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Coronavirus Updates

Kay Baxter :: Wednesday 25th March 2020 :: Latest Blog Posts


Coronavirus – 4th update - 26 March 2020

 

You may have heard today the Chancellor announcement for measures to help the self-employed. We have broken this down for you.

What is it?

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) whose income has been negatively impacted by COVID-19. The scheme will provide a grant to self-employed individuals or partnerships, worth 80% of their profits up to a cap of £2,500 per month.

HMRC will use the average profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. The scheme will be open to those where the majority of their income comes from self-employment and who have profits of less than £50,000. The scheme will be open for an initial three months with people able to make their first claim by the beginning of June.

As we understand the position you are still eligible if you are still working.

 

Am I eligible?

To be eligible for the scheme you must meet all the criteria below:

  • Be self-employed or a member of partnership;
  • Have lost trading/partnership trading profits due to COVID-19;
  • File a tax return for 2018-19 as self-employed or a member of a trading partnership. Those who have not yet filed for 2018-19 will have an additional 4 weeks from this announcement to do so;
  • Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021;
  • Have trading profits of less than £50,000 and more than half of your total income come from self-employment. This can be with reference to at least one of the following conditions:
  •       Your trading profits and total income in 2018/19
  •       Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19. We understand that if you have not been trading for the three previous tax years HMRC will average over the number of years you have been trading.

 Please remember that this income will be included within your profit and loss account and you will need to pay income tax and national insurance on any payments received through the scheme.

The grant is also recognised as income for the purposes of Universal Credit and Tax Credits and may impact the amount you are entitled to.

 

How do I access it?

Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. HMRC will then pay the grant directly to eligible claimants' bank account. HMRC is urgently working to deliver the scheme; grants are expected to start to be paid out by beginning of June 2020. For eligible individuals who have not submitted their returns for 2018-19, they will have 4 weeks' notice from the date of the announcement to file their returns and therefore become eligible for this scheme.

 

When can I access it?

HMRC is urgently working to deliver the scheme; grants are expected to start to be paid by the beginning of June 2020. This time is necessary to ensure that the scheme is both deliverable and fair. In the interim the self-employed will still able eligible for other government support including more generous universal credit and business continuity loans.

 

Why does this scheme not cover small businesses who are incorporated?

Self-employed individuals who are owner-managers and pay themselves a salary through PAYE will be eligible for support through the Coronavirus Job Retention Scheme.

SMEs can also access support through the temporary Coronavirus Business Interruption Loan Scheme. This supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years.

This new Self-Employment Income Support Scheme is open to anyone who reports trading profits through Income Tax Self-Assessment. Self-employed individuals who work through a company do not report their trading profits in this way.

 

Further announcements will be made over the next few days and we will keep you informed as and when we receive these.

If you have any queries/concerns regarding the above, please feel free to give Catherine or Richard a call.

 

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Coronavirus – Furlough and job retention scheme clarification – 23 March 2020

 

As advised in the previous update, the Government has announced its plans for financial assistance to help employers retain employees for an extended period of time, although offering no work, and avoid lay-offs. It is called the Job Retention Scheme and, while little information has been published as to how it will work, we have set out below what we do know, which will be updated as more details are released.

What is the Job Retention Scheme?

It involves employers placing their employees on "furlough". This is a term which is typically used in the US and essentially means putting employees on temporary leave of absence where they do not work and do not receive pay, but are retained on your books to be brought back in when you need them. Employers who do this will be able to obtain a grant from the Government to cover 80% of "furloughed employees" wages, to a maximum of £2,500 per employee per month.

Which employers can access the scheme?

All employers can access it; there is no restriction on size or type.

How do I get the Government grant?

Guidance states that you will need to designate which of your workforce will be furloughed employees and then submit that information to HMRC, along with each employee's earnings. You will then receive a grant to cover the 80% wages. More information is awaited from the Government on the online portal to be used to submit the information and what other information may be needed. The Chancellor has stated he hopes the first grants will be paid by the end of April 2020, and they will be backdated to 1 March 2020. The scheme is initially intended to run for three months but may be extended.

Which employees can be furloughed?

Any employee can be furloughed. They need to be on PAYE in order for you to be able to claim the grant for their wages. Guidance states that your ability to furlough an employee depends on their contract. It is not likely that employee contracts will include a specific right to use furlough.

However, contracts which contain a right to lay off employees on no pay already give you the right to send employees home and not pay them for a temporary period and so can likely be used to furlough employees.

