Measures To Assist Businesses With COVID-19

During these turbulent times we believe that it is always best to seek advice and assistance as soon as possible and not delay until matters becomes critical. Below we have summarised the latest position (as at 29 September) on a number of measures to assist businesses in financial difficulties due to the disruption resulting from COVID-19.

Further details can be found on the GOV.UK website. Should you wish to discuss matters further, please contact your engagement/relationship partner or email us mail@sgllp.co.uk

Government supported borrowing

  • The repayment period of Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loans will be extended from six to 10 years with interest-only periods of up to six months and payment holidays will be available.
  • The application date for all coronavirus loan schemes has been extended to 30 November.

VAT

  • Businesses who deferred their VAT bills will be able to spread repayment over 11 smaller interest-free payments up to March 2022. It will be necessary for businesses to opt into this scheme.
  • The reduced VAT rate for the tourism and hospitality sectors will be extended to the end of March next year.

Income Tax

  • Payments deferred from July 2020 and those due in January 2021, will not need to be paid until January 2022.

Statutory Sick Pay

Government guidance has been updated to confirm that, from 26 August 2020, employers can claim for employees who have been notified by the NHS to self-isolate before surgery for up to 14 days.

Self-Employment Income Support Scheme (SEISS) Grant Extension

 The extension will be limited to those currently eligible for the SEISS (although they do not have to have claimed previously) who are actively continuing to trade but are facing reduced demand due to COVID-19.

There will be two grants in the period November 2020 to April 2021. The first will cover the period 1 November 2020 to 31 January 2021 and will provide a taxable grant covering 20 per cent of average monthly trading profits, capped at £1,875 in total, paid out in a single instalment.

The second grant will cover a three-month period from the start of February until the end of April. The Government will review the level of the second grant and set this in due course.

The grants are subject to Income Tax and National Insurance Contributions.

Full details of how to claim will be provided by HMRC in due course.

Job Support Scheme

Whilst detailed guidance has yet to be published, the Government’s policy paper has outlined how the scheme will operate. It will open on 1 November 2020 and run for 6 months, until April 2021. Claims can be made from December 2020 and will be paid on a monthly basis in arrears – that is after the employee has been paid and HMRC notified through the Real Time Information (RTI) submission.

Employees will be paid in full by their employer for time worked but, for hours not worked, the cost will be split between the employer, the Government (through wage support) and the employee (through a wage reduction).

The Government will pay a third of hours not worked up to a cap of £697.92 a month. The grant will not include Class 1 employer NICs or pension contributions and these will remain payable by the employer.

The employer will also contribute a third – the Government’s expectation is that employers cannot top up their employees’ wages above the two-thirds level.

Where the cap does not apply, this will mean that employees receive at least 77% of their normal wages.

Hours Employee Worked 33% 40% 50% 60% 70%
Hours Employee Not Working 67% 60% 50% 40% 30%
Employee Earnings (% of normal) 78% 80% 83% 87% 90%
Gov’t Grant (% of normal wages) 22% 20% 17% 13% 10%
Employer Cost (% normal wages) 55% 60% 67% 73% 80%

The only condition for small and medium enterprises is that the employer has a UK bank account and UK PAYE scheme.

Large businesses will need to show turnover has fallen following COVID-19.

The Government expects that large employers using the Scheme will not make capital distributions, such as dividend payments or share buybacks (further details of this will be included in the future guidance).

The scheme is available irrespective of claims made under the Coronavirus Job Retention Scheme and has no impact on eligibility for the Job Retention Bonus.

To be included in the scheme, an employee must:

  • be on an employer’s PAYE payroll on or before 23 September 2020 – that is a Real Time Information (RTI) submission notifying payment to that employee must have been made on or before this date.
  • work at least a third of their normal hours for the first three months of the scheme operating. This threshold may increase after this point.

Employees can move in and out of the scheme and do not have to work a consistent pattern. However, each period must cover a minimum of seven days.

The scheme will use “usual wages” calculations similar to the Coronavirus Job Retention Scheme. Where staff have previously been furloughed, the calculation of usual pay and/or hours will be based on their underlying contracts, not the amounts whilst on furlough.

Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.

In line with the other support schemes, HMRC will carry out checks and may withhold or require repayment of claims made fraudulently or based on incorrect information.

Grants for businesses affected by local lockdowns

The Government is to introduce grants of either £1,000 or £1,500 paid every 3 weeks to businesses which are forced to shut due to local coronavirus-related restrictions. The grants will be taxable income and will be in addition to other assistance provided.

The higher level of grants will be available to businesses occupying premises with:

  • a rateable value of £51,000 or more; or
  • an annual rent of £51,000 or more; or
  • an annual mortgage payment of £51,000 or more.

The grants will only apply to businesses closed due to a national decision to close businesses in a high incidence area. They will not be available to businesses still closed at a national level.

Grants will be distributed by Local Authorities which will also receive an additional 5% top up to provide grants of up to £1,500 to businesses not eligible under these criteria.

Additional Grants

The Government is to provide £20 million of funding to local Growth Hubs to provide support to small and medium sized enterprises.

The funding is available across all sectors and will typically be of grants of up to £3,000 (with a maximum of £5,000).

It is intended to support businesses in purchasing minor equipment to adapt or adopt new technology and help access specialist professional advice. Additional details can be found here.

Tax-free childcare extended

The Government has announced that tax-free childcare for parents who have fallen below the minimum income requirement and critical workers who may have exceeded it has been extended to 31 October.

Further details can be found at: https://www.gov.uk/government/news/support-for-working-families-affected-by-coronavirus-covid-19-given-an-extra-boost

Furloughed Staff – Salary for Redundancy

The Government has announced that it will introduce legislation which will ensure that, from 31 July, statutory redundancy pay is calculated based on an employee’s normal pay, rather than furlough pay. This also covers other employment rights that rely on average weekly pay, including notice pay, unfair dismissal, and short-time working.

