Business Support

As part of the government’s response to assist businesses during the COVID-19 crisis is the offer to defer VAT and self-assessment tax and NIC payments.

VAT

HMRC will not enforce payment of VAT liabilities that fall due between 20 March 2020 and 30 June 2020. For most VAT registered firms, this will boost cashflow as one quarter's VAT payment will not be made.

SELF-ASSESSMENT TAX AND NIC

HMRC have also confirmed that any second payment on account due 31 July 2020 does not need to be made.

Whilst businesses and tax payers will appreciate this offer, there will come a day of reckoning.

Deferred does not mean cancelled.

Any deferred VAT will need to be paid by 31 March 2021, and any deferred self-assessment tax by 31 January 2021.

Make sure you factor these 2021 payments into your cashflow forecasting. Business owners may forget that these potentially significant payments will need to be dealt with early next year.

As the COVID-19 lock-down starts to bite, businesses will be utilising available resources to meet their daily needs. In a number of cases this may see cashflow diminish as losses start to make inroads into reserves.

The best way to plan for these deferred payments is to create a cashflow forecast. This can be a simple spreadsheet with a list of monies due in, monies to be paid out, and that projects a running balance of your bank balances. This needs to be done at least a year ahead and reviewed monthly so you can see where cash shortages are likely to occur.

We can set this up for you and show you how to keep the report up-to-date.  
 

New insolvency measures have been announced to help prevent businesses unable to meet debts, due to the impact of Coronavirus, to continue trading and not be forced to file for bankruptcy. The measures were announced by the Business Secretary, Alok Sharma.

These changes will see the temporary suspension of the wrongful trading law during the pandemic. It will apply retrospectively, from 1 March 2020, for three months. This means that company directors can continue to trade without the threat of personal liability. This will allow directors of companies to pay staff and suppliers even if there are fears that the company could become insolvent due to the current, exceptional trading circumstances. 

Other changes include a temporary moratorium for businesses undergoing a rescue or restructuring process. During this period, they cannot be placed in administration by creditors and be able to continue buying important supplies – such as energy costs and raw materials. There will also be a new restructuring plan binding on creditors.

These measures should help some businesses to cope with the significant difficulties of the current crisis and hopefully, enable them to continue functioning until the situation improves. 
 

The long-awaited statement from the Chancellor, Rishi Sunak regarding COVID-19 support for the self-employed has been announced. The Chancellor said that the scheme will benefit some 95% of people whose main income source is derived from self-employment.

A list of the scheme features as announced, and published, are as follows:

• Those that qualify 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. 

To be eligible, the following conditions will be taken into account:

• Applicants must be self-employed or a member of a trading partnership,
• Have lost trading profits due to COVID-19,
• Have filed a tax return for 2018-19. Late filers will have four weeks from 26 March 2020 to do so,
• 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. This can be with reference to at least one of the following conditions:
  • Your trading profits and total income in 2018-19,
  • Your average trading profits and total income across up to the three years between 2016-17, 2017-18, and 2018-19.

There is no need to apply to HMRC as they will contact you if you are eligible. HMRC will use existing data to make this judgement. The initial three-month grant will be paid directly to a nominated bank account in a single lump sum. The grants are expected to be paid out at the beginning of June. The reason for this delay is likely down to three main factors: the 4 weeks additional filing time for late filers, the requirement to set up a complex new system at the same time as the Coronavirus Job Retention Scheme and to reduce the risk of fraud. 

It is assumed that those self-employed who have experienced a significant drop in income due to COVID-19 disruption will need to apply for Universal Credits or Business Continuity Loans to tide them over until June. This will be a challenging time for those affected as the demand for help will place significant challenges on the institutions charged with providing this support.
 
CORONAVIRUS JOB RETENTION SCHEME (CJRS) – update for director shareholders

There has been uncertainty as to the position of director/shareholders claiming under the CJRS as their income is usually taken from their company as a combination of a low salary and dividends. In the news story published following the Chancellor’s statement on 26 March (regarding the Self-employed scheme) is a telling paragraph. It says:
 
Those who pay themselves a salary and dividends through their own company are not covered by the scheme (the Self-employed Scheme) but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

This infers that directors will only be eligible for the CJRS based on their salary alone, and only if there is a proven PAYE record.

