Government Coronavirus Support Schemes
As the coronavirus pandemic sweeps the globe, the UK, like many countries, has put a lockdown in place. Whilst the retail, hospitality and leisure sections have been hardest hit by this, many businesses have seen a downturn in their finances as a result. To aid businesses in this difficult time, the government has announced a variety of schemes to support the finances of the nation. Details on the most important schemes can be found below.
The information given in this article is accurate at the time of writing. It is advised that anyone looking to take up one of these schemes should review the current guidance and seek professional help where possible. Up-to-date information on all the schemes detailed below, including more detailed links on individual initiatives, can be found here (tinyurl.com/COVIDUKSupport).
Coronavirus Job Retention Scheme (CJRS)
With some businesses having to close entirely and others seeing a large drop in their income, many businesses were looking at redundancies. The CJRS is intended to avoid such job losses. The scheme, which is intended to run for at least three months, will provide a grant to cover 80% of employee wages, up to a maximum of £2,500 per month per employee.
CJRS covers any employee of a business at 28 February 2020 who would otherwise be made redundant. Where businesses had already made employees redundant before the scheme was announced, they can choose to rehire those employees and claim the grant for their wages. Claims can be backdated to 1 March 2020 when employees ceased working from that date.
Employees seeking to take advantage of CJRS need to identify which employees they are going to furlough. Affected employees must be furloughed for a minimum period of three weeks, though this can be renewed if necessary. Furloughed employees are not allowed to undertake any work for the business in that time though they are permitted to undertake voluntary work outside the business. They can also undertake training, even if this is related to the business, provided that doing so is voluntary.
Subject to the £2,500 maximum, the gross pay for the 80% reclaim will be calculated as follows.
• Over one year of employment – The higher of the average for the last 12 months or the amount paid in the same month last year.
• Under one year of employment – The average earnings for the months worked.
• Under one month of employment – The amount paid for their first month of employment, pro-rated up to a full month.
Bonuses, commissions and fees are specifically excluded from the calculations. According to current guidance, overtime can still be included. Whilst the reclaim is limited to 80% of the above calculations, the employer can still pay full wages if they wish to.
Calculations for tax, National Insurance and Auto Enrolment pension contributions will be made in the usual way on whatever wages are paid. Employers will be able to claim back the Employer’s National Insurance and minimum Employer’s Auto Enrolment pension contributions on top of the 80% wages.
As furloughing will not historically have formed part of employment contracts, this will need to be agreed with employees as a variance to their contracts. Legal advice is recommended to avoid problems with this.
Claims will be made through an HMRC portal. The current expected delivery date for this is 21 April.
Self Employed Income Support Scheme (SEISS)
The most recent big announcement was for a scheme similar to CJRS for the self-employed. This covers individuals who are sole traders or members of partnerships. This includes members of LLPs, which are treated as ordinary partnerships for most tax purposes.
This scheme does not cover individuals who operate their businesses through companies. Directors of small companies are considered employed for tax purposes. If a company has no income at present, directors will be eligible for the CJRS in the same way as other employees. It has been confirmed that simply undertaking the statutory duties to keep the company going will not breach the requirement that furloughed employees do no work. Posting to social media is also permitted, provided such posts do not seek to generate income.
To qualify for the scheme, an individual must meet the following criteria
• Self-employed as a sole trader or member of a partnership
• Have been self-employed during the 2018/19 tax year and filed their return. A four-week grace period from the announcement was given for those who had not yet filed.
• Had an ongoing trade from then that was expected to continue had the pandemic not occurred.
• Have lost income as a result of the pandemic
• Have trading profits below £50,000
• Have self-employment as more than 50% of their total income.
The £50,000 trading profit and 50% of income tests are passed if either the 2018/19 return or the average of returns including self-employment from 2016/17 to 2018/19 meet the requirements.
In a similar manner to the CJRS, the amount that can be claimed is 80% of average self-employed monthly profits. These will be calculated based on the profits reported on returns including self-employment for the 2016/17 to 2018/19 tax years. Current guidance is that self-employed individuals can still work while making the claim.
Sadly, the schedule for delivering this scheme puts it as being available in early June 2020. Self-employed individuals are being encouraged to apply for Universal Credit in the interim.
Deferral of tax payments
Individuals within self-assessment who were due to make a payment on account on 31 July 2020 can now defer that payment until 31 January 2021. Right to deferral is automatic.
VAT due between 24 March 2020 and 30 June 2020 can be deferred until 5 April 2021. Again, right to this deferral is automatic. VAT refunds should still be paid to businesses as normal.
It should be noted that both of these are deferrals of the liability, not a cancellation of the amount due. Anyone taking advantage of either of these deferrals should, if they can, put the money in a separate account to ensure they have funds available at the deferred due dates.
HMRC has also been instructed to take a more lenient line for Time to Pay arrangements. If you have any sort of tax bill falling due shortly and you will not be able to pay, you should contact the dedicated Time to Pay line on 0800 024 1222.
Business rates holidays and grants
As the business sectors most affected by the lockdown, those in the retail, hospitality and leisure industries are eligible for a rates holiday. This should mean that those businesses pay no rates for the 2020/21 tax year. If your rates registration shows that you are an eligible business then entitlement is automatic. Councils are already sending out amended rates bills showing the amendment. More details on which businesses are eligible can be found within the link at the top of the page.
In addition to this, businesses in those sectors may also be eligible for cash grants. Where the property they operate from has a rateable value of up to £15,000, the grant will be £10,000. For those with rateable values from £15,001 to £51,000, a grant of up to £25,000 will be available. Small businesse outside these sectors are also possibly eligible for grants. If your business occupies premises that are entitled to either Small Business Rate Relief or Rural Rate Relief, you should be eligible for a grant of £10,000.
The intention was that councils would contact eligible businesses directly about paying these grants. However, there have been appreciable differences in how this has been implemented across the country. At the time of writing, Hastings Council say they have received the government funding but they are asking eligible businesses to complete a form. Details of the grant and a link to the form to apply can be found here. (tinyurl.com/HastingsCV19).
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