This note follows on from our last update on 18 March. It comes on the back of the announcement yesterday of further support from the Government and summarises the latest information that we are aware of.
Points covered below are:
- Coronavirus Job Retention Scheme
- Income tax and VAT payment deferral
- Statutory sick pay
- Business grants
- Rates holiday
- Business Interruption Loan Scheme
- HMRC liabilities and time to pay
- Insurance cover
Coronavirus Job Retention Scheme
You will undoubtedly have seen coverage of this announcement already.
Government will cover 80% of staff salaries up to a maximum of £2,500 per employee per month. However, this will only apply to employees who are put on temporary leave – HMRC use the phrase “furloughed”.
It is a grant, not a loan. All businesses are eligible.
You will need to:
• designate affected employees as ‘furloughed workers,’ and notify those employees of the change
• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal
There is currently no system in place for claiming and making these payments (the existing PAYE system will not cope). HMRC is currently setting up a new system.
We understand that although claims can be made for costs as from the beginning of March, in reality, no funds will be paid out until the end of April so if cash flow is difficult, you will need to consider other ways of bridging the shortfall until payments start flowing, for example the funding covered below. However, it will be important to make key decisions now – if you need to talk this through, please let us know. Hopefully for those businesses needing to look at this issue, it will enable them to furlough staff rather than consider redundancy.
It should also be remembered that (at the present time at least) the scheme will only run for 3 months, although this is undoubtedly dependent on how the economy fares in the meantime.
It seems likely that there will be strict rules about how the scheme operates. As soon as detailed information is released on how to make a claim, we will advise you further.
Income tax and VAT payment deferral
VAT payments will be deferred for 3 months and will apply to any VAT due between 20 March 2020 and 30 June 2020. Self assessment payments on account due on 31 July 2020 will be deferred until 31 January 2021.
Both apply to all businesses and are automatic; no application needs to be made to HMRC. No interest or penalties will be charged in the deferral period.
These measures are clearly designed to help businesses in short term. Please bear in mind that all deferred taxes will need to be paid eventually and interest will be charged once the deferral period has ended. This is particularly important for VAT. Make sure you know what your liabilities are so you can keep track of the situation.
Statutory sick pay
To some extent, this has been superseded by the job retention scheme.
However, if you do have staff on sick leave, the information you need is covered in a separate briefing note here https://acklandwebb.co.uk/blog/. If you need specific guidance, please let us know.
We should also add that if you need advice on any staffing issues, we can put you in touch with HR advisers who can help. Even though these are exceptional times, it is not a case of “anything goes” and employment law still needs to be followed, however difficult that may be.
The government has announced two levels of one-off grant:
• A one-off cash grant of £10,000
This will be available to all businesses currently eligible for small business rates relief. Eligibility to the grant seems to be linked to occupation of a property with rateable value of less than £15,000. We infer from this that any business that does not occupy rateable premises will not be eligible for this relief, but we hope this will change as the guidance becomes clearer.
The grant will be paid automatically to all businesses registered for small business rates relief with the local authority. The funding will be provided to local authorities in early April and is expected to be distributed by them soon after that.
• A one-off grant of £25,000
This grant appears to be restricted to retail, hospitality and leisure businesses that occupy premises with a rateable value between £15,000 and £51,000. Eligibility based on business sector is based on the use of occupied premises as follows:
as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
for assembly and leisure
as hotels, guest and boarding premises and self-catering accommodation
It is understood that the same payment system will apply for this as the grant.
If you are in any doubt about entitlement to the grant, we recommend that you ring your local council.
Businesses in the retail, hospitality and leisure sector that occupy premises with a rateable value between £15,000 and £51,000 will also qualify for a holiday from business rates for the 2020/21 tax year. The same criteria for eligibility will apply as for the £25,000 grant; in other words, if you are entitled to the grant, it seems that you will also receive a rates holiday.
We understand that all relevant businesses will receive amended rates bills automatically. If you do not receive a revised bill in the next few weeks, we recommend that you ring your local council.
Business Interruption Loan Scheme
Clearly grants, where available, are infinitely preferable to loans which inevitably need to be paid back at some point. However, if alternative sources of funding are not available to you, we understand that loans of up to £5 million will be made available by the British Business Bank www.british-business-bank.co.uk .
The key features of these loans are that they will be backed by a Government security up to 80% and will be interest free for the first 12 months.
We understand that the scheme will be launched early next week and will provide further advice when it is available.
It is understood that the first point of contact or enquiry should be with your own bank – if you have a dedicated manager, please contact them as soon as possible, if not, ring the helpline or call centre number given to you.
We are being told that banks will be able to arrange emergency overdraft funding of up to £250,000 and that this should be possible to organise in a short period of time. Additional loan funding will take longer.
One word of caution: similar schemes in the past have not always been straightforward and the application process has been neither quick nor simple. Be ready for this.
HMRC liabilities and time to pay
As we have previously noted, asking for extra time to pay taxes is only ever likely to be a short-term measure. However, for many, it is a case of using every available route to get through the next few months.
It is usually the case that HMRC are more resistant to arrangements for payment of PAYE and VAT. However, whatever the tax, we recommend that you communicate any anticipated cash flow problems to HMRC as soon as you can. We would also strongly recommend that any such communication should be made by a director or senior finance person.
There is a dedicated time to pay hotline number which is 0800 0159 559.
We know from many conversations with clients over the past few days that this is a very contentious area.
Businesses that have cover for both pandemics and government-ordered closure should now be able to claim, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim as long as all other terms and conditions are met.
However, insurance policies can differ significantly and we understand that it is likely that most small businesses will not be covered as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.
Nevertheless, we strongly recommend that you check the terms and conditions of your own policies and/or contact your broker or provider to check the position.
We remain on hand to help and support you as far as we can. The situation is far from clear and is changing rapidly. We are endeavouring to keep up to date with all relevant announcements and will pass on information as soon as it is available.
If you need assistance or further guidance, please let us know. Check out further information on https://acklandwebb.co.uk/blog/