Coronavirus Government Support


Last updated 30th May 2020:


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.

Things are quite fluid and so many of the whys and the wherefores are still to be determined.  Therefore please note that the brief narrative below will no doubt alter from time to time as the overall picture becomes clearer.  Nonetheless it represents what is currently believed to be an interpretation of the announcements and rule changes so far. There are also links directly 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 will no doubt try to make the most of the 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


VERY IMPORTANT: IN ORDER TO MAKE ANY CLAIMS UNDER THE SELF-EMPLOYED INCOME SUPPORT SCHEME YOU WILL REQUIRE YOUR OWN ONLINE 'PERSONAL TAX ACCOUNT' WITH HMRC.  SEE THE APPROPRIATE WWW.GOV LINK UNDER THE 'HOW TO CLAIM' SECTION' BELOW.

 

Who will be entitled to the Self-Employed Income Support Scheme ('SEISS')?

All self-employed (sole traders and 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 at least one of the following: (a) trading profit and total income for 2018/19 or (b) average trading profits and total income across 2016/17, 2017/18 and 2018/19. 

Those with less than three years' figures should qualify and, for the most part, tax year averaging will be used by HMRC to determine entitlement.

Unfortunately, anyone who commenced their self-employment on or after 6th April 2019 will not be eligible to make any sort of claim under this scheme.

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What is the level of support?

The scheme was intended to run for three months (April, May and June 2020) although the Government has since extended it for a further three months, and so it now finishes at the end of September 2020.

For the initial three months the scheme pays 80% of average profits up to a maximum grant of £2500 per month (and so capped at £30000 per annum), and for the second three months this is reduced to 70% of average profits and capped at £2187 per month.  Therefore, someone receiving a total grant of say £6000 for the first three months will see this drop to £5250 for the second half of the scheme.

If average profits are less than the maximum grant, then the amount of grant payable will be proportionately matched to the actual lower profit figure.

Example: If average profit worked out at say £22500 per annum then the grant would be £4500 for the first three months (i.e. £22500 x 80% = £18000. Divided by 12 = £1500 per month. Therefore £1500 x 3 months = £4500).

This grant is taxable and will need to be subsequently declared to HMRC via the annual Tax Return.

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How to claim?

HMRC will automatically assess historic Tax Return data to determine who qualifies and how much they will be paid.  HMRC should then contact those taxpayers and invite them to apply. 

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 assist, it should be noted that claims will have to be made to HMRC via an individual 'personal tax account'. However, because we liaise with HMRC on your behalf it is likely that you will not have one as there has been no need and so, currently, the majority of our clients will not have a personal tax account.

Therefore, if you do not have one in place it is vital that you create an account as soon as possible by clicking on:

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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Timings?

Claims for the first three months began on 13th May 2020 with funds being paid directly into a nominated bank account soon afterwards; the second claims can be made in August 2020. To prevent the system from being overwhelmed the specific timing of when an individual can claim is being staggered to a degree by HMRC.

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Government link:

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

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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.

It should be noted that an owner director can furlough themselves as long as they carry out no work on behalf of their company whilst doing so, unless essential under the Companies Act 2006.  See EMPLOYERS below.

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EMPLOYERS

Coronavirus Job Retention Scheme

The initial version of the scheme runs to 30th June 2020, and an amended version will then run until 31st October 2020. The scheme is designed to allow an employer to keep employees on who might otherwise have to be made redundant.

All UK businesses are eligible.

Employers should designate affected employees as ‘furloughed workers’ and notify the relevant employees 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 employment contract, may be subject to negotiation.  Under the scheme, and until the end of July 2020, a furloughed worker is 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.

Current employees who were on the payroll and paid in February 2020 qualify to be furloughed, as do employees who started in March 2020 as long as they were paid wages for the first time on or before 19th March 2020.

Until 30th June 2020 a worker or director is not permitted to work for the business whilst they are furloughed. That said, it is recognised that directors have responsibilities under the Companies Act 2006 with regard to their company.  As such they will be allowed to carry out work that is judged to be reasonable or necessary in order to comply with those responsibilities.  Therefore work connected with generating revenue etc would be excluded.

