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Covid-19: Help For Business Summary as at 29th March 2020

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Here is a summary of the help the government have announced for the self employed, business and employers as at 29th March 2020 but subject to change as the government issue more details.

Self Employed and Partnerships

Self Employed Income Support Scheme

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

Who can apply

You can apply if you’re a self-employed individual or a member of a partnership and you:

  • have submitted your Income a Tax Self Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • are trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

  • having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  • average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return and use data on 2018-19 returns already submitted to identify those eligible.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

  • 2016 to 2017
  • 2017 to 2018
  • 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount. It will be up to a maximum of £2,500 per month for 3 months.

When will I receive the grant ?

HMRC will pay the grant directly into your bank account, in one installment which is not anticipated until June and backdated for 3 months.

For example if your profits on which you were taxed were:

2016/17    £25,400

2017/18    £27,200

2018/19    £23,650

The average would be £25,416. This would be divided by 12 to arrive at a monthly figure of £2,118.

80% of this monthly sum, ie 1,694 would be used to calculate this taxable grant and be payable as one lump sum in June. You would therefore receive £5,083.

Please note that the average is worked out against what information HMRC have for up to 3 years. So if you have been self employed for one or two years the averaged profits will be used. For example:

Two years self employment, 2017/18 and 2018/19 with profits of £20,200 and £25,000 the average would be £22,600.

One years self employment for 2018/19 with a profit of £20,200 the average would be £20,200

How to apply

Please note that you cannot apply for this scheme yet but HMRC will contact you if you are eligible and invite you to apply online. As your Accountant I have no input as regards this scheme or your past declared profits and cannot influence HMRC in any way. 

Combating scams or fraud

This scheme will be administered only via the GOV.UK website and no other means so if someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.

After you have applied

Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details. If you claim tax credits you’ll need to include the grant in your claim as income.

Whilst awaiting payment from the Self Employed Income Support Scheme

Government are encouraging the self employed to claim Universal Credit

As a self employed person you are able to claim Universal Credit, providing you meet the usual eligibility criteria.

The previous requirements of the Minimum Income Floor have been temporarily relaxed and the amount receivable has been increased to match the amount available to employees under Statutory Sick Pay (SSP), ie £94.25 per week.

New claimants will not need to attend the local Jobcentre to demonstrate gainful self-employment but evidence my be required via the online application process.

Income Tax

As a self employed person any income tax Payments on Account due on the 31 July 2020 will be deferred until the 31 January 2021. Please note this is a deferral NOT a write-off so payment of this tax is simply being pushed back to January 2021 making the payment due then that much bigger.

Eligibility

If you are self-employed you are eligible.

How to access the scheme

This is an automatic offer with no applications required.

No penalties or interest for late payment will be charged in the deferral period.

HMRC have also scaled up their Time to Pay Offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities. You can contact HMRC directly regarding this by calling 0800 0159 559.

Mortgage Payment Holiday

Mortgage payment holidays of up to three months are available to all homeowners who are up to date on their mortgage payments.

They’re also available to buy-to-let landlords whose tenants have been financially affected by the coronavirus. Landlords who take payment holidays are expected to pass on this relief to their tenants.

Homeowners who are in arrears on their mortgage should contact their lender, who will review any changes to their circumstances and discuss their options.

For Employers:

Job Retention Scheme – Updated 27th March 2020

The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC expect the scheme to be up and running by the end of April. It is designed to support employers whose operations have been severely affected by coronavirus (COVID-19).

Employers can use a portal (currently in development) to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.

Who can claim ?

Your business will be able to apply as you had a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Employees you can claim for

Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts
  • Owner/managed companies*

*Many owner managed company director/shareholders pay small salaries and the balance of income as dividends. The scheme does not extend to dividends. Only the salary is relevant to the scheme. Such companies must have been paying a salary through a payroll to be eligible for a grant. 

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

As an employer you should discuss with your staff and make any changes to the employment contract by agreement so that they can become furloughed. Please bear in mind that where you are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.

To be eligible for the subsidy you need to write to your employee confirming that they have been furloughed and keep a record of this communication.

Any employee hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

You do not need to place all your employees on furlough however, those employees who you do place on furlough cannot undertake work for you.

If your employee is on unpaid leave

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.

If your employee is on Statutory Sick Pay

Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.

Employees who are shielding in line with public health guidance can be placed on furlough.

If your employee has more than one job

If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.

If your employee does volunteer work or training

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.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay

Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.

If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.

Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

Work out what you can claim

Employers need to make a claim for wage costs through this scheme.

You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.

HMRC will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the scheme becomes live.

