COVID-19 – Further updates as at 2nd April 2020
What help is available for businesses experiencing increases in costs or financial disruption?
We want to keep all our clients and connections up to date with help and assistance available to businesses during this time of uncertainty. Below is a summary of the schemes available so please do feel free to contact us if you have any questions.
Self-Employed Income Support Scheme
If you are a self-employed individual or a member of a partnership then you may be eligible for a grant under the Self-Employed Income Support Scheme. The scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next three months.
You cannot apply for this scheme yet and HMRC will contact you if you are eligible for the scheme and invite you to apply online. To be eligible you would have to:
• Submitted your Income Tax Self-Assessment Tax Return for the 2018/19 tax year.
• Traded in the 2019/20 tax year.
• Are trading when you apply, or would be except for COVID-19
• Have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income comes from self-employment. This is assessed by at least one of the following conditions being true:
• Having trading profits/partnership trading profit in 2018/19 of less than £50,000 and these profits constitute more than half of your total taxable income.
• Having average trading profits in 2016/17, 2017/18 and 2018/19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period. If you started trading within this period HMRC will only use those years for which you filed a tax return.
The 80% grant will be calculated by HMRC on average profits figures submitted from 2016/17, 2017/18 and 2018/19 by adding together the three tax years, then divide by three and then by twelve to calculate a monthly amount. If you only started trading in 2017/18 or 2018/19 monthly amounts will be averaged accordingly. The amount calculated will also take into account any tax credits you claim.
Once you have given HMRC your figures they will calculate the grant due and pay the amount as a lump sum into your bank account. They aim to get monies out to qualifying people by early June.
As agents we should be able to submit the claims on your behalf if you are eligible and we will look to keep you updated if we can. In the meantime, if you would like us to check if you are eligible and how much you might receive please feel free to contact us.
Coronavirus Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
The scheme is opened as from 1st March 2020 for three months and is expected to be up and running by the end of April. Employers can use a portal to claim 80% of furloughed employees’ (those on a leave of absence) usual wage cost, up to £2,500 a month, plus the associated Employers National Insurance contribution and minimum automatic enrolment employer contributions on that wage.
The calculation for what salary the employee is due is based on their wage in February 2020, excluding bonuses and commission. If their pay varies you can use the higher of an average over the last twelve months or same month last year.
• Who can claim:
o UK employers that had a PAYE payroll scheme on 28th February 2020.
o Have UK bank account
o Organisations being; businesses,, charities, recruitment agencies, public authorities
• Eligible employees must be on the payroll before or on 28th February 2020
o Full-time and Part-time
o Agency contacts
o Flexible or zero-hour contacts
o Those made redundant since 28th February 2020 as long as they are rehired by their employer.
The employee cannot carry out any work during their period of leave for the organisation which would generate income or provide a service. If the employee is just on reduced hours or working for reduced pay, they will not be eligible for the scheme.
Employers will need to discuss the situation with their staff and agree any necessary changes to the employment contact. The employer should confirm in writing that the employee has been furloughed and both should keep a copy of this communication. The employer does not have to make all their staff furloughed.
There are various situations that might impact on the situation such as Statutory Sick Pay, employees already on unpaid leave or maternity. Please contact us if you would like further information in regards to these situations.
The minimum period that an employee can be furloughed is three weeks and the maximum period is currently three months.
HMRC will launch a portal where employers can make a claim; a claim can be made every three weeks and back dated to 1st March 2020 if applicable. Once the claim is processed the grant will be paid into the business bank account. The employee will pay tax and National Insurance via payroll in the usual way.
Job Retention Scheme Directors
Due to directors being officers of the company they do not qualify for the Self-Employed Income Support Grant but due to some directors receiving a salary from the company in some cases they can qualify for the Job Retention Scheme.
Due to the crisis many directors are not carrying out revenue activities as in theory the company has gone into ‘hibernation’ until it can start to trade again. It is on this basis that the company could make a claim under the job retention scheme but as this claim could be challenged it would be wise to keep note of the following evidence:
• Communication to customers and/or suppliers that the company is to halt trading
• Date that trading halted and day to day business activities ceased
• Communication to other key business connections/advisors that trading has halted
• How the profits of the company have been impacted by COVID-19
To qualify the director can not perform any work that would be classed as revenue generating or providing services or actively trying to diversify the company into new markets. The director can only carry out essential statutory duties; this in turn creates two contracts a service contract for statutory activities and an employment contract for revenue activities.
