In response to the economic crisis caused by the COVID-19 pandemic, the UK Government has announced a number of measures targeted at supporting UK businesses and their employees through this incredibly difficult time.
We have summarised what we know so far below. As more details become available, we will share these with you as well. We are here to help you and so please get in touch if you would like any help or advice on the measures outlined below.
Deferment of VAT
A VAT deferment during the period 20 March 2020 to 30 June 2020. Unfortunately, it is not wholly clear what this means. It probably means that if you have a VAT quarter that ended on 29 February and have not yet paid the VAT due on 7 April you will not now need to do so. Nor will a business with a March quarter need to make the payment due on 7 May, and businesses can similarly defer a payment that falls due on 7 June where they have an April quarter end date. This would mean that every business on quarterly VAT returns would get one VAT deferral. The Government has confirmed that if you are due a repayment, HMRC will make the payment to you.
You will still need to file the VAT return for the period even though you will not need to make the payment.
The VAT will still need to be paid to HMRC, but that payment will not need to be made until 31 March 2021.
Deferment of 31 July 2020 tax payments
If you pay tax under self-assessment, you will be able to defer your second instalment of income tax for 2019/20, which is due for payment on 31 July 2020. The deferred tax will become payable at the same time as the final payment which falls due on 31 January 2021.
Other tax cash flow issues
To help with cash flow concerns, HMRC have announced a dedicated Coronavirus time to pay helpline. The number to call is 0800 0159 559.
Time to pay simply allows you to agree a payment plan with HMRC for any past tax liabilities that you are unable to meet right now. Each case will be considered individually but we would expect HMRC to be very flexible due to current circumstances, provided that you can demonstrate that immediate payment of the tax will cause you financial hardship.
The Coronavirus Job Retention Scheme
The Government has committed to pay employers up to 80% of the salary of any employee that the employer would otherwise have laid off. The payment will be made monthly and is capped at £2,500 per month. The scheme will initially apply for the three months to 30 June 2020. This is a grant – not a loan – and so businesses that qualify will not have to pay back the amount that they are given by the Government under the scheme.
It should however be stressed that this will be paid only in respect of employees for whom no work is available.
The business must designate affected employees as ‘furloughed workers’, (basically employees that are temporarily told they are not needed by the business) and notify the employees of this change of status. Of course employment law continues to apply and so you may need to consult a specialist to help you through this. Our team at CBW is here to help.
The next step is to submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required).
HMRC has not quite worked out how to do this as they don’t usually pay money to employers. However, it is expected that the business will have to pay the employee through the payroll in the normal way and then claim reimbursement from HMRC.
It is hoped that the above, coupled with the other financial support measures that the Chancellor has announced will ease the cash flow pressures on businesses, retain your work force and ultimately survive this extraordinary time.
We are here to help both in terms of helping you understand the cash flow implications on your business as well as negotiating time to pay arrangements with HMRC.
These are very difficult times, but we are all in it together and our role is to help you with the financial impact.
Business Interruption Loan Scheme
To support SMEs, qualifying businesses can access working capital of up to £5 million through 40 of the UK’s accredited finance providers backed by the British Business Bank. The Government will pay the first 12 months of interest and any fees levied by the lender. Furthermore, the Government will guarantee 80% of the loan (subject to a cap per lender). It is hoped that this package will provide both cost effective borrowing for the SME as well as confidence to the lenders so that much needed capital can be injected into the economy.
Helpfully, the finance will be structured under usual commercial terms, including loans, overdrafts, invoice finance and asset finance, allowing for businesses to structure their finances in the most commercial and practical way possible.
To be eligible:
- Your business must be based in the UK;
- Have a turnover of no more than £45million per annum; and
- Meet the other British Business Bank eligibility criteria.
More details are to follow but it is likely that the lenders will require you to follow their usual lending process – albeit it may well be expedited in this time of extraordinary need. This will mean that each lender will have different criteria and a different process.
Our corporate finance team here at CBW are here to help you through this: https://www.cbw.co.uk/2020/03/corporate-finance-covid-19-debt-advisory/
We have a huge amount of experience in helping SMEs and growing businesses access finance and so please get in touch so that we can help you.
Support for larger businesses
The Government has announced that the Bank of England will buy short term debt from larger companies. The Bank of England have published their eligibility criteria on their website.
Our corporate finance team here at CBW can help structure the finance with you: https://www.cbw.co.uk/2020/03/corporate-finance-covid-19-debt-advisory/
Support for businesses paying statutory sick pay
UK employers will be able to reclaim statutory sick pay paid for sickness absence due to COVID-19 for the first two weeks of their absence. An employer is eligible if they had less than 250 employees on 28 February 2020 and they will not need to provide a GP fit note.
Unfortunately, the scheme is not live yet, but the Government is working on it so that employers can reclaim the money as soon as possible. We therefore urge you to keep records of not just who was sick but also why so that the right claim can be made once the scheme comes online.
Depending on the nature of your business, you may be eligible for an extended business rates holiday. This will apply for the year to 5 April 2021 and if you qualify you will get a letter from your local council confirming the change to your business rates. The sectors that it applies to are those that the Government feels will feel it the hardest. So, if you are in the hospitality sector, retail, leisure or you operate a nursery, you should be receiving such a letter. If you do not, we urge you to contact your local council.
If you are not in one of these sectors, but you are a small business that already pays little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief, then you will be provided with a one off, tax free, grant of £10,000. Your local authority will write to you if you are eligible.
Cash grants for the retail, hospitality and leisure sector
The size of the grant that your business will get depends on the rateable value of your property:
- Where the rateable value is under £15,000 you will receive a grant of £10,000
- Where the rateable value is between £15,000 and £51,000, you will receive a grant of £25,000
The grant is per property but is only payable to those that are within strict sectors.
You do not need to make a claim as your council will write to you. If you do not receive a letter, we suggest that you contact them directly.
How can we help?
We at CBW are here to help you understand the impact of this extraordinary situation and to support you where we can to ensure that you get through it. Part of that will be helping you get access to the support that the Government is providing.
Whether this is through helping you understand the cash flow implications on your business, applying for loans or negotiating time to pay arrangements with HMRC, we can and will be there to support you.
These are very difficult times, but we are all in it together. Call us – we are here to help.