However, it does not apply to any enhanced redundancy pay under the individual’s employment contract.

Why not paying your employees’ personal fuel costs may be in their best interest

As we are now coming out of lockdown, employers will start receiving claims from employees who are provided with fuel. However, it may be in both the employer’s and employees’ best interests for these not to be paid.

Whilst the amount of fuel used during the lockdown period is likely to be low, this does not reduce the income tax arising on the Benefit-in-Kind (BIK). Therefore, it is possible for the resulting tax liability to exceed the amount reimbursed.

In general, the fuel BIK is determined by the multiplier set by HMR&C, which is £24,500 for 2020/21, and the charge varies between 3% and 37% depending on the vehicles’ CO2 emissions. The BIK for the 2019/20 tax year will have been shown on the P11d recently issued.

If the fuel usage across a period is less than the BIK, then it is in the employee’s interest for the employer to withdraw the benefit for the relevant period. In order for the BIK to be stopped, the employer must stop paying for any of the fuel. There is no minimum period for this withdrawal but the benefit can only be stopped and restarted once in any tax year.

If you wish to discuss this matter further please contact Steve Williams – Stephen.Williams@sgllp.co.uk

Mini Budget 2020 – The Chancellor’s Summer Update

In his summer statement, the Chancellor announced a number of measures to help businesses recover from COVID-19. Whilst further details are to be published, the schemes announced were:

Coronavirus Job Retention Bonus

The Government has issued a policy paper which provides further details of the scheme under which employers will receive a £1,000 taxable one-off payment for every employee previously furloughed who remains continuously employed through to 31 January 2021. Anyone serving a contractual or statutory notice period, that started before 1 February 2021, is excluded from the scheme.

To be eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. Employers will be able to claim after they have filed their PAYE return for January and payments will be made from February 2021.

Employers expecting to claim under the scheme should ensure:

  • that their employee records are up-to-date including accurately reporting their employee’s details and wages on the Full Payment Submission (FPS) through the Real Time Information (RTI) reporting system;
  • all of their Coronavirus Job Retention Scheme claims have been accurately submitted and any necessary amendments have been notified to HMRC; and
  • all requests from HMRC to provide missing employee data in respect of historic Coronavirus Job Retention Scheme claims have been addressed.

The minimum earnings must be met, regardless of the frequency of the employee’s pay periods, their hours worked and rate of pay, and recorded through HMRC Real Time Information (RTI) records.

The bonus can be claimed for fixed term contract employees who were furloughed provided the other eligibility criteria are met. Contracts can be extended or renewed without affecting eligibility for the bonus, provided that continuous employment is maintained.

Detailed guidance will be published in September 2020. The policy paper can be found at: https://www.gov.uk/government/publications/job-retention-bonus/job-retention-bonus

VAT Cut For Hospitality Sector

With the fall in the rate of VAT there may be situations where the customer has already agreed a fee / been invoiced / has paid for the service at the higher VAT rate.  At a basic level, the consequences are:

  • Where a price has been agreed but not yet invoiced or paid, the amount payable must be altered unless there is an express term in the contract which stipulates that the gross price is fixed.
  • When an invoice has been issued or payment received, the business can (but is not required to) lower the rate charged to the extent that goods are removed or services performed after the change of rate.  The supplier has to issue an appropriate credit note within 45 days of the change of rate. If the lower rate is not used, the business should pay to HMRC the full amount of the VAT charged at the old, higher rate.
  • Where continuous supplies of goods or services are made which cover a change of rate and the invoice/payment date results in a higher rate than that in force when the goods or services were actually removed or performed, the business can (but is not required to) account for VAT at the new rate to the extent that the provision occurs after the change of rate. The supplier must issue a credit note within 45 days of the change of the change of rate. If the lower rate is not used, the business should pay to HMRC the full amount of the VAT charged at the old, higher rate.
  • Where goods are removed or services performed before the change of rate, provided:
    • payment was not received before the removal of the goods or the performance of services; and
    • the invoice is issued after the change of rate but not later more than 14 days after the removal of the goods or performance of the services,

then the supply may benefit from the reduction in rate.

However, businesses that have advised HMRC in writing that they do not wish to apply the 14 day rule are unable to benefit in these circumstances.  There are also a number of businesses that have agreed an extension to the 14 day rule with HMRC.  Such an extension would allow businesses more time to take advantage of the reduction in the VAT rate.

  • Any invoices issued in advance at the old rate are invalid to the extent that the date shown on the invoice is after the change of rate.

Businesses should take care not to be pressured into incorrect adjustments of VAT due as this would result in them being exposed to assessments and penalties.

The commercial considerations are different when the VAT rate falls from when it increases, and the notes above are not in themselves a basis for definitive action.  Clients who may be affected by the rate reduction should take appropriate advice.

Please speak to Paddy Behan on 020 7291 5652 or Anthony Martin-Luce on 020 7291 5611 if you would like to discuss how these changes may affect you.

Eat Out to Help Out Scheme

Full details of the scheme (including how to register) can be found here.

As a reminder, the scheme will commence Monday 3 August but restaurants must register in advance of offering the scheme and claims can only be made 7 days after registering.

Claims can be made between 7 August and 30 September for the periods:

  • 3 to 5 August
  • 10 to 12 August
  • 17 to 19 August
  • 24 to 26 August
  • 31 August

The Government guidance has been updated to confirm that the discount can be applied to soft drinks and/or packaged snacks, as long as they are for immediate consumption on the premises.

