The ongoing Coronavirus outbreak is posing unprecedented challenges to the UK economy. To support UK businesses and workers, the government has announced a raft of tax and economic measures designed to minimise the disruption caused during this period. This briefing examines some of the key measures announced.
Due to the fast-moving nature of the government response to the outbreak, while this briefing is up to date as of 2 April 2020, there may have been further developments since then. If you have any questions about the current position, or anything else in this briefing, then please get in touch with your usual Saffery contact.
Coronavirus Job Retention Scheme
Under this scheme, all UK businesses will be able to access government support to continue paying the wages of employees that would have otherwise been laid off due to the Coronavirus outbreak. They can claim up to 80% of the salary of each affected employee, up to a cap of £2,500.
In order to claim, employers must designate their affected employees as ‘furloughed workers’. This must be discussed with and notified to the affected employees, as changing their status remains subject to existing employment law, and depending on their contracts, may be subject to notification.
Information on furloughed workers, and their earnings, must then be notified to HM Revenue & Customs (HMRC) through a new online portal. This is not yet up and running, but is expected to be available, along with the additional information required, very soon.
The scheme is currently expected to run for at least 3 months from 1 March 2020, but the government have stated that this will be extended if necessary.
For more details on the scheme, see our separate article.
Support for the self-employed
The Chancellor has now unveiled the package of support available for the self-employed. For those eligible, the government will pay a taxable cash grant of up to 80% of their average monthly earnings, based on previous earnings over the last three years, and capped at a maximum of £2,500 a month.
To be eligible, self-employed people must:
- Have taxable profits of less than £50,000 in 2018-19, or average taxable profits of less than £50,000 in 2016-17, 2017-18, and 2018-19;
- Have traded in the tax year 2019-20;
- Be currently trading at the time of application, or would be but for the coronavirus;
- Make more than half of their income from self-employment; and
- Already be self employed and have filed a tax return on this basis for the 2018-19 tax year.
Find out more about the Self-employment Income Support Scheme.
Income tax payment on account deferral
The Chancellor had previously announced a deferral of the income tax payment on account from 31 July 2020 to 31 January 2021. Government guidance initially suggested that this was only going to be available for self-employed individuals, however it now states that all self-assessment taxpayers will be eligible, including trustees.
The deferral will be applied automatically and no interest or penalties will be charged; however, should taxpayers wish to make the payment by the normal payment date of 31 July 2020, they can still do so.
Income tax payment on account deferral
Self-employed taxpayers who are due to make an income tax payment on account on 31 July 2020 will now have this payment deferred until 31 January 2021. There is no need to make an application – the deferral will apply automatically, and HMRC will not charge penalties or interest for late payment in this deferral period.
Businesses registered for VAT will have their VAT payments deferred from 20 March 2020 until 30 June 2020. Taxpayers will have until the end of the 2020-21 tax year to pay any liabilities that accrue during this period.
Businesses do not need to apply for this deferral – it is given automatically, and they should not make any VAT payments during this period. HMRC will continue to pay VAT refunds and reclaims as usual.
Time to Pay
Individuals and businesses struggling to pay a tax bill can approach HMRC to negotiate a Time to Pay (TTP) arrangement. Arrangements can cover all taxes, including PAYE, VAT and CIS deductions, and payment terms can be highly personalised depending on the taxpayer’s ability to obtain funds. There is now a dedicated coronavirus HMRC helpline open (T: 0800 024 1222), and additional call handlers have been put in place to assist. HMRC requires contact via telephone to agree arrangements rather than in writing.
When agreeing a TTP arrangement, HMRC will ask for information about your income and expenditure, any assets you hold, and what action you’re taking to pay your tax bill (such as raising funds elsewhere). In complex cases, you may need to provide evidence to HMRC. A TTP will only be agreed where HMRC is convinced that you are unable to pay – if you are unwilling to pay to preserve cash, a TTP arrangement will most likely be refused.
Taxpayers should get in touch with HMRC to agree an arrangement rather than simply withholding payment of tax. Although interest will continue to accrue on unpaid liabilities, agreeing an arrangement will ensure that HMRC does not take action to collect the debt.
Off-payroll working for the private sector changes delayed
HMRC has confirmed a delay to the extension of the off-payroll working (also known as IR35) rules, which were due to expand to the private sector from April this year. The rules will now come into force from April 2021.
This is a welcome delay for many, but for others it may be frustrating as the news has come late enough that they may already have made alternative arrangements for some contractors and introduced new processes. However, it is clear that this is a postponement and not a cancellation, as the government remains committed to introducing this policy to ensure that people working like employees, but through their own limited company, pay broadly the same tax as individuals who are employed directly. Businesses should therefore ensure that they are still planning to be IR35 ready by April 2021.
