Coronavirus Government Support
Last updated 16 August 2021
As you will know there has recently been a raft of announcements concerning Government support for businesses, employers and employees affected by the coronavirus pandemic. Certain of the measures and eligibility differ dependent upon the size of the business involved - we concentrate below on how smaller businesses will be affected.
Please note that the narrative below will no doubt alter from time to time as and when new announcements are made by the Government. Nonetheless it represents what is currently believed to be a 'best interpretation' of the new rules and changes so far. There are also direct links to the relevant Government web pages.
WARNING: Please watch out for any fraudulent or spoof correspondence from HMRC or your Rating Authority etc as scammers are trying to make the most of the current situation.
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See below for:
SELF-EMPLOYED
COMPANY OWNER / DIRECTORS
EMPLOYERS
GENERAL BUSINESS SUPPORT
OTHER SUPPORT
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SELF-EMPLOYED
Self-Employed Income Support Scheme (SEISS)
Who will be entitled to the Self-Employed Income Support Scheme ('SEISS')?
As long as their business has been 'adversely affected' by Covid-19 then the scheme is available to all self-employed sole traders or partners who have tax assessable trading profits of less than £50000 per annum and who generate at least 50% of their total income from their self-employment. This can be with reference to one of the following: (a) trading profit and total income for 2019/20 or (b) average profits and total income across 2016/17, 2017/18, 2018/19 and 2019/20.
Those with less than four years' figures should qualify as long as their 2019/20 Tax Return was submitted to HMRC before 2 March 2021. Tax year averaging will then be used by HMRC to determine entitlement.
Unfortunately, anyone who commenced their self-employment on or after 6 April 2020 will not be eligible to make any sort of claim under the scheme.
It is important to note that the scheme does not preclude someone from making a claim if they have been able to carry out some self-employed work; the scheme being there to help those whose businesses have been adversely affected by coronavirus.
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What is the level of support?
As a result of extensions along the way the overall scheme is to consist of five separate grants. Making a claim for either grant one, two, three or four is now time-barred and so this narrative concentrates on grant number five.
Grant five: This will cover May, June, July, August and September 2021, and it can be claimed from mid-July up until 30 September 2021. In certain circumstances it will likewise potentially pay the same maximum as the earlier grants, being 80% of average three months' profits and will be capped at £7500. However, specific differences from earlier grant means that whilst eligibility will still be based upon a business being adversely impacted by coronavirus during the claim period, the 80% grant rate will only be paid to businesses that experience a year on year reduction in turnover of at least 30%; businesses that see a drop of less than 30% will instead only be paid 30% of average three months' profits, and for these cases a cap of £2,813 will be applied.
For the purposes of the 'year on year' comparison it will be turnover for the 2020/21 year that is compared to the turnover of the 2019/20 year. If that does not merit a claim then 2020/21 may be compared to the 2018/19 year instead. It is the turnover figure declared on each year's Tax Return that is the relevant figure to use, and so care must be taken because in many cases the grant claim will be made in advance of the 2020/21 Tax Return being submitted to HMRC.
When it comes to partnerships an individual partner's claim must be based upon the entire business turnover proportioned so as to match that particular partner's profit share. As example, if the partnership's total 2020/21 turnover was £800,000 and the partner involved received a 20% share of profit, then the turnover figure he/she would use is £160,000 (i.e. £800,000 x 20%) and so on.
Because the condition of 'adversely impacted by coronavirus' relates to the five months of May 2021 through to September 2021 it is likely that some claimants will chose to delay their claim to a degree so that they can better assess the affect of coronavirus across that whole five month period. Either way, if the fifth grant is to be claimed then the claim must be made by 30 September 2021 at the latest.
What is 'Adversely Affected'?