The guidance has been updated with a number of examples which show:

  • how to calculate the VAT based on the pre-discount amount of the bill
  • how other discounts offered are deducted before the scheme is applied. If the other discount applies to items not eligible under the scheme (such as alcohol) the amount disallowed from the total is reduced in proportion.
    From the example, a bill of £120, including £40 on alcohol, has a 10% discount applied. Therefore, the bill after the discount is £108 (90% of £120) but the deduction for the alcohol is only £36 (90% of £40) and so the scheme can be applied to the bill of £72.
  • when an alcoholic drink is included in a meal price, the normal price of the drink must be deducted from the meal price to establish the amount that can be discounted under the scheme.

The Government has also produced a YouTube video and live webinar which explain how the scheme works and established a webchat service and dedicated helpline. The links for these, along with the examples, can be found at: https://www.gov.uk/government/publications/get-more-information-about-the-eat-out-to-help-out-scheme/get-more-information-about-the-eat-out-to-help-out-scheme

Kickstart Scheme – Job Creation

The Kickstart scheme has now opened to assist young people on Universal Credit aged between 16-24 to find six month work placements – with the government paying 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week. Employers can top up this wage.

In addition, the government will also pay employers £1,500 per job placement to cover set up costs (such as uniforms) and ongoing support and training.

The scheme only applies to new jobs – they must not:

  • replace existing or planned vacancies
  • cause existing employees or contractors to lose or reduce their employment.

Once a job placement is created, it can be taken up by a second person once the first successful applicant has completed their 6-month term.

The jobs created must:

  • be for a minimum of 25 hours per week, for 6 months
  • be paid at least the National Minimum Wage for the age group
  • not require extensive training before commencing the placement

Each application should include how participants will be helped to develop their skills and experience, including:

  • support to look for long-term work, including career advice and setting goals
  • support with CV and interview preparations
  • supporting the participant with basic skills, such as attendance, timekeeping and teamwork

The scheme is open to businesses of all sizes and there is no cap on the number of places. However, applications must be for a minimum of 30 placements – employers offering fewer than this will need to make a bid with partner firms or through an intermediary, such as a Local Authority or Chamber of Commerce. An additional £300 of funding towards administrative costs is available to the representative applying on behalf of a group of employers.

Young people will be referred into the new roles through their Jobcentre Plus work coach with the first Kickstarts expected to begin at the start of November. The scheme will initially run until December 2021 although it may be extended.

Further details, including how to apply, can be found here.

 Kickstart Scheme – Trainees

The government will fund employers who provide trainees aged 16-24 year with work experience, at a rate of £1,000 per trainee.

Kickstart Scheme – Apprentices

The Government has released further details of the payments for apprentices.

The payments of £2,000 for those aged under 25 (£1,500 for those aged 25 and over) will apply for apprentices with

  • a contract of employment start date between 1 August 2020 and 31 January 2021 (inclusive) and
  • who have not have been employed by the employer within the six months prior to the contract start date.

Employers will be able to make claims from 1 September 2020 through the apprenticeship service with payment made in two equal instalments, where the apprentice is still in learning at day 90 and day 365.

There will be no limit on the number of incentive payments that an employer can claim for apprentices eligible to receive funding, provided each apprentice meets the criteria, including being a new employee.

The details of the scheme can be found at: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/900154/Apprenticeship_funding_in_England_from_Aug_2020_Policy_Document_FINAL.pdf

Green Jobs

From September homeowners and landlords will be able to apply for vouchers to make housing more energy efficient. The government will cover two thirds of the cost up to £5,000 per household, and the full cost up to £10,000 for those on low incomes.

Stamp Duty Cut

The government will temporarily increase the Nil Rate Band of Residential SDLT, in England and Northern Ireland, from £125,000 to £500,000. This will apply from 8 July 2020 until 31 March 2021.

Short-Term Home Building Fund Extension

The government will support small- and medium-sized housebuilders that are unable to access private finance by boosting the Short-Term Home Building Fund, providing an additional £450 million in development finance to smaller firms.

Deferring Self Assessment Payment – Reminder

Just a reminder that income tax due under self-assessment which is normally paid by 31 July can be deferred until 31 January 2021 without penalty or interest. If payment is made by Direct Debit then this should be cancelled through the bank – otherwise HMRC will automatically collect the payment normally due.

Statutory Sick Pay – TUPE

The Government has clarified the guidance to confirm that claims can be made for employees who have transferred under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), provided that the new employer had:

  • a PAYE scheme that was created and started on or before 28 February 2020; and
  • fewer than 250 employees (including TUPE transferred employees) across all PAYE payroll schemes on 28 February 2020

Additionally, an employer without a PAYE scheme on 28 February 2020 can claim provided that the previous employer had fewer than 250 employees across all their PAYE schemes on that date.

Claims can only be made for SSP paid by the employer making the claim, not for amounts paid by any other employer.

Coronavirus Statutory Sick Pay Rebate Scheme

The rules have been amended so that claims can now be made for employees who are self-isolating because they’ve been notified by the NHS or public health bodies that they’ve come into contact with someone with coronavirus.

The Government has announced that the online application system is to open on 26 May to allow employers to recover the costs of paying coronavirus-related SSP for eligible periods of sickness.

In order to claim, an employer must:

  • Have had a PAYE payroll scheme that was created and started before 28 February 2020.
  • Be small or medium sized, with fewer than 250 employees (including all connected companies).

The repayment will cover up to two weeks of SSP, and is payable if an employee is unable to work because they:

  • Have coronavirus; or
  • Are self-isolating and unable to work from home; or
  • Are shielding because they have been advised that they are at high risk of severe illness from coronavirus.

