Government support: Round up of latest measures from Friday 27th March
These are the new announcements following the Chancellor's press conference last night and a summary of previous ones.
Coronavirus Job Retention Scheme
The latest information from HMRC is that this funding will be open to all employers with a PAYE payroll scheme that was created and started on or before 28 February 2020, including charities. Employers can apply for grants of 80% of furloughed employees' (employees on a leave of absence) monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, provided they keep the worker employed. Employers may top up this payment to 100% of salary but are not obliged to do so. The scheme will cover the cost of wages backdated to 1 March 2020, if applicable; i.e. from the date the employee was actually sent on temporary leave (furloughed) and ceased working. This scheme does not cover reduced hours of working; your employee cannot continue working for you whilst furloughed.
HMRC are aiming to have the scheme up and running by the end of April 2020. More detailed guidance will be published in due course and employers will be advised when the scheme is open.
We recommend you continue to view the guidance which will be updated as the scheme is further developed, and in line with any further government announcements.
Important: Administration of the scheme
To access the scheme employers will need to designate employees as “furloughed workers” and notify their employees of this change. This change will be subject to existing employment law, which will therefore involve employee consultation and/or agreement, even if this is done remotely given the circumstances of office closures having become common. Given it may be a choice of being furloughed or being dismissed on grounds of redundancy, the vast majority of employees are likely to agree. HMRC will ultimately require evidence and records of furloughed workers so we recommend you keep detailed correspondence of your agreements with selected employees, date of furlough, adjusted gross salary to be paid and return to work documentation.
Employers will then need to submit information to HMRC about the employees that have been furloughed through a new online portal, which is in the process of being set up.
We still await details of how the reimbursement will be made to employers as the current PAYE/NIC system is not set up to facilitate payments to employers.
We anticipate that the scheme will be most useful when offices, factories or warehouses have to close completely bearing in mind certain staff (e.g. reception) won’t be able to work at all. However, it is likely that even if businesses have a large number of staff who are able to work remotely, there might well be some employees who are unable to work because of their physical presence being required. The scheme is therefore likely to offer considerable support to such employees (and their employers), who might otherwise have been subject to unpaid layoff periods or redundancies. We remain hopeful that these measures will help to limit the number of redundancies required to a bare minimum by allowing businesses to retain employees to whom they are temporarily unable to provide work.
You may encounter cash flow problems whilst paying furloughed staff and awaiting HMRC reimbursement. Further support should be considered from that outlined below...
Coronavirus Business Interuption Loan Scheme (CBILS)
The terms of the new temporary CBILS to be offered to UK businesses have been announced. The full rules of the Scheme with details of types of finance and links to the 40+ lenders can be found on the British Business Bank's website. In the first instance you should approach your own provider.
Qualification criteria and terms are as expected; turnover under £45m pa, government guaranteeing up to £5m of loans and overdrafts with no interest due for the first 12 months. The government will cover the first twelve months of interest payments. There is no guarantee fee for SMEs to access the scheme.
The Banks will be looking at performance prior to the Coronavirus crisis to ensure that the debt requested and any other existing debt can be serviced over the maximum term of 6 years (3 years for overdrafts and invoice finance). The borrower will be liable for the borrowing and the government guarantee is to the Bank if they cannot recover monies from the borrower.
The Banks may seek personal guarantees from directors / shareholders of limited companies depending on the covenant. Up to date financial information including management accounts will be key part of the decision making process. If you would like help putting management accounts together to support your application please get in touch.
Larger firms will receive support through the COVID-19 Corporate Financing Facility. The Bank of England will buy short term debt from larger UK companies.
If a company’s accounts are unlikely to be filed on time owing to being affected by Coronavirus then an application can be made to extend the period allowed for filing. If an application is not made and there is a late filing then the normal penalty regime would apply, so it is important to make the application ahead of the deadline.
Support for the self-employed
HMRC have announced support for the self-employed through the Self-employment Income Support Scheme.
The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).
This 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 3 months. This may be extended if needed. Trading profits will be averaged over your last 3 years tax returns but for those who have been self-employed for less time a shorter period will be accepted. There is a cap on profits of £50,000 per annum.
