Business Support

As we have written previously, if you are self-employed and qualify for the Self-employment Income Support Scheme you will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month. The initial grant will be for the three months, from 1 March through to the end of May 2020, but could be extended for a longer period. You can only make a claim if your business has been adversely affected by coronavirus.

When the scheme was launched, HMRC said that it would invite those who met the eligibility criteria to apply online. HMRC expected to begin contacting those eligible by mid-May 2020. However, in a news release published by HMRC we are told that HMRC began contacting taxpayers who may be eligible for the scheme on 4 May 2020.

You, or your agent can also go online and check your eligibility for the scheme at www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

In order to receive a quick confirmation from the eligibility checker, you will need your Unique Taxpayer Reference, National Insurance Number and bank account details to hand. You will also need your Government Gateway user ID and password and will need to confirm your details are up to date. If the checker confirms your eligibility, you will be given a randomly allocated date between 13 and 18 May when you can first use the online system to make a claim.

The online claims service will also open ahead of schedule on Wednesday, 13 May 2020. If you are eligible you will be able to claim a taxable grant worth 80% of your average trading profits up to a maximum of £7,500 (equivalent to three months’ profits for March, April and May), paid in a single instalment. The claims are expected to be paid within six working days of submitting a claim. 

On 30 April 2020, HM Treasury published its Direction to HMRC giving statutory footing for the Self-employment Income Support Scheme (SEISS). The document makes it clear that one of the conditions for using the scheme is that the self-employed must have been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease, in order to apply.

When the scheme was launched it was made clear that HMRC will use data on 2018-19 returns already submitted to identify those eligible for the SEISS. The relevant tax return should have been filed by 31 January 2020, but HMRC exceptionally extended this deadline until 23 April 2020 to allow the self-employed some additional time to get their house in order and to be able to benefit from the scheme.

The Treasury instructions to HMRC also makes it clear that the condition that the 2018-19 return must have been filed by 23 April 2020 is also extended to any other relevant tax years. To qualify, the self-employed also need to have traded in 2018-19 and 2019-20 and intended to trade in 2020-21. 

There are other qualifying conditions that must be met including that self-employed trading profits must be less than £50,000 and more than 50% of income must derive from self-employment.

The Coronavirus Job Retention Scheme will now be available until at least 30 June 2020. Payments under the scheme can be backdated to 1 March 2020 for employees who met the eligibility criteria on that date.

The scheme is designed to help employers furlough their employees with significant government support. Employers can claim cash grants of up to 80% for eligible furloughed wages to a maximum of £2,500 per month, plus the employer National Insurance contributions and minimum auto-enrolment employer pension contributions on that 80%.

There are a number of important conditions that must be met in order for an employee to be classed as a furloughed worked. This includes the following:

• Employees must be notified that they have been furloughed.
• Employees must be furloughed for a minimum of three weeks.
• The employee cannot do any work for the employer that has furloughed them.

The application process for the scheme was officially launched on 20 April 2020. The Chancellor, Rishi Sunak told the House of Commons on 27 April 2020 that the first grants have already started to be paid. Payments for claims made on Monday 20 April will be in the employers’ bank accounts by 28 April and are taking a maximum of 6 working days. When the Chancellor spoke, more than 500,000 claims had already been made and over 4 million jobs had been furloughed. Over 5,000 HMRC staff are working on delivering the scheme including those manning phone lines and webchat services.

If you are self-employed and qualify for the Self-employment Income Support Scheme you will receive a cash grant from HMRC based on 80% of profits, up to £2,500 per month. The initial grant will be for the three months, from 1 March through to the end of May 2020, but could be extended for a longer period.

There has been little additional information published since the scheme was first announced at the end of March. The online service is not currently open for applications and HMRC is aiming to contact those eligible to use the scheme by mid-May 2020. Those eligible will be invited to apply online when the portal opens. You will only be able to claim using the GOV.UK online service. The first grants are expected to be paid out at the beginning of June.

If you are self-employed you may be able to make a claim for Universal Credit whilst awaiting the grant. Government figures have suggested that many have already applied for help, but this option remains available if you qualify. When the grants are paid these should be recorded as part of your self-employment income, and it may affect the amount of Universal Credit paid. This will not affect Universal Credit claims for earlier periods.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before 23 April 2020 deadline in the usual way.

To be eligible your self-employed trading profits must be less than £50,000 and more than half of your income must derive from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.

The government has announced the introduction of temporary new measures to protect commercial tenants on UK high streets from aggressive rent collection and closure during the Coronavirus pandemic.

These measures will see statutory demands and winding up petitions issued to commercial tenants to be temporarily voided. There will also be changes made to the use of Commercial Rent Arrears Recovery, building on measures already introduced in the Coronavirus Act. Existing measures include a moratorium on commercial landlord evictions for at least three months that was announced in late March.

The government is encouraging landlords and investors to work collaboratively with high street businesses unable to pay their bills during COVID-19 pandemic. In many cases, this is happening, but some landlords have been using aggressive tactics to recover rent due.