Further details of the CJRS are due to be published imminently and will be added to our newsfeed as soon as they are available.

Most business owners are rightly focussed on sales. If sales dry up business costs will quickly result in losses; and losses will eventually burn through your assets until insolvency rears its ugly head.

In the current “lock-down” environment there is a temptation to ease back on collecting cash from customers if you offer credit in order to maintain sales.

And, of course, your customers may not be in a position to pay you according to agreed terms if their finances are being stretched.

What to do?

1. Firstly, negotiate with your customers, if you sell goods or services have a candid conversation about payment, when will your bills be paid?
2. Offer special discounts for cash sales or prompt payment. It is better to trim your profit margins than sell and increase bad debts.
3. Use online direct debit resources so that you can collect payment from customers on the agreed due date. We can help you choose an appropriate scheme.
4. Respond quickly to customers that are late in settling their account. There is no point in selling additional goods to a business that may be unable to pay.

If you offer credit to a customer – they pay you at a future date after goods or services have been supplied – you are volunteering to leave your money in their bank account for that period of time.

To minimise your risks of bad debts at this difficult time we recommend that you reconsider your credit control processes. Please call if you would like our help to do this.

The current “lock-down” to slow down the Coronavirus epidemic is a sensible medical response, but a potential disaster for small businesses desperately trying to keep their businesses open and operational.

Since the 10 March, we have had a formal budget and at least two major “mini-budget” announcements bringing forward schemes to assist individuals and firms to cope with this unprecedented COVID-19 disruption.

We are working round the clock, and when necessary from our homes, to keep you informed of these changes and with advice to ease your progress through these difficulties.

Please keep an eye open for our emails and other updates as they will help you survive the process. 

New schemes to support businesses are being announced almost weekly, so please, make a point of reading our updates and contact us if you have concerns that need to be addressed.

Finally, if you have business colleagues who may benefit from our news feed, please forward them a copy of our updates and ask them to sign up for our newsletter on our website.

Being informed and acting on the latest news can only have a positive impact on your ability to weather the Coronavirus disruption. If you need to respond to any of the issues we raise please pick up the phone. We are here to help.
 

If you have been 'furloughed' then the new Coronavirus Job Retention Scheme may be able to help. If you are furloughed it essentially means that your employer has given you a temporary leave of absence or a type of sabbatical to help cope with the economic turmoil resulting from COVID-19. If you are on furlough, then you should be at home and not working. However, you remain technically employed.

The new scheme will see the government cover up to 80% of wage costs, up to a cap of £2,500 per month per employee. HMRC are working to set up a system for reimbursement and the first grants are expected to be paid in the coming weeks. The scheme will run for at least 3 months, backdated from 1 March 2020, but will be extended if necessary. The government has not placed any limit on the funds to be provided using this scheme, but the costs will run into the billions each month the scheme is operational.

The use of this scheme is designed to encourage employers to avoid making people redundant and to help avoid significant financial hardship for individuals who have unfortunately been furloughed.  Your employer could choose to fund the differences between this government payment and your salary but is under no obligation to do so.

If your salary is reduced as a result of these changes, you may also be eligible for further welfare support. It appears that these grants will only be available to PAYE workers. It was not clear how this will apply to gig workers or those on zero-hours contracts. There will also need to be proper safeguards to ensure that this scheme is not subject to abuse.

We have written about the changes to business rates for businesses in England due to COVID-19. There is also a Retail and Hospitality Grant Scheme that provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property as well as a one-off Small Business Grant of up to £10,000 to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief.

The business rates in Scotland, Wales and Northern Ireland are set by the devolved administrations. We have set out below the main regional variations.

Scotland

To help owners of non-domestic properties, including businesses, deal with the impact of COVID-19, the Scottish Government has made changes to non-domestic rates (business rates) for 2020-21.

All non-domestic properties in Scotland will get a 1.6% rates relief. This relief effectively reverses the change in poundage for 2020-21. You do not need to apply for this relief, and it will be applied to your bill by your local council.

Retail, hospitality and leisure businesses will get 100% rates relief. To get this relief, a property has to be occupied. Retail, hospitality and leisure businesses with a rateable value between £18,000 and up to and including £51,000 will be able to apply for a one-off grant of £25,000.

