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The following list details all of the government advice affecting businesses and self-employed individuals.
Last updated 6 April 2020
The chancellor has announced a grant scheme for self-employed individuals that have genuinely lost income due to COVID-19, which could see claimants receive up to £2,500 a month for the next 3 months. The grant will be calculated on their average monthly profits over the last 3 years, unless the individual has been trading for a shorter period; in such cases, the grant amount can be calculated on the monthly average profits over a shorter time period. Note that the calculations will be made from the submitted self-assessment tax returns, and payments are expected to be made as a one-off lump sum payment in June.
In order to ensure that the grant is largely being directed to the targeted group, a few restrictions will become effective. Firstly, anyone whose 3-year average profit is greater than £50,000 will not be eligible to receive the grant money. This measure has been introduced to ensure that help is only being given to those individuals who require it. The scheme also excludes anyone who became self employed recently, as they will not have submitted a 2019 self-assessment tax return. The final restriction states that to be eligible for this grant more than 50% of an individuals income must come from self-employment. This is expected to benefit 95% of people who need the grant, whilst the remainder can access Universal Credit.
The grant is to count towards taxable income and must be included on the 2020/21 self assessment tax return. It is also important to note that company directors who pay themselves by way of dividends won’t be eligible, so this doesn’t apply to people working through personal service companies.
Unlike furloughed workers taking advantage of the Job Retention Scheme, self-employed individuals in receipt of this grant will still be able to work. The chancellor ended his announcement by foreshadowing a change in taxation that will see the self-employed pay equal amounts to the employed – an idea that is bound to be met with discontent. What everyone will agree on, however, is Sunak’s claim that the current Conservative government are offering one of the most generous support packages in the world.
There was a lot of speculation before Johnson’s update on 20th March as to how the government was planning to further support employers. What they have come up with, which has been received gratefully by many, is the Coronavirus Job Retention Scheme. As suggested by its name, the scheme’s primary objective is to prevent the laying-off of employees whose salaries would have been unpayable.
For employers to access this support, they will first need to identify and designate “furloughed workers” (workers who would have been temporarily laid off) and notify the employees of this change of employment status. This communication with the employee must be kept, but can be an email. This will largely depend on their employment contract and may be subject to dispute or negotiation. Employers will then need to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. Once the furloughed workers have been identified, HMRC will reimburse up to 80% of their salaries; this is capped at £2,500 per employee per calendar month.
The £2,500 cap relates to the gross salary element only, and any related employer contributions towards NI or pensions (at the auto-enrolment rate) can be claimed in addition. For employees who’s pay varies each month, if the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
o The same month’s earning from the previous year
o The average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
The scheme is open to any employer in the country and will cover the cost of wages backdated to 1 March 2020. It will continue for at least three months and can include workers who were in employment on 28 February. Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme. A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
An interesting aspect is that an employee who has been designated must keep their ‘furloughed status’ for a minimum of 3 weeks, but may be furloughed for a second time after returning to work. This creates the option to rota employees in and out of furlough.
Although this scheme does offer longer term financial support, many businesses will not see a boost to their cashflow for some weeks, as the repayment system in not expected to be up and running until late April. In the meantime, it may be necessary for businesses to make use of the Coronavirus Business Interruption Loans.
The Coronavirus Business Interruption Loan Scheme, being provided by the British Business Bank, is aiming to provide affordable lending to businesses whose cashflows are suffering. Loans of up to £5m will be available to borrow for businesses whose turnover does not surpass £45million, with the government pledging to pick up some 80% of irrecoverable losses to the bank. Furthermore, the loans will be available free of interest charges for the first 12 months due to additional government provision.
Interestingly, the government has recently clarified that for loans less than £250,000, there will be no need for personal guarantees.
As mentioned in the Self-employment entitlements section, company directors who pay themselves by way of dividends won’t be eligible for the self-employment grant, so this doesn’t apply to people working through personal service companies.
