Naturally I am being asked daily by clients for updates on what support is available for businesses and individuals. I have held off sending this on the grounds I was waiting for details rather than just the announcement. In addition, new announcements are made every day. For example I had written this yesterday (on 25th March 2020) only to then see that there will be a new major announcement to be made today about the self-employed. So there will be further updates when we know more!
I have broken down the topics I am covering roughly in order of the frequency of questions we have received. The topics are:
- Job Retention Scheme - Furloughing
- Coronavirus Business Interruption Loan Scheme
- VAT deferral scheme
- Business rates holiday for retail, hospitality and leisure businesses.
- Cash Grants for retail hospitality and leisure businesses
- Cash Grants for Small Businesses (based on rates paid)
- Statutory Sick Pay for Coronavirus
- Income Tax payments in July 2020
- Other options
Job Retention Scheme - Furloughing
What is it:
There is more misinformation about this than any of the other announcements. The government has said that they will provide a grant for up to 80% of the salary subject to a cap of £2,500 (equivalent to 80% of a salary of £3,125 per month (£37,500 per annum). The idea is that rather than lay off employees they can be 'Furloughed' and told they don't need to work. Indeed, it is a requirement that they must not be working. Where the business had either laid off the employee or sent them home without work then this scheme can be backdated to 1st March 2020 so long as they are kept on the payroll. You can top up their wages should you wish to 100% but the government will only pay 80%.
How do you get it:
Here the fun starts! First you must notify the effected employees that they are being furloughed and from what date this will start (potentially 1st March). Then you must upload the details to an HMRC portal with the information required. Then HMRC will reimburse the relevant proportion.
Pros:
This is great to avoid redundancies and in theory could be genuinely useful. Theoretically this can last for 3 months at which time it may be extended.
Cons:
Whilst the announcement is great the practice is quite frankly a shambles. First, there is the potential that the employees' contract of employment doesn't even allow you to do this. I suspect that there will be a number of HR cases once this is all over. Secondly the HMRC portal doesn't yet exist. Nor do we know what information is required. Thirdly we don't know when the money will be repaid or exactly what will be repaid. Will they for instance deduct any PAYE that you owe them before refunding the difference?
We also don't know if directors of owner managed businesses can claim. Of course, as most such individuals are on a low salary and high dividend it is only the salary that element that can be claimed for. But do remember that even in order for the directors to claim they cannot be working.
And the timescale for all this is a bit woolly too. The end of April keeps being bandied about but whether the refunds are coming though by then … I have my doubts. The same message has been on the government website since the announcement was made. That message says: “HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.” Not very useful!
My verdict:
Should be a great benefit to businesses but there are so many practicalities still to be sorted out that I fear the grants won't arrive for some time.
Coronavirus Business Interruption Loan Scheme (CBILS)
What is it:
The government will provide lenders with a guarantee of 80% of each loan. The maximum that can be applied for is £5m and for a period of up to 6 years. The government will cover the interest of the first 12 months payments. I also understand that from the lenders I have spoken to that you don't need to make any capital repayments for 6 months.
Note that you are only eligible for a CBILS loan if you do not have security to obtain a loan in the normal way. If you can demonstrate that you don't have security then the government offers the bank a guarantee that they will repay 80% of the loan if the business fails. To be clear - the business is liable for 100% of the loan. The only time that the guarantee comes into effect is if the company fails and goes into liquidation. If you do have security though, you can't get a CBILS loan.
How to get it:
You apply to your bank for a loan in the normal way and see if you are eligible. The loan application will be quite standard, and you will need to demonstrate the business case for needing a loan and provide accounts and all the usual information required. All of the high street and most (but not all) of the challenger (smaller) banks are signed up.
Pros:
If you are eligible you can borrow up to £5m for up to 6 years. There is no arrangement fee charges by the bank, you do not need to repay anything for 6 months and for the first 12 months the government will pay the interest rate.
Cons:
Your business has to be one the bank feels is viable and that under normal trading you can show that you could afford the repayments. I don't believe the process will be particularly quick – despite all the announcements. In my experience business loans usually take 4 to 8 weeks and that is when there is normal demand. If you are not eligible because you have security, then you can obtain a normal loan with an arrangement fee and repayments with interest starting on month 1. You have to demonstrate why you need the amount you are borrowing. The managers I have spoken to (who are genuinely trying to help) are exasperated by this. They understand that if we don't know how long this situation is going to last how are you supposed to know how much you need to borrow?
My verdict:
A very good deal if you are eligible but don't expect the money to arrive for 4 to 6 weeks and I would suspect that the banks will not be wishing to lend to certain sectors and so make it very difficult for those to obtain a loan.
VAT deferral Scheme
What is it:
You can defer your next VAT bill that is due between 20th March and 30th June 2020. The bill must be paid before 5th April 2021.
How you get it:
You don't need to apply it is automatically available. You still need to complete your VAT return on time though
Pros:
A simple system for deferring your next VAT bill and it seems there will not be interest charged (although as with so much details are a little sketchy).