We have prepared a separate briefing on the IR35 delay, which can be found here.
Business rates support
The government announced in the budget on 11 March 2020 that support would be provided for business rates payers and has provided updated guidance on 25 March 2020. In response to COVID-19 the government announced support under two schemes, one for small businesses and one for businesses in the retail, hospitality and leisure sectors
Support for business rates payers in England includes:
- A business rates holiday for retail, hospitality, leisure and nursery businesses for the 2020-21 tax year. Businesses that have already paid their rates for this year will be refunded.
- A one-off £25,000 grant for retail, hospitality and leisure businesses operating from premises with a rateable value between £15,000 and £51,000.
- A one-off grant of £10,000 to businesses who do not pay business rates because they are currently eligible for Small Business Rates Relief (SBRR) or rural rate relief, to help meet their ongoing business costs. If your business is eligible for SBRR or rural rate relief, your local authority will contact you – there is no need to apply. Note that those hereditaments with a rateable value of between £12,000 and £15,000 will receive tapered relief.
As business rates are devolved, different schemes may apply in Scotland, Wales and Northern Ireland.
The Scottish measures, all of which are effective from 1 April 2020, are as follows:
- A full year’s 100% non-domestic rates relief for retail, hospitality and tourism (this supersedes the 75% relief announced on 14 March).
- A one-off £10,000 grant for small businesses in receipt of the Small Business Bonus Scheme or Rural Relief, which mirrors the announcement in England.
- A one-off £25,000 grant for hospitality, leisure and retail properties with a rateable value between £18,000 and £51,000, which is similar to the English relief but with a higher threshold and supersedes any previous announcements.
Some businesses may pay an amount for business rates in their rent to their landlord. In this case, they should seek to negotiate a rent decrease for the period of the business rates holiday – this may be provided for in their rent agreement.
How will the grants be provided
Business rates holidays will be automatically applied by Local Authorities so no claim will need to be made.
Local Authorities will be responsible for delivering the funding to eligible businesses. Central Government will reimburse Local Authorities that pay grants to eligible businesses. Eligible recipients under either scheme will receive one grant per hereditament.
Hereditaments occupied for personal uses,
Car parks and parking spaces
Businesses which as of 11 March 2020 were in liquidation or were dissolved
Hereditaments with a rateable value of over £51,000 for the RHLG scheme or over £15,000 for the small businesses scheme
Any changed to the rateable value after 11 March, even where this is backdated, shall be ignored for the purposes of eligibility to this scheme
Coronavirus Business Interruption Loan Scheme
The Coronavirus Business Interruption Loan Scheme is a temporary scheme, delivered by the British Business bank. It is intended to support primarily small and medium-sized businesses to access bank lending, where they have a sound borrowing proposal but lack security for the loans. It will provide lenders with a government-backed guarantee of 80% on each loan, up to a value of £5 million (subject to a per-lender cap on claims).
The scheme is operational from 23 March 2020. To be eligible for access to this scheme, businesses must:
- Be UK-based;
- Have an annual turnover of less than £45 million;
- Operate within an eligible sector.
Further details of the scheme, including how to apply and how we can help, can be found here.
COVID-19 Corporate Financing Facility
The Bank of England has announced a new lending facility that will purchase short-term debt (less than one year) from larger businesses. To be eligible, the debt must be issued by non-financial companies that make a material contribution to the UK economy and that had, prior to the impact of Coronavirus, a short or long-term rating of investment grade, or financial health equivalent to an investment grade rating.
Statutory Sick Pay
Statutory sick pay (SSP) will now be paid from day one of illness. In addition, eligibility will be extended to all those advised to self-isolate, even if they had not yet presented with symptoms. There will also be no requirement to go to the doctors for a sick note as these will be made available by the NHS 111 service.
Employers with fewer than 250 employees as of 28 February 2020 will have the cost of SSP for any employee off work due to coronavirus for up to 14 days refunded by the government in full.
Those not eligible for SSP, such as the low paid, self-employed, and some working in the gig economy, will be able to claim Universal Credit and/or contributory Employment and Support Allowance.
The rate of statutory sick pay, currently £94.25 per week, is due to increase to £95.85 on 6 April 2020.
Businesses with insurance policies that cover pandemics or government-ordered closures should be covered under their policies. However, the terms and conditions of any insurance policy should be examined closely, as many standard business interruption insurance policies will not cover pandemics.
Filing accounts with Companies House
The Financial Reporting Council reports that Companies House is now automatically giving a three month extension to file accounts.
Affected businesses will still need to apply for the extension and this should be done before the filing deadline is passed.
If you have queries about any of the measures outlined here, please speak to your usual Saffery Champness contact.