The statutory affairs can mostly be defined around bookkeeping, dealing/arranging with the year end accounts and tax filing but could also include dealing with the post and banking.
Due to many directors/shareholders receiving small salaries along with larger dividends the 80% grant will not support income completely but would assist cashflow to enable the director to still take a salary. The grant will still be based on 80% of the salary paid in February 2020 up to the maximum of £2,500. The company could top up 80% salary paid out by the additional 20% if the company had the funds to do so.
Employee Holiday Entitlement
The Working Time Regulations have been amended to give workers an entitlement to carry over four weeks of their annual leave if they are unable to take it because of coronavirus.
The reasons why an employee may have been unable to take holiday are:
• Self-isolating or are too sick to take holiday before the end of their leave year
• Temporarily sent home as there is no work so ‘laid off’ or ‘put on furlough’
• Had to continue working and could not take paid holiday
Leave can be carried over into the next two leave years after this one. This only applies to the first four weeks of leave under the Regulations. The other 1.6 weeks of statutory minimum leave is already capable of being carried over to the next leave year with agreement and the new laws do not change this.
Bank holidays that cannot be taken because of the above reasons are within the carry over rules. Annual leave continues to accrue during lay off/furlough.
Deferring VAT Payments
The deferral for VAT payments will apply from 20th March 2020 until 30th June 2020 and applies to all UK businesses. Businesses that use the MOSS scheme are not covered by this scheme.
This is an automatic offer with no applications required therefore businesses will just not be required to make a VAT payment during this period. Businesses will have until the end of the 2020/21 tax year to pay liabilities that have accumulated during this deferral period.
Please note that you still have to submit the VAT return as the deferral is only for the payment. Also, if you pay you VAT liability by direct debit you will need to cancel this with your bank so that the payment is not collected. Please remember to re-set the direct debit up after this period.
Deferring Income Tax
All tax payers within self-assessment can defer their 31 July 2020 payment on account until 31st January 2021.
This is an automatic offer with no applications required and the government has stated that no penalties or interest will be charged in this deferral period. HMRC have highlighted that if you can afford to make payment then you should do so.
HMRC Dedicated Helpline – Time to Pay Service
HMRC have set up a helpline to support all businesses and self-employed people who are concerned about paying taxes due to the impact of coronavirus.
The helpline number 0800 024 1222; hopefully you will not require this but if your cash flow is impacted or a key member of staff is off who deals with payments it would be worthwhile contacting HMRC to make them aware.
Sick Pay Rebates
Qualifying small and medium sized businesses will be able to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The scheme will be open to employers who employ fewer than 250 (as at 28th February 2020) people and the following guidance has been issued:
• The amount of SSP that can be reclaimed is 2 weeks per eligible employee who has been off work due to COVID-19
• Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
The eligibility period for the scheme is from 13th March 2020 being the day after the regulations on the extension of SSP to those that are asked to self-isolate comes into force.
The weekly allowance for SSP is currently £94.25 rising to £95.85 as from 6th April 2020. The mechanism to make the refund claim is not yet in place but the government have stated they hope to get in place as soon as possible. This may be a claim against PAYE/NI or possibly a standalone claim.
Business Rates Holiday for Retail, Hospitality and Leisure Sectors
It was announced that all businesses in England within retail, leisure and hospitality sectors will receive a 100% business rates holiday for the next 12 months.
Properties that will benefit from the relief will be wholly or mainly being used:
• as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
• for assembly and leisure
• as hotels, guest & boarding premises and self-catering accommodation
There is no action for you to take as the relief will apply to your next council tax bill in April 2020. Due to the business rate bill having already been issued your local authorities may have to reissue your bill which will be done automatically to exclude the business rate charge. This should be done as soon as possible but if you have any queries please contact your local authority.
Business Rates Holiday for Nurseries
Nurseries in England will be eligible for a business rates holiday in 2020/21. Those properties that are eligible for the relief will be occupied by providers on Ofsted’s Early Years Register and used wholly or mainly for Early Years Foundation Stage.
No action is required if you are eligible as your local authority will contact the business and reissue business rate bill to exclude the business rate charge.
If your business occupies premises that are subject to business rates you may qualify for a grant.
• £10,000 One-off Grant
This is a one-off grant of £10,000 available to those businesses in England that are currently eligible for Small Business Rates Relief or Rural Rate Relief to help meet their ongoing business cost.
