The Government has set out a range of measures to support people and businesses who have been affected by COVID-19. This article describes, in brief, the help that will become available over the next few weeks. We are still waiting for some of the details to be released so we will be updating our website on a regular basis throughout. If you have any specific questions or concerns then please do contact us by email or phone.
SUMMARY OF MEASURES TO SUPPORT BUSINESSES
- CORONAVIRIS JOB RETENTION SCHEME
- DEFERRAL OF VAT AND INCOME TAX PAYMENTS
- SUPPORT FOR BUSINESSES PAYING SICK PAY TO EMPLOYEES
- SUPPORT FOR RETAIL, HOSPITALITY AND LEISURE BUSINESSES THAT PAY BUSINESS RATES
- SUPPORT FOR BUSINESSES THAT PAY LITTLE OR NO BUSINESS RATES
- SUPPORT FOR BUSINESSES THROUGH THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME
- SUPPORT FOR BUSINESSES PAYING TAX: TIME TO PAY SERVICE
This is not a full list of the measures that have been announced but it does include all those that we consider most relevant to small businesses in general.
JOB RETENTION SCHEME
The job retention scheme was announced by the Chancellor on 20 March 2020 in outline to help Employers retain their workers through this pandemic.
HMRC will reimburse 80% of ‘furloughed workers’ wage costs up to a maximum of £2,500, per month. This will be based on the employee’s gross salary for February 2020 unless their pay varies. The calculation is slightly more complicated if this is the case or if the employee has been employed for less than a year, if this is the case then please contact us for assistance. A furloughed worker is an employee who has been asked by their employer to take a temporary leave of absence whilst remaining on the payroll.
The scheme is backdated to the 1st of March 2020. We now know that the online portal through which claims will be processsed will be open from the 20 April 2020.
The scheme will initially run for 3 months although the Chancellor did not rule out extending it if necessary
There are processes which will need to be followed in order to reclassify employees as ‘furloughed workers’, these are as follows –
- Designate affected employees as ‘furloughed workers’ and notify these employees of the change. Unless there is a clause in the employment contract the employer will need to seek and document the employees agreement to the furloughing and reduction in salary.
- Submit information to HMRC about those employees who have been furloughed through a new online portal. We will inform clients as soon as the online portal is operational. If we manage your payroll we will make the submissions for you, if not, we will be available to help where required.
Visit https://blog.emmersonaccountants.com/?p=149 for employee notification and consent templates.
There are many unanswered questions about this scheme and how it will operate however we do know that it will allow many businesses to retain their staff albeit on temporary leave for now.
The job retention scheme will also include the directors of owner managed companies. The same rules will apply, so no work should be carried out during the furloughed period.
Whilst we know that the portal will be operational from the 20 April the actual payments may not be made until later but there are interest free ‘business interruption loans’ which are now available from all the major banks which will help businesses with their cash flow.
DEFERRAL OF VAT AND INCOME TAX PAYMENTS
VAT Payments are to be postponed for 3 months, from the 20 March to 30 June 2020. This is automatic, it is not necessary to apply to defer your VAT payment.
The VAT not paid in this period will become due at the end of the 2020/21 financial year. We understand that VAT Returns will still need to be submitted during this period in line with the MTD regulations as usual, it is just the VAT payment that is being deferred.
If you normally pay your VAT by direct debit you should cancel this asap so that HMRC do not attempt to automatically collect on receipt of your VAT return.
VAT refunds and reclaims will be paid by HMRC as normal.
INCOME TAX DEFERRAL
Income Tax Self-Assessment payments due to be paid on the 31 July 2020 will be deferred to 31 January 2021. This is automatic and no application is required. There will be no interest or penalties for late payment during the deferred period.
SUPPORT FOR BUSINESSES PAYING SICK PAY TO EMPLOYEES
Legislation is to be brought in to allow small and medium sized businesses with under 250 employees to reclaim Statutory Sick Pay for absences due to COVID 19. This covers up to 2 weeks SSP for staff who have to self-isolate.
Records of staff absences and payments of SSP should be kept but employees will not need to provide a GP sick note.
Again,the repayment system is not yet in place,but it is planned that it will be operational as soon as possible after the legislation has been passed. For more information visit https://www.gov.uk/statutory-sick-pay
SUPPORT FOR RETAIL, HOSPITALITY AND LEISURE BUSINESSES THAT PAY BUSINESS RATES
There will be a business rate holiday for 2020/21 for all businesses in the retail, hospitality and/or leisure sectors. This is automatic, local authorities will reissue rates bills to exclude the business rate charge.
For these sectors, if the rateable value is between £15,001 and £51,000 the business will receive a grant of £25,000 per property.
Any business in these sectors with a rateable value of under £15,000 will receive a grant of £10,000.
