COVID-19 Financial Support - Updated
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The word "unprecedented" has perhaps been heard more times in the past week than in many a year. Often such use of vocabulary is exaggerated but at this time it appears not to be the case given the extent of the package of Government financial support for businesses and individuals that have been announced by the Chancellor, Rishi Sunak.
In this blog we have drawn together all of the various announcements and provided an up to date picture of what is available to the different parts of the economy. This is a dynamic situation though and recent experience has shown that much can change in a very short period of time. Therefore what follows is accurately stated as at 27 March 2020.
The Chancellor announced a series of economic and taxation measures in the 11 March Budget and has since substantially upgraded these with further announcements addressing particular sections of the economy and society, with a promise to go further and do "whatever it takes", as the Government seeks to protect people and businesses at a time of national emergency
Much of the fine detail and the distribution mechanism is still being worked out by HMRC, The Treasury and others but the intent is clear and we should expect further details on these initiatives in the coming days.
Employee Wages & Salaries - "Coronavirus Job Retention Scheme"
In an attempt to avoid mass redundancies the Government have committed to pay 80% of the salary of PAYE employees - up to a monthly maximum of £2,500 and associated employer national insurance and minimum auto enrolment pension contributions - who would otherwise have been laid off during the crisis. It is backdated to 1 March 2020 and will last for at least 3 months. The key qualifying criteria are
All those employed at 28 February 2020 will qualify
It applies to full-time, part-time. agency contract and zero hour contract employees
The furloughed employee cannot undertake any work for or on behalf of the organisation
The minimum period of furlough is three weeks
To claim a business will have to designate specific employees as "furloughed workers" and formally notify them of this change of employment status. Legal advice on any required amendment to employment contracts may be needed. HMRC will also need to be notified through an online portal which is expected to be available by the end of April.
Read the full details on www.Gov.UK by clicking here
Businesses who would otherwise have needed to make a VAT payment between 20 March and 30 June 2020 will now have the option to defer payment until 31 March 2021 without penalty. Returns should still be submitted though. Where a refund is due these will be paid as normal during this period. HMRC have today further advised that if the deferral option is chosen then any direct debit arrangements should be cancelled. You do not need to notify HMRC of this choice.
Any business in England that qualifies for small business rate relief will receive a cash grant of £10,000. This is automatic and comes from the local authority. There is no need to apply for this.
Business rates will not be payable at all in 2020-21 in England in the retail, hospitality or leisure sectors. Businesses in these sectors that have a rateable value of between £15K and £51K will also receive an automatic £25,000 grant. Again there is no need to apply for this as the grant will be paid automatically.
Business Interruption Loan Scheme
From 23 March businesses with a turnover of less than £45m can apply for a loan facility of up to £5m from one of the 40 lenders that partner with the British Business Bank. The government will guarantee 80% of the loan and the government will pay the interest charges for the first 12 months. Applications are made to one of the panel of lenders and not to the British Business Bank.
Statutory Sick Pay
For businesses with less than 250 employees (as at 28 February 2020) SSP will be refunded for up to two weeks where employees are required to self isolate. This also applies to a director of a limited company with less than 250 employees. There is currently no mechanism to repay this money through the PAYE system. Whilst details are awaited businesses are advised to keep clear records of staff absence due to self isolation. Employees are not required to submit a GP fit note
IR35 - Off Payroll Working
Planned changes to the income tax regime facing contractors operating through their own limited company that were scheduled to take effect on 6 April 2020 have been delayed by a year to April 2021.
Housing - Mortgages & Rent
Borrowers can request a three month payment holiday from their lender. Interest will continue to be charged. No one can have their home repossessed during the next three months.
Tenants can request a three month payment holiday from their landlord. No one can be evicted from their home over the next three months.
Wages & Salaries
Employers have been encouraged not to make redundancies and instead to fund wages & salaries for laid off staff from the 80% allowance paid by Government.
On 26 March the Government announced a package of measures to support the UK's 5 million self-employed people. It is worth stating here, based on the enquiries that we have had and the misunderstanding that we have seen exhibited by some, that self employment relates to those who engage in business as sole traders and partnerships. Those who are directors of their own limited companies are not classified as self-employed.
Self-employment Income Support Scheme
Self-employed people can claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 for three months. This grant is likely to be paid in a single lump sum in June. To qualify you must:
Have submitted a self assessment tax return for the 2018-19 tax year
Have traded in 2019-20
Are trading when you apply (or would be except for the impact of COVID-19)
Intend to continue trading in 2020-21
Have lost trading profits due to COVID-19
Your trading profits must be less than £50,000 and be more than 50% of your total taxable income based on, either or both
In 2018-19, or
The average for the tax years 2016-17, 2017-18 or 2018-19
If you have not submitted a tax return in 2018-19 but should have done the Government are allowing you to do so before 23 April 2020.
You cannot apply for this scheme yet. HMRC will contact you if you are eligible and will invite you to apply online. There is no need to contact HMRC.
There is apparently already evidence of people operating scams that invite you to click on links or provide bank account details. HMRC will never contact you in this manner and any such approaches shoudl be dismissed.
New Businesses in 2019-20
The above qualifying criteria means that if you started a business in the past twelve months (and therefore were not self employed and weren't required to submit a 2018-19 self assessment return) then you do not qualify for this grant assistance.
Where more than one person is engaged in a partnership business structure then it is understood that the qualifying trading profit threshold is relevant to the share for each partner in the business and not the total trading profit of the partnership.
Income tax payments due on 31 July 2020 will be deferred until 31 January 2021. This is automatic and no application is required.
Self-employed people can access full universal credit at a rate equivalent to statutory sick pay - currently £94.25 per week (increasing to £95.85 in April)
Existing Tax Reliefs and Measures
In addition to the measures recently announced there are some long standing tax reliefs available which may be relevant to those whose businesses are adversely affected at this time.
Time To Pay
HMRC have long operated this scheme. Individuals and businesses can request to defer the payment of outstanding tax liabilities. These are agreed on a case by case basis and there is a dedicated COVID-19 helpline on
0800 0159 559. You should seek agreement to such a payment plan in advance of the due date.
Carry Back Of Losses
If you make a tax loss in the current year you will be able to carry this year's loss back to the previous year and claim a refund of tax paid.
This applies to sole traders, partnerships and limited companies. If you are in your first year as a sole trader or partnership you can carry a loss back up to three years and set it against any PAYE you may have paid as an employee in the earlier years.
In all such cases it is advisable to submit the current year tax return as soon as possible.
Submit Your Self-Assessment Tax Return Early
If you have paid tax on account based on last year's profits then you will be able to claim a refund of any tax overpaid. You can only do this when you submit your 2019-20 tax return. You will not have to pay the normal July 2020 instalment.
Working From Home
As you are most likely to be working from home a great deal more at the current time keep a record of this and you will be able to claim a tax allowance on your tax return in 2019-20 and most likely in 2020-21 too. For sole traders and partnerships under simplified expenses this relief is based on the number of hours per month (either £10, £18 or £26) that you use your home and for employees of limited companies (including directors) it is a flat rate of £4 per week though this is increasing to £6 from April.
If we can assist you with any questions on the above, or indeed for any other accounting or taxation matter please don't hesitate to contact us on 01905 928128 or by click here to e mail: firstname.lastname@example.org