Tax Talks

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Coronavirus: Senate Passes Emergency Coronavirus Response Bill Providing For Tax Credits for Sick and Family Leave Payments; President Trump Expected to Sign

Today, March 18, 2020, the Senate overwhelming passed the Families First Coronavirus Response Act, previously passed by the House.  President Trump is expected to sign the bill.

The bill would provide refundable payroll tax credits through 2020 to employers to cover wages paid to employees while they take time off under the bill’s sick leave (for up to 10 days) and family leave programs (for up to $10,000).  The sick leave credit would be for wages up to $511/day or $200/day if the sick leave is to care for a family member or child following the child’s school closing.  The family leave credit would be for wages up to $200/day ($10,000/maximum) while the employee is receiving paid family leave.  The credit could be claimed each quarter.  The credit would not be available for employers receiving a credit for paid family and medical leave under the Tax Cut and Jobs Act.

The bill would also provide for similar refundable credits against the self-employment tax.  The sick leave credit would cover 100% of a self-employed individual’s qualified sick leave equivalent amount, or 67% of the individual’s qualified sick leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing.  A self-employed individual’s qualified sick leave equivalent amount is the number of days during the taxable year that the individual cannot perform services and is entitled to sick leave pursuant to the bill (up to 10 days), multiplied by the lesser of average daily self-employment income (or 67% of that income if they are taking care of a sick family member or child following a school closing), or $511/day to care for the self-employed individual ($200/day to care for a sick family member or child following a school closing).  Self-employed individuals could receive a family leave credit for as many as 50 days multiplied by the lesser of $200 or 67% of their average self-employment income, up to a maximum of $10,000.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

IR35 overhaul postponed until 6 April 2021

Last night (17 March 2020) the UK’s Chief Secretary to the Treasury, Steve Barclay, announced in the House of Commons that the government is postponing the implementation of the changes to the application of the off payroll working tax rules to private sector clients (IR35) from 6 April 2020 to 6 April 2021 to ease pressure on businesses and individuals struggling with the COVID-19 crisis.

The Chief Secretary reiterated that it was “a deferral, not a cancellation” and that “the government remains committed to reintroducing this policy to ensure people working like employees but through their own limited company, pay broadly the same tax as those employed directly”.

Yesterday’s announcement is somewhat surprising given the confirmation in last week’s Budget that the IR35 reforms would go ahead as planned but illustrates clearly just how quickly the government’s priorities have changed in the past week. Many contractors and their clients will breathe a deep sigh of relief and, hopefully, the delay will lead to a more considered discussion about how the new rules should be implemented and the challenges that they will present to contractors and their clients alike.

The Chief Secretary’s announcement came on the same day that the UK Chancellor unveiled the Treasury’s latest measures to combat the crisis, which we reported on yesterday (UK Chancellor’s latest measures in response to COVID-19).

Coronavirus: Treasury Secretary Mnuchin Announces 90-Day Interest-Free and Penalty-Free Tax Payment Extension from April 15 to July 14

Today, March 17, 2020, Treasury Secretary Steven Mnuchin announced that individuals may defer up to $1 million in 2019 tax liability without interest or penalties until July 14 (90 days after April 15, 2020) and corporations may defer up to $10 million in tax liability without interest or penalties for 90 days.  Secretary Mnuchin said that the aggregate amount of deferral would be $300 billion.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

UK Chancellor’s latest measures in response to COVID-19

In addition to the measures announced in last week’s UK Budget 2020 (as we reported in our Tax Talks blog of 16 March 2020 The UK Budget and Coronavirus), at the UK Prime Minister’s daily briefing today the UK Chancellor announced further measures to support businesses affected by coronavirus (COVID-19).

The Treasury will make available £330 billion of government-backed loans to businesses, equivalent to 15 per cent of UK GDP. The Chancellor announced that this funding will be delivered through two main schemes intended to be up and running by the start of next week:

  1. for larger firms a facility has been agreed with the Bank of England to provide liquidity; and
  2. for SMEs the business interruption loan scheme announced in last week’s Budget is extended so that loans of up to £5 million will be provided (rather than the £1.2 million announced previously) with no interest due for the first 6 months.

The Chancellor also announced that businesses in the retail, leisure and hospitality sectors with a rateable value of less than £51,000 will receive a cash grant of up to £25,000. The business rate holiday announced in last week’s Budget is extended so that all businesses in the retail, leisure and hospitality sectors can avail of it, irrespective of their rateable value. Additionally, the 700,000 smallest businesses will be eligible for a £10,000 cash grant.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

The UK Budget and Coronavirus

As part of the UK’s Budget 2020, the Treasury has announced a range of measures aimed at assisting UK businesses, in particular small and medium sized businesses (SMEs), in tackling disruption caused by the coronavirus (COVID-19) outbreak.

The UK government will be hoping that such measures assist in lessening any longer term economic impact caused by the outbreak. Continue Reading

Coronavirus: House Passes Emergency Coronavirus Response Bill Providing For Tax Credits for Sick and Family Leave Payments

Today, March 14, 2020, the House overwhelmingly passed an emergency coronavirus response bill (H.R. 6201) with bipartisan support.  The Senate is expected to consider the package next week.  President Trump and Majority Leader Mitch McConnell (R-Ky) both issued statements indicating support for relief measures.

The bill would provide refundable payroll tax credits through 2020 to employers to cover wages paid to employees while they take time off under the bill’s sick leave (for up to 10 days) and family leave programs (for up to $10,000).  The sick leave credit would be for wages up to $511/day or $200/day if the sick leave is to care for a family member or child following the child’s school closing.  The family leave credit would be for wages up to $200/day ($10,000/maximum) while the employee is receiving paid leave.  The credit would not be available for employers receiving a credit for paid family and medical leave under the Tax Cut and Jobs Act. (See Division G of the Bill, Section 7001.)

The bill would also provide for similar refundable credits against the self-employment tax.  The sick leave credit would cover 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing.  A self-employed individual’s qualified sick leave equivalent amount is the number of days during the taxable year that the individual cannot perform services and is entitled to sick leave pursuant to the bill (up to 10 days), multiplied by the lesser of average daily self-employment income (or 67% of that income if they are taking care of a sick family member or child following a school closing), or $511/day to care for the self-employed individual ($200/day to care for a sick family member or child following a school closing). (See Division G of the Bill, Section 7002.)  Self-employed individuals could receive a family leave credit for as many as 50 days multiplied by the lesser of $200 or their average self-employment income, up to a maximum of $10,000.  (See Division G of the Bill, Section 7004.)

The bill does not include the payroll tax holiday that President Trump and Treasury Secretary Steven Mnuchin proposed earlier this week.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Coronavirus: President Trump Declares a National Emergency Allowing Possible Tax Filing and Payment Extensions

Today, March 13, 2020, President Trump declared a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the coronavirus.  This declaration allows the Treasury Department and the IRS to extend the deadline for certain taxpayers and small businesses to pay taxes until December 31, 2020 as Treasury Secretary Steven Mnuchin suggested earlier this week.

Sections 7508A of the Internal Revenue Code and Treasury regulations section 301.7508A-1 grant the Treasury Department and the IRS the authority to grant filing and payment extensions for income taxes and other taxes administered by the IRS for up to one year to any taxpayer determined to be affected by a “federally declared disaster”.  A federally declared disaster is any disaster determined by the President to warrant assistance by the federal government under the Stafford Act.  This Act gives the President broad discretion to declare an emergency for which federal assistance is necessary.

Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. Visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

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