Only a few weeks ago, I was worrying about the effect of the new IR35 rules on our clients and on our business, because so many of our clients are freelancers. Now those days seem like a carefree age as we worry about the health of ourselves and our loved ones, and how we are going to make a living as so many businesses are forced to close or see their customers stay away.
I wanted to see what we can do for our clients, and try to make sense of, and put some detail on, the recent Government measures that have been publicised in the last week – and this is what I have tried to do below. I have also given 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.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/
This scheme should be available from 23rd March 2020. It is a scheme provided by the British Business Bank via over 40 accredited lenders including all the major banks. Under this scheme, you can apply to various lenders – such as your bank – and obtain a loan. Details are very sketchy at the moment – but there should be more information very soon – and we know that 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.
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. Do contact us if we do your payroll.
- 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). Again, if we do your payroll, I imagine that we will be able to contact HMRC on your behalf.
Then, HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement because existing systems are not set up to facilitate payments to employers. So, this is still unclear and it may be some weeks away (the Government have said before the end of April).
Questions that we need answers to are:
- Will Employer’s NI be payable (do they give with one hand and take with the other) and will PAYE and Employee’s NI still be deducted?
- Does it cover directors – and their family employees? (I suspect it will cover owner/directors but only up to their salaries – and not their dividends)
- How do we get the money?
- What happens to employees if their employers don’t apply to join the scheme but simply lay off their staff.
- 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.
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 – but I suspect this could take a while as guidance to local authorities had not been sent out as at 20th March 2020.
- 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 contact you in April.
TIME TO PAY TAXES
- Deferring VAT and income tax payments
- For the self-employed, the second Payments On Account payment due by 1st July 2020 have been deferred to 31st January 2021.
No penalties or interest will arise – and HMRC should automatically apply the deferment.
But, I am unclear whether this includes director/shareholders of their own limited companies or just sole traders and Partnerships.
- 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.
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
This is the weakest and least generous area of the Government’s measures – because they have less information about the self-employed and small limited companies – so are struggling to come up with a suitable strategy.
- Universal credit
So far, all that has been offered to the self-employed, freelancers etc is that they can apply for the Universal Credit benefit without having to worry about the ‘minimum income floor’ limit.
The amount you get is dependent on several factors, and seems complicated to work out – 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.
I believe that the Government may implement extra measures because it cannot be right to tell a business owner, with a mortgage and family to support, that they must stop their business – and then only pay them a pittance. So I hope that more measures will be announced in the coming days.
But right now, 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