Text in Purple denotes Updates made on 26 and 27 March 2020
Dixcart has prepared a summary of the assistance that the government has made available to businesses at this challenging time. It is split into several categories to make it as easy as possible to follow.
Coronavirus Job Retention Scheme
- Available to any size of business (including charities), in any sector.
- This will be a grant to cover 80% of wages (up to £2,500 per month), for employees who are not working due to the impact of Coronavirus but are retained on the payroll.
- The 80% is based on the higher of (i) the earnings in the same pay period in the previous year; or (ii) the average earnings in the previous 12 months (or less, if the individual has worked for less time).
- Should businesses wish to top up the salaries they can.
- This will be backdated to 1st March 2020 and will be open initially for a three month period.
- Employees taken on after 1st March 2020, are excluded from the scheme.
- Businesses can re-employ people who have been made redundant since 1st March, and then furlough them.
- There is no limit on the funding available to the scheme.
- To claim the grant businesses should designate affected employees as ‘furloughed workers’ and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
- To qualify for the payment, an employee must be furloughed for a minimum of three weeks. They can then come off furlough. This means that employers cannot rotate staff weekly between furlough and non-furlough.
- Employees on furlough leave, can do volunteering or training, providing it does not generate any money for their employer.
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
- The aim is for the first grants to be paid before the end of April, but the existing systems are not set up to facilitate payments to employers, so the timing of the receipt of funds is uncertain.
- No business will have to pay any VAT from now until mid-June.
- The payment will be deferred, and businesses will have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.
- The deferral applies automatically and businesses do not need to apply for it.
- On the 25th March HMRC confirmed that it will not automatically cancel collection of VAT payments by direct debit. Businesses that have a direct debit mandate in place to pay their VAT and wish to defer payment will need to contact their bank to cancel that mandate. This needs to be done before the direct debit is due to be collected. Businesses will also need to remember to reinstate their direct debit mandate once the deferral is over and to make arrangements to pay the accumulated VAT by the end of the 2020/21 tax year.
- VAT refunds and reclaims will be paid by the government as normal.
Coronavirus Business Interruption Loan Scheme (CBILS)
- This scheme was launched on Monday 23rd March.
- Loans will be delivered by lenders that partner with the British Business Bank, including all of the major banks. The lender will receive a guarantee of 80% of the loan amount from the government. The loan will be interest free for the first 12 months.
- These loans are intended to support cash strapped small and medium sized business during the crisis. They are available for UK-based businesses with turnover of no more than £45 million and can provide for a facility up to £5 million.
- The borrower remains liable for 100% of the debt.
- It is expected that further measures for larger and medium size business will be announced shortly.
- As the details of the scheme were announced by the individual banks, some stated that they were looking for personal guarantees.
- The government has made it clear that the requirement for personal loans is at the discretion of the lender. However, a lender is not allowed to take a personal guarantee against a borrower’s principle residence under the scheme. Therefore, even if a personal guarantee is required under the lender’s credit policy, it cannot be taken against the borrower’s home.
- Some major lenders have announced that they are not going to require personal guarantees on loans under the CBILS scheme (of any size).
Coronavirus Corporate Finance Facility
- The Bank of England has set up a scheme to finance working capital by purchasing debt from larger business ‘making a material contribution to the UK economy’.
- Businesses do not need to have previously issued debt in order to participate.
- The scheme will operate for at least 12 months.
Help for Self-Employed Individuals
- On the 26th March 2020, the government announced a scheme enabling the self-employed to claim a grant through the coronavirus (COVID-19) Self-Employment Income Support Scheme.
- The grant will be a maximum of £2,500 per month for 3 months.
- You will need to have submitted your tax return for 2018-19, if you have not, you have until 23rd April 2020 to do so.
- HMRC will use the information from the last 3 tax returns, to ascertain your eligibility for the grant and will pay the grant directly into your bank account.
- Further information is available here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
- Self-employed individuals can defer tax payments for six months, making the next payments due 31 January 2021, instead of 31 July 2020. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
- Self-employed will be able to access Universal Credit at an equivalent rate to the Statutory Sick Pay that employees qualify for.