This applies to sickness starting on or after:

  • 13 March 2020 – if your employee had coronavirus or the symptoms or is self-isolating because someone they live with has symptoms.
  • 16 April 2020 – if your employee was shielding because of coronavirus.

In order to claim, an employer will require their Government Gateway user ID. Further details of the Scheme, including links to obtaining the Government Gateway user ID, can be found here.

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.

Support for Businesses that pay Business Rates

A business rates holiday is to be introduced for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

This includes properties wholly or mainly being used shops, restaurants, cafes, drinking establishments, cinemas, estate agents, lettings agencies, bingo halls and live music venues; for assembly and leisure; and as hotels, guest & boarding premises and self-catering accommodation.

The relief should be automatic and will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill to exclude the business rate charge.

You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator. Further guidance for local authorities is available in the expanded retail discount guidance.

Cash Grants for Retail, Hospitality and Leisure Businesses

Further guidance on the scheme has been issued which includes noting that the grants received will be subject to tax. The guidance can be found here.

Cash grants will be provided to retail, hospitality and leisure businesses operating from smaller premises, of £10,000 (for businesses with a rateable value of under £15,000) and £25,000 (for businesses with a rateable value between £15,000 and £51,000).

Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority. Find your local authority. Rateable values can be checked here.

Support for Nursery Businesses that pay Business Rates

A business rates holiday will apply for nurseries in England for the 2020 to 2021 tax year. To be eligible, occupiers must be providers on Ofsted’s Early Years Register or the premises wholly or mainly used for the provision of the Early Years Foundation Stage. This is automatic and will apply to your next council tax bill in April 2020. Further guidance for local authorities is available in the nursery discount guidance.

Support for Businesses that pay little or no Business Rates

The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs. If your business is eligible for SBRR or rural rate relief, you should be contacted by your local authority and do not need to apply.

Coronavirus Business Interruption Loan Scheme

From 30 July the scheme will be open to ‘undertakings in difficulty’ which have fewer than 50 employees and a turnover of less than £9 million.

The criteria and the list of accredited lenders is available on the British Business Bank website.

You should talk to you bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

COVID-19 Corporate Financing Facility

The Bank of England will buy short term debt from larger companies to allow them to finance your short-term liabilities. The scheme is now available for applications. More information is available from the Bank of England.

Coronavirus Large Business Interruption Loan Scheme

The maximum loan size has been increased from £50 million to £200 million. Companies borrowing in excess of £50 million will be subject to restrictions including:

  • No dividend payments other than those that have already been declared
  • No share buybacks
  • Cannot pay any cash bonuses, or award any pay rises to senior management (including the board) except where they were

a) declared before the CLBILS loan was taken out,
b) is in keeping with similar payments made in the preceding 12 months, and
c) does not have a material negative impact on the borrower’s ability to repay the loan.

Support for Businesses Paying Tax

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.

If you have missed a tax payment or you might miss your next payment due to COVID-19, you should call HMRC’s dedicated helpline: 0800 024 1222.

Further details can be found here.

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.

Coronavirus Job Retention Scheme – Flexible Furlough

The guidance has been updated for the change to flexible furloughing. Although this commences on 1 July, any employee who commenced furlough before that date MUST compete a minimum of 3 consecutive weeks.

For example, a previously furloughed employee can start a new furlough period on 22 June which would have to continue for at least 3 consecutive weeks ending on or after 12 July. After this the employee can then be flexibly furloughed for any period.

Claims can no longer include 2 calendar months and claims for periods to 30 June must be made by 31 July.

Claims for staff flexibly furloughed should only be made once the exact number of hours to be worked during the claim period is known. If a claim is made in advance and the employee works for more hours than expected, the excess will have to be paid back to HMRC.

For employees who are flexibly furloughed, the employer must calculate the employee’s usual hours. This can be calculated for either the entire claim period or for each pay period, or part of a pay period, that falls within that claim period.

Unless the employee

  • is not contracted to work a fixed number of hours; or
  • is paid depending on the number of hours worked

the fixed hours basis is used.

This requires the employer to

  • Start with the contracted hours at the end of the last pay period ending on or before 19 March 2020. (This should be calculated ignoring annual leave, being off work sick or on family related statutory leave)
  • Divide by the number of calendar days in the repeating working pattern, including non-working days.
  • Multiply by the number of calendar days in the pay period (or partial pay period) included in the claim
  • Round up or down if the result isn’t a whole number.

The guidance includes examples of how to work out usual hours for employees who are contracted for a fixed number of hours.

For employees who do not have fixed hours or are paid based on the hours worked, the variable hours method should be used. The ‘usual hours’ for the employee will be calculated based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020

The calculation should include

  • any hours of leave for which the employee was paid their full contracted rate (such as annual leave)
  • any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary

For employees on a flexible work time arrangement (“flexi-leave”):

  • Exclude hours worked that accrued paid time off rather than being paid
  • Include time off taken which had been accrued by working additional hours at some other time

The usual hours based on the average number of hours worked in the tax year 2019 to 2020 is calculated by:

  • Starting with the number of hours actually worked (or on paid annual leave or flexi-leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.
  • Dividing by the number of calendar days the employee was employed in the tax year 2019 to 2020, up until the day before the employee was furloughed, or the end of the tax year if earlier. (exclude periods on sick pay or family related statutory leave)
  • Multiplying by the number of calendar days in the pay period (or partial pay period) being claimed for
  • Rounding up or down if the result isn’t a whole number.

The guidance includes examples of how to work out the average number of hours worked in the tax year 2019 to 2020 for an employee who works variable hours.