In order to be eligible for the scheme, an individual’s trade must have been adversely affected by Covid-19 and experienced a direct lack of demand as a result. Examples that could cause lack of demand may include:
You have had to scale down; Government restrictions mean that you cannot trade; you have had difficulty getting hold of business supplies; you have had no customers or fewer than usual; your staff have been furloughed; one or more of your contracts or orders have been cancelled.
It is very important that those claiming under the scheme should be able to evidence how, why and when their business saw a lack of demand or adverse coronavirus related impact.
Importantly, if an individual's business naturally recovers after he/she has made their claim then eligibility should be unaffected. However, HMRC may well take a different view if, for instance, a claim was made in say late July 2021 in the full knowledge that a significantly large order book had already been secured for August 2021 and September 2021.
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Timings?
As mentioned above, the claim window for grant five opened around mid-July 2021 and runs until 30 September 2021. All late claims will be denied.
HMRC aim to pay legitimate grants within 7 working days of making a claim, and they remit all grants directly into a nominated bank account.*
HMRC usually contact taxpayers who look as though they may qualify for the SEISS grant so as to inform them of their potential eligibility. However, in case such contact is missed, it would be advisable to separately diarise and claim as and when appropriate.
Please watch out for any fraudulent or spoof correspondence from HMRC as scammers will no doubt try to capitalise upon the situation.
All grant applications must be made online and whilst we can obviously offer the necessary advice, it should be noted that claims will have to be made to HMRC by the individual via an online 'personal tax account'. However, because we liaise with HMRC on your behalf it is likely that you will not previously have registered for one as there has been no need. As such if you do not have a personal tax account in place then clicking on this link should take you to the appropriate HMRC registration page:
https://www.gov.uk/personal-tax-account
You can check whether you are eligible for SEISS and the allocated timing of your claim by clicking here. All you will need to make a check is your tax reference number (known as a UTR) and your National Insurance Number.
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Government link:*
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COMPANY OWNER / DIRECTORS
Typically an owner director will take a small salary and then extract the balance of his/her income via dividends.
However, as yet the Government has not extended any specific support to owner directors aside from the general measures such as VAT and self-assessment tax deferral, employee furloughing, business loans, rate reliefs and, potentially, Universal Credit. These are all outlined further below.
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EMPLOYERS
Coronavirus Job Retention Scheme (CJRS)
The Coronavirus Job Retention Scheme (CJRS) has now been extended to the end of September 2021.
All UK businesses are eligible for the CJRS irrespective of their size.*
For the CJRS employers should designate an affected employee (or employees) as a ‘furloughed worker’ and notify the relevant employee of this change. It should be noted that changing the status or conditions of an employee remains subject to existing employment law and, depending upon the furloughed employee's particular employment contract, may be subject to negotiation. Under the scheme, a furloughed worker was entitled to 80% of their normal salary up to a cap of £2500 per month, although employers may pay more than this if they wish and can afford to do so.
In order to qualify as a furloughed employee the scheme requires an employee to have been employed and paid by 30 October 2020 for claims made up until 30 April 2021 and employed and paid by 2 March 2021 for claims made after 1 May 2021.
For CJRS purposes the timing of an employee's start date is determined by whether or not a payroll RTI report was submitted to HMRC on or before either of the above dates.
From 1 July 2020 an employer was allowed to bring back workers on a part-time basis if required. As such, if an employee worked for two days out of five then the employer would be expected to pay full wages for those two days with the furlough scheme applying to the other three days, and so on. The latest extension to the scheme does not alter this flexibility.
An employer must submit information about the employees who have been furloughed, and their earnings, via HMRC's online portal.
Under the extended scheme, until 30 June 2021 HMRC will reimburse 80% of furloughed workers wages costs up to a cap of £2500 per month, but the scheme will provide no assistance in respect of employers' national insurance or the employers' share of staff pension costs.
However, for July 2021 the employer must fund 10% of the employee's 80% furloughed pay, with the Government picking up the tab for the other 70%. For August and September 2021, the final two months of the scheme, the ratio will change to 20% employer and 60% Government.
