Following on from our previous update on 23rd March, please see below for some updated guidance where further details have been released. This includes a summary of previously announced measures.
Please note that the Government’s announcements in response to the Coronavirus pandemic are moving at unprecedented speed, so please do check official resources such as this source for the most up to date guidance. Please also refer to any more up to date guidance from CRM on the news section of our website, since the information contained herein may be superseded.
In the last week, the two most significant announcements have been the clarification around the furlough payments for staff (officially known as the Coronavirus Job Retention Scheme) and the announcement of the self-employment income support scheme. Also included in this update is clarification on some other areas.
Coronavirus job retention scheme (“furlough scheme”)
On 26th March, the Government released more comprehensive guidance, which has brought a welcome degree of clarity. For full details, please see this government source.
The key points in the update, and based on Frequently Asked Questions we have taken over the last few days are as follows:
- You must notify staff they are being furloughed. If this is not stated as being possible in their employment contract (this is usually referred to as “lay off” in UK employment law), you should get the staff member’s agreement to this in writing.
- Employees can be furloughed individually (i.e. not all at once), but each individual must be furloughed for at least three weeks. Individuals must have been on the payroll as at 28th February 2020 (not a typo, 28th has been specified rather than 29th)
- Employees must undertake no work for their employer in this time, but can do training (e.g. for apprentices) and/or unrelated voluntary work. Furlough does not apply to reduced hours, only someone with no work at all.
- The grant will cover the lower of (for each employee):
- 80% of the employee’s basic wages, plus employer’s NIC and employer’s minimum legally required pension contributions on this 80% of normal wages (see the linked guidance on gov.uk at the top of this section for full details of this and how to deal with employees with variable income); or
- £2,500
- You can top up the employee’s wages above the 80%, or capped amount, but you are not required to do so in order to receive the 80% funding on normal salary
Example: Mr X has a usual gross monthly salary of £2,000. 80% of this is £1,600. Employer’s NIC on £1,600 is £122. Minimum payment under Auto-enrolment on £1,600 is £32. Total is therefore (£1,600+£122+£32) £1,754. This is less than £2,500 so the grant will be £1,754. If the employer pays £1,600 gross, £2,000 gross, or somewhere in between, the grant is still £1,754.
- Payroll is run as normal (albeit, you may be putting through a lower gross pay, requirement depending on your policy). You make your RTI submission. You will then make the grant claim (note: this is not yet in place, so currently you will just submit your RTI). It is anticipated that the grant will be paid in 3-4 weeks, so there is a cashflow connotation. The Government’s view is that this can be managed with VAT deferral, time to pay arrangement on PAYE and Coronavirus Business Interruption Loans.
- If paying staff at less than 100% of their usual pay means that National Minimum Wage/National Living Wage is not met, this does not cause a breach of regulations since the employee is not actually working.
Coronavirus (COVID-19) Self-employment income support scheme
Further to the initial draft guidance upon which our update of 26th March was based there has now been a superseding announcement which can be seen in full here.
The key points are:
- This only applies to self-employed people and partners in partnerships, NOT director/shareholders of limited companies
- You must have submitted your 2018/19 tax return to HMRC. If you have not, this must be submitted by 23rd April 2020
- You must have traded in 2019-20, be intending to continue trading into 2020-21, and have lost business profits
- Your profits must be under £50,000 either in 2018/19 or on average over 2016/17-2018/19 (and these profits must make up at least 50% of your income) otherwise no claim is possible
- The payment will be for the lower of:
- The average monthly profits (taxable profits after all costs including Annual Investment Allowance and other capital allowances) taking into account 2016/17, 2017/18 and 2018/19 where you have been self-employed over this whole period; or
- £2,500 per month, whichever is lower, for each month, for an initial period of three months.
- You cannot yet claim this grant, and HMRC will contact taxpayers who are eligible with a view to paying this around the end of June after writing to taxpayers by the end of May.
Coronavirus Business Interruption Loans (CBILs)
Since 23rd March, we have received information that CBILs will be available without personal guarantee for loans of up to £250,000. We do not know at this stage whether all lenders are applying this policy, but some at least certainly are. You should contact your own bank in the first instance.
Fees and 12 months’ interest will be covered by the Government as a Business Interruption Payment
We have also had many clients successfully negotiate payment holidays with finance companies where they have asset finance outside of this scheme.
PAYE / NI support – “Time to Pay”
HMRC has established a Coronavirus Helpline. It can be reached on 0800 015 9559 or here.
HMRC has significantly expanded its existing ‘Time to Pay’ scheme, whereby companies can defer PAYE payments (and agree on a repayment plan over time) if they are unable to pay.
So far, we have had clients agree on deferment for three months, with the potential for more to be agreed at a later date. Normally, HMRC charges 3.25% interest on late payments; this may be waived. Also, once the coronavirus business support scheme payments start (hopefully in April), HMRC may be less willing to defer these payments. Note though that we are anticipating up to a month’s lag between paying the wages and getting the 80% payment back from HMRC.
It is important to speak to HMRC rather than just not paying. We suggest you do so before your next PAYE payment is due.
VAT deferral
The Government is deferring VAT payments (currently payments due prior to the end of June). Companies will have until the end of the financial year to repay (i.e. 31st March 2021). This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. If the current situation continues, then the Chancellor has announced that this may be extended to cover later periods.
VAT returns will still need to be filed on time, unless you have a reasonable excuse, for example illness of yourself or key staff responsible for this.
Taxpayers will be given until March 2021 to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal in the intervening time.
It has been clarified this week, that where you pay your VAT by direct debit, the direct debit should be cancelled to prevent HMRC collecting this. Don’t forget you will need to restart the direct debit in due course.
Business rates relief and related grants
Some businesses in England will be eligible for a Business Rates holiday for 1 year from 1 April 2020:
- Retail, hospitality and leisure businesses will be eligible for a Business rates holiday for 2020-21. See detailed guidance here for businesses covered. It has also been announced that this will be extended to Nurseries and Estate agents/letting agents.
- You should expect further communication on this from your Local Authority. If you have any questions, you should contact your Local Authority
- If your business is eligible for small business rate relief in England (irrespective of sector), you are entitled to a one-off cash grant of £10,000.
- If your business is in the retail, hospitality or leisure sector in England with a rateable value of between £14,999 and £51,000 then you should be entitled to a cash grant of £25,000.
Income Tax
For Income Tax Self-Assessment, payments due on the 31 July 2020 may be deferred (without application) until 31st January 2021. It was originally announced that this would relate to the self-employed only. It has now been confirmed it will be applicable to all taxpayers under self-assessment. No penalties or interest will be charged for payments deferred for July 2020 to January 2021.
Sick Pay
A reminder that it was announced in the Budget that SSP would be paid without the usual 3 waiting days where this is Coronavirus related and would be repaid by the Government for up to two weeks per employee to businesses with up to 250 staff. Please see here for full details
