Well, it’s certainly been an unprecedented couple of weeks, and I know many of you will be very concerned with what lies ahead in the coming months. In this email, I aim to outline what assistance may be available for businesses following recent announcements from the Treasury.
So far the approach taken from the Chancellor can be broken down into four main components:
- Funding for Employers to cover 80% of wages for PAYE staff, to avoid widespread unemployment and encourage as many people as possible to stay home (rather than head out to look for alternative employment etc)
- Grants for businesses occupying commercial premises to help cover rent and other overheads
- Deferment of some upcoming tax payments, to aid cash flow
- Access to loans via a Business Interruption Loan Scheme, to further aid businesses’ cash flow
Coronavirus Job Retention Scheme
UK employers will be able to apply for funding of 80% of PAYE salaries for workers who would otherwise have been laid off due to the virus, up to a cap of £2,500/month. Application will be via a new online portal, which HMRC are currently ‘urgently working’ to get set up. Which will inevitably mean that it will crash constantly when it is eventually launched. I think it’s fair to say that there will be a delay before this funding is readily available, and businesses should make other arrangements in the interim.
No further details have yet been released regarding this, and whether company Directors will be eligible to apply for funding for their usual monthly salaries. More information on this one when there is any.
VAT payments normally due during the next 3 months can be deferred until ‘the end of the 2020/21 tax year’ – which I assume is 31.03.2021. I take it this will apply to liabilities due for the quarters ending 29 February (due 7 April), 31 March (due 7 May) and 30 April (due 7 June). Please note this is a deferment of the VAT due ONLY, the liability will still need to be paid eventually, but does at least achieve some short term cash flow advantage.
Also, the Income Tax Self Assessment payment on account due 31 July will be deferred until 31 January 2021.
For both deferments, no application is required by any business/individual wishing to take advantage – HMRC are simply not chasing any payments for which the above applies.
Business Rates Relief
A business rates ‘holiday’ is being introduced for all businesses within the retail, hospitality and leisure sectors, for the 2020/21 tax year. This covers, for example, shops, restaurants, pubs and cafes – just as well since they can’t open. This is being dealt with by the local authority who would normally be responsible for collecting business rates, who will apply it automatically for all eligible businesses.
Cash Grants for retail, hospitality and leisure businesses
The above businesses will be eligible for a cash grant of up to £25,000 per commercial property. Businesses in the sector who occupy premises with a rateable value of under £15,000 will receive £10,000 whilst those with a rateable value of between £15,000 and £51,000 will receive £25,000.
Again, this is being administered by the local authority, who will write to all eligible businesses shortly with further details.
Additional funding for businesses occupying small commercial premises
Further Grants are being made available for all small businesses who currently qualify for Small Business Rates Relief, in the form of a cash grant of £10,000. Again, this is being administered by the local authority, who will write to all eligible businesses shortly with further details.
Coronavirus Business Interruption Loan Scheme
A temporary loan scheme, delivered by the British Business Bank, will launch early this week, to help businesses access bank lending and overdrafts. The government will be providing lenders with an 80% guarantee on each loan to aid confidence. Further details can be found on the British Business Bank website.
HMRC Time To Pay Service
The above, which is always available for businesses struggling to make a particular tax payment, is being somewhat relaxed over the coming months. The service allows businesses to reach an agreement with HMRC to pay a tax liability in monthly payments, where cashflow prevents payment in full by the usual due date.
So if you have, for example, a Corporation Tax payment becoming due in the coming months, first port of call should be to enquire about a Time to Pay arrangement, rather than seeking a loan etc. It seems likely at this stage HMRC will readily agree to any reasonable offer to spread any liability.
So that’s about it at this stage; the focus so far is very much on covering wages to avoid mass unemployment, and providing aid aimed at allowing businesses to continue covering overheads, mainly rent (presumably to try and avoid thousands of businesses defaulting on rent leading to the courts becoming clogged with landlords seeking eviction notices). As many have already pointed out, no aid has yet been provided for the self employed, freelancers and home based business.
If you’re a company director, and have traditionally received a tax efficient salary from the company, it’s possible a claim may be made in due course for 80% of the usual monthly salary – which would therefore only amount to a few hundred £s per month.
If you’re self employed, things are even bleaker with the only option available is to claim universal credit at a rate equivalent to Statutory Sick Pay – currently around £95/week.
If you have any further questions on your particular circumstances, please do not hesitate to give me a call. Please also feel free to pass this email onto any other contacts who you think may benefit from the information.
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