Rishi Sunak was appointed Chancellor of the Exchequer on 13 February 2020 in what were considered, by the standards of the time, a “shock” move following the unexpected resignation of Sajid Javid following the Prime Minister’s February reshuffle following the December 2019 General Election. He, and us all, could hardly have envisaged the present circumstances as the novel COVID-19 virus sweeps the globe.
From schools gates being barred to all those but the children of hastily designated key workers, businesses in the retail, hospitality and leisure sectors being ordered to close in order to enforce social distancing and families unexpectedly having to juggle the commitments of working from home whilst providing childcare or self isolating due to presenting symptoms, there are unprecedented times both for our society and economy.
The ‘National Effort’
On 20 March at what has become the ritual 5pm No. 10 press conference, the Chancellor laid out his plans to support businesses and workers, again making the statement that he is willing to do more, repeating that the actions he is taking are “unprecedented” and again committing to do “whatever it takes”. For those who run businesses with employees and premises, the following support measures are being made available.
Coronavirus Job Retention Scheme
What is it: a grant to keep on employees who can’t work due to coronavirus
Applies to: companies with employees
The Coronavirus Job Retention Scheme is a grant to pay employees’ wages, and will be administered by the HMRC. It’s designed for businesses of all sizes who have employees on PAYE who would otherwise be laid off due to the coronavirus crisis.
In order to qualify, you would formally designate impacted employees as ‘furloughed workers’, and you’d notify them as such. This isn’t designed to subsidise employees who are still actively working for you, even if you can’t afford to pay them. Instead, you would take the decision to make them furloughed workers and they would stop working, but continue to be paid.
Once you’ve designated your employees as furloughed you will be able to submit information about them and their earnings to HMRC via a new online portal. You will then be reimbursed 80% of their wage costs, up to a cap of £2,500 per employee, per month. This means for employees earning up to £37,500 per year 80% of the wage bill will be paid by the government. The payments can be backdated to 1st March, they’ll initially be for 3 months, and they may be extended.
This is a grant. You will not be expected to repay this subsidy.
Sick pay for self-isolation
What is it: £94.25 per week of sick pay paid for by the government
Applies to: anyone self-isolating who has or is using a PAYE scheme
If you find yourself self-isolating, you are entitled to claim statutory sick pay (SSP) and the government will refund the cost to small businesses – including contractors and consultants using limited companies. It’s not a huge amount (£94.25 per week), but you should be eligible to claim it.
You will be refunded SSP. You will not be expected to pay it back.
VAT payment deferral
What is it: VAT payment due up between 20 March 2020 to 30 June 2020 can be deferred until April 2021
Applies to: any VAT registered business
Any VAT payments due between now and the end of June can be deferred until the end of the tax year (April 2021). This is available now, and no applications are required. You can simply hold back any VAT payments due over the coming three months.
This is not a grant. You’ll still need to pay the amount in full before April.
Whilst there’s no application process, this measure is designed to alleviate cash flow difficulties facing unprecedented pressures as a result of the pandemic.
Small Business Grant Scheme for businesses that occupy properties
What is it: a £10,000 grant
Applies to: small companies who occupy ‘rateable’ properties
If your business formally occupies a property (such as an office) which is rateable (this would exclude home offices), then you may be entitled to a grant. In addition, your business receive the small business rate relief, rural rate relief or tapered relief.
In these circumstances, you will qualify for a £10,000 grant. This grant will be administered by local authorities, who will write to you if you are eligible for this grant. You do not need to do anything.
This is a grant. You will not be expected to repay this.
£25,000 grants to retail, hospitality and leisure businesses
What is it: a £25,000 grant
Applies to: Companies in the retail, hospitality and leisure sectors who occupy premises with a ratable value of less then £51,000
Companies in these sectors have been particularly impacted by the outbreak of coronavirus and the social distancing measures introduced as a result, including wholesale closures of entire sectors of the service economy.
In these circumstances, eligible businesses qualify for a £25,000 grant. This grant will be administered by local authorities, who will write to you if you are eligible for this grant. You do not need to do anything.
Additionally, business rates for the retail, hospitality, and leisure sectors are suspended for 12 months commencing 6th April. This will mean that every shop, pub, theatre, music venue, and restaurant will pay no business rates until April 2021.
This is a grant. You will not be expected to repay this.
Self Assessment payment on account deferral
What is it: July’s Self Assessment payments on account will be deferred until January 2021
Applies to: TBC if this applies to business owners drawing dividends, we expect so
Contractors and consultants who draw dividends usually pay self-assessed income tax in advance, via ‘payments on account’, due in July and January. The July 2020 payment will be deferred until January 2021.
This is not a grant. You’ll still need to pay the amount in January 2021.
If you’ve set aside cash for your July payment, this could be useful today. However, given it’s only been two months since the last payment, it may be of limited immediate use.
It will be of some help if your income has been or you expect it to be depressed. It will prevent the need for you to pay income tax in advance based on an outdated forecast of earnings.
This scheme is available automatically, and you don’t need to apply. You can simply skip your July 2020 payment on account and no penalties or interest will be applied.
HMRC’s Time To Pay
What is it: payment plans for outstanding taxes
Applies to: any company or individual in financial distress
If you’re facing financial distress and you have an outstanding tax liability, HMRC’s Time To Pay (TTP) service may be beneficial. TTP is a long-established means for HMRC to support businesses who are unable to meet tax payment deadlines. With TTP, HMRC will discuss your business’s finances and – should they approve – they will allow you to pay any outstanding tax liabilities as monthly instalments. These payment plans are agreed on a case-by-case basis.
This is not a grant. It’s a monthly payment plan for outstanding tax.
You should only contact HMRC if you have missed, or are about to miss a tax payment. If your next tax payment is some time away, HMRC has asked that you contact them closer to the time to help manage demand for the service.
Here are some tips for using Time To Pay:
- Expect to be on hold for some time – demand is significant and HMRC are currently scaling up call centres
- Make sure you have all the required information to hand:
- Payment reference numbers (CT UTR, self-assessment UTR, VAT number, PAYE accounts office reference number)
- Details of the outstanding tax liabilities
- How much you think you can realistically pay now, and each month
- Expect to be asked about your businesses and your personal income and expenditure, and assets such as bank accounts and savings. It is likely that HMRC will want to establish if your business is still viable.
- Make sure you’re authorised to speak to HMRC
- You’ll need to be either a company director or an ‘authorised agent’ – i.e. an accountant with pre-existing authorisation to speak on your behalf
- We would advise that you also write to HMRC asking for a deferral
- Summarise the above in a letter, and ensure that you include your payment reference numbers
- You should write to each individual department if needed (CT, income tax/PAYE, VAT)
- Corporation Tax Services, HMRC, BX9 1AX
- PAYE and Self Assessment, HMRC, BX9 1AS
- HMRC VAT Written Enquiries, Crown House, Birch Street, Wolverhampton, WV1 4JX
Should you need further income support, the only backstop at present is Univeral Credit. This is typically worth £409.89 per month. The government have recently relaxed the application rules for the self-employed, making it more accessible, by temporarily removing the minimum income floor, which is the amount the DWP uses to set your universal credit payment each month.
Because the minimum income floor has been removed temporarily, self-employed people are now treated the same as employed people within the universal credit system. Previously, if someone had been self-employed for 12 months, universal credit would apply the minimum income floor to them, which is essentially a financial assumption about the income they have coming in, regardless of whether they are actually earning it.
The government says the the change to the minimum income floor will last “for the duration of the outbreak”. The government website offering more guidance is at gov.uk/universal-credit and gov.uk/guidance/new-style-employment-and-support-allowance.