SUMMARY OF HELP FOR EMPLOYERS AND EMPLOYEES
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme provides financial support to employers to help them to maintain their workforce during the Covid-19 pandemic. Instead of laying workers off, employers can instead furlough them and claim a grant of 80% of their wages from the Government, plus the associated employer’s National Insurance contributions and the minimum level of employer contributions that the employer is required to make under auto-enrolment.
Employees can be furloughed if they were on the payroll as at 19 March 2020 and a PAYE submission had been made to HMRC by that date. Employers can also take back on employees on the payroll as at 28 February 2020, who left or were made redundant before 19 March 2020, and furlough them. In order to claim a grant in respect of a furloughed employee, the employee must be furloughed for at least three weeks.
The scheme is open from 1 March to 31 October 2020. Prior to 1 August 2020, furloughed employees are not allowed to do any work for the employer while on furlough. However, changes are to be introduced from August to allow furloughed workers to return to work part-time while continuing to receive 80% of their wages, with the costs shared between the employer and the Government.
Grant claims must be made online via the online portal. Only one claim can be made for each pay period and should include all employees in respect of whom a grant is claimed. Grants paid under the scheme must be paid over to the employee in full. You must also comply with the usual payroll reporting requirements, and deduct tax and National Insurance from the grant payment and pay it over to HMRC, together with the associated employer’s National Insurance. HMRC aim to make the payments into the employer’s designated bank account within six working days of a claim.
Help for homeworkers
The Unprecedented numbers of employees are working from home as a result of the Covid-19 pandemic. Tax relief is available in certain circumstances.
Where an employer provides equipment and supplies to enable the employee to work from home, as long as there is no significant private use, the provision is tax free. Similarly, no tax liability arises if an employee who is working from home as a result of the pandemic buys the homeworking equipment and is reimbursed by the employer as long as the reimbursement is made after 16 March 2020 and before the end of the 2020/21 tax year. If the employee meets the cost themselves, they can claim tax relief.
Employers can also pay a tax-free allowance of £6 per week/£26 per month to cover the additional household costs incurred as a result of working from home. Prior to 6 April 2020, the tax-free amount was £4 per week/£18 per month. Higher claims can be made where actual additional costs are more, but must be substantiated
Employees can claim tax relief for expenses wholly, necessarily and exclusively incurred in doing their job, but HMRC will allow claims for additional household costs up to the above tax-free limits without requiring evidence to support the claim.
Statutory sick pay (SSP) is not normally recoverable and the employer must meet the cost of SSP paid to employees who are absent from work. However, employers who had fewer than 250 employees as at 28 February 2020 are able to claim back SSP for absences related to Covid-19. Claims, which are limited to two weeks’ SSP per employee, can be made for periods of sickness starting on or after 13 March 2020 where the employee was off work because they had Coronavirus symptoms or were self-isolating because someone in their household had symptoms and for absences from 16 April 2020 where the employee was shielding because of Coronavirus.
Claims can be made online.
HELP FOR THE SELF-EMPLOYED
Self-employment Income Support Scheme
Financial help is available for self-employed individuals and partners in the form of a grant. However, eligibility is limited to those who:
- traded in the 2018/19 tax year and submitted their 2018/19 tax return no later than 23 April 2020;
- traded in 2019/20;
- intend to continue to trade in 2020/21;
- were adversely affected by the Covid-19 pandemic; and
- have profits for 2019/19 of £50,000 or less or average profits for 2016/19 to 2018/19 of £50,000 or less
The scheme is targeted at those who derive the majority of their income from self-employment and a claim can only be made where self-employment income is at least 50% of total income.
HMRC have written to those who they believe are eligible.
The grant is equal to 80% of average monthly profits for a period of three months, capped at £2,500 per month. The maximum grant is therefore £7,500. Average profits are those for the three tax years 2016/17, 2017/18 and 2018/19, as returned on the self-assessment tax return. If the trader has not traded throughout this period, the calculation is adjusted.
Individuals can make a claim at any time on or after the date given to them by HMRC, which was between 13 and 18 May 2020. Claims had to be made online.
While claims cannot be made by agents on behalf of self-employed clients, we can advise you on how to make a claim and on what you should receive.
