Coronavirus – Government Aid Packages

The government will meet 80% of the cost of employees usual monthly wage costs, where the employees would otherwise have had to be laid off (these will be designated as ‘furloughed’ employees)

Details we do know:

• Only PAYE employees are covered, not contractors
• There will be a cap of £2,500 per month per employee
• The scheme will run from 1 March 2020 for at least 3 months
• Only employees employed on 28 February 2020 can be included
• A dedicated claims portal will be set up (not available yet) – when available, claims can be backdated to 1 March
• A “furloughed” employee cannot perform any work for the employer during the period for which a claim is made
• The employee remains employed under their existing employment contract
• The employer may top up the employee’s salary to their normal level, but the scheme does not oblige them to

Some of the things we don’t know yet:

• Whether owner/director-employees can be included
• Whether the cap of £2,500 per employee per month refers to the maximum amount the government will reimburse, or whether the maximum is 80% of £2,500
• The employment law consequences of furloughing an employee, where this action conflicts with the employment contract
• Whether reimbursements will be subject to tax for the business
• The exact calculation of which employment costs can be included in the reimbursement
• What information will be required to be submitted through the claim portal and what (if any) checks HMRC will carry out
• How will it work for employees with variable pay e.g. those on zero-hours contracts
• How to account for PAYE and NIC on payments

What furloughed workers need to know

If your employer cannot cover your wages due to COVID-19, they may be able to access support to continue paying part of your wage. This will ensure redundancies are avoided.  If your employer intends to access this Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a ‘furloughed worker’. This would mean that you are kept on your employer’s payroll, rather than being laid off. However, to qualify for this scheme, you should not undertake work for them while you are furloughed.

This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month. You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to. If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit. The government intends for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.

Read here for guidance on claiming benefits

If your employer cannot cover staff costs due to COVID-19, they may be able to access support to continue paying part of your wage, to avoid redundancies.

If your employer intends to access the Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a furloughed worker. This would mean that you are kept on your employer’s payroll, rather than being laid off.

To qualify for this scheme, you should not undertake work for them while you are furloughed. This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.

You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to.

If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit.

We intend for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.

All VAT payments due up to 30 June 2020 can be deferred

Detail we do know:

• The deferral applies from 20 March 2020 to 30 June 2020
• The deferral is automatic and does not need to be applied for
• All UK business are included
• Payment of deferred amounts will be “at the end of the 2020/21 tax year”
• You still need to submit your online VAT return digitally, you just don’t pay it until “the end of the 2020/21 tax year”

Some of the things we don’t know yet:

• The announcement implies that it is VAT payments falling due within the stated period which can be deferred, irrespective of the VAT period for which the payment is due. But this is not certain
• For instance, payment for a VAT quarter ending on 31 May 2020 is due for payment by 7 July 2020 – as things stand we expect that this will still be due for payment by the normal date
• We assume installment payments (for large businesses) falling due up to 30 June are included, but this is not stated explicitly
• What does “at the end of the tax year” mean? We would expect it to be the VAT year, which will end in March, April or May 2021, depending on your company’s VAT quarters, but this is not yet certain
• This announcement only relates to VAT paid through VAT returns. To date we are not aware of any deferral of VAT (or any customs duties) which is normally paid directly on the importation of goods
• It is not stated explicitly, but we would expect that VAT returns must still be submitted on time as normal.
• How to account for PAYE and NIC on payments

For individuals who make self-assessment payments on account, the July 2020 payment is deferred until 31 January 2021

Detail we do know:

• The deferral is automatic and does not need to be applied for
• No interest or penalties will be applied on amounts deferred, if they are paid by 31 January 2021

HMRC are relaxing their normal conditions for businesses and individuals which wish to apply for extra time to pay their tax liabilities

Detail we do know:

• A new Coronavirus phone number has been set up for businesses and individuals to access this Time to Pay service:  0800 0159 559 (Note opening hours are Mon to Fri 8am to 4pm)
• You MUST put in a call to HMRC to access this service
• These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
• HMRC have staffed the number with more agents, but wait times are still long (1 hour +)
• Anecdotal evidence to date is that companies with a good previous tax compliance record are being offered deferral of PAYE liabilities until at least June 2020 with little additional evidence being requested at present

Some of the things we don’t know yet:

• Usually a Time to Pay arrangement removes the risk of penalties but interest must still be paid. We don’t yet know whether interest charges will be waived.
• Whether HMRC have any absolute “red lines” on taxes which cannot be included, overall amounts of tax which can be deferred, or limit on the period over which they will defer liabilities (normally they are reluctant to agree more than 12 months)

The Government will guarantee up to 80% of the value (up to £5m) of loans introduced, this will be interest free for 12 months and is available now.

