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contact@JamesESmith.co.uk

Coronavirus Business Support

Worried about the impact of Coronavirus on your Business?

The aim of this guide is to support our key clients and make available on an ongoing basis what support is available to small businesses, sole traders and landlords during the Coronavirus Pandemic.

Please note, whilst we always do our best to find time for any client in difficulty,  we are unlikely to have any more information than listed here.  This is a fast moving situation, and we are referring to primary sources from formal statements from HMRC and government, as opposed to secondary sources which may be unreliable.

Last update 27 March noon.

 

Summary Table

Universal Assistance
For Who? Cash Flow or Extra Money Timing? Process?
Delay Tax Payments (Time to Pay)

 

All Businesses

 

Cash Flow.  Delay your tax payments.

 

Available now

 

Call HMRC 0800 015 9559
Some interest arises.
VAT Deferment

 

VAT Registered

 

Cash Flow

 

Quarters ending February, March or April, payment deferred to March 2021.

 

Returns filed as normal
Don’t pay bill
more

DD’s will need to be cancelled
No interest charged before 31st March 2021

3 Month Mortgage Holiday
All Individuals, including BTL Loans
Cash Flow.  Delay your mortgage payments (but will increase overall debt and interest)
Available now
Contact your mortgage company
more
Most banks have now given guidance to customers on how to make a claim, They are generally struggling with phone application and pointing you towards online forms.  See your banks website.

Small Business (Premises and/or employees)
For Who? Cash Flow or Extra Money Timing? Process?
Coronavirus Job Retention Scheme(See below table for more details)
Employers with laid off workers (unlikely to be for sole directors)
 80% of salary, upto £2,500 a month for 3 months, per employee.
March to May payslips.
 Grant via webportal, end of April
Small business grant
Guidance notes
Any premises with rateable value under £15,000
 Extra £10,000
Unknown, presumably Q2
Via Business Rates (ie local authority)
Grant for retail, hospitality and leisure businesses
Guidance notes
Premises with rateable value between £15,000 and £51,000
 Extra £25,000
Unknown, presumably Q2
 Via Business Rates (ie local authority)
Micro Business (Sole traders & director only companies)
For Who? Cash Flow or Extra Money Timing? Process?
Coronavirus Business Interruption Loan

 

All Business

 

Cash Flow.  Interest free for 12 months.

 

From early April

 

Loan application with bank.
Watch out for personal liability for debt.
Payments on Account

 

Sole traders with a July payment on account.
Cash Flow

 

Deferred to 31st Jan 2021

 

Don’t pay the July Payment.

 

Self Employment  Grant
(see below table for more)
Sole traders
80% of average income, upto £2,500 a month for 3 months
From June
HMRC to contact you and issue taxable grant

Additional Details and Explanation

Job Retention Scheme

more details on the 80% of wages scheme

Eligibility :  All Businesses with employees

Worker Status:  They must be “furloughed”  which means “an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.”  The minimum period for a furlough is 3 weeks.

Payments:  80% of pay (as of 28th Feb, average for 2019/20, or same month in prior year), capped to £2,500 per month.  You can make an additional claim for employer’s NI and pension, worth about £250 for Er’s NI + pension.

Until when?  1st March to May and possibly beyond.

Process:  A separate system will be built, to be ready by end of April.

Contractual issues:  Most employment contracts wont allow for this automatically, and would need to be amended.  The employer many need to top up pay to cover the full notice periods etc in the absence of employee agreement. Holiday pay and other entitlements are likely to accrue so must be dealt with carefully to avoid claims in 6 months time against you.

I enclose a link to some more detailed analysis from Lewis Silkin (HR Lawyers)

Latest guidance from HMRC (26/3) is here

 

The key question for our clients is:  “Can directors access this scheme?”

Whilst in theory “yes”, and this has been confirmed by the Chancellor on 26/3,  we just don’t know how tightly the rules will be drawn.  In particular I am unsure how a sole director company can “furlough” themselves.  It seems logically impossible for them to do no work at all in the business, as they have a legal duty of care over the business.  If you have two directors, it seems plausible, as one can sit out, and one continue to keep the business ticking over for the next few months. This will hopefully be clarified in due course.

On a wider point the majority of our clients operate a high dividend/low wages strategy.  The typical “salary” is £8,632 for 19/20, so the maximum claim over a full 3 months period will be 80% of £2,158 = £1,726, or £575 a month. The grant is a taxable receipt for the company.

 

Typical Situations

I enclose some general thoughts for our key client base, and what is likely to be typically available:

Landlords

click for more

For landlords the ability to defer mortgage payment for 3 months should prove helpful.  This is confirmed to cover both Buy to Let and residential loans.

Eviction will not be possible during the pandemic, not least as the courts are closed.

Link to the announcement

For holiday letting clients, business rate relief is your main help  For most properties with a rateable value under £15,000, the grant of £10,000 administered via the local authorities will be key.   It should be automatic.

The main “gotcha” with mortgage deferral is that the banks will add the interest to the loan capital, so as the borrowing goes up, your ongoing interest will rise too.

For holiday lettings clients, if you have not switched to payment of business rates and pay domestic council taxes, then this help will not be available.

 

Personal Service Company

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There is little help available right now, other than VAT deferment.  To defer, simply cancel your DD, although you will need to remember to pay it manually by the of March 2021.  I would suggest however that those who can pay, should pay as it will be easy to forget to pay, and some banks are really awkward about setting up DD’s for the second time when cancelled.

The “furlough” option doesn’t look viable for sole company directors due to the key condition “an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.”

We just don’t know at this point, but the position should be clarified by the time a claim is possible end of April.

You can however apply for a 3 month mortgage holiday on your personal outgoings (not all banks are able to do this right now), and you will get generous terms on delaying corporation tax bills via the “time to pay” arrangements.

Do remember than the “director’s loan” rules mean that if you empty the business bank account over and about its reserves you will be personally liable for the debts of your company.

Sole Traders

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The main help is the self employment grant, which gives a taxable grant upto 80% of income, to a maximum of £2,500 per month

Eligibility

  • Average taxable income under £50,000 per annum
  • Registered self employed, and tax returns filed (presumably for partnership too, but unconfirmed)
  • More than half income from self employment
  • You can still run your business

Process

  • Based on filed tax returns 2017/18 to 2019/20 [or pro-rated for 1 or 2]
  • Appears to be computed by HMRC and tax payers contacted, as opposed to something to be applied for.

Won’t Cover

  • Those working through a limited company
  • Newly self employed
  • If you have not filed 2019/20 tax return (you have until end of April to file!)

Other help is the ability to defer the July ‘payment on account’ and some minor support from Universal Credit rules being relaxed.

In general the self employed scheme seems a good compromise balancing giving key support where it’s needed most with the state not being abused with fraudulent claims.  Its hard to come up with anything better.   This would seem to apply on a blanket basis, rather than on a loss of income basis.   The detailed guidance notes will be key here, which should be available in around 10-15 days.