Coronavirus Support for Businesses
As our clients, and the wider business community, grapples with the impact of COVID-19 we have summarised some of the Government’s Coronavirus support for businesses.
This is clearly moving very quickly, and at the time of writing (27 March 2020) we may still see further packages of support. Where this is the case then we will provide more details of these when we have them. This blog will be continually updated with latest advice at the top, and previously announced support further down.
Below are the latest support measures as at 27 March 2020
1) Coronavirus Job Retention Scheme – updated
Further to the information below, the Government has now provided further detailed guidance which can be found here. Below summarises a number of key points from the new guidance:
i. The scheme is expected to be up and running by end of April 2020.
ii. HMRC are establishing a portal through which employers can claim 80% of a furloughed employees wages, up to a cap of £2,500 per employee per month. For details of furlough employees see 20 March update below.
iii. In addition to the 80% wage costs (or £2,500 cap) employers can claim for the employer National Insurance and minimum pension auto enrollment cost through the portal.
iv: HMRC have confirmed employee’s must have been on the payroll at 28 February to be eligible for the scheme and the employer must have had a payroll scheme and UK bank account set up at 28 February.
v: Employees must not do any work while furloughed otherwise they will not be eligible for the scheme (except volunteer or training see vi). In addition, to be eligible the employer must write to their staff, to confirm they have been furloughed and keep a record of the scheme.
vi: Employees can take part in volunteer work or training so long as it does not provide services to or generate revenue for or on behalf of the employer.
vii: For employee’s who pay varies then the 80% wage should be calculated as follows:
- If the employee has worked for you for a full 12 months: Either the same months earnings for the previous year or average monthly earnings for 2019/20 tax year, whichever is HIGHER.
- If the employee has worked for you for less than 12 months: An average of their monthly earnings since they started.
- If the employee joined in February 2020: Their pro-rata earnings so far.
viii: The minimum period an employee can be furloughed is 3 weeks.
2) Deferral of VAT and Income tax payments – update
i. HMRC have now confirmed there will be no interest charged on the deferred VAT liability. For details of this scheme, including what to do if you pay by Direct Debit see below.
ii. HMRC have confirmed that all individuals due to pay their second self-assessment payment on account by 31 July are eligible for deferment. This includes sole traders, Limited company Directors and those with property income. The deferment is optional but automatic should you wish to take it.
3) Coronavirus Self Employment Income Support Scheme – NEW
A taxable grant available of up to £2,500 per month. Available to those who are self-employed, including Partners of a partnership. The grant is available for at least 3 months and is expected to be paid as one cash lump sum. To be eligible for the scheme you must:
i. Have submitted a 2018/19 Self assessment tax return. If you were due to file a return but missed the 31 January deadline you must file it by 23 April 2020 to be eligible.
ii. Traded in tax year 2019/20.
iii. Been trading when you apply, or would be except for COVID-19.
iv. Intend to trade in tax year 2020/21.
v. Have lost trading income due to COVID-19.
vi. And one of the following statements must apply:
- A – Trading profits must be below £50,000 and more than 50% of your income must come from self—employment; or
- B – Average trading profits for 2016/17, 2017/18 and 2018/19 must be less than £50,000
If you are eligible, then the grant will be equal to 80% of your average profits from tax years 2016/17, 2017/18 and 2018/19, up to the maximum of £2,500 per month. If you were not self-employed in one of these years then HMRC will look at the years which you were self employed.
How to apply? You do not need to apply for this (and in fact can’t as the scheme is not set up yet). HMRC will contact eligible individuals and invite them to apply online. Please note this scheme does not apply to Limited company Directors.
Below are the latest support measures as at 20 March 2020
Coronavirus support for Businesses
1) Coronavirus Job Retention Scheme
A Government funded scheme providing a grant to employers of up to 80% of the wage costs of any furloughed workers. A furloughed worker is described as any worker who remains on the payroll but is temporarily not working as a result of Covid-19. Note that the grant is capped at £2,500 per worker per month.
It’s important to note it is a grant to the employer, and so the employer pays the furloughed worker as normal through the payroll using the Real Time Information (RTI) system. The employer will then claim the grant and be reimbursed by the HMRC. There is therefore a cash flow implication and the loan scheme in point 2 below may be relevant.
