Summary of The Measures Introduced By The Government in Relation to COVID-19

March 31, 2020

Tax helpline

An HMRC helpline for businesses or the self-employed is available on 0800 024 1222. This may cover time to pay and instalment arrangements, suspending debt collection proceedings and cancelling penalties and interest due to payment difficulties.

Income Tax

For self-assessment generally, payments due on the 31 July 2020 may be deferred until 31 January 2021. This is an automatic offer with no applications required and no penalties or interest for late payment will be charged.

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

Claim for wage costs through the Coronavirus Job Retention Scheme

This is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. HMRC expect the scheme to be up and running by the end of April.

Employers can use a portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated employers’ NIC and minimum automatic enrolment employer pension contributions on that wage. The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and have a UK bank account. Where a company is being taken under the management of an administrator, the administrator will be able to access the scheme.

Public Sector Organisations

Where employers receive public funding for staff costs and that funding is continuing, the Government expects employers to use that money to continue to pay staff in the usual fashion and not furlough them.

Furloughed Employees

Employers should discuss with their staff and make any changes to the employment contract by agreement and may need to seek legal advice on the process. Furloughed employees must have been on the relevant PAYE payroll on 28 February 2020 and can be on any type of contract including employees on agency contracts or on flexible or zero-hour contracts. The scheme also covers employees who were made redundant since 28 February 2020 if they are rehired by their employer.

When on furlough, an employee can not undertake work for or on behalf of the business and the employee’s wage will be subject to the usual income tax and other deductions. If an employee is working but on reduced hours or pay, they will not be eligible for this scheme. Employers will need to write to their employee confirming that they have been furloughed and keep a record of this.

Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February. Employees on sick leave or self-isolating should get SSP but can be furloughed after this. Employees who are self-isolating can be placed on furlough.

If workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.

Employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay

If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply. If an employer offers enhanced (earnings-related) contractual pay to women on Maternity Leave, this is included as wage costs that can be claimed through the scheme. The same principles apply where an employee qualifies for contractual adoption, paternity or shared parental pay.

What can be claimed

Businesses will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated employers’ NIC and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included. An employer can choose to top up an employee’s salary but is not obliged to do so.

For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate the 80%.

For those whose pay varies, then if an employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, a claim can be made for the higher of either the same month’s earnings from the previous year or the average monthly earnings from 2019/20. If the employee has been employed for less than a year, a claim can be made for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far.

Making a claim

Various information will be required including the ePAYE reference number, the number of employees being furloughed, the claim period (start and end date), the amount claimed (per the minimum length of furloughing of 3 weeks) and the bank account number and sort code. Only one claim can be submitted at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

Business treatment of the Job Retention Grant

Payments received by a business under the scheme must therefore be included as income in the business’s calculation of its taxable profits. Businesses can deduct employment costs as normal when calculating taxable profits.

Reference: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Deferral of VAT payments

Temporary changes to the VAT payments due between 20 March 2020 and 30 June 2020 have been made to help businesses manage their cash flow. VAT-registered businesses which have a VAT payment due between 20 March 2020 and 30 June 2020 have the option to defer the payment until any time before 1 April 2021. This does not cover VAT MOSS payments. HMRC will not charge interest or penalties on any amount deferred but businesses will still need to submit VAT returns on time. Businesses do not need to tell HMRC that they are deferring VAT payment.

Reference: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19

Income Tax

For self-assessment generally, payments due on the 31 July 2020 may be deferred until 31 January 2021. This is an automatic offer with no applications required and no penalties or interest for late payment will be charged.

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

Support for self-employed through the Self-employment Income Support Scheme

This scheme will allow businesses to claim a taxable grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months. It is open to those who have submitted their self-assessment return for 2018/19, traded in 2019/20, are trading when they apply (or would be except for COVID-19), intend to continue to trade in 2020/21 and have lost trading/partnership trading profits due to COVID-19.