• £25,000 One-off Grant
This is a one-off grant of £25,000 available to those businesses in England operating in the retail, hospitality and leisure sector from smaller premises that have a rateable value over £15,001 but below £51,000.
If your business qualifies for one of the grants government guidance states that your local authority will contact you therefore no need to apply.
We strongly recommend that any business that believes they are eligible should check their local authority website as some have application forms online to complete and submit so that the local authority can capture key information so that they can hopefully issue the grants early April once they have accessed you met the criteria.
Protection from Commercial Eviction
If your business does rent premises and you cannot pay the rent due to COVID-19 you will be protected from eviction. This will cover payments up to 30th June 2020 and there is an option for the government to extend this period if needed.
This is not a rent holiday and you will still be liable to pay the rent.
Interruption Business Loan Scheme
Ian Walker in our Corporate Finance Team is keeping an eye on this area and will be happy to discuss any questions you may have but the basic details are:
• The interest-free period has been increased from six months to twelve.
• The scheme is being managed by the British Business Bank but businesses will access them via one of 40 accredited lending providers, including most major banks.
• The maximum value of a facility provided under the scheme will be £5 million – higher than the £1.2m announced initially.
• Loans have been available since Monday 23 March 2020.
Smaller firms have been finding it difficult accessing loans via the Coronavirus Business Loan Scheme. There were claims that banks were taking advantage of the situation and refusing funds to good businesses that were in financial crisis.
On Thursday 2nd April the Chancellor announced changes to deal with issues that have arisen; these were:
• Applications will not be limited to those businesses refused loans on commercial terms.
• Banks will be banned from asking company owners to guarantee loans with personal assets; this is on borrowings of £250,000 or less.
• Larger firms will also be eligible for more help under the scheme
Delay in IR35 Changes
It was announced that the IR35 off-payroll changes that were due to come in effect from April 2020 have been delayed for 12 months until April 2021 due to the current situation. This legislation impacted on contractors and the companies that used their services. We can provide further details on this if you are affected.
Mortgage lenders have agreed they will support customers that are experiencing issues with their finances as a result of COVID-19. The type of support mentioned is a payment holiday of up to 3 months.
It would be worthwhile contacting your lender to discuss your situation and seeing what else they can offer as many banks and building societies announced the following assistance:
• Access to locked in savings penalty free
• Extension to credit card limits
• Extension to terms of mortgages/switch rates
It has been mentioned that access to assistance offered by banks and lenders during this time should not impact on your credit score but you should check with your lender that this is the case.
Access to Universal Credits for the Self-Employed
The minimum income floor for access to universal credit has been suspended for self-employed people affected by the economic impact of coronavirus. You can apply online via the gov.uk website or contact the helpline on 0800 328 5644 to see what you are entitled to.
Relaxation on Planning Regulations
To support the food industry and help to provide meals for those that self-isolate the government is relaxing planning regulations to allow pubs and restaurants to start providing takeaway meals without a planning application.
Business Insurance Policy
Check your insurance policy to see if it has a business interruption clause and what it covers so you are aware if you can make a claim to cover increase staff cost or other expenses incurred due to COVID-19.
Businesses that have cover for both pandemics and government-ordered closures should be covered as the government and insurance industry confirmed on 17th March 2020 that advice issued to the public to avoid pubs, theatres etc is sufficient to make a claim. Therefore, if in doubt contact your insurance provider to confirm what your policy covers.
Temporary Suspension of the Wrongful Trading Rules
Due to the crisis the government has announced that it will temporarily suspend the wrongful trading on insolvency rules. These will be backed dated to 1st March 2020.
The reason for the suspension is that as a director you should not allow your company to continue trading whilst you are knowingly insolvent. The knock-on effect to the director was that you could become personally liable for the company’s debt including amounts that the company might owe to HMRC
Prior to the suspension if the director was in the above situation, they would need to contact an insolvency practitioner. The suspension will give many businesses breathing space to access help via government schemes and to consider other options to rescue the company.
If someone texts, calls or emails claiming to be from HMRC, saying you can claim financial help or are owed a tax refund, and ask you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
The support for businesses is an ongoing situation and as the government implements the measures mentioned above to help businesses and individuals financially. We will be keeping an eye on updates but please feel free to contact us if you have any questions or require assistance in any way.
Please keep an eye on our website for further updates as well as signing up to our Resources section.