To assist businesses that are grappling with the ramifications of the COVID-19 “Lockdown”, we have brought together the latest guidance on the support the government is providing. More particularly we have tried to address questions which our clients have been raising about this.
We hope that this is of assistance as you consider your options at this stage. If there is further assistance we can give – for example if a bank requires a cash flow forecast, then please get in touch with us.
The starting point is this Government website, which is being updated daily, so if you have a question, you may find it addressed a day or two later:
The system is not yet active, and the guidance is being refined all the time, but the current guidance can be found here – https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
In outline the government will pay a grant to help fund the gross pay and employment costs of furloughed employees. These are employees who cannot work and would otherwise be laid off. Please note that our understanding is that:
- The employees cannot work part time – the employee will be kept on your books but not be working at all.
- The employer must write to the employee confirming that they have been furloughed and keep a record of this.
- The minimum furlough period is 3 weeks, so staff do not need to be furloughed for the whole of the period of the scheme.
- The government will fund up to 80% of the “regular” salary and employment costs, if the employee agrees to be furloughed.
- You must pay the employee at least the amount of the grant claimed (ie the 80% of “regular” salary. You are not obliged to pay or fund the additional 20%, although you may if you wish to.
- If you wish to reduce the employee’s salary to be closer to the grant available, this is a change in employment terms which will need the agreement of the employee concerned.
- The facility is backdated to 1st March, so you can go back and re-engage employees laid off between then and now.
- When live, details of employees furloughed in this way will need to be uploaded onto a new HMRC portal.
- The maximum funding available from the government is £2,500 per employee per month plus the associated employment costs such as national insurance and some employer pension costs
- Claims will be audited retrospectively by HMRC.
The grant is calculated on the “regular” salary as at 28th February 2020, which excludes variable elements such as commission and bonuses. For employees on variable pay the regular salary used can be the higher of:
- the average monthly earnings for the 2019/20 tax year; and
- the earnings of the month of the claim in the previous year.
Individuals receiving a mix of low salary & dividends will only be able to obtain funding based on the salary element.
If you have HR/employment law questions about how to deal with staff, then our clients can access an HR Telephone helpline run by Croner Taxwise, you can call 0844 892 2807 and speak to one of their team. The Scheme number you will need when asked is 27901.
Staff who are self-isolating due to their own or household symptoms of COVID
SSP is available from day 1 of the self-isolation period. You need to maintain a record of absences to claim, but no formal fit (“sick”) notes are required.
- If your business is VAT registered, then payments of VAT due to be paid at the beginning of April, May and June may be deferred until 5th April 2021. No application is required, but you should cancel your direct debit if you wish to take advantage of this and normally pay this way.
- If you are self-employed, then the income tax payment due on 31st July 2020 will be deferred until 31st January 2021. You do not need to apply – just don’t make the payment.
- If you operate as a limited company and are concerned about the payment of corporation tax, or have PAYE liabilities that may be difficult to meet, then HMRC have scaled up the help they will give through “Time to Pay” arrangements. You need to apply for this, if you have missed a payment or might miss your next payment, by telephoning 0800 0159 559. Do not ring if you have general worries about future payments, you need a specific debt to discuss with them.
- A business interruption loan may be able to assist. This is loan or overdraft finance for up to 6 years. The first 12 months of interest and any up-front fees will be covered by the Government, who will also guarantee up to 80% of the loan. You need to apply for this from your bank or another institution, and it will still be subject to the bank’s own lending criteria. Further details about criteria and the banks offering this facility can be found here – https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
Financial support for the self-employed will be paid in June, so such businesses will need to rely upon other measures, including business interruption loans (see above) to bridge the gap until a payment is made.
Qualifying self-employed individuals or partners in a partnership must:
- Have submitted a 2018/19 tax return reporting trading profits.
- Have trading profit of less than £50,000 reported on their 2018/19 tax return, or an average annual trading profit of less than £50,000 reported on their tax returns for 2016/17, 2017/18 and 2018/19.
- Receive more than 50% of their income from trading activities in the relevant tax returns.
- Be continuing to trade now or would be if it were not for the COVID-19 crisis.
Eligible individuals will be identified by HMRC and invited to apply for the grant, which will be paid in June. The payment is at a rate equivalent to 80% of the average profits reported on their tax returns for 2016/17, 2017/18 and 2018/19, subject to a cap of £2,500 per month and it will initially cover the three months of March to May.
A business rates holiday is available for retail, hospitality and leisure businesses for the whole of the 2020/21 tax year. You do not need to apply for this, but it will be granted automatically by your local authority.
This has been extended to nursery businesses, and it is possible that there will be further extensions announced.
A one-off grant is available to some businesses in the retail, hospitality and leisure businesses. This is either nil, £10,000 or £25,000 depending on the rateable value of the property.
A one-off grant of £10,000 is available to businesses that receive the benefit of small business rate relief (SBBR).
You do not need to apply for these, but your local authority should initiate payment.