The claims window will be quite short, with claims for one month having to be made within 14 days from the start of the next.
Coronavirus business support has been heavily targeted by fraudsters. Therefore, as part of the Government's prevention measures it will be publishing the names of all employers that use the furlough scheme from December 2020 onwards. This means that employees will be able to see whether or not their employer is making any furlough claims in respect of their workforce.
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Coronavirus Job Retention Bonus
This will no longer be paid.
The Government was to introduce a one-off 'bonus' payment of £1,000 to UK employers for every furloughed employee who was continuously employed up until the end of January 2021. The subsequent extension to the CJRS to September 2021 effectively rendered the bonus redundant, hence it will no longer be applied.
Whether or not the Government decides to offer some form of job retention incentive at a later date is yet to be seen.
Support for businesses who are paying sick pay to employees
The Government will bring forward legislation to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to Covid-19. The eligibility criteria for the scheme will be as follows:
This refund will 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 - the size of an employer will be determined by the number of people they employed as at 28 February 2020.
Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of Covid-19.
Small businesses will be able to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to Covid-19, and this refund will cover up to 2 weeks’ SSP per eligible employee who has been off.
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GENERAL BUSINESS SUPPORT
Support for businesses through VAT Reduction, VAT Deferment and Income Tax
VAT:
Reduction: An intended six month VAT cut for pubs, restaurants, accommodation and attractions has now been extended until 31 March 2022.
For relevant businesses the VAT rate dropped from 20% to 5% on 15 July 2020 in respect of food and non-alcoholic drinks sold by restaurants, pubs and cafes etc. Hot takeaway food is also included.
Accommodation in the likes of hotels and B&Bs, and admission to attractions such as theme parks and cinemas, is also covered.
The reduced 5% rate will be in situ until 30 September 2021 when it will be increased to 12.5% for the next six months to 31 March 2022. It will then revert to the standard rate of 20%.
Very importantly, this means that until 30 September 2021 any business selling alcoholic drinks alongside food or non-alcoholic beverages, or as part of offering accommodation, will need to differentiate and record the portion of their overall takings that relates to the 5% rated element of their sales. The same situation applies 1 October 2021 to 31 March 2022 whilst the temporary 12.5% rate is in operation.
Care will also be needed when supplying a VAT receipt to a customer if mixed VAT rates are involved.
Deferment: VAT due to HMRC between 20 March 2020 and 30 June 2020 could be deferred. This was an automatic offer with no application required and so businesses did not need to make a VAT payment during this period. Nonetheless, there was no exemption from actually submitting the related 'deferred payment' VAT Return.
In respect of settlement VAT payers were originally given until 31 March 2021 to clear their deferred VAT in full. However, the Government has since announced that this can be paid off instead via smaller direct debit remittances across the subsequent year, via the VAT Deferral Scheme. As such, the deferred VAT must now be settled by 31 March 2022 at the latest.
In order to spread the VAT payment an online application to HMRC via the VAT payers own Government Gateway account is required. Deferment applications must be made between 23 February 2021 and 21 June 2021, and this link should take you to the appropriate sign-in page:
https://www.tax.service.gov.uk/pay-vat-deferred-due-to-coronavirus/eligibility
Income Tax:
For those covered by Self Assessment the coronavirus concessions allowed for the deferral of the 31 July 2020 tax payment to 31 January 2021, this deferral being free from HMRC interest or late payment penalties. However, subsequent changes mean that the deferred July 2020 amount, and the January 2021 payment itself, can now be settled over the subsequent 12 months - i.e. paid in full by 31 January 2022.
To achieve this a 'time to pay' payment plan must be put into place via an online application to HMRC, albeit the Government has indicated that acceptance will be automatic and immediate (time to pay arrangements usually incur HMRC interest charges).
