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As the spread of Covid-19 picks up pace, the government is rapidly introducing initiatives to help. New announcements are being made on at least a weekly basis. We want to help you keep on top of the help available to you. Our knowledgeable team is monitoring these updates and below is a summary of those that will affect you, together with clear instruction on where to go for help.

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We envisage more actions will be taken by the government during this and coming weeks. Of course, we will endeavour to get this news to you quickly. However even more rapid updates will be posted directly to your mobile on the Howards’ app so please make sure you have downloaded it to your device. It is totally free of charge for all our clients (please see how to download the Howards’ app here).

Coronavirus Job Retention Scheme

HEADLINE MEASURE – the government will meet the cost of 80% of employees, where the employees would otherwise have had to be laid off (these will be designated as ‘furloughed’ employees)

 

Details we do know:

  • Only PAYE employees are covered, not contractors
  • There will be a cap of £2,500 per month per employee
  • The scheme will run from 1 March 2020 for at least 3 months
  • Only employees employed on 28 February 2020 can be included
  • A dedicated claims portal will be set up (not available yet) – when available, claims can be backdated to 1 March
  • A “furloughed” employee cannot perform any work for the employer during the period for which a claim is made
  • The employee remains employed under their existing employment contract
  • The employer may top up the employee’s salary to their normal level, but the scheme does not oblige them to

 What has been clarified as of 27th March 2020:

  • It is not possible to Furlough employees who were hired after 28 February 2020.
  • The scheme can cover employees who were employed as at 28 February but have been made redundant if they are rehired.
  • The minimum length of furloughing is three weeks.
  • The employer must write to their employee notifying them that they have been furloughed (subject to contractual terms). The communication should be recorded as HMRC may audit.
  • Employees who are on sick leave or who are self-isolated cannot be furloughed and should receive Statutory Sick Pay. They can be furloughed after this.
  • Employees who are shielding in line with Public Heath guidance can be furloughed.
  • National Minimum Wage does not apply to furloughed employees as they are not working.
  • The scheme pays a grant (not a loan) to the employer through a new online system which is being built for this purpose. Payments will not be made until late April at the earliest.
  • The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual.
  • You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included. Any employer pension contribution above the minimum automatic enrolment rate (3%) will not be covered by the scheme.blog po
  • For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%.
  • Where an employees’ pay varies if the employee has been employed for a full twelve months prior to the claim, you can base the 80% calculation on the higher of either:
    – the same month’s earning from the previous year; or
    – average monthly earnings from the 2019-20 tax year
  • If the employee has been employed for less than a year, you can base the 80% calculation on an average of their monthly earnings since they started work.
  • The Government’s Coronavirus Job Retention Scheme, which funds 80% of wages of individuals that have been furloughed, can be used to support people employed by companies in administration

Some of the things we don’t know yet:

  • Whether owner/director-employees can be included
  • The employment law consequences of furloughing an employee, where this action conflicts with the employment contract
  • Whether reimbursements will be subject to tax for the business
  • The exact calculation of which employment costs can be included in the reimbursement
  • How to account for PAYE and NIC on payments

 

What furloughed workers need to know

If your employer cannot cover your wages due to COVID-19, they may be able to access support to continue paying part of your wage. This will ensure redundancies are avoided.  If your employer intends to access this Coronavirus Job Retention Scheme, they will discuss with you becoming classified as a ‘furloughed worker’. This would mean that you are kept on your employer’s payroll, rather than being laid off. However, to qualify for this scheme, you should not undertake work for them while you are furloughed.

 

This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month. You will remain employed while furloughed. Your employer could choose to fund the differences between this payment and your salary, but does not have to. If your salary is reduced as a result of these changes, you may be eligible for support through the welfare system, including Universal Credit. The government intends for the Coronavirus Job Retention Scheme to run for at least 3 months from 1 March 2020, but will extend if necessary.

 

Read here for guidance on claiming benefits

VAT Payments Deferred

HEADLINE MEASURE – all VAT payments due up to 30 June 2020 can be deferred

 

Detail we do know:

  • The deferral applies from 20 March 2020 to 30 June 2020
  • The deferral is automatic and does not need to be applied for
  • All UK business are included
  • Payment of deferred amounts will be “at the end of the 2020/21 tax year”
  • You still need to submit your online VAT return digitally, you just don’t pay it until “the end of the 2020/21 tax year”

 

 

Some of the things we don’t know yet:

  • The announcement implies that it is VAT payments falling due within the stated period which can be deferred, irrespective of the VAT period for which the payment is due. But this is not certain
  • For instance, payment for a VAT quarter ending on 31 May 2020 is due for payment by 7 July 2020 – as things stand we expect that this will still be due for payment by the normal date
  • We assume instalment payments (for large businesses) falling due up to 30 June are included, but this is not stated explicitly
  • What does “at the end of the tax year” mean? We would expect it to be the VAT year, which will end in March, April or May 2021, depending on your company’s VAT quarters, but this is not yet certain
  • This announcement only relates to VAT paid through VAT returns. To date we are not aware of any deferral of VAT (or any customs duties) which is normally paid directly on the importation of goods
  • It is not stated explicitly, but we would expect that VAT returns must still be submitted on time as normal.
  • How to account for PAYE and NIC on payments