The grant schemes are being administered by local authorities. The grants do not have to be applied for in the first instance, local authorities are writing to businesses they have idenified as being eligible. Grants are now being approved and paid directly into businesses bank accounts.
SUPPORT FOR BUSINESSES THAT PAY LITTLE OR NO BUSINESS RATES
The Government has also announced a one-off grant of £10,000 that will be available to businesses in all sectors who pay little or no business rates because they receive small business rate relief (SBRR) or rural rate relief (RRR). This is also being administered by the local authority and letters are being sent out and many will now have already received their grants.
SUPPORT FOR BUSINESSES THROUGH THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME
A new Coronavirus Business Interruption Loan Scheme has been set up to support small and medium sized businesses to access bank lending and overdrafts. The scheme will be administered by the British Business Bank, but all the major banks will offer the scheme once it has launched. The borrower will not pay any upfront costs and the loans will be interest free for the first 12 months as the Government will cover these payments. The loans will be available to businesses that are based in the UK and have a turnover of no more than £45 million per annum. They must also meet the other British Business Bank criteria;details can be found on its website at https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
The loans scheme is now operational. Unfortunately the minimum loan on the scheme is £25,000 which is more than many small businesses want to borrow. This is something that we are hoping the Government will reconsider.
SUPPORT FOR BUSINESSES PAYING TAX:TIME TO PAY SERVICE
This is a service that is available to all businesses and self-employed people with outstanding tax liabilities who are in financial difficulties as a result of COVID 19. HMRC will consider each taxpayers request for time to pay on a case by case basis but the implication is that they will be more sympathetic to taxpayers difficulties at this time.
To discuss ‘time to pay’ a tax liability, ring HMRC’s dedicated helpline on 0800 0159 559.
MORTGAGE & RENT HOLIDAY
The government has agreed with mortgage lenders that they will offer repayment holidays of 3 months to households who are in financial difficulty due to COVID-19. This is also available to landlords whose tenants are experiencing financial difficulties because of COVID-19
We understand that this offer is only available to customers who are up to date with payments and not already in arrears.
It should be noted that customers still owe the amount not paid as a result of the repayment holiday and interest will still be added to the mortgage, there is no interest free period just a break from making payments in order to ease cash flow. Those who are concerned about their financial position should contact their lender as soon as possible to discuss whether this is a viable option for them
Legislation is also to be implemented to ensure that landlords will not be able to initiate proceedings to evict tenants for at least a 3-month period.
RESTAURANT & BARS SERVING FOOD SWITCHING TO TAKEAWAY SERVICE
Restaurants and bars will be allowed to operate as hot food takeaways during the coronavirus outbreak, this will help support people who are staying at home through this period. Once the legislation is in place a pub or restaurant will be able to notify their Local Authority that they are now operating as a takeaway without prior approval.
IR35 REFORMS DELAYED
The government has announced that the reform to off-payroll working rules (IR35) as applied to those contracting their services to large and medium sized organisations in the private sector, will be delayed for one year until 6 April 2021.
THE SELF EMPLOYED
The eagerly awaited support, specifically for the self-employed, was announced by the Chancellor on the 26 March. This will be in the form of a taxable grant. It will be 80% of average monthly trading profits up to a maximum of £2,500 per month for three years. This will be calculated by reference to the profits declared on the Self Assessment Tax Returns for the years 2016/17, 2017/18 and 2018/19.
The grant will only be paid to those whose trading profits are below £50,000. In order to qualify, self-employed profits must be the majority of a taxpayer’s income.
Taxpayers who are eligible will be contacted by HMRC and invited to apply online through GOV.UK in early June 2020. HMRC are indicating that the grant, once agreed, will be paid directly into the taxpayer’s bank account in one instalment.
In order to claim, trading must have taken place in 2019/20 and it should be intended that trading will continue through 2020/21. Profits also do need to have been adversely affected by COVID 19.
For those who have not submitted three years Tax Returns because they began trading between 2016 and 2019, HMRC will calculate monthly average profits based on the years that have been filed.
Those who became self-employed after 5 April 2019 will not be eligible for the grant.
Those who cannot claim may be eligible for Universal Credit. Some of the requirements usually in place have been relaxed for the duration of the crisis. For more information on how to claim visit https://www.gov.uk/universal-credit and https://www.gov.uk/guidance/new-style-employment-and-support-allowance
Some of the other measures, such as the interest free loans and mortgage repayment holidays, will still be available to the self-employed. As the grants will not be accessible until June at the earliest, many of the self employed will, of necessity, be relying on these measures in the meantime. For this reason there is increasing pressure on the banks to make this process as straightforward as possible.
Do please get in touch with any queries. The above is based on our understanding of the measures at the present time but as we know things are changing rapidly so we would advise that you continue to check our website and get in touch if you need specific advice or assistance.
Director Emmerson Accountants Ltd
t. 01473 729917
m. 07595 710861