Coronavirus Business Support

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 19th March, 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 June and possibly beyond.

Process:  Payroll is paid as normal, or on a reduced baiss, and the employer makes a grant claim.

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 (updated regularly) is here

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

Yes! Is the answer, but you will need to undertake no income generating activities, or ‘provide services to’ the company, other than statutory duties.   The main issue our clients have is we generally operate an “annual payroll scheme” which is probably outside of the rules.  See “Small Limited Company” below for further details.

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

The ability to defer July “payments on account” towards your 2019/20 tax bill has been extended to all taxpayers – initially this was for sole traders only.

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.

Company director’s can apply for the “Job Retention Scheme” grant which allows for 80% of wages to be paid, but not (as we understand on 1st May) if you are on an annual scheme, and it was filed in late March.  This means for many of our clients, no claim is possible unless this position changes.

Key conditions

• Operations have been severely affected by coronavirus (COVID-19)
• Furlough for 3 weeks minimum, is formally minuted and communicated in writing
• You cannot generate revenue, or provide ‘services to or on behalf of’ the company.  ie you do nothing for the business.
• You can however meet statutory duties such as filing accounts, which we assume means you can do normal bookkeeping.
• You can undertake training

Claim

• 80% of your wages, which for most clients will be 80% of £8,632, so £575/month.
• Claims process has not been built, due end of April.
• If you are a client for whom we operation PAYE, make sure we know you are furloughing.

The “bounce back” loans are surprisingly generous with 25% of turnover available as a loan, to repay over up-to 6 years with just a 2.5% rate of interest after 12 months and no fees.  Do be careful – if you borrowed this money and lent it to yourself it would cause a number of tax issues, and is not supposed to be used for this purpose.

There is little other 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.

You can however apply for a 3 month mortgage holiday on your personal outgoings, and you will get generous terms on delaying corporation tax bills via the “time to pay” arrangements.

Plus the ability to defer July “payments on account” towards your 2019/20 tax bill has been extended to all taxpayers – initially this was for sole traders only.

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.

The main help is the Self Employment Income Support Scheme (SEISS), which gives a taxable grant upto 80% of income, to a maximum of £2,500 per month.  This is for a fixed 3 months period, and is an “all or nothing” claim, paying a maximum of £7,500 or 80% of one quarter of average annual earnings.

Eligibility

• Average taxable income under £50,000 per annum
• Tax return filed for 2018/19
• More than half income from self employment
• Your business is ongoing

Process

• Based on filed tax returns 2016/17 to 2018/19 [or pro-rated for 1 or 2]
• HMRC  to contact tax payers, and a claim put in during May.
• HMRC to compute the sums due from your submitted tax returns.

Won’t Cover

• Those working through a limited company
• Newly self employed
• Sole trade ceased

Guidance notes from HMRC are here

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

The scheme is fairly “blunt” with no adjustments for part periods, or the period to which your business has been affected.  Currently agents are not permitted to make claims on behalf of clients which is unexpected.