At AMS we have tried to make sense of, and put some detail on, the recent Government measures that have been publicised – below are links to certain other websites that contain useful information – namely the www.gov.uk website, the ICAEW website and a link that our bank, NatWest, forwarded to me. The Government one is being updated every day so do refresh it if you keep it open.
AMS Accountancy working practices
We are now pretty much all working from home but are covering post each day and phone calls are being directed to one member of staff. This might change as events progress. But, for now, the best way to contact us is by sending an email to the person whom you want to talk to – or else email our email@example.com address and ask for a call-back from the person you need to talk to. We are also allowing more flexibility in working hours as staff meet the demands of home-working – so there may be delays in dealing with some enquiries. But we are fully open as a business and doing the same work as usual.
None of us knows how long this situation last, so it is worth assuming that you will need all the cash you can get – and I recommend that you take advantage of any measures you can – because you may regret not doing so at a later date.
The Government measures can be split between loans, grants, HMRC tax deferments, and help for the self-employed.
- The banks
NatWest have pledged £5b of working capital to their customers during this virus outbreak. I am sure that other banks will be doing something similar. And I would strongly recommend that any client with any financial issue, calls their bank for a discussion as soon as they can.
- Coronavirus Business Interruption Loan Scheme (CBILS) https://www.gov.uk/guidance/apply-for-the-coronavirus-business-interruption-loan-scheme
This scheme is now available although there definitely seem to be teething problems as relatively few loans have apparently been made – and some banks were insisting on director’s guarantees – despite the loans being 80% guaranteed by the Government. The scheme is provided by the British Business Bank via over 40 accredited lenders including all the major banks. Under this scheme, theoretically, you can apply to various lenders – such as your bank – and obtain a loan. The loans will be interest-free for 12 months. To find out more, contact your bank.
- Bank overdrafts
NatWest are offering overdraft facilities of £5,000 – or an increase of 10% on a current overdraft – to customers on a free-fee basis – initially, for three months. I am sure that other banks are doing something very similar.
- Business loans and mortgages
Business loan lenders and mortgage lenders have agreed a 3 month payment on loans and mortgages. Unfortunately the interest will still be accruing, and the capital repayments will be added on to the end of the payment schedule – but it will help with cash flow. You should approach your lenders directly about this as soon as you can.
The mortgage holiday is also available to buy-to-let landlords whose tenants are struggling and cannot pay their rent.
- HP agreements and car leases
Some HP finance companies are looking at offering payment holidays – and it is worth contacting any HP agreements/long term leases on vehicles or equipment to ask about a payment holiday.
- Credit card balances
The Financial Conduct Authority (FCA) has called on lenders to use flexibility built into their rules to support consumers. And, it may well be worth talking to your credit card company to agree a payment holiday – and they should arrange this in such a way that it will not impact on your credit score.
GRANTS TO BUSINESSES (money that will not need repaying)
There are several types of grants that have been created to help businesses:
- Coronavirus Job Retention Scheme
The Government have announced that they will pay money to employers in order for them to keep on employees who they would otherwise let go because of the virus outbreak. The scheme is going to be backdated to 1st March 2020 and will run, initially, for three months. The scheme is going to be run by HMRC. We now know that the scheme will be launched on 20th April 2020 and, where we are Agent, we can make the claim on behalf of our clients.
You will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change. This will mean they are not actually working for you – and must not work for you whilst receiving the grant. We have contacted clients for whom we do the payroll and have this in hand
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (as stated above, HMRC intend to launch this on 20th April 2020).
Then, HMRC will reimburse employers cash equivalent to 80% of the furloughed workers’ wage costs for three months (based principally on the February 2020 salary), up to a cap of £2,500 per month. HMRC are working to set up a system for reimbursement because existing systems are not set up to facilitate payments to employers. We expect this system to be launched on 20th April 2020.
Questions that arose included:
- Will Employer’s NI be payable? Yes – salaries/wages will be taxed as normal – but the Government will reimburse Employer’s National Insurance on the subsidised pay and also the Employer’s Pension contribution on the subsidised pay (up to the auto enrolment rate of 3%).
- Does it cover directors – and their family employees? Yes – owner/directors and their relatives can be furloughed and the scheme will cover 80% of their standard salaries (based on February 2020) so long as they do no work except for necessary company administration.
- How do clients get the money? You/we claim it on/after 20th April 2020 and HMRC will pay it directly to the employer’s bank account.
- What happens to employees if their employers don’t apply to join the scheme but simply lay off their staff? Then the staff are not furloughed and need to consider claiming the Universal Credit benefit – but this is what the scheme is intended to avoid happening.
- The Retail and Hospitality Grant Scheme (£25,000) – and business rates holiday
For businesses in retail, hospitality and leisure, the government is going to pay a cash grant up to £25,000 to businesses with a rateable value between £15,000 than £51,000; and a grant of £10,000 to businesses with a rateable value of less than £15,000.
Also, business rates are being abolished for these businesses for 12 months.
So this is two lots of good news if you are a pub, shop hotel or restaurant with premises. Many businesses have already received these grants
How do you get the money?
Well, firstly, try to find out what the rateable value of your premises are. Here is a useful link https://www.gov.uk/correct-your-business-rates
Then, for the rates reduction – you should do nothing but wait for the council to adjust your rates bill for 2020/21 to nil.
For the grant, again, you should do nothing. Your local authority will write to you with instructions on how to claim – if they haven’t already done so.
- The Small Business Grant Scheme
The government is going to pay a one-off cash grant of £10,000 to businesses that already benefit from either the Small Business Rate Relief (which applies to business with a rateable value of less than £15,000) or Rural Rate Relief. This grant will not be paid to businesses that benefit from the Retail and Hospitality Grant scheme. This is going to benefit many businesses with premises.