However, from 1st July 2020 an employer will be 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.

An employer must submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.

Until 31st July 2020 HMRC will reimburse 80% of furloughed workers wages costs, up to a cap of £2500 per month. However, this percentage will reduce to 70% and be capped at £2187 per month for September 2020 and will further reduce to 60% and be capped £1875 per month for October 2020.  During September and October 2020 the employer will be required to make up the difference in order to bring an employee's wages back to at least the '80%' level.

For the purposes of furloughing and the amount to be refunded, for the first three months of the scheme the proportionate cost of the employer's national insurance contributions and their pension contributions will be taken into account.  However, with effect from 1st August 2020 the scheme will provide no further assistance in respect of these particular costs.

HMRC's online furlough reimbursement system can be accessed via: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme.  Should you not already have one then you will first need to set-up an online PAYE account with HMRC, as the associated login details are the same as those needed to start your claim.

There is also a useful HMRC furloughed wages calculator which provides a guide as to how much you can claim back (https://www.gov.uk/guidance/work-out-80-of-your-employees-wages-to-claim-through-the-coronavirus-job-retention-scheme#calc).


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Government link (for scheme details):

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-job-retention-scheme

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 of 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.

The links between sick pay and furloughing workers is as yet unclear.


Sick notes can be obtained via the NHS 111 website.  This also applies to those isolating because another member of their household is unwell.

Eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force

The Government's online system to enable the relevant SSP re-claim is to go live on 26th May 2020.

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Sick pay (from your employees' perspective)

Those who follow advice to stay at home and who cannot work as a result will be eligible for Statutory Sick Pay (SSP), even if they are not themselves sick.

Employers should use their discretion and respect the medical need to self-isolate in making decisions about sick pay.

Entitlement to SSP depends upon length of service and the employer's contract. They may be entitled to up to £94 per week.

This is available from Day 1 of not being able to work.

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GENERAL BUSINESS SUPPORT


Support for businesses through deferring VAT and Income Tax


VAT:  Payments of VAT for any UK business will not have to be paid for 3 months.

For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. VAT payers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period.

You should still file your VAT Returns when due.

If you wish to defer payment you must cancel your direct debit (and re-establish it in due course) otherwise HMRC's system will assume that you wish to pay on time and it will collect your remittance in the usual manner.

Income Tax: For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. If you are self-employed you are eligible. If you want to pay something, it might be worth looking at the online time to pay instalment options – see end of document.

This is an automatic offer with no applications required.

No penalties or interest for late payment will be charged in the deferral period.

HMRC have also scaled up their Time to Pay Offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

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:

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

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

The Government will introduce a business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

You are eligible for the business rates holiday if:

Your business is based in England

Your business is in the retail, hospitality and/or leisure sector

Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:

as shops, restaurants, cafes, drinking establishments, estate agents, cinemas and live music venues for assembly and leisure

as hotels, guest & boarding premises and self-catering accommodation.


How to access the scheme

You should not need to do anything. This will relate to your next rates bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They will do this as soon as possible.

You can estimate the business rate charge you will no longer have to pay this year using the Government’s Business Rates Calculator.


Cash grants for certain retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25000 per property.

Businesses in these sectors with a property that has a rateable value of £15000 and under will receive a grant of £10000.

Businesses in these sectors with a property that has a rateable value of between £15000 and £51000 will receive a grant of £25000.

You are eligible for the grant if:

your business is based in England

your business is in the retail, hospitality and/or leisure sector

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

as hotels, guest and boarding premises and self-catering accommodation.


How to access the scheme

You do not need to do anything. Your local authority will write to you if you are eligible for this grant.


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 (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10000 to eligible businesses to help meet their ongoing business costs.

You are eligible if:

your business is based in England

you are a small business and already receive SBBR and/or RRR

you are a business that occupies property


How to access the scheme?

You do not need to do anything. Your local authority will write to you if you are eligible for this grant.



Government link:

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-that-pay-little-or-no-business-rates



Support for businesses through the Coronavirus Business Interruption Loan Scheme ('CBIL')

How to access the scheme?