The scheme will be backdated to 1 March and is initially open for a 3-month period, with further extensions as necessary. Whilst it is backdated an employer will only be eligible to claim the grant once it has agreed the furlough status with the employee. HR advice should be taken on furloughing employees as normal employment law applies.
All UK businesses of any size and sector are eligible for the grant including charity and not for profit organisations.
To be eligible for the scheme the furlough employee must have been on the payroll at 29 February 2020. The employee must not work for the employer during the furlough period. It has now been confirmed that those who began work after 29 February will not be eligible for the grant.
Businesses will be allowed to top up the 20% so that workers receive their full salary, but this is not a requirement of the scheme.
Detailed guidance from HMRC has now been released which answers some of our previous FAQs. The questions below have been updated at 27 March 2020.
i) When will the scheme be ready? It is expected to be up and running by end of April. It will be administered by HMRC.
ii) Is this available to everyone? Whilst the scheme is open to all businesses, its intention is to support businesses whose workers cannot work due to COVID-19. Therefore, where employees can work remotely or are performing work they will not constitute furloughed workers.
iii) What if employees don’t earn a fixed salary? Detailed guidance has now been released. Scroll up for the update at 27 March 2020 which outlines how the 80% is calculated where an employee’s wage varies.
iv) How long until a business could receive the grant? Expected to be by the end of April, but this is still dependent on how quickly HMRC can establish a process to do so.
v) Will this be available to Directors? Again there is no guidance currently on this. We know this is available to those on PAYE schemes as at 28 February. However, it is unclear whether a Director could be furloughed and so they may not be eligible for the scheme. We will provide further guidance once we have it. It should however be noted that the scheme will under no circumstance extend to dividend earnings. This will impact owner managed businesses who take small salaries with the balance as dividends.
2) The Coronavirus business interruption loan scheme will now be interest free for the first 12 months.
Previously announced it would be interest free for first six months. Detail of the scheme is in point C below.
3) Deferral of VAT and Income tax payments
All VAT payments from 20 March 2020 until 30 June 2020 will be automatically deferred. No applications are required and businesses will have until 31 March 2021 to pay any liabilities. VAT refunds will be paid as normal.
It is important to note the VAT returns must be filed on time as normal.
HMRC have confirmed that if you wish to defer and normally pay by Direct Debit you must cancel this with sufficient time before the VAT payment is collected. This is because once the money leaves your bank account it is not possible to get this back from HMRC.
Income tax self-assessment payments for the those due to make second payment on account on 31 July are deferred until 31 January 2021. No applications are required and the deferral is automatic. HMRC have now confirmed deferral is available to all individuals due to make a payment not just the self-employed.
4) Business rates holiday for nurseries in England for 2020/21 tax year
For nurseries based in England who provide Ofsted’s Early Years Register or Early Years Foundation Stage there will be a business rate holiday for the upcoming tax year.
Below are the support measures announced as at 19 March 2020
Coronavirus Support for Businesses
A) Business Rates holiday
Available for retail, hospitality and leisure businesses for 2020/21 tax year. This means any business in these sectors will pay no business rates for the upcoming tax year.
If you received the retail discount in tax year 2019/20 then you will be rebilled by your local authority.
In addition to the business rate holiday, retail, hospitality and leisure businesses operating from smaller premises with a rateable value between £15,000 and £51,000 will receive a £25,000 grant.
Enquiries on the eligibility or provision of these reliefs should be directed to the local authority, not central Government. Please note that guidance for local authorities on the business rates holiday is to be published by the Government by 20 March. Prior to this there may be little support available from your local authority.
i. What if you are in the retail, hospitality or leisure sector with a rateable value below £15,000? See point 2 below.
ii. Do you need to contact the local authority or will they contact you? This is not currently clear on Government guidance. We suggest waiting until the 20th when local authorities will have the guidance from central Government, and then contacting them.
iii. What is my rateable value? To check your rateable value you can go here
B) Support for businesses with a rateable value below £15,000
If your rateable value is below £15,000 (and you do not have multiple properties) then you should qualify for Small Business Rate Relief (SBRR). Where this is the case, the Government are providing a one-off grant of £10,000 to businesses eligible for SBRR.
