The Coronavirus pandemic has already had a huge impact on all of us. While the primary concern is our health, there are also significant financial implications to individuals and their businesses as a result of the restrictions in place.
The government have set out an unprecedented package of measures to support people and businesses during this period. Included below is a summary of the measures which have been introduced, alongside links should you wish to review this in more detail.
Please note that, whilst this information is correct at the time of sending, it is a rapidly evolving situation and the government is still releasing additional details and clarifications in connection with many of these measures.
CORONAVIRUS JOB RETENTION SCHEME
Under this scheme employees who are unable to work due to the current situation, or who the employer cannot afford to pay, are “furloughed” instead of being made redundant or dismissed. It is open to all UK employers for at least three months commencing from 1 March 2020. Employers must set out which of their employees are ‘furloughed workers’ and inform the particular employees.
HMRC will reimburse employers with 80% of furloughed workers’ wage costs (including Employer’s NI and auto-enrolment pension costs), up to a cap of £2,500 per month. It is up to the employer whether they wish to fund the remaining element of the salary, but they do not have to. If employers choose not to fund the difference the employee’s salary will drop to match the government reimbursement amount, so that there is no net cost to the employer of retaining furloughed workers.
Only employees on the PAYE payroll as at 28 February 2020 can be furloughed, and Employees should not undertake any work while on furlough. The grant will be based on the employees’ actual salary, before tax, as of February 2020. Fees, commissions and bonuses are not included. Where an employee’s salary varies, the employer can claim the higher of their earnings for the same month in the previous year and their average monthly earnings for 2019/20 tax year.
Employers submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal, which is expected to be available by the end of April. Claims can be made every three weeks. Payment is by a grant provided by HMRC to be paid by BACS directly into a UK bank account.
HMRC have confirmed that Directors of small Limited Companies who are paid under PAYE are able to furlough themselves and are therefore eligible for the scheme, however the grant will only be based on their salaries and not the dividend element of their remuneration.
SELF-EMPLOYMENT INCOME SUPPORT SCHEME
This provides a taxable cash grant worth 80% of trading profits for the self-employed (including partnerships), up to a maximum of £2,500 per month. The scheme will initially cover March to May 2020 and will be paid in the form of a single lump sum which the government intends to pay in June 2020.
The scheme applies to self-employed individuals with trading profits up to £50,000 per year whose majority of income comes from being self-employed. To be eligible, you must have submitted a Self-Assessment tax return for the 2018/19 tax year, traded in the 2019/20 tax year (and intend to continue trading in 2020/21), and have lost profits due to the Coronavirus pandemic. Your 2018/19 self employed trading profits must be below £50,000 or your average trading profits for the last three years must be below that threshold.
The grant will be calculated as 80% of the average monthly profits of the last three tax years, capped at £2,500 per month. HMRC will contact you during the coming weeks if you are eligible for the scheme and invite you to apply online.
Please note that this scheme does not apply to company directors, who take their income as salary and/or dividends and so are not considered to be self employed.
DEFERRAL OF SELF-ASSESSMENT PAYMENTS
Income Tax payments which are normally due in July 2020 under the Self-Assessment system will be deferred to 31 January 2021. No penalties or interest for late payment will be charged in the deferral period. This is an automatic offer with no applications required.
VAT PAYMENT DEFERRAL
A payment deferral applies to any VAT payments due between 20 March 2020 to 30 June 2020 for VAT registered business. This is an automatic offer with no applications required. VAT refunds and reclaims will be paid by the government as normal.
Please note that businesses who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return.
TIME TO PAY FOR OTHER TAX LIABILITIES
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, will be able to apply for their case to be reviewed by HMRC with a view to arranging a bespoke time to pay agreement.
HMRC has set up a dedicated Coronavirus “Time to Pay” helpline: 0800 0159 559.
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME
A new Coronavirus Business Interruption Loan Scheme will be delivered by the British Business Bank, through 40 accredited lenders who able to offer the scheme (including all the major banks). This is aimed at small and medium-sized businesses to access bank lending and overdrafts of up to £5 million in value. The scheme will be open for six months with loan terms of up to 3 years. Businesses are liable for 100% of the loans they receive, the government are providing a guarantee for 80%. Businesses can access the first twelve months of that finance interest-free, as the government will cover the first twelve months of interest payments.
Businesses are advised to approach their existing lender / bank and to apply through the lender’s own website in the first instance. They can then try other lenders if their own lender cannot help.
SUPPORT FOR RETAIL, HOSPITALITY AND LEISURE BUSINESSES
Two reliefs are available for businesses in the retail, hospitality and leisure sectors:
The reliefs will be administered by local authorities. Cash grants will be paid automatically. Businesses will receive a bill showing no business rates charge for the 2020-2021 tax year. Those who had already received bills for the 2020-2021 tax year will be rebilled.
To be eligible for these schemes, businesses must be in the retail, hospitality and/or leisure sector. That means they must be ‘wholly or mainly being used’ as shops, restaurants, cafes, drinking establishments, cinemas and live music venues, for assembly and leisure, or as hotels, guest & boarding premises and self-catering accommodation. Decisions about granting reliefs will be taken by local authorities, following government guidance.
STATUTORY SICK PAY (SSP)
Employers will be able to reclaim up to 2 weeks of SSP payments per employee where those SSP payments relate to Coronavirus. SSP will be payable from day one instead of day four for affected individuals. Employees will not need to provide a GP fit note. The reclaim will not be via RTI, instead, HMRC will set up a new portal to facilitate this.
LANDLORDS AND TENANTS
Residential properties: Landlords will not be able to start proceedings to evict tenants for at least a 3 month period. Landlords whose tenants are experiencing financial difficulties due to coronavirus will receive a 3 month mortgage payment holiday. At the end of this period, landlords and tenants are expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.
Commercial properties: Any commercial tenant who misses a lease payment up until 30 June will not automatically be evicted. The government may extend this beyond 30 June as and when it becomes necessary. This is not a rental holiday and all rent payments must ultimately be met as part of the rent agreement.
Changes to the IR35 off-payroll working rules in the private sector have been delayed by 12 months to April 2021.
Companies House – If a company’s accounts are unlikely to be filed on time owing to being affected by Coronavirus then an application can be made to extend the period allowed for filing.
Mortgage borrowers can apply for a 3 month payment holiday. Interest will continue to be charged on any amount that they owe.
OTHER USEFUL LINKS AND FURTHER READING:
Government Coronavirus Hub
Government Guidance for employers and businesses
Government Guidance for employees
MoneySavingExpert – Coronavirus Financial Help & Rights (aimed at individuals)
Croner Taxwise – specialist HR and payroll advice regarding SSP and
Clients of ClearFin can also take advantage of their specialist HR Support Line, free of charge. Call 0844 892 2807 and say that you are a client of ClearFin Accountants Limited. If they ask for a reference, please quote “CTX00603”.
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