GUIDANCE FOR OUR CLIENTS – CORONAVIRUS (COVID-19) – UPDATED 27 MARCH 2020


As promised in our earlier guidance, here is an updated summary of the government announcements or “Ch-ch-ch-ch-changes” (thanks David Bowie):

Self-employed (new measures 26 March 2020)

  • Your 2018/19 tax return must have been filed (and there is an extension to 23 April if it hasn’t been done), and you were self-employed in that year, remain so now, and intend to continue into 2020/21.
  • You must have lost profits due to Covid-19.
  • Self-employed with profits under £50k will qualify, as long as self-employment income is more than half of your total income in either: (a) 2018/19 year, or (b) on average for the three years to 2018/19. This may be useful if you had fluctuating profits.
  • For self-employment starting after 6 April 2016, there will be a pro-rata adjustment.
  • The grants are similar to the Job Retention Scheme (see below) for those on PAYE, i.e. 80% of profits, with a maximum of £2500
  • Grants are taxable, and will be paid in one instalment direct to your bank account, probably in June.
  • The measures also apply to anyone in a trading partnership.
  • The option of a Universal Credit claim still remains.

Employment Support (Job Retention Scheme)

  • You can pay staff 80% of their wages, to a maximum of £2500, whilst furloughing them (essentially just telling them not to work), and reclaim this as a grant from HMRC.
  • This applies to all staff, including part-time, zero hours, and casual workers who were employed as at 29 February.
  • The grant will include employer national insurance and basic auto-enrolment pension contributions.
  • The grant is taxable, but the payments are deductible, meaning a net zero effect on profits.
  • Minimum furlough period is three weeks.
  • There is no mechanism in place for this yet, but we expect there to be more news on that in the next couple of days.
  • You may of course need to wait until you get the grant to pay the staff if you can’t access bank funding.
  • If you decide to pay some staff more than 80% you need to be able to justify this. Use the same criteria as you would for any standard lay-offs or redundancies.
  • You should obtain employee agreement to furloughing, ideally in writing or via email, and may wish to obtain legal advice.
  • Directors should also qualify, as long as they do no work. How HMRC would view doing a few minutes of (non-revenue generating) administration, is difficult to advise on.
  • You should probably hold off any possible redundancies, as you would not get any financial support for those payments.

VAT

  • HMRC has agreed to defer VAT for one quarter until March 2021.
  • HMRC has now advised that it cannot stop direct debits so you need to contact your bank to cancel it.
  • With little or no sales likely in the next quarter for some businesses (assuming a 3 month shutdown in many cases), you may be able to make a reclaim, and this will be paid back in the normal way.
  • You must still submit VAT returns on time, or the usual penalties will apply.

PAYE

  • There will obviously be some liability due in April for March wages and you may want to consider withholding this.
  • We suggest waiting on this, and not yet cancel any direct debit, in case this ties in with the Employment Support scheme.

Corporation Tax

  • This isn’t due until nine months after the last accounts year-end, but you may wish to would consider not paying it for now.
  • Again, you would probably need to contact the Time To Pay helpline.

Personal income tax

  • The 31 July instalment for self-employed has been deferred until 31 January 2021.
  • If you don’t qualify (e.g. you are company directors), you may want to contact the Time To Pay helpline on this in due course.
  • We expect HMRC to be sympathetic to requests, and there may be further announcements from the government on this.

Rates

  • If you pay little or no rates, due to Small Business Rate Relief (SBRR), there is a £10k grant available.
  • Those in retail, hospitality and leisure will have to pay no rates, and may be able to claim a £25k grant for larger premises (rateable value £15k to £51k).
  • This will be administered by the local authority who will contact eligible businesses shortly.

Rent

  • You should contact your landlord to discuss a rent holiday.
  • Eviction of non-paying tenants is not really an option for most landlords, as they wouldn’t be able to re-let the premises anyway, and would probably rather have a reliable tenant at the end of this.
  • For landlords on the receiving end of requests, you may be able to obtain mortgage repayment holidays for three months.

Discretionary spending

  • This could be the time to think about stopping your own pension payments, but you should discuss this with your financial advisers.

Grants

  • There were grants available for retail, hospitality and leisure businesses.
  • We are not sure if these will remain available now that businesses have been told to close, but you ought to check.
  • These are being administered by the local councils.

Banks & lending

  • The banks will have schemes in place for cheap or interest free loans, 80% guaranteed by the government.
  • They have been told to be sympathetic as a trade-off for the support they got in the 2008 financial crisis.
  • Mortgage lenders have been told to view requests for three month repayment holidays sympathetically.

Insurance

  • Although some insurers initially seemed to be doing their utmost to avoid paying out on claims for “pandemic” business closures, they have agreed with the government that they will meet their liabilities.
  • Unfortunately, most policies simply do not cover pandemics, but you should check the policy wording.
  • Business closures
  • The government announced further lockdown measures on Monday23rd March, and specified a list of businesses that MUST CLOSE, together with details of exceptions.

Company accounts

  • The filing date can now be extended by three months due to Covid19 issues.
  • The filing extension must be applied for online, so contact us if you wish to apply.

Helpful weblinks

Business support (grants; job retention scheme, etc):

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

  • Self-employment guidance:

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

Business closure list:

https://www.gov.uk/government/publications/further-businesses-and-premises-to-close/further-businesses-and-premises-to-close-guidance

Company accounts guidance: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts

Best wishes, and stay safe and healthy

Andy, Simon, Jo, Hannah and the team 

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