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Covid-19 Government Support for Business (updated 14 April 2020)

by | Apr 14, 2020 | business issues, business taxation, Covid19

Updated 16 April 2020

The Government has outlined widespread support for businesses during the Covid-19 disruption. For ease we are rolling all content into this post, which we are updating as new information becomes available, please bookmark and check back..

Everything is moving rapidly. This is up to date to the best of our knowledge but E&OE

 

Contents

 

HM Government Links

 

Summary of Covid-19 Support Schemes

 

Scheme
 Eligibility
 Application Process
For Employers
SSP Relief – SSP repaid rather than borne by employer Business with less than 250 employees at 28 February 2020 Not known – expected to be a portal of some soft, not sure when
Job Retention Scheme – 80% of wages of “furloughed workers” reimbursed to employer All UK businesses HMRC are releasing a portal, later in April
Small Business Support
Coronavirus Self-employment Income Support Scheme Sole traders / partnerships with profits less than £50,000.

  • Must have been Self Employed pre 5.4.1
  • Average profits less than £50k
  • Self Employment represents more than 50% of your income
 80% of average profits for three months
Business Rates Support
Business Rates Holiday – one year All businesses in Retail, Hospitality and Leisure sectors.

Nurseries added as well

 Via Local Authority
Cash Grants to Businesses
£25,000 cash grant, non repayable, to businesses in retail/hospitality/leisure Business in retail/hospitality/leisure with rateable value between £15,000 and £51,000. Via Local Authority
£10,000 cash grant, non repayable, to small businesses Businesses in receipt of Small Business Rate Relief or Rural Rate Relief – broadly this will be businesses occupying premises with a Rateable Value of £15,000 or less Via Local Authority
Tax Deferral and Time to Pay
VAT Deferral – until 30 June 2020 All businesses Automatic no application required, although Direct Debit needs cancelling. Vat return still needs submitting.
Income Tax – Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021 Anyone due to pay Self Assessment in July 2020 (send 2019-20 Payment on Account) It says this is “an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.”
Time to Pay All businesses HMRC dedicated helpline: 0800 0159 559.
Coronavirus Business Interruption Loan Scheme
80% Government Guarantee on loans up to £5m Businesses turnover less than £45m Via British Business Bank – link below
Uprated SSP for Employees
Employees can claim SSP from day 1 not day 4 Employees – including company directors via employers payroll
Support for Self Employed
Self Employed will be able to claim Employment Support Allowance (not means tested) and possibly Universal Credit (means tested) Self Employed and partners, not company directors Via HMRC
Company Directors – SSP and Universal Credit Company Directors SSP via payroll. UC via HMRC

 

Coronavirus Job Retention Scheme

Widely touted on social media as paying 80% of the wages of laid off staff, its not quite as simple as that. Here is what HM Government has to say:

“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.

“Eligibility – All UK businesses are eligible.

“How to access the scheme – You will need to:

    • designate affected employees as ‘furloughed workers,’ and notify your 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
    • 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)

“HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan”

Detailed Guidance from Whitefield Tax and HM Government

A couple of points:

  • Employment Law still applies – so you will need to agree this with your staff
  • Directors an claim the 80% Furlough on their own salaries (but not dividends), but they mustn’t be doing any work for the company other than statutory duties, eg accounts and VAT (compared to substantive revenue earning work)

 

Coronavirus Self-employment Income Support Scheme

This was announced at the end of March and details are evolving:

  • a taxable non repayable grant for Self Employed and Partners – not company directors
  • only available if your average profits over 16/17, 17/18 and 18/19 less than £50,000
  • grant is 80% of average profits over 16/17, 17/18 and 18/19 to a maximum of £2,500 / month (believe this is 80% of £2,500 – punctuation not clear on Government website)
  • scheme lasting three months initially
  • the averaging year rules adjust if you started Self Employment in that period
  • Self Employment must be the majority of your income
  • payments to be made from June onward as one lump sum
  • no restriction on continuing to work

HMRCs Guidance:

Company Directors / shareholders not covered. In theory can claim the Coronavirus Job Retention Scheme grant at 80% of salary but:

Our review of the guidance

 

VAT and Self Assessment Deferrals

VAT deferral

  • Vat payments due between 20 March 2020 and 30 June 2020 can be deferred. The deferred payment will need to be settled by 31 March 2021 at the latest.
  • You don’t need to tell HMRC you are deferring your VAT payment, but you do need to (a) cancel your Direct Debit and (b) Submit the VAT return normally. You will need to re-instate the Direct Debit for the next payment.
  • On the subject of VAT, the 12 month soft landing on having Digital Links in your accounting systems, which expired at the start of this month, has been extended. This won’t effect many people, unless you are struggling with integrating tills, complex spreadsheets or similar.

Self Assessment deferral

  • Anyone due to make a Self Assessment payment in July 2020 (Second Payment on Account 2019-20) can defer this payment until January 2021
  • Government says “You do not need to be self-employed to be eligible for the deferment. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until 31 January 2021.”
  • A caution on Self Assessment payments. Most Coronavirus disruption is coming into 2020-21 not 2019-20, so don’t expect balancing 2019-20 Self Assessment payments due in January 2021 to be much lower. It may be possible to reduce 2020-21 Payments on Account normally due 31 January and 31 July 2021, but bear in mind Government grants and support are taxable income. We can help you look at estimated 2020-21 tax liabilities in December 2020 or January 2021 and take a view about the Payments on Account.

 

Statutory Sick Pay for Employees

  • SSP will apply from first day of absence not the fourth day.
  • SSP will apply to
    • people with Covid-19
    • people who have to self isolate
    • people unable to work because they have been advised to self isolate (not sure how this differs from previous head)
    • people caring for someone in their household with Covid-19
  • Relaxed rules around fit notes from GPs – employers advised to use their discretion not to request them. They will also be issued by NHS 111
  • Start date for these rules to be confirmed in a forthcoming Covid-19 bill, presumably in coming days given the urgency
  • SSP is £94.25/week 2019/20 and £95.85/week 2020/21. The amount is subject to Tax and NI under PAYE. Average earnings requirement £118 p/w 2019/20 and £120 2020/21
  • Includes directors for their salary (not dividend)

 

SSP Reimbursement for Employers

  • Employers with less than 250 staff will have SSP costs refunded from government up to 2 weeks per employee – at present employers cannot recover SSP at all
  • Start date for these rules to be confirmed in the forthcoming Covid-19 bill
  • Claim via a portal, details to be announced

 

Sick Pay for the Self Employed and those Ineligible for SSP

  • “New Style” Employment and Support Allowance (NSESA) will be available to people with Covid-19/Self Isolating from day 1 rather than day 8.
    • NSESA is £73.10 (or £57.90 if aged under 24) a week – rises to £74.35 for 2020/21
    • Dependant on NI contributions or credits over previous two years,
    • See https://www.gov.uk/guidance/new-style-employment-and-support-allowance-detailed-guide#overview.
    • Savings aren’t taken into account, but pensions are
    • Can claim NSESA without visiting Job Centre (at the time of writing this isn’t reflected in all Government web guidance)
    • Possibility of applying for Universal Credit on top of NSESA but not if savings over £16,000
  • If you haven’t paid NI for the last two years (or had NI credits) then its possible to make a Universal credit claim
    • Seems that the Income Related ESA referred to on .gov.uk is not available to new claimants
    • Universal Credit amounts vary according to circumstances – see https://www.gov.uk/universal-credit/what-youll-get
    • Partners income and savings over £6,000 are taken into account. No UC if savings over £16,000
    • Can claim without visiting Job Centre

Additionally, during the Covid-19 outbreak the Universal Credit minimum income floor rules for Self Employed to be suspended.