You need to;
- have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
- traded in the tax year 2019-20
- be trading when you apply, or would be except for COVID-19
- intend to continue to trade in the tax year 2020-21
- 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 come from self-employment. This is determined by at least one of the following conditions being true:
- having trading profits/partnership trading profits 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 between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
The grant is not available for claiming yet and HMRC will write to those affected but the portal link is here.
Deferred VAT and Income Tax payments
HMRC will defer VAT payments due for 3 months and Income Tax payments due for all taxpayers paying payments on account in July for 6 months. We suggest you cancel your DIrect Debit in case liabilities are collected in error.
All UK businesses are eligible and the deferral will apply to payments that would have been due from 20th March 2020 until 30th June 2020. This is an automatic process that doesn't require an application, ensuring businesses will not need to make a VAT payment during this period. Taxpayers will be required to settle any accumulated liabilities by the end of the 2020/21 tax year (i.e. April 2021) so we strongly advise clients to set-aside funds in a ring-fenced account when and where possible. Refunds and reclaims of VAT will be paid by HMRC as normal.
If you are due to make income tax payments-on-account you will be eligible to defer payments normally due on 31st July 2020 until 31st January 2021. No application is required for this deferral; it is automatic. No penalties or interest for late payment will be charged.
Time to Pay arrangements
HMRC have scaled up their Time to Pay offer to all firms and individuals who are in financial distress. If you have outstanding tax liabilities, you may be eligible to receive support with your tax affairs through HMRC’s Time To Pay service however these arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.You are eligible if your business:
- pays tax to the UK government
- has outstanding tax liabilities
How to access the scheme
If you have missed a tax payment or you might miss your next payment due to COVID-19, please call HMRC’s dedicated helpline: 0800 0159 559. If you’re worried about a future payment, please call HMRC nearer the time.
In most cases HMRC will need to have the liability registered on their systems to discuss a T2P arrangement; in other words; your VAT return, Corporation Tax Return, P32 (PAYE+NIC) or Personal Tax Return needs to have been submitted already before contacting HMRC. Expect long waits on the phone and please be patient. We have heard that HMRC have reduced the hours that this helpline will be open.
Statutory Sick Pay
HMRC will bring forward legislation to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. SSP is paid at a weekly rate of £94.25 rising to £95.85 from 6th April 2020.
The eligibility criteria for the scheme will be as follows:
- this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
- UK employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28th February 2020
- employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
- eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
- the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible
How to access the scheme
A rebate scheme is being developed. Further details will be provided in due course once the legalisation has been passed.
Sunak also extended the business rates holiday for all businesses in England in the retail, hospitality and/or leisure sector for 12 months; regardless of rateable value. This is an enhancement to the Budget announcement. Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- as hotels, guest and boarding premises and self-catering accommodation
Cash Grants for retail, hospitality and leisure businesses
The Retail and Hospitality Grant Scheme offers cash grants of up to £25,000 to retail, hospitality and/or leisure businesses in England.
Businesses in these sectors with a rateable value over £15,000 and below £51,000 will receive a grant of £25,000. For businesses in these sectors with smaller premises with a rateable value under £15,000 they will receive a grant of £10,000.
These will be delivered through Local Authorities who will write to you if you are eligible - you should not need to do anything. Guidance on the scheme has now been given to Local Authorities and can be found here. You should direct specific enquiries to your local authority.
Here are a few local Hertfordshire authorities:
- St Albans Council Business Rates
- Welwyn Garden City Business Rates
- Hemel Hempstead Business Rates
- Watford Business Rates
Support for businesses that pay little or no rates
In another adjustment to this month's Budget, the Chancellor enhanced the small business rate relief grant of £3,000 to £10,000 available to small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This is a one-off grant and your Local Authority should contact you about this; you do not have to apply.
Unfortunately for those small businesses outside of the retail, hospitality and leisure sectors paying full rates above a rateable value of £15,000 there is no assistance currently on offer.
The Chancellor also confirmed that mortgage lenders have agreed to support struggling customers as a result of COVID-19 with a payment holiday of up to 3 months. There is no announcement yet of support for those in rented accomodation.
12-month delay to the IR35 off-payroll rules for private sector engagers until 1 April 2021. At this stage those affected have probably already taken mitigating action but it is one less legislatory change to deal with for now.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics. You need to check the terms & conditions of your policy.
Further information on all of the above can be found on the government's website COVID-19 support for businesses.