Corporation Tax:
HMRC have scaled up similar time to pay arrangements when it comes to paying corporation tax. As such, companies that find themselves in temporary financial distress as a result of Covid-19 can apply to HMRC for a payment plan. Unlike Self Assessment, acceptance is not automatic as companies are usually assessed on a case by case basis, albeit the general impression is that company applications will be looked at favourably for the most part.
If you are concerned about being able to pay your tax due to Covid-19, call HMRC’s dedicated helpline on 0800 0159 559.
Government link:
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Support for retail, hospitality and leisure businesses that pay business rates
Business rates relief is to continue for the 2021/22 rates year for eligible retail, hospitality and leisure related properties. Between 1 April 2021 and 30 June 2021 there will be 100% rates relief, and for the remaining nine months to 31 March 2022 this will drop to 66% (the latter is subject to a monetary cap, albeit the maximum support applicable to most small businesses is likely to work out less than the cap in any event).
Cash grants for premises closed as a result of lockdown.
A local authority grant has been available since November 2020 to businesses that have had to close due to the national lockdown requirements, and so this is effectively an expansion of the grant that was already being made available to businesses that had to shut because of localised or national restrictions.
To be eligible a business must be registered for business rates and the grant amount will be dependent upon rateable value:
Rateable Value to £15000: Grant = £1334 per 28 day qualifying period.
Rateable Value £15001 to £50999: Grant = £2000 per 28 day qualifying period.
Rateable Value £51000 and above: Grant = £3000 per 28 day qualifying period.
Grants will be paid by the relevant local Rating Authority, which will also process the grant applications themselves.
Restart grants are to be payable to certain businesses from April 2021 to assist them to start operating again.
Coming out of lockdown, non-essential retail outlets etc are to open earlier than hospitality and leisure businesses. As such, grants of up £6000 will be available to non-essential retail whilst a higher figure of up to £18000 will apply to hospitality.
To be potentially eligible your business must be registered for business rates and it had to close due to the recent coronavirus restrictions; or it had to close to such an extent that it could not offer its usual person to person customer service from the business premises (aside from say click and collect).
A business will not be eligible if the decision to shut was voluntary rather than required by law. Therefore, a business choosing to adopt a 'premises closed' policy will not receive the grant if the business in question could have legitimately opened.
Grants will be paid by the relevant local Rating Authority, which will also process the grant applications themselves.
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Support for businesses via Coronavirus Loans
CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME ('CBIL')
Applications for a CBIL scheme loan must be made by 31 March 2021. All major banks are offering this scheme and the scheme covers all business sectors.
At the discretion of the lender overdrafts can be included and so the CBIL scheme can extend to cover general business borrowing as well as formalised loans.
How do I evidence my viability?
Businesses will need to have a sound borrowing proposal (notwithstanding the disruption caused by the current Covid-19 pandemic). The required criteria will no doubt vary by lender, but could include providing information such as recent accounts and trading information, as well as cash flow forecasts. Lenders will provide their own guidance on what information they need to assess a finance application.
Will I have to pay interest on my loan?
If a business is eligible for the CBIL scheme then the Government will provide a grant to small and medium businesses ('SMEs') to cover the interest and initial fees levied by the lender (e.g. arrangement fees) for the first 12 months. After the expiry of 12 months interest will then be payable and lenders will let businesses know what the cost of this is.
With a loan facility it may be necessary to provide capital repayments on a regular basis, but lenders may be able to provide capital repayment holidays subject to discussions with them.
Businesses who borrow under the CBIL scheme will also not be subject to early repayment charges should they choose to repay their financing before its term ends.
Businesses will still be wholly responsible for paying the facility back, as well as interest and fees charged by the lender after twelve months.
Products covered by the scheme were intended to have a maximum term of six years although the Government has recently indicated that the term will be extended for up to ten years. However, for overdraft or invoice finance, the term is shorter.Is the CBIL Scheme a loan or a grant?
The scheme is not a grant. The scheme provides a guarantee to a lender to allow them to provide finance, but businesses will still have to repay this loan or facility. The Government is underwriting 80% of the loan amount.