The usual hours based on the usual hours for a pay period or partial pay period based on the corresponding calendar period in the tax year 2019 to 2020 is calculated by:

  • Identifying the pay periods in the 2019 to 2020 tax year that correspond to at least one calendar day in the pay period (or partial pay period) being claimed for.
  • If the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period in the tax year 2019 to 2020, then the number of hours actually worked in that pay period is used.
  • If the pay period (or partial pay period) being claimed for does not start and end on the same calendar days as the identified pay periods in the tax year 2019 to 2020, then the proportion of the hours worked in each of the pay periods identified is added together (see below).

The last step noted above requires that the employer, for each pay period identified in 2019 to 2020, to:

  • Start with the number of hours worked in the pay period identified in the tax year 2019 to 2020.
  • Multiply by the number of calendar days in that pay period which correspond to at least one calendar day in the pay period (or partial pay period) being claimed for.
  • Divide by the total number of calendar days in the pay period in the tax year 2019 to 2020.

The amounts calculated for each pay period are then added together and rounded up or down if the result is not a whole number.

The guidance includes: an example of how to work out the usual hours worked in the same period last year for an employee who works variable hours and the pay period (or partial pay period) being claimed for starts and ends on the same calendar days as the identified pay period.

and an example of how to work out the usual hours based on the hours worked in more than one pay period in the tax year 2019 to 2020.

Where employees are paid per task or piece of work done, the same basis as employees who work variable hours should be used, if possible. If the hours worked is not known then this should be estimated using the number of ‘pieces’ produced and the “average rate of work per hour” calculated to comply with National Minimum Wage rules.

The number of hours furloughed is calculated by subtracting the number of hours actually worked in the claim period from the employee’s usual hours. Any time on annual or family related statutory leave while flexibly furloughed counts as furloughed hours and does not count as time actually worked.

The updated guidance can be found at: https://www.gov.uk/government/collections/coronavirus-job-retention-scheme

Coronavirus Job Retention Scheme

The Government has updated the guidance:

Further details of how the scheme changed from 1 July can be found here and here.

Deferring VAT and Income Tax

Income Tax payments from the self-employed due in July 2020 under the Self-Assessment system will be deferred to January 2021. This applies for all the self-employed and is automatic – no penalties or interest for late payment will be charged in the deferral period.

A reminder has been issued that the deferral only applies to payments due up to 30 June. Therefore, payments for periods ending in May and June should be paid as normal.

Any cancelled direct debits should be set-up in time for HMRC to take the due payment.

Any amounts deferred will need to be paid by 31 March 2021.

HMRC have clarified that the following payments can be deferred:

  • quarterly and monthly VAT returns’ payments for the periods ending in February, March and April
  • payments on account due between 20 March 2020 and 30 June 2020
  • annual accounting advance payments due between 20 March 2020 and 30 June 2020

In addition, future repayments will not be offset against deferred VAT although they will be offset against existing debts.

If a payment on account due between 20 March and 30 June is deferred but the balancing payment is outside of these dates, the amount that must be paid is the balancing payment less any deferred payments. Deferring payments will not create a repayment.

HMRC have confirmed that the automatic deferral does NOT apply to payments for VAT MOSS or import VAT. However, it is possible to apply to HMRC for an extension on the payment of custom duties and import VAT if it can be demonstrated that COVID-19 has had a significant impact on the cash position of the business.

Registered Importers who pay VAT and Duty cash (or an equivalent) at the time of importation and are facing severe financial difficulties can request an extension to the payment deadline at the time the payment is due. HMRC will make the decision on a case-by-case basis and the request could be refused.

For further information, please contact the Customs Debt Policy inbox (custdebtrr.customspolicy@hmrc.gov.uk).

Businesses should contact the Duty Deferment Office on 03000 594243 (recommended) or by email cdoenquiries@hmrc.gov.uk or on the COVID-19 helpline on 0800 024 1222.

Income Tax payments from the self-employed due in July 2020 under the Self-Assessment system will be deferred to January 2021. This applies for all the self-employed and is automatic – no penalties or interest for late payment will be charged in the deferral period.

Protection from Eviction

Under measures to be included in the Coronavirus Bill, no business (in England, Wales and Northern Ireland) will be forced out of their premises if they miss a payment in the period to 30 June. Tenants will still be liable for the rent after this period.

Self-Employed Income Support Scheme – REMINDER

Just a reminder that claims for the first grant, relating to being adversely affected before 14 July 2020, must be submitted by 13 July 2020.

Applications for the second grant, relating to being adversely affected on or after 14 July 2020, will open on 17 August 2020.

Self-Employment Income Support Scheme

A reminder that claims for the second tranche (for those whose business was adversely affected on or after 14 July) can now be made. The deadline for claims is 19 October. The amount received will be 70% of 3 months average trading profit capped at £6,570 in total.

The Government has issued updated guidance on how to inform HMRC if the grant was incorrectly claimed or the amount received was incorrect and details of the possible penalties for an error not corrected by the later of 20 October 2020 and 90 days after the grant is received.

This can be found at: https://www.gov.uk/guidance/tell-hmrc-and-pay-the-self-employment-income-support-scheme-grant-back

Further details, along with a link to check eligibility under the scheme, can be found here. The grant is taxable and should also be included as income on any tax credits claim.

“Empty” Business Rates Relief

Property professionals have suggested that owners of premises (such as  restaurants, pubs, bars, nightclubs, theatres, cinemas and gyms) which have been ordered to shut for business as a result of coronavirus regulations are eligible to claim empty rates relief from the day they closed until 31 March, when the government’s support package takes effect, as the property could not be occupied.

As these rates would already have been paid, the advice is that such businesses should consider applying for refunds for these extra days until the end of the month.

With regard to other business sectors, property professionals believe that, given the advice regarding groups not assembling and people working from home, it would be possible for our firms to declare that their offices and work locations are ‘empty’ and so claim relief. However, there is a warning to check that this doesn’t impact any grants the government is offering.