With regards to the Job Retention Scheme, it is important to understand what furloughed pay does and does not cover. The grant payable from the government is only to cover 80% of salary going through payroll, and as such will not count any income taken as dividends. If a minimum salary is being taken (£12,500 or less), the grant would not offer a huge amount of financial support. The director must stop working completely in the business to be eligible for the scheme. We understand that statutory duties can be carried out but no services or revenue-generating work may be undertaken.
Other schemes that may be of use are the mortgage payment holidays and Business Interruption loans.
For self-employed individuals, income tax payments for self-assessment that would have been due in July 2020 will now be deferred to January 2021. You will be considered automatically eligible for this if you are self-employed, and no applications are required.
The VAT payments deferral scheme will operate from 20 March until 30 June 2020. There is no requirement for businesses to make VAT payments during this period. Businesses will then have until the end of the 2020/21 tax year to settle any liabilities that have accumulated during the deferral period. As with income tax deferrals, there is no need for businesses to apply.
Note that payment deferrals are not automatic, and Direct Debits should be manually cancelled and reinstated after 30 June.
With the number of employees self-isolating and social-distancing increasing steadily, employers have been facing staff shortages and cashflow problems, which has been accentuated by the sick pay subsidies provided. The chancellor has, in part, addressed this issue by promising a full refund of up to 14 days Statutory Sick Pay per employee – note that this only applies to employers with fewer than 250 employees. It is estimated that this could reach a value of £2bn across 2 million business.
Small businesses that are eligible for Small Business Rates Relief or Rural Rates Relief will be contacted by their local authorities about a £10,000 cash grant that has become available. The qualifying criteria for the cash grant is to have a premises with a rateable value lower than £15,000. Local authorities will be provided with funding in early April and will contact businesses automatically. You will not need to apply and can expect to hear more about this scheme soon.
A grant of £25,000 is to be made available to businesses operating in the hospitality, leisure and retail sectors if their premises has a rateable value between £15,000 and £51,000. These businesses will also benefit from a business rates holiday for the 2020/21 tax year which will be applied automatically by the Local Authority. In the case of a business rates holiday, any existing Direct Debits must be cancelled manually, or may continue to be taken. For more information regarding eligibility for these grants, please contact your local authority.
List of properties that are eligible for relief
1) Places being used for the sale of goods to visiting members of the public:
− Shops (such as: florists, bakers, butchers, grocers, greengrocers, jewellers, stationers, off licences, chemists, newsagents, hardware stores, supermarkets, etc)
− Charity shops
− Post offices
− Furnishing shops/ display rooms (such as: carpet shops, double glazing, garage doors)
− Car/caravan show rooms
− Second-hand car lots
− Markets − Petrol stations
− Garden centres
− Art galleries (where art is for sale/hire)
2) Places that are being used for the provision of the following services to visiting members of the public:
− Hair and beauty services (such as: hair dressers, nail bars, beauty salons, tanning shops, etc)
− Shoe repairs/key cutting
− Travel agents
− Ticket offices e.g. for theatre
− Dry cleaners
− PC/TV/domestic appliance repair
− Funeral directors
− Photo processing
− Tool hire
− Car hire
3) Places that are being used for the sale of food and/or drink to visiting members of the public:
− Sandwich shops
− Coffee shops
A dedicated HMRC helpline for businesses and self-employed individuals who have difficulty with paying their tax due to coronavirus is now in operation.
The number of the helpline is 0800 0159 559.
The helpline can assist with all taxes, including:
• Agreeing a deferred payment date or payment plan
• Suspending debt collection proceedings, and
• Cancelling late payment penalties and interest.
2,000 HMRC staff are available on the helpline.
The outstanding debt needs to initially show on your HMRC account before any formal agreement can be made regarding a payment deferral or payment plan, without facing any surcharges or interest fines. It is important to note that HMRC should be contacted in advance of the payment date, so the necessary actions can be taken. HMRC are currently awaiting more guidance from the Government which they think will come either this week or next week at the latest.