If you’re eligible for SBRR then you will be contacted by your local authority and so the current Government guidance is that you do not need to apply for this grant.
Similar to point 1 above, funding has not yet been provided to local authorities to pay these grants and this is expected to occur in early April. Local authorities will shortly receive further guidance from central Government.
C) Coronavirus Business Interruption Loan Scheme
There are currently temporary loans available to businesses due to interruption caused by Coronavirus. These loans are provided by British Business Bank through participating providers (typically high street banks & lenders). It is available for viable businesses who have insufficient security to meet lender requirements. We understand that they will launch week commencing 23 March 2020 to enable businesses to access lending and overdrafts. Products include overdrafts, term loans, invoice financing and asset financing.
To obtain a business interruption loan you should apply through your normal bank/lender. The Government is providing lenders with a guarantee of 80% of the value of each loan. The intention is that lenders will be more confident to provide businesses with loans due to the Government guarantee. It is important to note the borrower is 100% liable for the debt.
The maximum loan will be £5 million under this scheme and the first 12 months will be interest free as the Government is covering the cost of interest payments. Note that this has been updated as previously the Government announced the first 6 months would be interest free.
i. Are there any other criteria to be eligible? Yes, the business must be UK based with turnover of no more than £41 million per annum and have a sound borrowing proposal. The business must also operate within an eligible industrial sector as listed here and have not received State aid beyond €200,000 in last 3 fiscal years.
D) Business tax liabilities
If you run a business or are self-employed and find yourself in financial distress due to Coronavirus then you may be able to benefit from HMRC’s Time to Pay arrangements. We understand HMRC has around 2,000 staff on a telephone helpline ready to assist. The Government has confirmed that it would allow you to defer payment of VAT, PAYE and NIC and other taxes under the arrangements (but see point 3 above, automatic deferral of VAT until 30 June 2020). These apply on a case by case basis and are based on the specific circumstances. If you are experiencing distress, we recommend discussing this with HMRC dedicated team on 0800 0159 559. Please do speak to us before hand as we can provide some practical tips on these measures.
E) Employers paying Statutory Sick Pay (SSP) to employees
These rules were widely covered, but broadly they enable employers to reclaim the cost of SSP in full for employee sickness due to Covid-19. There are a few things to bear in mind:
The maximum refund is two weeks SSP for each eligible employee off work due to Covid-19.This is available for employers with less than 250 employees.Each employer should keep records of SSP payments made to employees and of employee absence. Doctors notes/fit notes are NOT required.The repayment mechanism is still being set up and further details will be provided from the Government on this.
F) The introduction of IR35/new off payroll working rules have been postponed until April 2021 due to Covid-19.
Outside of Government reliefs, we are also recommending each of our clients consider their personal and business’s financial position. We know that for many there is huge overlap between having a stable business and feeling secure in their personal affairs. Our recommendation is to review expected cash flows for both your personal affairs and your business. Depending on your sector, you should be mindful that customers and clients may pay late due to their own financial distress. They may also be unable to pay at all. For individuals a range of measures have been announced and we have summarised these briefly below for awareness.
Support for individuals
- Three-month mortgage payment holidays. Banks have agreed to offer customers who are struggling a three-month mortgage holiday with no payments during this time. Given the uncertainty over how long disruption will last, those who currently consider themselves in a stable position may still look to apply for a holiday. This will strengthen their cash position.
- If you currently rent you should speak to your landlord as soon as possible. The Government has protected renters from eviction during this difficult time. This will last for at least three months. In addition, landlords are entitled to a three month mortgage payment holiday on buy-to-let mortgages and the hope is that this could be passed on to tenants.
- Statutory sick pay is available to employees from day 1. This also applies to individuals who are self-isolating due to coronavirus because they, someone in their household or a doctor/NHS 111 have told them to self-isolate.
We appreciate these are uncertain times but we hope that this provides a useful summary of the coronavirus support for businesses. Further guidance can be found on the Government website here. We are here to help our clients and other businesses during this uncertainty so please pick up the phone and talk to us or contact us here.