As the country is returned to lockdown, the Chancellor has announced an extension to the Coronavirus Job Retention Scheme. You can find full details on gov.uk.
For accountants supporting large employers who have been affected by the pandemic and business closures, it is essential to understand the government’s Financial Impact Test. This test provides evidence to HMRC that an employer with more than 250 employees has seen an impact on their income due to Coronavirus. The Financial Impact Test is a critical component of applying for the Job Support Scheme.
Who can claim JSS Open?
If a business remains open this winter but faces decreased demand, the JSS Open scheme will provide support to help retain employees on reduces hours. For large employers, the scheme requires a Financial Impact Test to evidence that their income has been impacted due to Coronavirus.
When should you complete a Financial Impact Test for your client?
The Financial Impact Test must be completed ahead of a large employer’s first claim for the Job Support Scheme (Open). For the purposes of the JSS Open, a large employer is defined as a legal entity with 250 or more employees across their payrolls on 23rd September 2020.
What does the Financial Impact Test prove?
By comparing total sales figures submitted on VAT returns, the Financial Impact Test demonstrates the impact of Coronavirus and the pandemic on the large employer’s turnover. If the turnover has remained equal to or decreased in comparison to the previous year then the employer will qualify for JSS Open.
Does my client need to submit a test for each claim under JSS Open?
No, the Financial Impact Test only needs to be completed once, before the employer’s first claim for JSS Open.
How do I perform the Financial Impact Test for my client?
It depends on how often they submit their VAT returns. In each case, the test compares box 6 on the VAT return – which records the total values of sales and all other outputs excluding VAT whether or not they are subject to VAT – with the same period during the prior year.
For clients who submit a quarterly VAT return, you should compare the total sales figure on their VAT return due to be filed and paid between 31st August 2020 and 7th November 2020 with the total sales figure from the same quarter in 2019.
Clients who submit their VAT return monthly will compare the three consecutive months due to be filed and paid by 7th November 2020 with the same three consecutive months in 2019.
Less frequent returns
Any client who files less frequently should make the same year-on-year comparison but must have submitted a VAT return between 31st August 2020 and 7th November 2020 to be eligible.
If the client is part of a VAT group you should use the VAT group’s turnover figures for the calculation.
A charity with 250 or more employees either registered with a UK charity regulator or exempt from such registration do not have to complete the test and are eligible for JSS Open.
What if my client is not VAT registered?
HMRC will provide further guidance for large employers who are not VAT registered by the end of October.
Where can I find further information?
BTCSoftware can help with VAT
We released our Making Tax Digital for VAT software to support accountants with clients of all sizes in creating and submitting their VAT returns to HMRC. BTCHub gives you a quick and easy way to link up your clients’ bookkeeping records – regardless of the system they use – with the HMRC MTD for VAT submission process.
BTCHub makes it easy to perform the Financial Impact Test. You will have full visibility of any previous Making Tax Digital for VAT returns that your client has submitted, even those made before you sign up for BTCHub, thanks to our back-end links with HMRC.