Cons:
Remember this is just a deferral … you will need to pay any amounts across to HMRC before 5th April 2021. You MUST cancel any DD set up to pay your VAT because otherwise HMRC will try and collect payment. You will need to re-set up the DD for future payments.
My Verdict:
A simple and helpful cash flow advantage and is effectively a short term (interest free we think) loan. But remember it is just a one-off boost that must be paid in 12 months.
Business rates holiday for retail, hospitality and leisure businesses.
What is it:
There will be business rates holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. Local authorities are apparently in the process of rebilling for those properties affected which will mostly be currently being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- as hotels, guest & boarding premises and self-catering accommodation
How do you get it:
There is no action for you. This will apply to your next council tax 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.
Pros:
Excellent for those affected so long as the local authority don't try and collect amounts based upon the original bill before the rates holiday was introduced.
Cons:
It is not available for all the other businesses that are suffering. You are reliant on the local authority who appear overwhelmed by what they have to do.
My Verdict:
This is a genuine help to some businesses albeit most of those that this applies to have been required to close – so whilst it is a saving they have no income at present.
Cash Grants for retail hospitality and leisure businesses.
What is it:
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 £15,000 and under will receive a grant of £10,000. Businesses in these sectors with a property that has a rateable value of between £15,000 and £51,000 will receive a grant of £25,000.
Properties that will benefit from the relief will be occupied 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 get it:
You do not need to do anything. Your local authority will write to you if you are eligible for this grant.
Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.
Pros:
This will be great for those in relevant sectors.
Cons:
It is not available for all the other businesses that are suffering. You are reliant on the local authority who appear overwhelmed by what they have to do, and I doubt the money will be coming very quickly.
My Verdict:
This is excellent for those businesses that will get the grant, but I fear it will take some time to for the money to hit the account.
Cash Grants for Small Businesses.
What is it:
There is a potential £10,000 grant for those small businesses that already pay little or no business rates because of Small Business Rate Relief or Rural Rate Relief and Tapered Relief.
Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a
How to get it:
You do not need to do anything. Your local authority will write to you if you are eligible for this grant.
Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.
Pros:
This will be great for those small businesses that it applies to.
Cons:
It is not available for all the other businesses that are suffering. You are reliant on the local authority who appear overwhelmed by what they have to do, and I doubt the money will be coming very quickly.
My Verdict:
This is excellent for those businesses that will get the grant, but I fear it will take some time to for the money to hit the account.
Statutory Sick Pay (SSP) for Coronavirus
What is it:
Employees who are sick with Coronavirus symptoms must self-isolate for 14 days. To encourage them to do so they will be entitled to SSP from day 1 (usually the first 3 days are unpaid). Employers will be able to claim the SSP paid back from the government.
How you get it:
if an employee is off due to Covid-19 then you can pay the employee up to 2 weeks SSP (from day 1) so long as you company had less than 250 employees on 28th February 2020. The employer needs to maintain records but does not require a GP fit note. The employer will need to reclaim the expenditure from the Government. The current guidance states: A rebate scheme is being developed. Further details will be provided in due course once the legislation has passed.
Pros:
Many people don't realise that employers cannot normally claim back SSP as this was gradually withdrawn over the last decade and was completely stopped a few years ago. So there is at least some benefit here.
Cons:
There is nothing set up to enable the business to actually get the SSP back at the moment. The government website 'helpfully' states that they will work with employers over the coming months (note they say Months not weeks!) to set up a repayment mechanism. Just as a point remember employees are accruing holiday entitlement whilst off sick.
Verdict:
The employer will be out of pocket for a number of months. That said at least (assuming they can survive) they get something back that they normally cannot claim for. But there is no short-term benefit here.
Income Tax payments in July 2020
What is it:
Those in the self-assessment system do not have to make their second self-assessment payment on accounts in July. (This has been amended from just the self-employed). However, the advice says that if you can pay it to do so!
How you get it:
There is no application, the second payment on account due in July just doesn't need to be paid.
Pros:
A benefit for cash flow for all.
Cons:
If you do take advantage of this remember this is just deferring when the tax will be due. You will therefore have a bigger payment due in January 2021.
My Verdict:
Useful for those that may find it difficult to pay in July.
Other options
HMRC – Time to pay – HMRC are being fairly relaxed about allowing time to pay for outstanding taxes. However, you should get agreement first before not paying. Getting through on the phone however is proving problematic. One of our clients phoned up and the announcement said they were something like number 113,000 in the queue! One of the problems is also it seems very much dependent upon the person you talk to as to what response you get. All accountants have known for a long time that if the person says no to time to pay the correct response is to phone back in half an hour and see if the next person you talk to says yes. More often than not they do! In the current climate however the indications are that they are being pretty helpful.
Self-employed – there is an announcement due today and we will update you once we know more.
Mortgage holidays – you can apply for a 3 month mortgage holiday from your lender. My understanding though is that this is not guaranteed and that just not paying, without agreement from the lender will put you into default. The trouble is trying to get through to some lenders. Some have or are setting up online portals to apply.
Other loans and Hire purchase holidays – many lending companies are allowing you to take a payment holiday for other loans and HPs etc. But check with them first.