Text in Purple denotes Updates made week commencing 4 May 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.
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
- The reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed staff, this should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.
- Normally, an employee cannot switch freely out of salary sacrifice scheme unless there is a life event. HMRC agrees the Covid-19 counts as a life event that could warrant changes to salary sacrifice, if the relevant employment contract is updated accordingly.
- For employees whose pay varies: if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either: (i) the same month’s earning from the previous year, or (ii) the average monthly earnings from the 2019-20 tax year.
- If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
- If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
- Please note for the scheme to operate, it has to be a UK employer with a UK bank account. This is because HMRC cannot ever pay by direct transfer into a non UK bank account.
- The employer will also be able to claim Employer’s National Insurance and Employer’s Auto Enrolment, minimum contributions, on the furloughed salary up to the maximum of £2,500 per month.
- 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.
- It was originally announced that ‘Employees taken on after 1st March 2020, are excluded from the scheme’, but on the 15th April that was changed to 19th March. As long as the employee was on the payroll as at 19th March, that individual can be furloughed and included in the claim.
- 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 in writing, the employee should confirm acceptance in writing and this document needs to be kept for 5 years. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Employers may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage in collective consultation processes to procure agreement to changes to terms of employment.
- 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. To claim, you will need:
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing for 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
You will also need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
- 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. The system to handle the refunds is still being built, so exactly how this will work is still uncertain. Employers should be prepared to fund the payments through to at least May, before receiving the refund. The Government is constantly updating the advice on what can be claimed. The last advice can be found here.
Holidays for Employees
It is unlikely that many employees will wish to take much holiday whilst there are restrictions on the ability to travel. The government have recognised this and are relaxing the rules on carrying over annual leave. Employers need to recognise the difficulty and communicate to their employees what their policy will be. The policy needs to be fair and clear. It also needs to be applied to all. It will be easy to consider that furloughed staff and others, that are having to stay at work and cannot work, are ‘already on holiday’ and therefore should not accrue holiday time through this period, which they could take afterwards. This however, will be seen as unfair by the employees in question, who probably had little choice about whether they were told to remain at home and not work. What will be of particular concern to the business, is that after the crisis is over that the whole workforce may rush to take their whole year’s entitlement to holiday, in the remainder of 2020. This is why the government is extending the period to use this holiday over the next 2 leave years. Employers should reflect the new rules in their holiday procedures, but at the same time protect their business from all staff trying to take holidays at once.
All workers who have not taken all of their statutory annual leave entitlement due to COVID-19, will now be able to carry it over into the next 2 leave years.
Currently, almost all workers are entitled to 28 days holiday including bank holidays each year. However, most of this entitlement cannot be carried between leave years, meaning workers lose their holiday if they do not take it.
There is also an obligation on employers to ensure their workers take their statutory entitlement in any one year – failure to do so could result in a financial penalty.
The regulations will allow up to 4 weeks of unused leave to be carried into the next 2 leave years, easing the requirements on business to ensure that workers take the statutory amount of annual leave in any one year.
This will mean that staff can continue working as part of the national effort against the coronavirus without losing out on annual leave entitlement.
The changes will also ensure all employers affected by COVID-19 have the flexibility to allow workers to carry over leave, at a time when granting annual leave could leave them short-staffed in some of Britain’s key industries, such as food and healthcare.
The changes will amend the Working Time Regulations, which apply to almost all workers, including agency workers, those who work irregular hours, and workers on zero-hours contracts.
- 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). As a further update on the 4th April, the Government announced: personal guarantees are not required to secure lending below £250,000. For anyone borrowing above £250,000 personal guarantees will be capped at 20% of the outstanding value of the loan, as the Government is providing the guarantee for the remaining 80% of the finance. This will apply to all customers that have secured a loan under the scheme since its launch on 23rd March.
Coronavirus Bounce Back Loan
- The scheme was announced on 27 April and was launched on 4 May.
- The Bounce Back Loan scheme will help small and medium-sized businesses to borrow between £2,000 and £50,000.
- The government will guarantee 100% of the loan and there will not be any fees or interest to pay for the first 12 months.
- Loan term loans will be up to 6 years. No repayments will be due during the first 12 months. The government has worked with lenders, to agree a low rate of interest of 2.5% for the remaining period of the loan.
- The scheme will be delivered through a network of accredited lenders.
- Applications will be made through a short online form. There will be no forward looking tests of business viability.
- You can apply for a loan if your business:
- is based in the UK
- has been negatively affected by Coronavirus
- was not an ‘undertaking in difficulty’ on 31 December 2019.
If you have already received a loan under the Coronavirus Business Interruption Loan Scheme, you cannot also apply for a Bounce Back Loan, but you may be able to transfer the CBILS loan into a Bounce Back Loan. You will have to arrange this with your lender before 4 November 2020.
Future Fund – to be launched in May 2020
- This Scheme will issue convertible loans between £125,000 to £5 million to innovate companies, which are facing financing difficulties due to the Coronavirus outbreak.
- The Future Fund will provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equally matched funding from private investors.
- These convertible loans may be a suitable option for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme.
- The scheme will be delivered in partnership with the British Business Bank.
- You are eligible if:
- Your business is based in the UK
- Your business can attract the equivalent matched funding from third party private investors and institutions
- Your business has previously raised at least £250,000 in equity investment from third party investors in the last 5 years
Full eligibility criteria will be published in due course.
Coronavirus Large Business Interruption Loan Scheme
The Government has announced a new Coronavirus Large Business Interruption Loan Scheme (CLBILS) which will provide a government guarantee of 80% to enable banks to make loans of up to £25m to firms with an annual turnover of between £45m and £500m. It is believed that this will give banks the confidence to lend to many more businesses which are impacted by coronavirus. Facilities, backed by a guarantee under CLBILS, will be offered at commercial rates of interest.
It is expected that this scheme will be delivered through commercial lenders. The Government will provide lenders with an 80% guarantee on individual loans for businesses, that would be otherwise unable to access the finance they need.
Lenders will still be expected to conduct their usual credit risk checks, but this scheme allows them to specifically support business that were viable before the Covid-19 outbreak, but are facing significant cash flow difficulties, that would otherwise make their business unviable in the short term.
The new scheme will launch later this month and will support a wide range of businesses to access financial products including; short term loans, overdrafts, invoice finance and asset finance.
Businesses would remain responsible for repaying any facility that they may takeout.
To be eligible, the bushiness must:
- Be UK based in its business activity
- Have an annual turnover of between £45 million and £500 million
- Be unable to secure regular commercial financing
- Have a borrowing proposal with the lender:
- Would consider viable, were it not for the Covid-19 pandemic
- Believes will enable you to keep trading through any short-term to medium-term difficulty
Businesses from any sector can apply, except the following:
- Banks and building societies
- Insurers and reinsurers (but not insurance brokers, who can apply)
- Public-sector organisations, including state-funded primary and secondary schools
Further detail on eligibility will be confirmed later this month.
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
There is a separate Article specifically for the self-employed which can be found here.
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 024 1222 (lines are open Monday to Friday, 8:00 to 16:00).
- If you have PAYE to pay this can be deferred. There does not seem to be a consistent message from HMRC, but they seem to be accepting deferral for the next 3 months. To be certain, call them to agree this quoting your PAYE reference number.
- Self-employed individuals can defer tax payments for six months, making the next payments due by 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. Please view our separate article, specifically for the self employed here.
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 and again on the 2nd May 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: email@example.com. If you are already a client, please speak to your usual contact.
- Further advice can be found on the Government website.