Business are liable for the debt and lenders may ask for personal guarantees and security over business assets to support the borrowing facilities.
What sort of personal guarantee or security will businesses have to provide?
Under the terms of the scheme, security may be required for facilities over £250,000 although a borrower's private residence cannot be taken as security under the scheme.
BOUNCE BACK LOANS
Since May 2020 the Government has additionally been offering a new style of loan aimed primarily at smaller businesses, commonly known as a 'bounce back loan'. Applications for these loans can made until 31 March 2021.
Loans can range between £2000 and £50000 and will be 100% guaranteed by the Government, which will also cover the cost of interest and charges for the first year, albeit the loans will be subject to an underlying flat rate interest charge of 2.5% per annum.
There will be no need for the recipient to make any loan repayments for the first 12 months and the loans will be offered for a maximum of ten years (when originally released the maximum term was to be six years although the Government has recently extended this).
Bounce back loans are being offered via the usual high street banks etc and there is no requirement to take a bounce back loan from the institution that the business banks with, although that may prove easier. However, unfortunately these loans have proven to be a very easy target for fraudsters, so much so that many lenders have since either decided to temporarily suspend offering the loans or they are being more selective about advancing them.
Nonetheless, the application process itself is quite straightforward, the intention being that this will allow funds to be extended to businesses very quickly.
These will be offered from 6 April 2021 and, subject to review, until 31 December 2021.
Recovery Loans are closer to a CBIL than a Bounce Back Loan insofar as the Government will underwrite 80% of the amount borrowed. Therefore it is fully expected that the banks and lending institutions that offer Recovery Loans will look at typical lending criteria when assessing borrower suitability, such as ability to repay, the viability of the business in question and so on.
It should be noted that businesses that have already taken out a CBIL or Bounce Back facility will not be excluded from applying for a Recovery Loan.
The loans will be open to all business sectors and will cover borrowing between £25001 and £10m. General business borrowing, such as overdrafts, can be included and the permitted length of the loan will depend upon the type of borrowing taken, for instance a maximum of six years for formalised loans against only three years for overdrafts.
No personal guarantees will be required for loans of up to £250000 and the borrower's private residence cannot be taken by a lender as security.
OTHER SUPPORT
If you are not entitled to any of the above then you may need to apply for Universal Credit (or Employment Support Allowance (ESA)).
The amount offered is currently approximately £95 per week although the Government will enhance this by £20 per week until September 2021.
However, you may also be able to get help for rent, and there is the potential for a mortgage holiday which is mentioned below.
Do not delay making a claim for benefits if you think you might have been financially affected by coronavirus.
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Government link:
https://www.gov.uk/universal-credit
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Citizens Advice ‘Get help applying for Universal Credit’:
https://www.citizensadvice.org.uk/benefits/universal-credit/claiming/helptoclaim
What do I do if I can’t make my monthly mortgage payment?
The first thing to do is to contact your lender.
Many of the major banks and lenders now have information on their websites for people who have been affected by loss of earnings due to coronavirus, either directly or indirectly.
If your lender can offer a mortgage holiday then you should not be required to pay anything for up to three months, and they may also offer other alternatives, such as changing your mortgage so as to allow payment of a smaller amount each month.
A mortgage holiday may not be the best option if your circumstances are unlikely to change in the near future as your payments will return to normal after the three months are up.
The interest you should have paid will also be added to the total which you owe and will need to be paid later - it does not get wiped off your account.
The borrower will also need to make up the missed repayments in the future, which could be over the remaining term of the mortgage.
If this is the case, then your monthly repayments will be slightly higher than before if you want to pay off the mortgage in the same time.
The best thing to do is check carefully with your lender about how it will work.
Please bear in mind that banks and lenders are currently receiving large demand for this service, and so it can take a long time to get through. They are working to improve the access for those who need it.
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