The scheme is now open for applications. To apply, you should talk to your bank or one of the 40 accredited finance providers (not the British Business Bank) as soon as possible, to discuss your business requirements. You can find out the latest on the best ways to contact them via their websites.

All major banks are offering this scheme. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow. The scheme covers all business sectors.

However, it should be noted that the scheme is effectively a 'fall back' facility and so some banks are taking this to mean that normal bank lending, if offered, must take precedence over a CBIL; and so a normal bank loan or extended overdraft may be what is offered instead.

How do I evidence my viability?

As with other external finance applications, businesses will need to have a sound borrowing proposal (notwithstanding the disruption caused by the current Covid-19 pandemic). The required details to evidence this will vary by lender but might 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 payment to small and medium businesses ('SMEs') to cover the interest and initial fees levied by the lender (e.g. arrangement fees) in the first twelve months so that the SME does not have to cover these. After this twelve-month period interest will be payable and lenders will let businesses know what this 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.

When can I access the scheme?

The scheme was available to businesses from late March 2020. Lenders’ standard facilities are available today and businesses should not hesitate to go to lenders’ online advice pages or ask lenders to ask about these options.

Banks are experiencing a significant number of calls, including from vulnerable customers, and it will be much quicker for businesses to check the guidance online to identify the best way to access the scheme.


What products can I use through the scheme?

A variety of products can be covered by the scheme, as below, and each lender will have to decide which products they wish to supply.

Term loan facilities

Overdrafts

Invoice finance facilities

Asset finance facilities

Not all lenders are accredited for all types of products and they will be able to discuss with businesses what they can offer to best suit their needs.


Is there any limit on the term length of products under the scheme?

Products covered by the scheme have a maximum term of six years, however for overdraft and invoice finance facilities, please note that terms are up to three years.


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. 

Business are liable for the debt and lenders may ask for personal guarantees and security over business assets to support the borrowing facilities.

The Government has announced a number of support measures for businesses, such as grants, for which businesses may be eligible. Further information on these initiatives can be viewed, via the link shown at the top of page one.

What sort of personal guarantee or security will businesses have to provide?

Under the terms of the scheme, security may be required and all available assets are required to be pledged for facilities over £250000. Primary Residential Property will not be taken as security under the scheme.

The Government is underwriting 80% of the loan amount.


BOUNCE BACK LOANS

With effect from 4th 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'.

These 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 six years.

The loans will be obtained from the bank which the business banks with and the application process consists of just seven questions, the intention being that this simplified procedure will allow funds to be extended to the business in question within a matter of days.


Government link:

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


CBIL Summary

In short, the scheme is:

A borrowing facility to provide cashflow support to SME businesses experiencing lost or deferred revenues, or disruptions to their cashflow due to Covid-19 or for funding for investment when lenders cannot support a finance application under normal criteria.

Provided as a loan, overdraft, invoice finance facility or asset finance facility.

Available for products with a maximum term of six years (three years for invoice finance and overdraft facilities).

Accessed through lenders if they are accredited and available on lending up to £5 million.

Due to go live in most cases from the week commencing 23 March 2020.

Open to eligible SMEs which:

are UK based, with sales or turnover of no more than £45 million per annum

operate within any business sector (different terms will apply for a small number of sectors, including: agriculture, aquaculture and transport).

have a sound borrowing proposition and are viable (notwithstanding short-term disruption) but are unable to meet the lenders’ normal criteria. 

The Government will provide a grant payment to SMEs to cover the interest and initial fees levied by the lender (e.g. arrangement fees) in the first twelve months so that the SME does not have to cover these.



OTHER SUPPORT

If you are not entitled to any of the above then you will need to apply for Universal Credit (or Employment Support Allowance (ESA)).

It appears that the minimum income requirements to make a claim are being lowered, and the amount available is potentially a bit higher.

The amount on offer is currently approximately £95 per week although the Chancellor has indicated that this will be topped up by around £1000 over the first year.

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.

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 the coronavirus, either directly or indirectly.

If your lender can offer a mortgage holiday, you won’t pay anything for up to three months.

They may offer you other alternatives, such as changing your mortgage to pay 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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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
































































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