We continue to talk to clients and investigate the questions being raised.
Here are the headlines of what we know to date:
Job Retention Scheme
A government grant to cover 80% of salary of workers who would otherwise be laid off.
This is open to any employer in the country and covers the cost of wages backdated to 1 March 2020 including employees employed up to 28 February 2020.
HMRC will reimburse 80% of furloughed workers costs, capped at £2,500 a month.
Furloughed means “grant leave of absence to” consequently these workers cannot be doing any work and will need their work reallocated to other workers potentially with a handover.
The process will involve submitting information to HMRC, including earnings details, through a new HMRC portal being developed by HMRC. Further details to follow.
The link below to the ICAEW has good worked examples of the scheme:
The Government’s Guidance for Employers and Businesses
This sets out the package of measures announced by the Chancellor including details regarding;
• Statutory Sick Pay – Support for businesses who are paying sick pay to employees
• a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
“Coronavirus Business Interruption Loan Scheme’ (CBILS)”
CBILS provides cashflow support for up to 12 months (or possibly more) to cover disruption caused by Coronavirus.
The scheme provides for loans up to £5m for businesses with revenue up to £45m. No interest is payable for the first 12 months as this is settled by the government.
Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. The government suggests that the application process should be simple. Here are some FAQs for SMEs. We are working through the details of many more questions.
You will need to give thought to what support you are seeking and the health of your business before the Coronavirus measures came into place.
The CBILS guarantees 80% of the loan and are to the lender. Security to cover the remaining 20% will be required, possibly in the form of Personal Guarantees. The borrower remains liable for 100% of the debt.
Covid Corporate Financing Facility (CCFF)
Bank of England can 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 in the scheme. The scheme will operate for at least 12 months and provides a minimum facility of £1m.
Support for the self-employed
This new scheme has been introduced in order to make provision for self-employed individuals or a member of a partnership 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.
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
To qualify, more than half of their income in these periods must come from self-employment.
Importantly, if you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.
The income support scheme, which is being designed by HMRC from scratch, will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June.
Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational. Amounts will be paid direct into individual’s bank accounts by HMRC.
Additionally as separate measure announced before the above support, all self-assessment income tax payments due 31 July 2020 have been automatically deferred to 31 January 2021.
Tax & VAT
VAT – It may be possible to spread the quarterly liability over the following three months to spread the cashflow and to roll that forward. You need to pre-agree that with HMRC who may now be prepared to give more given the government directives.
From 20 March 2020 until 30 June 2020 all VAT registered traders can defer VAT payments. This is an automatic offer from HMRC and no application is required.
For those with automatic direct debits already set up with HMRC you are advised to cancel any arrangements in place and then set them up again subsequently. VAT refunds and reclaims will be paid by the government as normal. Businesses will have until end of the 2020/21 tax year to settle the liabilities that have accumulated.
Businesses should continue to file their VAT returns by the due date.
PAYE – This is a monthly liability but HMRC may be flexible to paying each month in arrears. This would need HMRC agreement in advance.
It is not yet clear exactly how the Time to Pay policy will work but suggestions include;
• agreeing to pay by instalments
• suspending debt collection proceedings
• cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately
HMRC has changed the dedicated phone number for the coronavirus helpline targeted at businesses and the self employed to 0800 024 1222 to increase their capacity to deal with enquiries.
Most businesses are unlikely to be covered, as standard business interruption insurance policies will exclude pandemics but do check the terms and conditions of your policy.
Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc pre the closure announcement is sufficient to make a claim.
Businesses affected by the COVID-19 pandemic can now apply to Companies House to request an extension to file their accounts, reports and confirmation statements.
From 25 March, companies can apply for a three month extension for filing their accounts
Complete ban on evictions
No renter in either social or private accommodation will be forced out of their home during this difficult time.
Commercial tenants unable to pay rent because of coronavirus will be protected from eviction
This is available to all sectors and buy-to-let landlords but is merely a deferral of the repayments and consequently interest still accumulates on the outstanding loan.
Tenants can apply for a rent holiday although it is noted that this is just a deferral and not a waiver of the amounts due.
These new rules have new been deferred for 12 months.
Time to talk
This is an extraordinary challenge we all face. If you would like to talk through the issues you are facing, please speak to your usual Goodman Jones contact or email email@example.com