Covid-19 Business Update - 23rd March 2020

Collier-Marsh Accountancy

Chartered Accountants


Coronavirus Job Retention Scheme

 

Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February.

 

To claim under the scheme employers will need to:

 

  • designate affected employees as ‘furloughed workers’, and notify employees of this change. This includes employees, that would otherwise have been laid off during the crisis. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and

 

  • 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.

 

While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.

 

Furloughed workers – these are workers that would normally be laid off, but instead are kept on the payroll to avoid redundancies. Employers will need to discuss with employees about becoming classified as a furloughed worker. To qualify for this scheme, employees should not undertake work while being furloughed. Employers can choose to fund the differences between this payment and normal salaries but does not have to.

 

VAT payments

 

The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.

 

The deferral applies automatically and businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.

 

Income Tax payments

 

Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

 

Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

 

Universal credit

 

Self-employed people can now access full universal credit at a rate equivalent to statutory sick pay.

 

HMRC Time to Pay

 

HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559.

 

Business Rates holidays and cash grants

 

  • No rates payable for the 2020-2021 tax year for any business in the retail, hospitality or leisure sectors.

 

  • In those sectors, if your rateable value is between £15K and £51k, you'll also receive a cash grant of up to £25,000 per property.

 

  • Any business which gets small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000 (increased from £3,000 announced in the 11 March Budget).

 

  • The rates holiday and cash grants will be administered by local authorities and should be delivered automatically, without businesses needing to claim.

 

Coronavirus Business Interruption Loan Scheme

 

  • These should be available from Monday 23 March and are delivered by lenders that partner with the British Business Bank, including all the major banks. The lender receives a guarantee of 80% of the loan amount from the government.

 

  • They are available for UK-based businesses with turnover of no more than £45 million and can provide for a facility up to £5 million. The borrower remains liable for 100% of the debt.

 

  • No interest will be charged for the first 12 months (a change from 6 months).

 

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website. All the major banks will offer the Scheme once it has launched. There are 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. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

 

COVID-19 corporate financing facility

 

The Bank of England has set up a scheme to finance working capital by purchasing commercial paper from larger business ‘making a material contribution to the UK economy’. Businesses do not need to have previously issued commercial paper in order to participate. The scheme will operate for at least 12 months.

 

Mortgage and rent holiday

 

Mortgage borrowers can apply for a three- month payment holiday from their lender. Both residential and buy-to-let mortgages are eligible for the holiday. It is important to remember that borrowers still owe the amounts that they don't pay as a result of the payment holiday. Interest will continue to be charged on the amount they owe.

 

Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.

 

Insurance claims

 

Businesses that have cover for both pandemics and government-ordered closure should be covered. The government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres, etc., is sufficient to make a claim as long as all other terms and conditions are met. Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers.

 

Statutory Sick Pay (SSP)

 

  • If you're a director of a limited company with less than 250 employees, you can pay yourself two weeks of SSP if you need to self-isolate subject to meeting the minimum payroll requirement for SSP.

 

  • The government will refund £94 per week, maximum £188, to your company.

 

  • It will also refund SSP for staff of businesses with less than 250 employees for up to two weeks.

 

A rebate scheme is being developed, to facilitate the reimbursement to employers. Further details will be provided in due course once the legalisation has passed.

 

IR35 Off payroll working

 

In addition to the above, the government announced last week, that the changes to IR35 off-payroll working would be delayed until 2021. This is welcome news for many businesses who would be impacted by these changes.

 

 

Useful websites:

 

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

 

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees

 

Dated: 23rd March 2020

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