercial revenue or provide services to or on behalf of their company.”

• The decision to furlough a director must be formally adopted as a company decision, communicated in writing to the director and this record kept for 5 years.
• The minimum length of time you can be “furloughed” is 3 weeks. You may then return to work for a period of time, and then be “furloughed” again.
• Claims can be backdated to 1 March – but in practice you would have to have done no company work since then to claim from this date.

How much can directors claim?

As for employees, the company can claim 80% of your wages.  This relates to the amount on the payroll as salary, and does not include any dividend payments.

• For directors who pay themselves a regular monthly amount, this will be 80% of your February 2020 payroll amount.
• For directors whose pay varies, or is paid irregularly, you can claim the HIGHER of:
  • The same month’s earning from the previous year
  • Your average monthly earnings for the 19-20 tax year

Claiming in Practice

As previously announced the claims will be made via the new online portal once it is launched.  HMRC will check your claim and if you are eligible pay the amount into your company bank account.

The portal is supposed to be open by the end of April.  There is currently no new information on this apart from to say that HMRC will retain the right to audit your claim retrospectively, and have already warned that anyone submitting bogus claims, or attempts to falsify records to increase payouts will be shot.  (OK slight exaggeration, but you get my point!!)

Conclusion

Great that we finally have some clarification – but to qualify, directors really can do no normal work at all.  I have a couple of clients with employees and they have disabled their access to their work email to ensure they can’t send the odd email or do anything that would invalidate their claim.  Directors in my opinion need to follow a similar approach if they want to ensure their claim will be valid.

On and off furloughing may be an option, but potentially horribly complicated!  At the end of the day, we are talking about £500 a month, so directors will need to make personal decisions about whether they can generate more continuing to work.  Remember that £500 is also taxable income in your accounts!

More info as and when we get it!!

Rosie