The difference is that employees on lay off will receive, subject to service criteria, statutory guarantee pay (SGP) whereas furloughed employees will receive 80% of their wages. SGP is £29 per day for a maximum of five days in a rolling 13-week period, so furlough offers the employee a much more favourable option in terms of pay. If contracts do not contain a right to unpaid lay off, you can ask the employee to agree to furlough. Although 80% of wages may not be an initially attractive option next to full pay, it is likely to be more attractive than redundancy which may be the end result if alternative options cannot be found. It may also be useful for employees who are struggling to find childcare.

If you have already taken the step to utilise lay off, you can get in touch with those employees and agree to change their current status from lay off to furlough. This would simply involve changing their pay arrangements from nothing (if not entitled to SGP), or SGP to 80% wages, as they are already not working.

You need to designate employees as furloughed, which means it is your choice. However, if you are not placing everyone on furlough, you should consider carefully who it should be. Think about whose skills will continue to be in demand through this difficult period.

While you may assume that the best thing to do is furlough those employees labelled as high risk by the Government, forcing them on to furlough without their input, and therefore forcing them on to 80% wages, may result in discrimination claims from those who allege they were made to do it because of their age, disability or pregnancy. Where you need to select employees for furlough, it may be best to ask for volunteers across the workforce and if any high risk employees, who had previously been risk assessed as fine to still be in work, put themselves forward, it may well be appropriate to choose them first. There does not appear to be a maximum or minimum number of employees who can be furloughed.

Can I furlough employees who are on short-time working?

Furlough requires the employee to not carry out any work, so short-time working could not continue during furlough. However, consider whether you could re-organise reduced work patterns to allow for some of those on short-time working to go back to full hours and the others to be furloughed. You should discuss this with employees first.

If I put employees on furlough and I get a grant to cover 80% of their wages, do I have to make up the other 20%?

No, there is no requirement to do this, but you can if you wish.

What about zero hours employees who have no standard wages? How will the 80% be calculated?

There is no clarity on this yet, but the Chancellor said the intention was to try to cover as broad a group of people as possible.

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Coronavirus – 3rd update – 21 March 2020

 

As you may have heard last night, the Chancellor announced further measures to help businesses:

Coronavirus Job Retention Scheme

All UK employers will be able to access support to continue paying part of their employees' salary for those employees that would otherwise have been laid off during this crisis.

How to access the scheme:

  • Designate affected employees as "furloughed workers" and notify your employees of this change. Take care in changing the status as this is still subject to employment law and depending on the employment contract, may be subject to negotiation. The definition of "furlough" is to allow or force someone to be absent temporarily from work.
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal – more information is due from HMRC

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.

If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan – see below

 

Deferring VAT and Income Tax Payments

The Government will support businesses by deferring VAT payments for 3 months – deferral will apply from 20 March 2020 until 30 June 2020. Please bear in mind this is only a deferral.

Self-employed the July income tax payment will be deferred to January 2021.

 

Businesses who are paying sick pay to employees

Employers will be able to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility for the scheme is:

  • The refund will cover up to 2 weeks' SSP per eligible employee who has been off work because of COVID-19
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP as a result of COVID-19
  • Employers should maintain records of staff absences and payments of SSP. Employees will not need to provide a GP fit note. If employers need evidence then employees can obtain an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from NHS website

How to access this a rebated scheme is being developed.

 

Support for business that pay business rates

Retail, hospitality and leisure businesses

As advised previously there will be a business rates holiday for retail, hospitality and leisure businesses. This is mainly:

            Shops; restaurants; cafes; drinking establishments; cinemas and live music venues

            Assembly and leisure

            Hotels, guest and boarding premises and self-catering accommodation

No action to access the scheme. This will apply to your next bill in April 2020.

Cash grants for retail, hospitality and leisure businesses

A cash grant of up to £25,000, for businesses with a rateable value of between £15,001 and £51,000.

A cash grant of up to £10,000, for businesses with a rateable value of less than £15,000.

No action is required to access the scheme.

Businesses that pay little or no business rates

 A one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs. You must be in receipt of the Small Business Rate Relief or the Rural Rate Relief to be eligible.

No action is required to access the scheme.

 

Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme delivered by the British Business Bank will be launched early next week.

Businesses can access the first 12 months of the finance interest free.

To be eligible your business needs to meet the British Business Bank eligibility criteria.