Self-employed trading profits must be less than £50,000 and more than half of the individual’s income must come from self-employment. This is determined by at least one of the following conditions being true:

  • Having trading profits/partnership trading profits in 2018/19 of less than £50,000 and these profits constitute more than half of the total taxable income; or
  • Having average trading profits in 2016/17, 2017/18 and 2018/19 of less than £50,000 and these profits constitute more than half of the average taxable income in the same period.

If a business started trading between 2016 to 2019, HMRC will only use those years for which a return has been filed. Any outstanding 2018/19 returns must be filed by 23 April 2020.

A taxable grant of 80% of the average profits from the years (where applicable) 2016/17, 2017/18 and 2018/19 will be paid. HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable) and use this to calculate a monthly amount up to a maximum of £2,500 per month for 3 months. The grant will be paid directly into a bank account in one instalment.

HMRC will contact relevant businesses if they are eligible for the scheme and invite them to apply online.

Reference: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Support for businesses who are paying sick pay to employees

The Government will allow SME employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19 to cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19. Employers with fewer than 250 employees will be eligible, determined by the number of people employed as of 28 February 2020.

Employers should maintain records of staff absences and payments of SSP but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website.

A rebate scheme is being developed and further details will be provided in due course.

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

Support for retail, hospitality and leisure businesses that pay business rates

The Government will introduce a business rates holiday for businesses based in England for retail, hospitality and leisure businesses for 2020/21 and businesses that received the retail discount in 2019/20 will be rebilled by their local authority as soon as possible.

Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used as shops, restaurants, cafes, drinking establishments, cinemas and live music venues, for assembly and leisure and as hotels, guest and boarding premises and self-catering accommodation.

In addition the Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property. Businesses in these sectors with a property that has a rateable value of up to £15,000 will receive a grant of £10,000. Businesses in these sectors with a property that has a rateable value of between £15,000 and less than £51,000 will receive a grant of £25,000. Businesses which don’t pay business rates are not included in this scheme.

In addition, a business rates holiday for nurseries in England will apply for 2020/21. Properties that will benefit from the relief will be hereditaments occupied by providers on Ofsted’s Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage.

Support for businesses that pay little or no business rates

The Government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief, rural rate relief and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.

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

Similar arrangements are being made in:

Wales - https://gov.wales/coronavirus-covid-19-support-businesses

Scotland - https://www.gov.uk/guidance/coronavirus-covid-19-information-for-individuals-and-businesses-in-scotland

N. Ireland - https://www.nibusinessinfo.co.uk/content/coronavirus-business-support-grant-schemes

...Support for businesses through the Coronavirus Business Interruption Loan Scheme

The temporary Coronavirus Business Interruption Loan Scheme supports SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5m and for up to 6 years.

The Government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments. The Government will provide lenders with a guarantee of 80% on each loan (subject to pre-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The scheme will be delivered through commercial lenders, backed by the government-owned British Business Bank.

The scheme is open to businesses based in the UK, with turnover of no more than £45m per year and the business meets the other British Business Bank eligibility criteria.

Support for larger firms is being offered under the new Covid-19 Corporate Financing Facility, under which the Bank of England will buy short term debt from larger companies.

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

Temporary changes to pension processes as a result of coronavirus

HMRC have issued various easements for pension scheme administrators including relaxation of the rules on rent and loan payment holidays.

Reference: https://www.gov.uk/government/publications/pension-schemes-newsletter-118-march-2020/pension-schemes-newsletter-118-march-2020

Filing Deadlines

Companies House have confirmed that businesses will be given an additional 3 months to file their accounts to help companies avoid penalties as they deal with the impact of COVID-19. The guidance states companies will have to apply for the 3 month extension to be granted, and will need to cite issues around COVID-19. Applications can be made through a fast-tracked online system where it is anticipated to take just 15 minutes to complete and these companies will be automatically and immediately granted an extension. Those companies which have already extended their filing deadline, or shortened their accounting reference period are unlikely to be eligible for this extension.

In addition, a company granted further time by the Registrar of Companies in which to deliverfile its accounts, may be able to deliver its return later than the filing date without incurring a penalty.

References: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts and see https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm94100

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