Business Support

HMRC’s guidance makes it clear that any business that makes an error in making a Coronavirus Job Retention Scheme (CJRS) claim must pay back any amount over-claimed. Any claims based on inaccurate information can be recovered by HMRC.

The CJRS application claim form has been updated and now allows businesses to advise HMRC if they have identified previous errors and over-claimed. If you confirm that your business has been overpaid, the new claim amount will be reduced to reflect this overpayment.

HMRC has also clarified what will happen if you have made an error in a CJRS claim and do not plan to submit further claims. HMRC is working on a process that will allow employers to let HMRC know about these errors and pay back any amounts that have been over-claimed. HMRC will update their guidance when this option is available.

Employers must pay the full amount they are claiming to their employees, even if the company enters administration. If the employer is unable to pay employees what they are due, the monies will need to be repaid to HMRC. The same applies in relation to employer NICs and pension contributions.

It is important to ensure that all claims made for furloughed employees are accurate. Employers are required to keep full records relating to any CJRS claims (including adjustments) for a period of six years.

As our readers will be aware, the Coronavirus Job Retention Scheme (CJRS), has been extended until 31 October 2020. There are a number of important changes to the way the scheme works that will start to come into effect from 1 July 2020, when employers can bring back furloughed employees to work part-time, for any amount of time and any shift pattern.

For any periods starting on or after the 1 July, the maximum number of employees that employers can claim for cannot be higher than the maximum number they claimed for in a previous period. For example, if the highest single claim for periods up to 30 June was for 100 people, then employers cannot claim for more than this number in later periods.

The government will continue to pay 80% of costs for normal hours not worked up to the £2,500 cap during the month of July. From August 2020, employers will be expected to start contributing towards furloughed employees wage costs by paying employers’ NIC and pension costs for any normal hours an employee does not work. There will be further reductions in government support to 70% of capped wages in September and to 60% in October before the scheme is closed.

HM Treasury has published its weekly update (to close of business on 7 June 2020) on COVID-19 lending schemes designed to support businesses impacted by the pandemic.

Under the Coronavirus Business Interruption Loan Scheme (CBILS), 47,650 businesses have received funding so far, with lenders approving £9.56 billion. This was an increase of £640 million of funding to 1,807 businesses over the previous week.

The Coronavirus Large Business Interruption Loan Scheme (CLBILS) has approved £1.57 billion in loans to 244 larger businesses. In the past week, 53 firms were approved for £460 million in loans.

Under the Bounce Bank Loan Scheme (BBLS), for small and micro businesses, in the five weeks since the launch over 780,000 businesses have successfully applied for funding totalling £23.78 billion.

The Future Fund is a special investment fund for high-growth companies impacted by the crisis, made up of funding from government and the private sector. Funding applications for the Future Fund opened on 20 May 2020 and the first government loans totalling £55.9 million have now been approved for 53 companies.

The recent news that the lockdown is being eased for certain businesses is good news. Unfortunately, there are many other businesses that are still closed and unable to trade.

And there is always a background risk that any relaxation of the lockdown will increase the number of COVID-19 infections.

The Government seem intent on easing the economic down-side of the pandemic and its likely that any reestablishment of tighter restrictions will be focussed on controlling local outbreaks.

In which case, it probably makes sense to minimise the risks by observing government guidelines regarding social distancing and other health and safety issues. The old adage, act in haste repent at leisure comes to mind.

Unfortunately, the distancing rules are going to reduce potential footfall for many shops that can now reopen. It's unlikely that window shoppers will have the patience to stand in a queue to take a closer look.

Dentists will have to reorganise waiting rooms and may have problems sourcing PPE.

Financially, many risks can be minimised by careful planning. Readers who can now reopen their doors to business should do so after considering the financial implications. We can help. Please call if you would like to consider your options. 

There is the potential that present changes may result in future, backward changes. Fingers crossed that this is not the case.

Recent statistics published by HM Treasury confirm that £22bn of Bounce-Back Loans have been taken up by 700,000 small businesses across the UK. That is an average loan of approximately £31,000 per business.

As these loans are limited to 25% of business turnover, the average turnover of each business is £124,000.

The terms of these loans are generous. 2.5% fixed interest rate and no repayments due for 12 months. In the first year the Government is picking up the tab for interest and set-up charges and is providing a guarantee to the lenders.

However, these are loans and will need to be repaid out of future years’ earnings.

And they imply that there will be a bounce-back in activity. No doubt many sectors will bounce-back but there will be others more seriously affected and needing to cope with longer-term issues. For example, how long will it take the hospitality and travel industries to recover? Will we ever have the confidence to step on an aircraft again in the certain knowledge that our return will not be frustrated?

If you have taken out a loan presumably you did so after taking these considerations into account? If you did not, it is not too late to consider your planning options. Please call if you need help to do this. 

HMRC’s guidance on the Coronavirus Job Retention Scheme has been updated a number of times as the workings of the scheme evolve. The most recent update, on 29 May 2020, followed an announcement by the Chancellor, Rishi Sunak.