- It is expected that there will be further assistance announced for the self-employed, once the government has worked out how to do this.
- As we near the end of the tax year, get your income tax return in as soon as possible after 6 April 2020, for a potential refund of part of your January 2020 tax payment. Then you will know the exact amount that should have been due in July, but will now not be payable until January 2021.
- If you make a sole trader or partnership tax loss to 5 April 2020, you can generate a tax refund, by carrying the loss back to 2019.
- If you are a start-up, sole trader or partnership, this loss can be carried back three years to generate a tax refund from your previous PAYE job or even from rental income.
- If you are working from home more than usual, claim more costs against your taxable income for your home office.
- The sooner you get tax returns sent in, the sooner you can benefit from the above. Getting your return in early will not bring forward any tax payment dates, but it does bring forward tax refunds.
As of the 23rd March the House of Commons Public Bill Committee proposed an amendment to the Coronavirus Bill. If this goes through and it is expected to, it compels the government to introduce Regulations providing that “freelancers” (undefined) and “self-employed people” should receive guaranteed earnings of:
(a) 80% of their monthly net earnings, averaged over the last three years; or,
(b) £2,917 per month
whichever is the lower.
The purpose of this amendment is to make the Government ‘top up’ self-employed workers’ earnings to the lower of 80% of their net monthly earnings or £2,917 a month. As further information becomes available we will update this item.
HMRC Time to Pay
- HMRC’s ‘Time to Pay’ scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities.
- HMRC’s dedicated Covid-19 helpline provides practical help and advice on: 0800 0159 559 (lines are open Monday to Friday, 8:00 to 20:00 and on Saturday, 8:00 to 16:00).
Business Rates Holidays and Cash Grants
- No rates payable for the 2020-2021 tax year, for any business in the retail, hospitality or leisure sectors.
- The list of businesses eligible for relief was expanded on the 25th March 2020. Following the announcement on 23th March 2020 of further measures to limit the spread of coronavirus, the government has subsequently confirmed that that some of the exclusions for this relief, such as estate agents and letting agents, have been removed. Retail, leisure, and hospitality properties, therefore, that will have been forced to close as a result of the COVID-19 restriction measures, will now be eligible for the relief.
- In those sectors, if your rateable value is between £15K and £51k, you will also receive a cash grant of up to £25,000 per property.
- Any business which receives small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000 (increased from the £3,000, announced in the 11 March Budget).
- The rates holiday and cash grants will be administered by local authorities and should be delivered automatically, without businesses needing to claim.
- Businesses that have cover for both pandemics and government-ordered closure should be able to make a claim.
- The government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres, etc., is sufficient to make a claim as long as all other terms and conditions are met. There is more certainty now that these businesses have been ordered to close.
- Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers.
Statutory Sick Pay (SSP)
- If you are a director of a limited company with less than 250 employees, you can pay yourself two weeks of SSP if you need to self-isolate, subject to meeting the minimum payroll requirement for SSP.
- The government will refund £94 per week, maximum £188, to your company.
- It will also refund SSP for staff of businesses with less than 250 employees, for up to two weeks.
- The method of refunding has not yet been announced.
- If you are a limited company and make a loss in your current year, carry it back by a year, to generate a tax refund.
- The sooner you complete and file, the accounts and the tax return, the sooner you can benefit from the tax refund.
Off Payroll Working (IR35) Deferral
- Freelancers and consultants worried about getting taxed as an employee from 6 April 2020, have a year’s reprieve until 6 April 2021.
Mortgage Holidays for Individuals
- Mortgage borrowers can apply for a three- month payment holiday from their lender. Residential and buy-to-let mortgages are eligible for the holiday. It is important to remember that borrowers still owe the amounts that they do not pay as a result of the payment holiday. Interest will continue to be charged on the amount that they owe.
Dixcart has lawyers, accountants and tax advisers that can assist your business to apply for financial assistance, at this challenging time. Please phone: 0333 122 0000 to speak to one of our directors or email: firstname.lastname@example.org. If you are already a client, please speak to your usual contact.