A one-off grant of £10,000 will also be available to small businesses who get Small Business Bonus Scheme relief or Rural Relief.

The Scottish Government is working with Scotland's 32 Councils and other stakeholders to agree a common approach to the application process for the grants and 100% rates relief.

Wales

Retail, leisure and hospitality businesses will receive 100% business rates relief for 2020-21.

For retail, leisure and hospitality businesses with a rateable value of between £12,001 and £51,000, a grant of £25,000 will be offered.

The new reliefs also provide a £10,000 grant to all businesses eligible for Small Business Rates Relief and with a rateable value of £12,000 or less.

Businesses that qualify for this support will not need to do anything to apply for this scheme. This will be administered through the Business Rates system. You do not need to contact your Local Authority about this, you will receive information in due course.

Northern Ireland

Businesses in Northern Ireland can access the following schemes:

• COVID Small Business Grant – Small business grant of £10,000 to be issued immediately with a cost of £267m providing support to 27,000 businesses in NI. This is for all businesses with a NAV up to £15,000
• Hospitality, Tourism and Retail Sectors Grant Scheme – An immediate grant of £25,000 will be provided to companies in these sectors with a rateable value up to £51,000.

Further information on these schemes will be made available at NI Business Info.

All NI businesses will pay zero rates for the next three months (April, May, June). This automatically reduces rates by 25%, in addition to any existing rate reliefs. This applies to all businesses and does not need to be repaid.

LV test

On Friday, the Chancellor went significantly further than in the history of this great county, with a series of unprecedented announcements in the Government’s support of businesses, employees and individuals. 

The range of measures for UK businesses is significant and now includes the following:

• a Coronavirus Job Retention Scheme
• deferring VAT and Income Tax payments
• a Statutory Sick Pay relief package for SMEs
• a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
• small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
• grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
• the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
• a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
• the HMRC Time To Pay Scheme
• insurance coverage

Readers who are anxious about their businesses in these fast-changing and uncertain times are advised to call so we can help you plan for the next few challenging months. This would include a review of the following reliefs and those that you will be eligible to claim.

Each of these items is now explained in more detail below.

Coronavirus Job Retention Scheme

Under the Coronavirus Job Retention Scheme all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.

Eligibility: All UK businesses are eligible.

How to access the scheme – You will need to:

• designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.
• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month per employee. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Deferring VAT and Income Tax payments

Government has announced that HMRC will allow you to defer Value Added Tax (VAT) payments for 3 months. The deferral period will apply from 20 March 2020 until 30 June 2020.

Additionally, if you are self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

1. VAT Deferral. All UK businesses registered for VAT are eligible. This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020-21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.
2. Income Tax. For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. If you are self-employed you are eligible. This is an automatic offer with no applications required.

Support for businesses who are paying sick pay to employees

HMRC are bringing forward legislation to allow small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. 

The eligibility criteria for the scheme will be as follows:

• this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
• employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
• employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
• employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. If evidence is required by an employer, those with symptoms of coronavirus can get an isolation note from NHS 111 online and those who live with someone that has symptoms can get a note from the NHS website
• eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
• the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

You are eligible for the scheme if your business is UK based, small or medium-sized and employs fewer than 250 employees as of 28 February 2020.

A rebate scheme is being developed. Further details will be provided in due course once the legalisation has passed.

Support for businesses that pay business rates

Business rates holiday for retail, hospitality and leisure businesses.

The government is introducing a business rates holiday for retail, hospitality and leisure businesses in England for the 2020-21 tax year.

Businesses that received the retail discount in the 2019-20 tax year will be rebilled by their local authority as soon as possible.

You are eligible for the business rates holiday if: your business is based in England and your business is in the retail, hospitality and/or leisure sector.

Properties that will benefit from the relief will be occupied premises that are wholly or mainly being used:

• shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
• for assembly and leisure;
• as hotels, guest & boarding premises and self-catering accommodation.

There is no action that you need to take. The relief will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They will do this as soon as possible.

Cash grants for retail, hospitality and leisure businesses

The Retail and Hospitality Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.

For businesses in these sectors with a rateable value of under £15,000, they will receive a grant of £10,000.

For businesses in these sectors with a rateable value of between £15,001 and £51,000, they will receive a grant of £25,000.