You do not need to do anything – the local authority should have contacted you in early April – and many businesses have already received their grants in the first two weeks of April.
TIME TO PAY TAXES
- Deferring VAT and income tax payments
- For all taxpayers, the second Payments On Account payment due by 31st July 2020 have been deferred to 31st January 2021. No penalties or interest will arise – and HMRC should automatically apply the deferment. Initially it was thought this was just for self employed workers but it has been widened out (probably because HMRC’s systems couldn’t differentiate). So, clients can just not pay their 31st July 2020 income tax payments.
- All businesses with VAT due between 20th March 2020 and 30th June 2020 can defer paying the VAT on that particular VAT return until the end of the 2020/21 tax year (31st March 2021 for Companies; 5th April 2021 for sole traders/Partnerships). The VAT return will still be due by the normal due date – but not the VAT payment itself. If you pay VAT by direct debit, your VAT payment will still automatically be taken unless you cancel your direct debit. We will remind our clients of this when preparing VAT returns for clients. There is no need to notify HMRC that you are taking advantage of the offer to defer payment.
- There are no specific measures to delay PAYE or Corporation Tax – but see below.
- HMRC time to pay
If you are unable to pay other taxes not covered above, because of the coronavirus, then you (or we) can call the HMRC Coronavirus Helpline on 0800 015 9559. You may need to know your tax reference numbers so do call us before you call HMRC.
The relevant HMRC webpage is https://www.gov.uk/difficulties-paying-hmrc
RELIEF FOR THE SELF-EMPLOYED – the Self Employed Income Support Scheme (SEISS)
The SEISS measures are aimed at certain businesses who have lost some or all of their income as a result of the coronavirus. The relief is helpful for sole traders who make less than £50,000 profit per year – but bad news for sole traders making more than that – and bad news for self employed people who trade through a limited company.
- Who benefits from the SEISS measures?
If you are a sole trader (or a partner in a partnership) and your average taxable profit over the last three tax years (up to 2018/19) is less than £50,000, then, if your income has reduced or ceased, HMRC will contact you in June 2020 and invite you to apply for a taxable grant (i.e. money that will be included in your accounts) worth 80% of average monthly profits, up to £2,500/month, for (initially) 3 months. You will only be eligible if you filed a 2019 Tax Return which included sole trader/partnership income. If you only have one or two recent tax returns showing sole trader/partnership income, then these will be used for calculating the average figure so long as they include your 2019 Tax Return.
So, if you started trading in 2017/18 and have trading profits of £25,000 in 2017/18 and £35,000 in 2018/19, then your average monthly profit is £2,500 – and you could get a grant of 80% x £2,500 x 3 = £6,000. This is supposed to be paid by HMRC in June 2020 who will contact you directly, invite an grant application, and then pay it directly to your bank account. Let us know if you hear directly from HMRC. And we will be in touch when details are released closer to June 2020.
- Who doesn’t benefit from the SEISS measures?
Two types of self employed people will not benefit.
- If you are a sole trader whose average profits exceed £50,000 per year, you will not benefit from the SEISS and may have to rely on applying for a loan and claiming Universal Credit. This seems grossly unfair – particularly given the £2,500 cap for high earning furloughed employees.
- And if you trade via your own limited company, you are not eligible for the SEISS. There is some lobbying going on to try to help small businesses who trade through a limited company, so there is a glimmer of hope – but no more than that.
3.What is available for people who are self employed through a limited company?
As mentioned above, director/shareholders are eligible for the Coronavirus Job Retention Scheme – under which, if do not do any work beyond basic company administration, HMRC will pay 80% of their salary to their company. But because the typical director/shareholder is only on a salary of £719/month, this means that HMRC will generally only pay £575/month as support to the company. This is not going to go far – and will mean very many self employed people will be struggling to pay their bills.
Consequently, company directors should seriously think about contacting their bank about a loan; plus look at mortgage/loan holidays; and consider applying for Universal Credit (as mentioned below).
OTHER HELP FOR THE SELF EMPLOYED
- Universal credit
For a lot of people, the above measures will not be enough to survive on – which leaves State Benefits.
The Government have said that the self-employed, freelancers etc. can apply for the Universal Credit benefit without having to worry about the ‘minimum income floor’ limit.
The amount you can get is dependent on several factors, and seems complicated to work out (and if you have savings of over £16,000 it appears that you will not be entitled to it) – but is only going to be worth a few hundred pounds per month – far less than most self-employed/freelance/small business owners need to live on – and in great contrast to the £2,500/month being made available for ‘furloughed’ employees.
But, given that we don’t know how long the lockdown will continue, I recommend that clients do consider registering for Universal Credit if their businesses have ceased.
The link to registering for Universal Credit is here: https://www.gov.uk/apply-universal-credit
- IR35 delayed
As I imagine all freelance contractors know by now, the ‘IR35 in the private sector’ rules due to come in on 6th April 2020 have been postponed for a year because of the coronavirus outbreak. This means that end-clients and agencies must not deduct PAYE or National Insurance from sales invoices – but must instead pay them in full as has been the case up until now. Hopefully all end-clients and agencies are aware of the postponement.
- AMS Accountancy fees
We have taken a big hit this year as many of our freelancer clients were forced into Umbrella companies by the new IR35 rules. Hopefully, this stops getting worse for the time being because of the postponement of IR35.
Also, we do have clients in industries heavily affected by the government measures. If you are one of them (e.g. a pub, a salon, a holiday company) and need to talk about deferring fees while your business effectively closes down, do please get in touch.
- Insurance against epidemics
Some business insurance policies have cover in respect of closures caused by epidemics. It is worth checking out your policy to see what it says.
Peter Bromiley ACA