The key points are:

• Loans are available from £25,001 to £5m
• Available from 1 – 6 years
• No interest is payable for 12 months
• Capital repayment holidays are available for 12 months as well – so some clients will have no payments to make in the first year
• Loans are limited to 25% of the business’ turnover in 2019, or double the annual wage bill

These criteria may vary from lender to lender.  We are happy to facilitate an introduction to an appropriate lender if required to discuss your circumstances.

For businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) or tapered relief, there is a one-off cash grant of £10,000 available. This will help eligible businesses meet their ongoing business costs.

Detail we do know:

• There are two schemes available for local authorities to dispense grants to businesses: the Small Business Grant Fund (SBGF) and the Retail, Hospitality and Leisure Grant (RHLG)
• Through the Small Business Grant Fund (SBGF) there is a one-off cash grant of £10,000 available to businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) or tapered relief
• The Retail, Hospitality and Leisure Grant (RHLG) is an enhanced grant created for businesses that qualified for the Expanded Retail Discount announced in late January. Retail, hospitality and leisure businesses with a rateable value of up to £15,000 will get a grant of £10,000, while those with property valuations between £15,000 and £51,000 will be eligible for £25,000.
• Funding for the scheme will be provided to local authorities in early April and that “guidance for local authorities on the scheme will be provided shortly”.
• You don’t need to do anything to access this scheme, your local authority will write to you if you are eligible.
• Apparently the Department of Business, Energy and Industrial Strategy (BEIS) issued guidance to local authorities on Tuesday 24^th March explaining the criteria and conditions around the grant schemes.

What we don’t know yet:

• All that needs to happen now is for local authorities to set up administration systems with the relevant data fields to satisfy BEIS oversight requirements and contact eligible businesses

Self-employed workers can claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months.

The key points are:

· The grant is worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months

· Self-employed trading profits must be below £50,000

· HMRC will use data from 2018-19 returns to identify if you are eligible for the grant

· Income from self-employment must account for more than half of your income

Check Your Status

You will qualify for a grant from the Self-employed Income Support Scheme if:

· your trading profits/partnership trading profits in 2018-19 were less than £50,000 and made up more than 50% of your total taxable income

or

· your average trading profits in 2016-17, 2017-18, and 2018-19 were less than £50,000 and constituted more than half of your average taxable income in the same period

If you started trading between 2016 and 2019, HMRC will work on data from Self-Assessment tax returns during that period.

Who can apply?

HMRC will use data from 2018-19 tax returns to confirm eligibility for the grant. Late returns filed before 23 April 2020 will be risk assessed in the usual way. If not already submitted, Income Tax Self-Assessment tax returns for 2018-19 must be filed by 23 April 2020

The scheme is open to self-employed individuals and members of a partnership who:

· have submitted an Income Tax Self-Assessment tax return for 2018-19

· have traded during the 2019-20 tax year

· are still trading when they apply for a grant, or would be trading except for COVID-19

· intend to continue to trade in 2020-21

· have lost out on trading profits due to COVID-19

How Much Will I Receive?

· HMRC will provide a taxable grant equating to 80% of your average profits from the tax years 2016 to 2017, 2017 to 2018 and 2018 to 2019 (where applicable).

· It will be calculated by adding together the total trading profit for the 3 tax years (where applicable) then dividing by 3 (where applicable). This figure will then be used to calculate a monthly amount.

· The maximum payable is £2,500 per month for 3 months.

· HMRC will pay the grant directly into your bank account as a single lump sum.

· If you claim tax credits, you’ll need to include a grant from the Self-employed Income Support Scheme in your claim as income.

Application Process

The scheme is not yet open for applications. If you are eligible for support, HMRC will contact you and invite you to apply online. The scheme can only be accessed via GOV.UK

Scams

Be aware of a growing number of scams. If someone texts, calls or emails you, claiming to be from HMRC and says you can claim financial help or tells you that you are owed a tax refund and asks you to click on a link or to give your name, credit card or bank account details or other information, do not respond.

Other Aid for the Self-Employed

Remember that the Government has already announced a package of measures to help self-employed workers:

· Self-Assessment income tax payments due in July 2020 can be deferred

· VAT due from 20 March 2020 until 30 June 2020 can be deferred

· Grants are available for businesses that pay little or no business rates

· You can claim increased amounts of Universal Credit

· New Business Interruption Loan Scheme

Directors of their own company who are paid through PAYE may be able to apply for support via the Job Retention Scheme.

Further Information

The full package of Government support announced to date, along with ongoing updates, is available at: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19

As further details on the support for workers and businesses are released, we will update you as soon as possible.