Employee Expenses – General

Further to the previous announcement that Coronavirus tests were a taxable benefit in kind, HMRC has now removed this statement from its guidance following an outcry by MPs.

HMRC has updated its guidance to clarify that, for employees working in a situation where the risk of coronavirus transmission is very high and the employer’s risk assessment shows that PPE is required, then the provision of PPE (or reimbursement for the actual expenses of employees who purchase PPE themselves) is non-taxable.

The guidance also states that Coronavirus (COVID-19) testing kits or tests carried out by a third party which have been purchased by the employer to provide to employees, are treated as a taxable benefit in kind on the employee. However, this would appear to contradict the general principle that health checks once a year (which can include a series of tests for the same thing over a few weeks) are exempt. If you wish to discuss this matter further please contact Steve Williams (Stephen.Williams@sgllp.co.uk).

HMRC has updated its guidance to clarify that, if an employee was travelling to a temporary workplace when placed on furlough or starting to work from home, then the period of furlough or home working will be part of the continuous work at that location.

As a reminder, a workplace stops being temporary when attendance there is expected to be more than 24 months. Tax and National Insurance contributions will then become liable on any payments of travel and subsistence expenses.

Further details of the taxation of staff expenses can be found here.

The Government has announced a temporary tax and NI exemption on home office equipment purchased by employees and reimbursed by the employer.

Based on the information currently provided, in order to qualify the equipment:

  • must have been bought for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak; and
  • would have qualified as exempt from income tax if it had been provided directly to the employee by or on behalf of the employer. This would include any private use being ‘not significant’ and it’s only use being to enable the employee to perform the duties of that employment. There is also a list of excluded items which would automatically trigger a benefit charge in any circumstances such as building works of any type to create a ‘home office’ and these remain in force.

What this means is if an employee needs, say, a scanner at home to work they can buy one and claim the purchase cost back without incurring a benefit charge. This is a relaxation to deal with specific COVID-19 lockdown requirements, the provision of a desk, a chair etc. will still trigger the benefit regulations as they would not be classed as being directly in response to the current situation.

Whilst the rules will apply from the day after the regulations come into force until the end of the tax year 2020/21, HMRC will use its discretion to not collect tax and NI due between 16 March 2020 (the date the government recommended working from home) and the date these regulations take effect.

HMRC has issued further guidance on the tax treatment of expenses and how these should be reported:

  • Unless a statutory exemption applies, providing living accommodation to an employee working at a permanent workplace will remain taxable.
  • Tax relief is available for accommodation at a temporary workplace (less than 24 months) although this should still be reported on the P11D.
  • Lodging expenses (including subsistence) if an employee cannot return home is taxable and can be reported through a PAYE Settlement Agreement.
  • Free or subsidised meals may be tax free if offered to all employees and are limited to a reasonable value.

The full guidance can be found here.

HMRC have published guidance for employers on what equipment, services and supplies are taxable if their employees are working from home due to COVID-19. The guidance applies to employees working from home due to either the workplace being closed or they are following advice to self-isolate. It does not apply to furloughed workers.

  • Mobile phone provided by the employer, limited to 1 per employee, is non-taxable.
  • Broadband – If the employee already pays for broadband then no expense can be claimed. If broadband was not already available then the reimbursement is non-taxable provided it is limited to that required for work purposes.
  • Reimbursing expenses for office equipment employee has purchased and will be retained at their home address is taxable and should be reported on PAYE Settlement Agreement
  • Payments of up to £4 a week (£6 from 6 April) for additional household expenses (such as electricity, heating and broadband) are non-taxable. To claim above this amount, the employee will need to keep receipts
  • Loans at a time of hardship with a value less than £10,000 in a tax year are non-taxable

Further guidance can be found here.

Employee Expenses – Cars

HMRC has issued further guidance on the tax treatment of expenses and how these should be reported:

  • The use of a company car or employees being reimbursed fuel costs for undertaking volunteer work is taxable and should be reported through a PAYE Settlement Agreement.
  • Normally refunding costs of transport from work to home are taxable although there is an exemption for irregular late-night travel if conditions are met. The exemption has been expanded to include employees who regularly travel to work in a car with one or more other employees but are unable to do so due to COVID-19. The maximum number of journeys under the exemptions is 60 in any tax year.
  • Company cars in the possession of the employee remain “available for private use” even if the employee has been instructed not to use the car and asked to keep photographic evidence of the mileage before and after the period of furlough. This applies even if the car cannot be physically returned or collected although HMRC will accept a car is no longer available if car keys (including tabs or fobs) are returned to the employer or a third party as instructed by the employer. Where the contract has not been terminated, this will only apply from 30 days after the keys are no longer available.

The full guidance can be found here.

With home working and furloughing of employees, businesses should review the provision of cars to staff.

Staff who are furloughed cannot provide any work to the business and staff working from home will no longer be travelling for work purposes. This does not however alter the taxable Benefit in Kind on the car.

In order to stop the BIK, the employee would need to return the car and hand in the keys for a minimum period of 30 days. We would also recommend that it is confirmed in writing or by email that the car will not be available to them for this period.

If the employee wishes to keep the car then the BIK can be reduced by the employee paying for their private mileage (which, with travel restrictions, is likely to be low).

Insolvency Rules

The Government has published a number of factsheets to explain the changes being introduced.

The most significant point is that these clarify that, for a temporary period, small suppliers will be exempt from the requirement to continue to supply a customer which has entered an insolvency or restructuring procedure or obtained a moratorium.

For this purpose, a small supplier is defined as meeting 2 out of:

  • Turnover not more than £10.2 million
  • Gross assets on the balance sheet not more than £5.1 million
  • Average number of employees not more than 50

in its last financial period. Turnover is proportionally adjusted if the period was not a year.