To access the scheme and to find out the full rules of the Scheme, details are located on the British Business Bank website - https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

 

Time to pay service

Any business or self-employed person in financial distress, you may be eligible to receive support with their tax affairs through HMRC's Time To Pay service.

If you have missed a tax payment or might miss your next payment due to COVID-19, please call HMRC's dedicated helpline 0800 0159 559.

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Coronavirus – 2nd update - 18 March 2020

 

As you may have heard, the Chancellor announced yesterday the following measures to help small businesses:

Hotels/pubs/retail

  1. If you have pandemic insurance, then you should be able to claim under your insurance policy.
  1. No business rates even if your rateable value exceeds £51,000.
  1. You will be able to receive a cash grant of up to £25,000 per business.  You will need to apply to your local authority to receive this.  Guidance for local authorities on the application of this will be available by 20 March 2020.   This is with a rateable value between £15,000 and £51,000.

Other small businesses

  1. No business rates.
  1. Cash grants of up to £10,000 per business.  Apparently, it appears that you do not need to apply as you will be contacted by your local authority.  Funding for the scheme will be provided to local authorities by government in early April.

Both

  1. If you must pay your staff statutory sick pay, then you can claim this back from HMRC. 
  1. There will be an interest free loan for 6 months.
  1. If you have difficulty in paying outstanding tax liabilities, you may be able to receive support through HMRC's Time to Pay service.  If this is the case, please call the COVID-19 dedicated helpline on 0800 0159 559.

Individuals

  1. Your lender should allow you to have a 3-month payment holiday without penalties.

 

We will keep you updated as and when this is updated.

However, if you do have any queries/concerns then please feel free to get in touch.

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Coronavirus – 1st update - 17 March 2020

 

The Budget, announced on 11 March, contained several measures to enable some businesses to preserve cash and to prevent insolvency. These measures included -

  • HMRC to provide assistance through the delay of collection of tax bills (i.e. PAYE, NI, VAT and CT) through the launch of a new 'time to pay' HMRC Coronavirus Helpline number - 0800 0159 559.
  • Business rates being abolished for one year for small firms in the retail, leisure and hospitality sectors.  There is a £5,000 business rates discount for pubs with a rateable value below £100,000 in England.
  • The 700,000 smallest businesses who are already exempt from paying rates are now eligible for £3,000 in grants to help meet business costs.
  • A Coronavirus Business Interruption Scheme has been launched, under which the government guarantees debt to encourage lenders to give loans to companies that would otherwise be deemed too risky. The scheme will delivered by the British Business Bank with more than 40 lenders providing funds as terms loans, overdrafts or asset based lending secured on invoices or equipment.
  • The reimbursement of sick pay costs for up to 14 days, which is just under £200 per employee.

 

However, over the next few weeks it may well take more than just the above to keep a business afloat. You should also consider the following -

  • Focus on debt collection. We are already hearing of some companies introducing a policy of delaying payment to their suppliers to preserve their own cash position. You should therefore focus on recovering their larger outstanding debtor balances and in particular, seeking payment of monies due from larger companies who may have the flexibility to accommodate requests for early payment. You should take the time to explain to larger companies that they should speed up supplier payments to ease the cash crisis facing smaller businesses.
  • Where debts are proving difficult to collect, you should incorporate and familiarise themselves with a debt recovery process and should not feel inhibited about issuing proceedings against perhaps a major customer.
  • Asset finance. Whether it be through an existing or new lender, you should establish if there is the ability to raise finance on unencumbered or existing part financed assets including property, chattels, stock, machinery etc.
  • You should approach your existing bank. There is never a good time to have these difficult conversations, but if not now, when? Banks are offering holidays on loan repayment and are encouraging customers to get in touch to discuss options. Some banks, including Lloyds and Nat West, have already outlined funding packages worth £2bn and £5bn for small businesses.
  • Consider emergency funding from alternative finance providers. Peer to peer borrowing has become very popular, but usually comes with strings attached, such as high interest rates, short repayment terms and the need for personal guarantees. You should be cautious about the ease with which such borrowing appears to be easily available and should probably consider this as something of a last resort. Using a reputable Commercial Finance Broker will provide appropriate access to such funds and they will assist in finding the right type of finance for you.
  • Rent. I suspect some landlords will be expecting a call from their tenants to request a rent holiday or change in payment terms. From your perspective, there is never a good time to have these difficult conversations but it is a valid form of easing cashflow and should be considered.
  • Focus on cost cutting measures, including elimination of non-essential overheads, reduce staff costs, amend supplier payment terms, reduced opening hours, etc.