Standard Universal Credit amounts (2020/21):

  • Single and under 25 £256.05 / month
  • Single and 25 or over £323.22 / month
  • In a couple and you’re both under 25 £401.92 (for you both) / month
  • In a couple and either of you are 25 or over £507.37 (for you both) / month
  • These rates taper off the more you earn, or the more savings you have

All of the above linked to publication of COVID-19 Emergency Bill re start dates – at the time of writing some of the .gov.uk website information is out of date –
https://www.gov.uk/government/news/government-outlines-further-plans-to-support-health-and-social-care-system-in-fight-against-covid-19

 

Support if you are not sick but cannot work due to no customers or working sites being closed

The only possible recourse here is Universal Credit

  • Universal Credit amounts vary according to circumstances – see https://www.gov.uk/universal-credit/what-youll-get
  • Partners income and savings over £6,000 are taken into account. No UC if savings over £16,000
  • For duration of Covid-19 outbreak, a claim for UC can be made without visiting Job Centre (precise arrangements for this being implemented at the time of writing)
  • During the Covid-19 outbreak the Universal Credit minimum income floor rules for Self Employed to be suspended
  • See https://www.gov.uk/self-employment-and-universal-credit

 

Business Rates and Grants

In the Budget of 11 March 2020 a package of Business Rates easements were announced. These have now been extended:

  • Existing small business rate relief continues to apply, this provides full relief for businesses using a single property with a rateable value of £12,000 or less.
  • A unrestricted business rate holiday applies to retail, hospitality and leisure businesses in England for the 2020/21 tax year (at budget this was subject to a £51,000 Rateable Value cap).
  • Business rates holiday now extended to nurseries.
  • Pubs are given a rates discount of £5,000 – but superseded by the rates holiday in the point above.
  • A £25,000 grant will be provided to retail, hospitality and leisure (RHL) businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
  • The government will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or Rural Rate Relief (increased from £3,000 in the budget)

The grants will be administered by Local Authorities. HMG say “If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority. You do not need to apply. Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.” Isle of Wight Council has a link to start applying for these grants

 

Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank to support primarily small and medium-sized businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80% on each loan. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.

Eligibility – Your business is UK based, with turnover of no more than £45 million per annum.

The scheme will be available from week commencing 23 March.

Details – Coronavirus Business Interruption Loan Scheme (CBILS)

 

Support for businesses with paying tax: Time to Pay service

HMRC helpline 0800 0159 559 – “All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.”

 

Postponement of IR35 Private Sector Changes

  • HM Treasury have said they intend to postpone the introduction of the Off-payroll working rules to the private sector.
  • The extension of the off-payroll working rules was due to commence on 6 April 2020. The start date is now be deferred to 6 April 2021.

 

Hardship Fund: Social housing and homeless

The government has announced a new £500 million Hardship Fund so Local Authorities can support economically vulnerable people and households. The government expects most of this funding to be used to provide more council tax relief, either through existing Local Council Tax Support schemes or through similar measures. The Ministry of Housing, Communities and Local Government will set out more detail on this funding, including allocations, shortly.

 

Analysis of position for typical Whitefield and Yoga Tax Clients

 

Personal Service Company Clients

  • As you will not have premises within the scope of Business Rates the business support grants will not be available
  • 80% funding for salary is available if you are not working
    • Will be salary not dividend, so for anyone on a low salary/high dividend arrangement the amount will be small
    • Q – is it worth increasing salary? No, as the scheme is based on salary at 28 February 2020 (possibly now 19 March 2020)
    • Anyone who has been within IR35 should be better off as you would have had a higher salary
    • Some commentators have suggested that the absence of an employment contract for a director may affect this claim – our feeling is this is unlikely to be an issue
    • You cannot work whilst claiming this, other than statutory duties as a company director
    • Company Directors can claim means tested Universal Credit:
      • Standard Universal Credit amounts (2019/20):
        • Single and under 25 £251.77
        • Single and 25 or over £317.82
        • In a couple and you’re both under 25 £395.20 (for you both)
        • In a couple and either of you are 25 or over £498.89 (for you both)
  • The Coronavirus Self-employment Income Support Scheme grant isn’t available, as it applies to Sole Traders / Partners only
  • If you are off work ill (as opposed unable to work due to client lay off / closed sites / lack of clients) then SSP available with 100% recovery, again salary not dividend.
  • Coronavirus Business Interruption Loan Scheme is a possibility but its a loan not grant
  • Tax payments:
    • Tax deferrals for VAT will be available
    • Presumably tax deferral for Self Assessment although at present HM Government guidance says this only applies to the self employed.
    • Time to pay service available for taxes