For suppliers in their first financial period, the conditions become:

  • Average turnover for each complete month not more than £850,000
  • Gross assets on the balance sheet at the date the customer began insolvency procedures not more than £5.1 million
  • Average number of employees not more than 50

The factsheets, which include further guidance and examples, can be found here.

The Corporate Governance and Insolvency Bill is now going through Parliament which will introduce a series of amendments to insolvency and company law in response to the coronavirus outbreak.

The Act will introduce a moratorium which will give companies breathing space from their creditors while they seek a rescue. The company will remain under the control of its directors but the process will be overseen by a licensed insolvency practitioner. The business will have 20 (extendable to 40) business days to consider a rescue plan. This period can be extended with the agreement of creditors or the Court.

There will also be a change to the use of termination clauses in supply contracts – it will no longer be possible for a supplier to rely on contractual terms to stop supplying, or vary the contract terms (such as price) with the company, where a company has entered an insolvency or restructuring procedure or obtains a moratorium during this period of crisis. However, this will not apply to financial contracts or to financial services firms.

The business will have to pay for supplies received after the start of the insolvency process but will not be required to clear debts that predate this while it is arranging its rescue plan. However, there will be exemptions to the requirement to continue to supply the company, for example where it would cause the supplier hardship.

There are also provisions to force dissenting creditors to be bound by the plan provided the Court finds it to be fair and equitable and that the creditor would be no worse off if the company entered an alternative insolvency procedure.

The new regulations also temporarily remove the threat of personal liability for wrongful trading from directors in the period between 1 March to 30 June and prohibit creditors from filing statutory demands and winding up petitions for coronavirus related debts.

Certain financial services firms have been excluded from parts of these reforms as their regulators already have powers to intervene and there are special insolvency regimes available to them.

In order to assist companies in dealing with COVID-19, a number of changes are being made to the insolvency rules.

  • The Wrongful trading rules (which can hold directors personally liable for company debts) are being suspended (retrospectively) from 1 March 2020 until such date as the government determines.
  • There will be a new moratorium preventing creditors applying for administration orders or petitioning for the winding up of the company while it seeks a rescue or restructure. During this time the company’s supplies will be protected so that the company can continue to access raw materials and utilities. The necessary legislation is expected shortly.

The rules relating to Wrongful trading (under which Directors can be held personally liable for company debts) are being temporarily suspended from 1 March. However, laws relating to fraudulent trading and director disqualification will remain in force as a deterrent against director misconduct.

Further guidance can be found approximately two-thirds of the way down here.

Workplace Pensions

The Pension Regulator has yet to make any announcements on the deferral of employer pension scheme contributions and it remains incumbent on employers to have a business continuity plan (BCP) which sets out what actions would be taken if events, including of course the current coronavirus issue, impact the running of their scheme.

We understand that pension providers have started dialogue about options to delay pension contributions but this is awaiting clarification and we are aiming to issue another update as soon as we have clear guidelines.

The Government has already announced that where employees have been furloughed under the Coronavirus Job Preservation Scheme then employers will be able to claim associated costs of those employees, including national insurance and pension contributions in addition to salary costs.

Coronavirus Future Fund

The British Business Bank has issued some Frequently Asked Questions to assist Investors providing the funds to be matched by the loan. These note that:

  • Applications will be processed on a “first come, first served” basis.
  • The application is made by the “Lead Investor” on behalf of the company and other investors.
  • There is no limit to the number of companies that can be invested in but a separate application must be made for each company
  • The Lead Investor does not have to be the largest investor but must be investing at least £12,500
  • The total number of investors (including the Future Fund and Lead Investor) is limited to 149 so that no prospectus is required
  • It is their understanding that the scheme will not meet existing rules for tax reliefs, including SEIS and EIS
  • Equity funding of at least £250,000 must have been raised in the period 1 April 2015 to 19 April 2020 from third-party investors (which excludes Founders, Directors and Employees or their connected parties)

There is also extensive guidance on the information that will be required to support the application. The FAQs can be found here.

Find out more and apply via the British Business Bank here.

“Support Finder” Tool

The government has launched a new ‘support finder’ tool to help businesses and the self-employed identify what financial support is available to them.

This can be found here.

HMRC Videos and Webinar

]HMRC has produced a number of videos and a free webinar to help businesses understand the assistance available to them.

These can be found here.

Coronavirus Bounce Back Loan

The previous requirement that the business not be “an ‘undertaking in difficulty’ on 31 December 2019” has been removed.

Applications for the loan have now opened and further details of the scheme have been issued by the British Business Bank. These include:

  • the claimant must be a UK limited company or partnership or tax resident in the UK
  • the amount of the loan is limited to 25% of a business’ turnover
  • interest rate is at 2.5% pa, with the government covering the first 12 months
  • there are no fees on early repayment
  • no security can be required in the form of personal guarantees or over a borrower’s personal assets
  • the claimant (and any member of any group of which it is a part) must derive more than 50% of its income from trading activity
  • a group may only make one claim and may not also claim for Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility

The details on the scheme and the banks through which applications should be made can be found here. Further details can also be found here.

Pension Schemes

Small Self-Administered Schemes (SSAS) and Self-Invested Personal Pensions (SIPP):

HMRC have announced a number of measures to assist Pension Schemes. In particular:

  • Pension Scheme Returns will NOT be required for the 2019/20 tax year due to difficulties in obtaining the required valuations.
  • If a valuation is required (for example, when funds are designated for a drawdown pension), then HMRC will accept that special circumstances exist if, due to COVID-19, trading in the share has been suspended or the closing price is not a proper measure of value. This would allow an alternative method of valuation to be used.
  • HMRC will accept payment holidays on loans to connected parties and rent holidays on commercial property as arm’s length commercial decisions (and so not giving rise to an unauthorised payment charge) without a valuation. The Scheme should still be able to demonstrate that the decision was on an arm’s length commercial basis.