The Chancellor outlined further details on the extension of the scheme to 31 October 2020 and the introduction of flexible furloughing. As things stand the extension will be final and the scheme will be closed on 31 October 2020. Further guidance on the workings of the amended scheme is expected to be published on 12 June.

The government support for the scheme will continue but employer costs of the using the scheme will slowly increase from July.

We have summarised the main points below:

• In June and July, the government will continue to pay 80% of costs up to £2,500 cap.
• From 1 July, employers can bring back employees to work part-time, for any amount of time and any shift pattern. Any claim under CJRS will be limited to normal hours not worked. Employers will have to pay employees for the hours they work.
• From 1 August, government support for the scheme will begin to reduce. The government will continue to pay 80% of wages up to £2,500 cap, but employers will have to cover employers’ NIC and pension costs for the hours the employee does not work.
• From 1 September, government support will be lowered to 70% of wages up to a reduced £2,187.50 cap. Employers will pay employers’ NIC, pension costs plus 10% of wages to a total cap of £2,500 for furloughed workers time.
• From 1 October, government support will be lowered further to 60% of wages up to a reduced £1,875 cap. Employers will pay employers’ NIC, pension costs plus 20% of wages to a total cap of £2,500 for furloughed workers time.
• The cap will be proportional to hours not worked.
• The CJRS will be closed-down 31 October 2020.

The Chancellor has confirmed that the Self-Employment Income Support Scheme (SEISS) is to be extended for a final three-month period to 31 August 2020. The maximum grant for the final 3 months of the scheme will be based on 70% of eligible earnings (previous quarter 80%). This means that the SEISS will in total provide qualifying self-employed workers up to 6 months financial support from the government.

The following points list some of the most important eligibility criteria for the scheme:

• Applicants must be self-employed or a member of a trading partnership, voluntary work, or duties as an armed forces reservist.
• Carry on a trade which has been adversely affected by COVID-19,
• Have filed a tax return for 2018-19.
• Have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020-21,
• Have trading profits of less than £50,000 and more than half of total income from self-employment.
• Individuals can continue to work, start a new trade or take on other employment including voluntary work, or duties as an armed forces reservist.

Eligible applicants will have to wait until the last month of the claim period, August 2020, to make a claim. The maximum grant for the three-months will be £6,570 (Previous quarter £7,500) paid in a single instalment. It will be possible for a qualifying self-employed person to claim for the second grant even if they had not claimed for the first grant.

The government has started the slow process of reopening selected businesses as we continue to face restrictions in almost all aspects of daily life. The reopening of retail outlets reflects the acceptance that life for the foreseeable future will operate under what is being referred to as the ‘new normal’ complete with social distancing and other measures.

The timetable for the reopening of the retail economy in England started on 1 June 2020, with outdoor markets and car showrooms being allowed to open on condition that they meet the COVID-19 secure guidelines to protect shoppers and workers. There have also been changes to the definition of ‘essential’ retailers to include home-ware stores.

From 15 June 2020, all other non-essential retailers including shops selling clothes, shoes, toys, all furniture stores, books, and electronics, tailors, auction houses, photography studios, and indoor markets are expected to reopen. This is conditional on retailers meeting the necessary requirements including the five tests laid out by the Government for easing the lock-down.

Some businesses such as hairdressers, nail bars, beauty salons, pubs, clubs and restaurants will remain closed until at least July because the risk of transmission in these environments is still thought to be too high.

There are regional variations to these rules in Northern Ireland, Scotland and Wales.

The government has announced that a new code of practice is to be published for High Street businesses and their landlords to help provide clarity and reassurance over rent payments. A new working group has been setup with leading businesses and trade associations to develop the new code of practice.

The government has said that the new code will encourage fair and transparent discussions between landlords and tenants over rental payments during the Coronavirus pandemic and guidance on rent arrear payments and treatment of sub-letter and suppliers. This will enable collaboration and cooperation within the sector and help ensure no one part of the chain shoulders the full burden of payment. The new code will be temporary in nature and the government will be able to explore options to make it mandatory if necessary.

The new code will build on other measures for the sector already announced including a moratorium on commercial landlord evictions until at least the end of June. There are also measures temporarily banning the use of statutory demands and winding up petitions until 30 June 2020 and more breathing space for tenants by preventing landlords using Commercial Rent Arrears Recovery unless they are owed 90 days of unpaid rent.

The Coronavirus Job Retention Scheme (CJRS) is open to all UK employers to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

The CJRS will close to new entrants on 30 June 2020. From that date onwards, employers will only be able to furlough employees that had previously been furloughed for a full three-week period prior to 30 June.

The following HMRC guidance is useful for those involved in payroll processing:

• The final date employers can furlough staff for the first time is 10 June 2020. Employers will have until 31st July to make any claims in respect of the period to 30 June.
• From 1 July the scheme will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed.
• From 1 July, claim periods will no longer be able to overlap months, employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this going forward. This is necessary to reflect the forthcoming changes to the scheme.
• The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim period.
• Employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run.
• Employers will be able to make their first claim under the new scheme from 1 July.
• This scheme will be closed down on 31 October 2020.