These measures will help to safeguard the high street and millions of jobs by protecting businesses from permanent closure during this time. However, while landlords are urged to give their tenants the breathing space needed, the government is also calling on tenants to pay rent where they can afford it or to pay what they can in recognition of the strains also felt by commercial landlords.

The new legislation to protect tenants will be in force until 30 June 2020 and can be extended in line with the moratorium on commercial lease forfeiture.

The Chancellor, Rishi Sunak has today (27 April 2020) made a statement to the House of Commons on the government’s economic response to the Coronavirus outbreak. The Chancellor confirmed that the Office of Budget Responsibility (OBR) has said that the Coronavirus will (not surprisingly) have significant negative impacts on the UK and global economy.

The most important announcement made by the Chancellor concerned the launch of the new Bounce Back Loans scheme. The launch of this scheme will help many small and micro businesses that appeared to have fallen through the cracks and were ineligible for most of the support measures that had previously been announced.

The new scheme will allow small businesses to borrow between £2,000 and £50,000 and access the cash, in most cases, within 24 hours of approval. The loans will have a 100% government guarantee and businesses can apply for a loan of up to 25% of their turnover. The government will also pay the interest on these loans for the first 12 months and no repayments will be due during this time.

The Chancellor said that banks will not need to perform any forward-looking test of business viability or other complex eligibility criteria and that businesses will be able to apply for a loan online using a short and simple form. The new scheme will open for applications at 9am next Monday, 4 May, and firms will be able to access these loans through a network of accredited lenders.

The Chancellor has received many representations looking for the Coronavirus Business Interruption Loan Scheme (CBILS) to have a 100% government guarantees (rather than 80%) but resisted doing so saying he remained unconvinced that it was necessary to make such a move. However, many businesses are reporting difficulties accessing finance as banks are refusing to lend.

The Chancellor said:

'Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis. This is in addition to business grants, tax deferrals, and the job retention scheme, which are already helping to support hundreds of thousands of small businesses.'

It was also confirmed that over 1.5 million new claims have been made for Universal Credit. More than 500,000 claims have been made for the job retention scheme since it was officially launched and over 4 million jobs have been furloughed. The Chancellor also suggested that, without government interventions to assist, a quarter of businesses may have stopped trading as a result of the Coronavirus pandemic.

Aside from the various rate reduction schemes, grants linked to the occupation of business premises, the furlough scheme and the Self-Employed Income Support Scheme, all other sources of government support for SME’s are a bewildering array of government backed loan schemes.

As we said in a post last week, a cash grant (treated as income) is better than a bank loan (treated as a repayable liability).

By offering these loan guarantees, government is shifting the support it is offering from current expenditure to some future date when and if banks are forced to call in the government guarantees.

By taking the loans, businesses are increasing their costs – after discounting any initial government assistance – and adding loan repayments to their cashflow forecasts.

Another way to consider this latter point means that businesses will need to make more profit to cover the interest costs, and more importantly, generate additional profits to fund the loan repayments.

Which is why planning prior to taking out loans is paramount. 

This planning process will serve two functions:

1. Provide you with the evidence that a loan can be managed, and
2. Provide you with a report to support your loan application.

If you cannot claim COVID-19 generated grants, and need to plug your cashflow gap with a loan and are unsure how to undertake the necessary forecasting process, please call.

An income stream is a fanciful term to describe a source of income. This post examines the value of creating more than one source of income as opposed to relying on just one source.

First, a cliché, placing all your eggs in one basket…

This analogy, that if you drop your basket (lose a sole source of income), then all your fragile eggs are likely to be broken due to this single action.

Counter this with a basket that contain an egg and a piece of cheese. Drop this basket and you may lose your egg, but you can still benefit from the cheese.

The current rapid and discriminatory lock-down that has forced the closure of leisure, retail and many other firms, has basically placed their owners in the position of the egg basket handler, staring in dismay at the shattered remains of their ability to sustain themselves.

Whilst the distress and uncertainty that this process has created cannot, and should not be underestimated, perhaps it does open up space to consider future options including the possibility of creating more than one income stream.

Consider Joe, a driving instructor until social distancing left him without a business, who now drives local deliveries for a supermarket chain and fully intends to continue this post COVID-19. He plans to reopen his driving instructor business evenings and weekends and has already started selling craft products on the internet.

Instead of eggs in his basket, he now has eggs, cheese and bacon…
 

The Government has launched a raft of grants and loan guarantee arrangements since the COVID-19 lock-down started last month.

In almost all cases the grants are taxable and non-repayable, unless HMRC at some future date consider that the grants were claimed fraudulently.

Grants are treated in your accounts as other income.

Loans are an obligation to repay. Even if the Government guarantees 80% of loans taken out, the loans received are classified as liabilities not as other income. You will be expected to repay the full amount borrowed and cover interest payments – once any Government agreement to cover interest and charges has expired.