Deferring VAT and Income Tax payments
Payments of VAT will not be required for payments due between the 20th March and 30th June 2020, these will be deferred, not waived. Businesses will have until 5th April 2021 to catch up with the VAT payments deferred in this period. If you pay your VAT by DD normally, you are advised to cancel the VAT DD in good time before the normal due date. Refunds will be made as normal.
In addition, the second payment on account of self-assessment tax due on 31st July 2020 for the self-employed only will also be deferred until 31st January 2021.
Both of the above measures are automatic, and all UK businesses are eligible for the VAT deferral and all UK self-employed individuals are eligible for the tax deferral (including partners in partnerships and LLP’s I understand).
If the above is still not sufficient, HMRC have scaled up their Time to Pay offer so you may be able to defer or arrange instalment options for historic tax liabilities that you have outstanding. Be prepared for a long wait on the phone to get through!
Coronavirus Job Retention Scheme & Furlough Leave
The below information is what we know at present in relation to the Coronavirus Job Retention Scheme, we will update as more information becomes available.
What is it?
The Coronavirus Job Retention Scheme allows all UK employers to access financial support to continue paying part of their employees salary that would otherwise have been laid off due to Covid-19. It is intended to prevent against layoffs and redundancies.
Who is eligible?
All UK companies are eligible: limited companies, sole traders who employee people, LLPs, partnerships, charities.
How does it work?
- The employer must designate affected employees as furloughed workers which means they should not undertake any work for the company while furloughed, including answering calls or emails.
- It is unlikely that directors will qualify as affected employees.
- They should notify the employee that they have been marked as Furlough. Agreement from the employee may be required.
- HMRC must be notified of the employee designated as furloughed workers as well as details of their earnings. This is done through an online portal (not currently set up).
- HMRC will reimburse 80% of furloughed workers wage costs in the form of a grant, based on their February earnings, up to a cap of £2,500 per month. This could cause case flow issues as the employee will almost certainly need to be paid before the 80% re-imbursement is received.
- Employees remain employed
- JRS is intended to run for at least three months from 1 March 2020, but it will be extended if necessary. The JRS will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It is open for workers who were in employment on 28 February.
What are the employment issues?
Changing the status of employees to a furloughed worker remains subject to existing employment law. Generally, where an employee’s contract contains a layoff or short term clause employers should be able to place employees on furlough leave. Where there is no such clause, it is best advised to get agreement from the employee.
Additionally, a 20% reduction in salary will be a change in terms and conditions of employment. Where employers are not topping up the government payment, they should also seek agreement from the employee.
Given the current situation and the alternatives for those employees should they not agree, one can expect that most employees will agree. That said, prudent employers will seek to get their employees agreement as part of their furlough leave process.
We will have a template letter to employee’s on the above available to you shortly.
There is a similar arrangement for freelancers and the self-employed currently being debated which would see that group receive 80% of their monthly net earnings, averaged over the last 3 years, capped at £2,917 per month. The Chancellor has warned that this a complex issue and that you should pursue the other forms of help announced first as it is likely to be sometime before a scheme for the self-employed is put in place.
SSP will now be available for eligible individuals diagnosed with coronavirus or those who are unable to work because they are self-isolating in line with government advice. The weekly allowance for SSP will increase from £94.25 to £95.85 on 6 April. This is in addition to the change announced by Prime Minister that SSP will be payable from day one instead of day four for affected individuals.
Coronavirus statutory sick pay is expected to be in the form of a refund and therefore cash flow issues still apply. The Treasury says that it is working with employers over the coming months to set up a repayment mechanism as soon as possible for employers reclaiming statutory sick pay.
How to access the Coronavirus LOAN scheme
The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website at
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.
The key points are (which may vary from lender to lender):
- 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
How do I get the government £10,000 coronavirus grant?
The government has announced that small businesses that already pay little or no business rates will be eligible for a one-off coronavirus grant worth up to £10,000.
Around 700,000 businesses in England currently eligible for Small Business Rate Relief (SBBR) or Rural Rate Relief can apply for the emergency funding.
The Department for Business, Energy & Industrial Strategy will be writing to local authorities to outline the scheme, and encourage local authorities to prepare.
However, once up-and-running, your local authority will contact you rather than having to apply yourself.
And funding will not be available until April, as stated on the government website.
As to other assistance announced;
Business rates scrapped
All retail, leisure and hospitality companies will be exempt from business rates for a whole year.
In addition, businesses in those sectors with a property that has a rateable value of between £15,000 and £51,000 will receive a grant of £25,000.
The government will also review the long-term future of business rates, a property tax which many say is unfair given the rise of online shopping and out-of-town retail parks.