Income tax – self-assessment July 2020 payment on account

HEADLINE MEASURE – for individuals who make self-assessment payments on account, the July 2020 payment is deferred until 31 January 2021

 

Detail we do know:

  • The deferral is automatic and does not need to be applied for
  • No interest or penalties will be applied on amounts deferred, if they are paid by 31 January 2021

“Time to Pay” improvements

HEADLINE MEASURE – HMRC are relaxing their normal conditions for businesses and individuals which wish to apply for extra time to pay their tax liabilities

 

Detail we do know:

  • A new Coronavirus phone number has been set up for businesses and individuals. To access this Time to Pay service call 0800 0159 559 (Note: opening hours are Mon to Fri 8am to 4pm)
  • You MUST put in a call to HMRC to access this service
  • These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
  • HMRC have staffed the number with more agents, but wait times are still long (1 hour +)
  • Anecdotal evidence to date is that companies with a good previous tax compliance record are being offered deferral of PAYE liabilities until at least June 2020 with little additional evidence being requested at present

 

Some of the things we don’t know yet:

  • Usually a Time to Pay arrangement removes the risk of penalties but interest must still be paid. We don’t yet know whether interest charges will be waived.
  • Whether HMRC have any absolute “red lines” on taxes which cannot be included, overall amounts of tax which can be deferred, or limit on the period over which they will defer liabilities (normally they are reluctant to agree more than 12 months)

Coronavirus Business Interruption Loan Scheme.

HEADLINE MEASURE – the Government will guarantee up to 80% of the value (up to £5m) of loans introduced, this will be interest free for 12 months and is available now.

 

The key points are:

  • Loans are available from £25,001 to £5m
  • Available from 1 – 6 years
  • No interest is payable for 12 months
  • Capital repayment holidays are available for 12 months as well – so some clients will have no payments to make in the first year
  • Loans are limited to 25% of the business’ turnover in 2019, or double the annual wage bill

These criteria may vary from lender to lender.  We are happy to facilitate an introduction to an appropriate lender if required to discuss your circumstances.

 

These criteria may vary from lender to lender.  We are happy to facilitate an introduction to an appropriate lender if required to discuss your circumstances.

 

 

Small business grants clarified (access details now confirmed)

HEADLINE MEASURE – For businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) or tapered relief, there is a one-off cash grant of £10,000 available. This will help eligible businesses meet their ongoing business costs.

 

Detail we do know:

  • There are two schemes available for local authorities to dispense grants to businesses: the Small Business Grant Fund (SBGF) and the Retail, Hospitality and Leisure Grant (RHLG)
  • Through the Small Business Grant Fund (SBGF) there is a one-off cash grant of £10,000 available to businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) or tapered relief. Claim it here through Stafford Borough Council.
  • The Retail, Hospitality and Leisure Grant (RHLG) is an enhanced grant created for businesses that qualified for the Expanded Retail Discount announced in late January. Retail, hospitality and leisure businesses with a rateable value of up to £15,000 will get a grant of £10,000, while those with property valuations between £15,000 and £51,000 will be eligible for £25,000. Claim it here through Stafford Borough Council.
  • Funding for the scheme will be provided to local authorities in early April and that “guidance for local authorities on the scheme will be provided shortly”.
  • You don’t need to do anything to access this scheme, your local authority will write to you if you are eligible.
  • You can make your claim through the scheme now. You will need your company details (reg no and VAT reg no) and you will be asked to upload your bank details if you do not currently pay rates by direct debit. Claim it here through Stafford Borough Council..

 

What needs to happen next:

  • All that needs to happen now is for local authorities to set up administration systems with the relevant data fields to satisfy BEIS oversight requirements and contact eligible businesses

 

Some of the key conditions affecting both schemes include:

  • Effective from 11 March 2020. Businesses that were dissolved before that date will not be eligible
  • Only available for companies in England
  • Premises occupied for personal uses will be excluded, along with car parks and parking spaces
  • Local authorities can choose to withhold or award grants where they feel their valuations for a property were inaccurate on 11 March 2020. “This is entirely at the discretion of the local authority and only intended to prevent manifest errors,” the BEIS advised.
  • Nor will the small business grants be available for home-workers who do not pay business rates. However, Howards understands that Chancellor Rishi Sunak may introduce new measures to support the self-employed later this week.

 

Further links and information

The full package announced by the Chancellor so far, together with any ongoing updates, can be found here.

 

It is clear that the government’s stance on business support is fluid, and more announcements will be made. It goes without saying that we will endeavour to get this news to you quickly. Remember to download the Howards’ app for immediate updates straight to your mobile device. In addition, please keep your eye on our website and social media to stay ahead.