You are eligible for the grant if: your business is based in England and your business is in the retail, hospitality and/or leisure sector.

Properties that will benefit from the relief will be occupied premises that are wholly or mainly being used: 

• 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.

There is no action you need to take. Your local authority will write to you if you are eligible for this grant.

Support for businesses that pay little or no business rates

The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of up to £10,000 to eligible businesses to help meet their ongoing business costs.

You are eligible if: your business is based in England; you are a small business and already receive SBBR and/or RRR and you are a business that occupies property.

You do not need to do anything. Your local authority will write to you if you are eligible for this grant.

Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

Coronavirus Business Interruption Loan Scheme

The new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch early week beginning 23 March 2020, to support primarily small and medium-sized businesses to access bank lending and overdrafts.

The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value.

Businesses can access the first 12 months of that finance interest free, as government will cover the first 12 months of interest payments.

You are eligible for the scheme if: your business is UK based, with turnover of no more than £45 million per year and your business meets the other British Business Bank eligibility criteria.

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website. All the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.

Support for larger firms – the COVID-19 Corporate Financing Facility

Under the new COVID-19 Corporate Financing Facility, the Bank of England will buy short term debt from larger companies.

This will support your company if it has been affected by a short-term funding squeeze and allow you to finance your short-term liabilities.

It will also support corporate finance markets overall and ease the supply of credit to all firms.

All UK businesses are eligible.

The scheme will be available early in week beginning 23 March 2020. More information is available from the Bank of England.

Support for businesses paying tax: Time to Pay service

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

You are eligible if your business pays tax to the UK government and has outstanding tax liabilities.

Insurance

Businesses that have cover for both pandemics and government-ordered closure should be covered, 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.

Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.

The following guidance is reproduced from the mygov.scot website

Help with non-domestic rates in Scotland during coronavirus (COVID-19)
Last updated: 20 March 2020

To help owners of non-domestic properties, including businesses, deal with the impact of COVID-19, the Scottish Government has made changes to non-domestic rates (business rates) for 2020-21.

The Scottish Government has introduced extra rates reliefs (discounts). It has also introduced a one-off grant for some businesses.

These reliefs will be available to non-domestic properties from 1 April 2020 to 31 March 2021.

It will be possible to apply for the grants from April 2020 and they will be available to 31 March 2021.

The non-domestic rates reliefs and grant funding measures announced by the Chancellor of the Exchequer in March 2020 apply only in England. They do not apply in Scotland.

Extra reliefs to help with COVID-19

All non-domestic properties in Scotland will get a 1.6% rates relief. This relief effectively reverses the change in poundage for 2020-21.

You do not need to apply for this relief, and it will be applied to your bill by your local council.

Retail, hospitality and leisure businesses

Retail, hospitality and leisure businesses will get 100% rates relief. To get this relief, a property has to be occupied.

The Scottish Government are working with Scotland's 32 Councils to make sure this relief is administered in the most effective way. You can check this page for updates, including information on any application process.

You can get these rates reliefs even if you already get another relief for your property.

Grants

Retail, hospitality and leisure businesses with a rateable value between £18,000 and up to and including £51,000 will be able to apply for a one-off grant of £25,000.

A one-off grant of £10,000 will also be available to small businesses who get:

• Small Business Bonus Scheme relief
• Rural Relief

You can also get this grant if you applied for Nursery Relief or Disabled Relief but are eligible for the Small Business Bonus Scheme.

You can only apply for one grant – even if you own multiple properties.

Applying for a grant and getting paid

The Scottish Government are working with Scotland's 32 Councils and other stakeholders to agree a common approach to the application process.

This should help make sure there's an effective and timely processing of grants as soon as possible.

Deferring payment of non-domestic rates
If you're struggling to pay your non-domestic rates bill you should contact your local council 

Types of retail, hospitality and leisure businesses who qualify

This list is not exhaustive. If you think you may be eligible for this relief, contact your local council.

State Aid

State aid rules still apply in the UK until the end of 2020.

The European Commission are consulting with Member States on a number of temporary State aid measures. These measures aim to help with the financial pressures businesses face as a result of COVID-19.

The Scottish Government will work with the UK Government to make sure these measures can be adopted to help Scottish Businesses where possible.