COVID-19: Government Support

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This is a summary of the recent announcement of Government support for businesses and employees.

We will be updating this page as more government announcements are made.

Full details are available here on the official government guidance.

Help for the self employed

The scheme is available to self-employed people and partnerships, those who file through the self-assessment system. The taxable grant is worth 80% of the trading profits up to a maximum of £2500 per month for 3 months. This may be extended.

However, it is not that simple. The Government has laid out specific criteria to qualify for the grant which is covered in detail on the HMRC webiste: COVID-19 – Support for the self employed

You cannot apply for the scheme yet, eligible people will be contacted by HMRC but beware of scams around this. The first payments will be made in June which is still a few months away and not ideal for the majority of the self-employed who need financial support sooner.

Contractors and Freelancers working through their own Limited companies are not classed as self employed, but a director of a company. Directors may be able to get help via the job retention scheme as the majority would have filed a small salary through PAYE, however, the Government has not specifically mentioned this. Please scroll to read more about the Job retention scheme.

3 month extension to file company accounts -25th March Update

We recommend to speak to your accountant to ensure your company is eligible. You can apply online via:

Job Retention Scheme

Instead of making staff redundant, you can furlough them and continue to pay salaries which the government will cover partly, up to £2,500 per month.  The advantage is that when you start up again, you have your existing experienced staff immediately available.

The government will give a grant equal to 80% of all employment costs up to a cap of £2,500 per month plus Employers NICs and pensions. The employer does not have to pay the 20% difference – i.e. employer can agree with the employee to reduce salary to 80% of February’s figure.

You still need to pay attention to contractual obligations/rights and discuss these changes with employees, which are subject to employment law before furloughing staff. The employees must not be working for the business at all during this time (i.e. need to be at home) and it is likely HMRC will have a system of verification with the employees to ensure they have been properly furloughed.

It will cover only employees who were on the payroll as at 29th February 2020 and will likely use February’s payroll figures to workout the 80%.

The scheme will be run for three months from 1st March 2020 and could be extended if necessary.

In terms of how it will work:

1.) You need to furlough staff who will be part of this scheme.

2.) Run payroll as normal, albeit possibly on a lower salary (via agreement with employees).

3.) Pay staff as per payroll calculations.

4.) Submit information on furloughed staff and salaries via a new HMRC online portal (not yet setup).

5.) HMRC will pay the calculated grant directly to the business.

Are directors eligible for the scheme?

  • Yes, directors can be furloughed and this should be a minuted decision by the board. This is also true where there is only one director (e.g. a personal service company). Per HMRC rules (link below), furloughed directors can carry out duties to fulfil the statutory obligations they owe to their company and no more than that. They should not do work of a kind to generate commercial revenue or provide services on behalf of their company.
  • The company must continue declaring a salary to the company to be eligible.
  • Dividends will not form part of the amount paid – it will be based purely on PAYE salaries.

When will the scheme go live?

  • Although employees can be furloughed from 1st March 2020, the system to receive the grants is expected to go live from the end of April.
  • We will update when we know more

More details: click here.

New IR35 rules delayed

The new Off-Payroll IR35 private sector rules have been delayed for a year to 6th April 2021. This means for now your client does not have any responsibility for determine your IR35 status – it remains with you. 

Deferring VAT

VAT payments will not be required between 20th March until 30th June 2020. You do not need to apply for the deferral, it is automatic. If you usually pay VAT by direct debit, you need to cancel it if you wish to take advantage of this, otherwise HMRC will collect payment.

Businesses will have until the end of the 2020/21 tax year (5th April 2021) to pay any liabilities that accumulate during this deferral period.

More details: click here.

Deferral of July 2020 Income Tax Payments on Account

These payments on account of income tax are automatically deferred until 31st January 2021. We assume HMRC will issue updated statements in July to reflect this.

As it currently stands this is for self employed sole traders only and not for anyone else who may have to file a tax return such as a limited company director, a shareholder or a private landlord, etc.

More details: click here.

Statutory Sick Pay (SSP)

The government will refund Covid-19 SSP paid to employees/directors. Key features.

  • 2 weeks per eligible employee off work because of Covid-19 (either sick yourself or advised to household quarantine.
  • £94.25 per week. Must earn a least £118 per week to qualify.
  • Company directors on payroll would qualify.

A mechanism is being setup by HMRC to rebate this Covid-19 SSP paid to employees.

More details: click here.

Universal Credit:

If you cannot claim SSP (for example you are a self-employed sole trader) or under pay threshold of £118 per week, you should qualify for Universal Credit.

More details: click here.

Mortgage Support

Mortgage lenders have agreed they will support customers that are experiencing issues with their finances as a result of Covid-19, including payment holidays of up to 3 months. For more information, speak to your mortgage provider.

Small Business Rates Relief (Grant of £10k)

If you pay little or no small business rates because of Small Business Rates Relief (i.e. your business premises has a rateable value less than £15,000 and operates typically in one premises), the government will provide a one-off grant of £10,000. 

Your local authority that sends you your rates bill will contact you ASAP about eligibility to this. Please direct queries to them.

More details: click here.

Grant for retail, hospitality and leisure businesses (Grant up to £25k).

Businesses in these sectors with a property up to a rateable value of £15,000 and under will receive a grant of £10,000 (as above). 

For a rateable value in this sector between £15,000 and £51,000, the grant amount will be £25,000. 

Your local authority that sends you your rates bill will contact you ASAP about eligibility to this. Please direct queries to them.

More details: click here.

Business Rates for retail, hospitality and leisure businesses

Businesses in the retail, hospitality and leisure sectors will pay no business rates for 2020-2021. No action on your part is required. 

Your local authority will reissue your April 2020 rates bill. Please direct queries to them.

More details: click here.

Coronavirus Business Interruption Loan Scheme

You can apply for a “Coronavirus Business Interruption Loan Scheme” loan via many different commercial lenders. They have been incentivised to lend through government guarantees on 80% of the loan as well. On top of this, the government will cover the first 12 months of interest payments and lender fees.

More details: click here.

Delaying other tax payments

If you are in financial distress and have outstanding business tax liabilities, you can contact HMRC to setup an arrangement. There is a special helpline for delays relating to Covid-19 to discuss missed and upcoming payments: 08000-159-559.

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