 

Sole Traders / Partnerships including Yoga Teachers (viz our YogaTax clients)

  • Loss of Profits
    • 80% of average profits up to £2,500/m – subject to conditions – under the Coronavirus Self-employment Income Support Scheme
    • If you are off work ill (as opposed unable to work due to client lay off / closed sites / lack of clients) then Employment Support Allowance available, generally not means tested
    • Option to claim means tested Universal Credit:
      • Standard Universal Credit amounts (2019/20):
        • Single and under 25 £251.77
        • Single and 25 or over £317.82
        • In a couple and you’re both under 25 £395.20 (for you both)
        • In a couple and either of you are 25 or over £498.89 (for you both)
  • Business Rates and Grants
    • If you have premises within the scope of Business Rates then the Business Rates holiday will be available if you are in the Retail, Hospitality or Leisure sector, or run a nursery
    • If you have business premises with a Rateable Value of less than £15,000 then the £10k grant will be available
    • If you have business premises with a Rateable Value of £15,000 to £51,000 then the £25k grant will be available if you are in then Retail, Hospitality or Leisure sector
  • Staff costs
    • 80% funding for salary of laid off employees, but you will need seek agreement with employees concerned.  You may or may not make up the other 20%
    • Funding from Government for SSP for employees
  • Coronavirus Business Interruption Loan Scheme is a possibility but its a loan not grant
  • Tax payments:
    • Tax deferrals for VAT will be available
    • Presumably tax deferral for Self Assessment although at present HM Government guidance says this only applies to the self employed.
    • Time to pay service available for taxes

 

Small Companies

  • Business Rates and Grants
    • If you have premises within the scope of Business Rates then the Business Rates holiday will be available if you are in the Retail, Hospitality or Leisure sector, or run a nursery
    • If you have business premises with a Rateable Value of less than £15,000 then the £10k grant will be available
    • If you have business premises with a Rateable Value of £15,000 to £51,000 then the £25k grant will be available if you are in then Retail, Hospitality or Leisure sector
  • Staff costs
    • 80% funding for salary of laid off employees, but you will need seek agreement with employees concerned.  You may or may not make up the other 20%
    • Funding from Government for SSP for employees
  • Loss of profits / funding for Directors / Shareholders salary and dividend:
    • 80% funding for salary is a possibility,
    • Will be salary not dividend, so for anyone on a low salary/high dividend arrangement the amount will be small.
    • Based on salary at 28 February 2020 – retrospective increases will not assist
    • Anyone who has been within IR35 should be better off as you would have had a higher salary.
    • Some commentators have suggested that the absence of an employment contract for a director may affect this claim – our feeling is this is unlikely to be an issue.
    • The Coronavirus Self-employment Income Support Scheme grant isn’t available, as it applies to Sole Traders / Partners only
    • SSP for directors off work unwell, like any other employee
    • Option to claim means tested Universal Credit:
      • Standard Universal Credit amounts (2019/20):
        • Single and under 25 £251.77
        • Single and 25 or over £317.82
        • In a couple and you’re both under 25 £395.20 (for you both)
        • In a couple and either of you are 25 or over £498.89 (for you both)
  • Coronavirus Business Interruption Loan Scheme is a possibility but its a loan not grant
  • Tax payments:
    • Tax deferrals for VAT will be available
    • Presumably tax deferral for Self Assessment although at present HM Government guidance says this only applies to the self employed.
    • Time to pay service available for taxes

 

Photo by Kelly Sikkema on Unsplash