Further details can be found here.

Additional Funding to Local Councils

The government is to provide £617 million to local authorities to provide additional support to small businesses, particularly those that pay council tax rather than business rates, and so have missed out on other support.

Whilst local authorities have discretion based on local economic need, the government has asked them to prioritise businesses in shared spaces, regular market traders, small charity properties that would meet the criteria for small business rates relief, and bed and breakfast owners.

To qualify, a business must be small, under 50 employees, and they must also be able to demonstrate that they have seen a significant drop of income due to coronavirus restriction measures.

The maximum grant will be £25,000 with councils having further discretion on payments of up to £10,000.

Tax-Free Childcare and 30 hours Free Childcare

HMRC have issued guidance on temporary changes during Coronavirus. These include:

  • Furloughed staff and those not able to work or working less will need to reconfirm that they still meet the criteria.
  • Time spent on Statutory Sick Pay will count as working and meeting the minimum income requirement
  • Staff made redundant will no longer meet the criteria. If employment is started again, applications can be made 31 days before the start of the new job
  • The self-employed may need to confirm that they still meet the criteria. Grants through the Self-Employment Income Support Scheme will count as earnings.
  • For those claiming Universal Credit, they will no longer qualify for Tax-Free Childcare. However, they may still qualify for 30 hours free childcare.
  • Local authorities will be able to extend the 31 March deadline for Critical workers to apply for 30 hours free childcare.
  • Critical workers who have exceeded the maximum income of £100,000 per year because of increased hours due to coronavirus may still be eligible for 30 hours and Tax-Free Childcare.

Further details can be found here.

Business Interruption Insurance

The Financial Conduct Authority (FCA) is urging small and medium sized enterprises who have experienced difficulties making claims under business interruption (BI) insurance policies during the pandemic to join its test case challenging insurers’ decision making.

Further details, including the email address to contact, can be found here. Please note: Responses are required by the FCA by 20 May 2020.

Governance Changes

The Government has published a number of factsheets to explain the changes being introduced.

The legislation will also ease the administration burden by allowing companies to hold closed AGMs, conduct business and communicate with members electronically, and extends filing deadlines, during the period of the pandemic.

Local Authority Discretionary Grants Fund

The eligibility criteria states that the business must:

  • be based in England
  • have relatively high ongoing fixed property-related costs
  • occupy property (or part of a property) with a rateable value or annual mortgage/rent payments below £51,000
  • have been trading on 11 March 2020
  • have been adversely impacted by the coronavirus

The Government has issued details of the grants to be made available to support small and micro businesses with fixed property costs not eligible for other grant schemes.

Grants will be made of £25,000, £10,000 and any amount up to £10,000. The grants do not have to be repaid but are taxable income to the business.

To be eligible a business must:

  • be based in England
  • have fewer than 50 employees
  • have fixed building costs such as rent
  • have been trading on 11 March 2020
  • have been adversely impacted by the coronavirus

Councils have been asked to prioritise:

  • small businesses in shared offices or other flexible workspaces, such as units in industrial parks or incubators
  • regular market traders
  • bed and breakfasts paying council tax instead of business rates
  • charity properties getting charitable business rates relief, which are not eligible for small business rates relief or rural rate relief

A business cannot apply if it:

  • pays business rates
  • is in administration, insolvent or has received a striking-off notice
  • is already receiving support under another government grant scheme (such as Small Business Grant Fund or Retail, Hospitality and Leisure Grant)

Eligible businesses can also apply for the Coronavirus Job Retention Scheme (furloughing employees), the Self-Employed Income Support Scheme and other coronavirus-related loans.

Further details of the grant can be found here.

Guidance on Assessing Going Concern

The ICAEW has prepared a short document to guide businesses in assessing the Going Concern status of their enterprise. Whilst it is written for directors of limited companies (for whom this is a statutory obligation), the points made on forecasting would also be relevant to other business structures considering the impact of COVID-19.

The document can be found here.

Military Reservists

The Coronavirus Job Retention Scheme guidance on military reservists has been clarified. An employee who is a military reservist returning to work after a period of mobilisation after 10 June, can be furloughed for the first time, provided that:

  • the employer has already claimed for another employee for a furlough period of at least 3 consecutive weeks, between 1 March 2020 and 30 June
  • the employee was away on a period of mobilisation that started before 10 June and returned from that mobilisation after 10 June
  • the employee was on the PAYE payroll and included on an RTI submission on or before 19 March 2020

The maximum number of employees who can be furloughed is increased by the number of military reservists being furloughed for the first time.

Support Package for Arts & Culture

The government has announced a £1.57bn package to support Britain’s arts, culture and heritage industries including theatres, heritage, historic palaces, museums, galleries, live music and independent cinema.

Support will be provided through both repayable finance and grants and will be awarded after consultation with independent experts from the sector including the Arts Council England, Historic England, National Lottery Heritage Fund and the British Film Institute.

Further details will be announced when the scheme opens for applications.

Regional Assistance

Additionally, assistance is being provided by the devolved governments in Scotland and Wales.

Businesses in Scotland can access the business helpline number on 0300 303 0660 (open Monday to Friday 8.30am to 5.30pm). Further information is available here.

Details of assistance for businesses in Wales is available here.

Please contact your engagement partners at Simmons Gainsford if you would like more information or need any assistance.

Other Blog

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Posted on 29th Sep 2020

What is the Job Support Scheme?

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What Is The Kickstart Jobs Scheme?

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