Full time and part time employees

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.

Employees whose pay varies

If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • 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.

If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.

Employer National Insurance and Pension Contributions

All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

National Living Wage/National Minimum Wage

Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working.

Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

What you’ll need to make a claim

You need to discuss this scheme and furlough with your staff and make any changes to their employment contract by agreement. You may need to seek legal advice on the process. If sufficient numbers of staff are involved, it may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment.

Where a claim is to be made and I undertake your payroll I will make the claim / liaise with you regarding this.

To claim, we will need:

  • your PAYE reference number*
  • the number of employees being furloughed
  • the claim period (start and end date)
  • amount claimed (per the minimum length of furloughing of 3 weeks)
  • your bank account number and sort code
  • your contact name*
  • your phone number*

*I have this information already

We then need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of any claim.

Claim

We can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

What to do after the claim has been made

Once HMRC have received the claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.

You should make your claim in accordance with actual payroll amounts at the point at which you run your payroll or in advance of an imminent payroll.

You must pay the employee all the grant you receive for their gross pay, no fees can be charged from the money that is granted. You can choose to top up the employee’s salary, but you do not have to.

When the government ends the scheme

When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).

Employees that have been furloughed

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

Once the scheme has been closed by the government, HMRC will continue to process remaining claims before terminating the scheme.

Income tax and Employee National Insurance

Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.

Employers will be liable to pay Employer National Insurance contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme.

Tax Treatment of the Coronavirus Job Retention Grant

Payments received by a business under the scheme are made to offset these deductible revenue costs. They must therefore be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles.

Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

For those businesses that are VAT registered:

Support for businesses through deferring VAT payments

HMRC will support businesses by deferring Valued Added Tax (VAT) payments for 3 months for any VAT due between 20 March 2020 until 30 June 2020.

Eligibility

All UK businesses are eligible.

How to access the scheme

This is an automatic offer with no applications required abs businesses will not need to make a VAT payment during this period.

Please note that this is a deferral of this tax NOT a write-off so you will be given until the end of the 2020/2021 tax year (April 2021) to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

If you intend to use this scheme and usually pay by Direct Debit then you MUST cancel that Direct Debit mandate with your bank. 

For those businesses that can take on or require finance.

Support for businesses through the Coronavirus Business Interruption Loan Scheme (Update 4th April 2020…Details of the revised scheme rules and who may apply have been released and can be found HERE)

A new temporary Coronavirus Business Interruption Loan Scheme is being delivered by the British Business Bank which will launch early next week 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 (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to businesses. 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 12 months of that finance interest free, as government will cover the first 12 months of interest payments.

Eligibility

You are eligible for the scheme if:

  • your business is UK based, with turnover of no more than £45 million per year
  • your business meets the other British Business Bank eligibility criteria

How to access the scheme

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website and you will need to have a business loan proposal that is acceptable to the lender but perhaps doesn’t come with sufficient security for the bank to lend under its normal terms.

All the major banks will offer the Scheme once it has launched with 40 accredited providers in all.

You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched although anecdotal evidence I have received so far is that most banks are not yet set up to proceed with applications as they do not have details of the criteria themselves yet.

If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

The scheme launched on 23 March and was updated to apply to more businesses on 4th April 2020.

For those businesses in the retail, leisure or hospitality sector that pay business rates:

Support for businesses that pay business rates

Business rates holiday for retail, hospitality and leisure businesses

HMRC are introducing a business rates holiday for retail, hospitality and leisure businesses in England for the 2020/2021 tax year.

Businesses that received the retail discount in the 2019/2020 tax year will be re-billed by their local authority as soon as possible.

Eligibility

You are eligible for the business rates holiday if:

  • your business is based in England
  • your business is in the retail, hospitality and/or leisure sector

Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure
  • as hotels, guest & boarding premises and self-catering accommodation

How to access the scheme

There is no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge and they will do this as soon as possible.

You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator.

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.

For businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000.

For businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000.

Eligibility

You are eligible for the grant if:

  • your business is based in England
  • your business is in the retail, hospitality and/or leisure sector

Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:

  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure
  • as hotels, guest and boarding premises and self-catering accommodation

How to access the scheme

You do not need to do anything as the local authority will write to you if you are eligible for this grant.

Support for businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered releif. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

Eligibility

You are eligible if:

  • your business is based in England
  • you are a small business and already receive SBBR and/or RRR
  • you are a business that occupies property

How to access the scheme

You do not need to do anything as the local authority will write to you if you are eligible for this grant.

Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

This information is subject to change as the Government release more details. Believed correct as at 29th March 2020

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