HELP WITH TAX BILLS
VAT-registered businesses are able to defer their VAT payments for a limited period to help them manage cashflow difficulties arising from the Covid-19 pandemic. VAT-registered businesses that have a VAT payment that falls due between 20 March 2020 and 30 June 2020 can either pay their VAT as normal or defer the payment to a later date.
Where VAT is paid quarterly or monthly, the VAT that can be deferred is that for periods that end in February, March and April 2020. Payments on account and annual accounting payments that are due between 20 March 2020 and 30 June 2020 can also be deferred.
Where the deferral option is taken interest and penalties are not charged on the deferred VAT. However, the VAT return should still be filed by the normal due date. Any VAT that is deferred must be paid by 31 March 2021. Traders do not need to tell HMRC that they are deferring – they can simply delay payment.
Traders that are in a repayment situation can reclaim their VAT as normal.
Deferring July 2020 self-assessment payment on account
Under self-assessment, the second payment on account for 2019/20 is due by 31 July 2020. This payment can be deferred and paid instead by 31 January 2021, with any outstanding balance due for 2019/20. The first payment on account for 2020/21 will be due as normal by 31 January 2021.
As long as the full amount due for 2019/20 is paid by 31 January 2021, HMRC will not charge interest and penalties on the deferred payment on account.
Time to pay
Taxpayers who are having difficulties meeting other tax payments in respect of which there is not a specific deferral option should contact HMRC’s Payment Support Service to see if they can pay any outstanding liability in instalments.
GRANTS AND BUSINESS RATES RELIEF
Business rates relief – retail, leisure and hospitality
Businesses in the retail, leisure and hospitality sectors in England do not have to pay business rates for the 2020/21 tax year. The relief is given automatically by the council and eligible businesses do not need to apply.
Small business grants
Businesses in England which occupy a property which was eligible for small business rate relief (including tapered relief) or rural rate relief on 11 March 2020 are entitled to a business support grant of £10,000. Small business rate relief is available in respect of properties with a rateable value of less than £15,000. No business rates are payable where the rateable value is less than £12,000; tapered relief is given where the rateable value is between £12,001 and £15,000.
Where the business has more than one property, a grant is payable in respect of each property.
The grants are paid by local councils.
Business support grants – retail, leisure and hospitality
Businesses in the retail, hospitality and leisure sectors which are based in England may be eligible for grants of up to £25,000 per property to help them meet their business costs during the Coronavirus outbreak. The amount of the grant depends on the rateable value of the property.
Where the business has a property with a rateable value of £15,000 or less, a grant of £10,000 will be paid in respect of that property. Where the rateable value of the property is more than £15,000 but less than £51,000, the grant is £25,000.
The grants are based on the rateable value on 11 March 2020. They comprise one-off cash grants payable by the local council
Bounce Back Loans
Bounce back loans enable small and medium-sized businesses to borrow between £2,000 and £50,000 capped at 25% of their turnover. The loans are 100% Government guaranteed. No interest is payable on the loan for the first 12 months and repayments do not need to be made for the first year either. After 12 months, the interest rate is 2.5%. The loans are for a period of six years but can be repaid early without any early redemption fee. To be eligible, the business must have been trading on 1 March 2020 and have been adversely affected by the Covid-19 pandemic.
Applications for bounce back loans should be made through the lender’s website. Participating lenders include many of the main retail banks.
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme helps small and medium-sized businesses access loans and other kinds of finance up to £5 million. The Government guarantee 80% of the loan and pay interest and fees for the first 12 months.
Loans under this scheme are available to businesses based in the UK with turnover of up to £45 million which have been adversely affected by the Covid-19 pandemic and which would be viable were it not for the pandemic. Businesses borrowing more than £30,000 need to demonstrate that they were not classed as a business in difficulty on 31 December 2019. The facility is available for three years where finance provided is in the form of an overdraft or invoice finance facilities and for six years for loans and asset finance facilities.
Coronavirus Futures Fund
Convertible loans of between £125,000 and £5 million are available to innovative companies facing difficulties due to the pandemic under the Coronavirus Futures Funds. The availability of funds is contingent on at least equal match funding from private investors. The scheme is due to run until the end of September 2020 and may help businesses that rely on equity investment.
This bulletin deals with a number of topics which, it is hoped, will be of general interest to clients. However, in the space available it is impossible to mention all of the points which may be relevant in individual cases, so please contact us for personal advice on your own affairs.