Tax

COVID-19: Government support

We thought it would be useful to summarise some of the measures the UK Government has implemented in an effort to support businesses as they navigate the national emergency that is COVID-19.

Please appreciate that the comments below are based on our understanding of preliminary guidance from Government. We will update this document as further information becomes available – last updated Thursday 9 July 2020.

 

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme online portal launched on 20 April 2020, with claims to be paid within 6 working days. All UK employers, who cannot maintain their current workforce because their operations have been severely affected by Coronavirus, are eligible to claim financial support under the scheme.

This is a temporary scheme designed to help those employers retain their employees and to protect the UK economy. It commenced on 1 March 2020 and will continue in its current form for the five months to 31 July 2020, following which the claim criteria will change for the three months to 31 October 2020, with employers required to pay a percentage towards the salaries of those staff who may remain furloughed.

The scheme will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that have already been furloughed for a full three-week period prior to 30 June 2020. Where employees have not been furloughed, the last date for furloughing an employee under the scheme will be 10 June 2020.

The guidance for employers contains a list of what will need to be provided when making a claim (see below), however it does not ask for evidence that the current workforce cannot be maintained due to operations being severely affected by coronavirus. It is therefore unclear as to what is required of employers in this regard. However, the guidance does state that HMRC reserve the right to retrospectively audit all aspects of a claim.

 

Grant Available

The maximum grant will be calculated per employee and is the lower of:

  • 80% of ‘an employee's regular wage’; and
  • £2,500 per month.

In addition, employers can also claim the associated employers’ National Insurance Contributions (NIC) on this amount and the minimum automatic enrolment employer pension contributions on that wage.

From 1‌‌ July 2020, businesses using the scheme will have the flexibility to bring furloughed employees back to work part time with the government continuing to partially subsidise the normal hours which they do not work.

Employers can decide the hours and shift patterns their employees will work on their return, and will be responsible for paying their wages in full whilst working. Any working hours arrangement agreed between a business and their employee must cover at least one week and be confirmed to the employee in writing.

If employees are unable to return to work, or employers do not have work for them to do, they can remain on furlough and the employer can continue to claim the grant for their full hours under the existing rules.

In addition, the scheme will be tapered from 1 August 2020, with employers being required to pay a percentage towards salaries as follows:

  • the government will continue to pay 80% of wages up to a cap of £2,500 but employers will pay Employers NICs and pension contributions from 1 August 2020;
  • from 1 September 2020, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work, employers will be required to pay Employers NICs, pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500;
  • from 1 October 2020, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work, employers will be required to pay Employers NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.

Fees, commission and bonuses should not be included.

Please note employers can top up wages to beyond the scheme maximum thresholds if they wish, but there is no requirement to do this.

 

What Employers need to do

  • designate affected employees as “furloughed workers”, and notify employees of this change, noting that changing the status of employees will remain subject to existing employment law and, depending on the employment contract, may be subject to negotiation. Once “furloughed”, these employees will not be able to undertake work; and
  • 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).

When employers are making decisions in relation to the furloughed process, it is recommended they seek advice of an employment lawyer.

 

Eligible Employees you can claim for

Furloughed employees must have been on your PAYE payroll on or before 19 March 2020, notified to HMRC on a Real Time Information (RTI) submission on or before 19 March 2020 and can be on any type of contract, including:

  • full-time employees;
  • part-time employees;
  • employees on agency contracts; and
  • employees on flexible or zero-hour contracts.

The scheme also covers employees who were on the payroll as of 28 February 2020 (i.e. notified to HMRC on an RTI submission on or before 28 February 2020) and were made redundant or stopped working for the employer in the period prior to 19 March 2020, if the employer re-employs them and places them on furlough.

To be eligible, when on furlough, an employee can not undertake work for or on behalf of the business. This includes providing services or generating revenue.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.

 

Employees whose pay varies

If the employee’s salary varies (e.g. staff on zero- hour contracts) and they have been employed for a full twelve months prior to the claim, employers claim for the higher of either:

  • the same month’s earning from the previous year; and
  • average monthly earnings from the 2019-20 tax year.

 

Employees who have worked less than a year

If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.

Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.

 

How to claim

Employers (or their agents that are authorised to act for PAYE matters) need to calculate the amount they are seeking to claim in accordance with the actual payroll amounts (either shortly before or during running payroll) and will need:

  • Employer PAYE reference number;
  • the number of employees being furloughed;
  • NI number of furloughed employees;
  • Unique Tax Reference number for the business;
  • the claim period (start and end date);
  • amount claimed (per the minimum length of furloughing of 3 consecutive weeks);
  • bank account number and sort code;
  • contact name; and
  • phone number.

Please note HMRC will retain the right to retrospectively audit all aspects of any claim and will monitor employers after the scheme has closed.

When claiming for part-time furloughed hours, employers need to submit the usual hours an employee would be expected to work in a claim period and the actual hours worked. These claims must be made for a minimum period of a week.

 

Coronavirus Job Retention Bonus

The Chancellor announced the introduction of the Job Retention Bonus on Wednesday 8 July. This bonus will be a one-off payment to employers that have furloughed employees under the Coronavirus Job Retention Scheme (CJRS) of £1,000 for each furloughed employee who remains continuously employed until 31‌‌‌ ‌January 2021.

 

Eligible Employees you can claim for

 

Each eligible individual must:

  • earn at least £520 per month (above the Lower Earnings Limit) on average for November, December and January;
  • have been furloughed at any point and legitimately claimed for under the Coronavirus Job Retention Scheme; and
  • have been continuously employed up until at least 31‌‌‌ ‌January 2021.

 

How to claim

Employers are able to claim the bonus from February 2021 once accurate RTI data to 31‌‌‌ ‌January has been received. More information about this scheme is to become available by 31‌‌‌ ‌July 2020.

 

Coronavirus Business Interruption Loan Scheme

The scheme went live on 23 March 2020 and will initially run for six months.

It will be provided by the British Business Bank through participating providers, with the aim of supporting the continued provision of finance to UK businesses during the COVID-19 outbreak.

The scheme provides the lender with a Government-backed guarantee against 80 per cent of the facility. Please note the borrower always remains 100 per cent liable for the debt.

The Government will also cover the first 12 months of interest payments and any lender-levied fees, so businesses will benefit from no up-front costs and lower initial repayments. The business remains liable for repayments of the capital. The maximum value of a facility provided under the scheme will be £5m.

Products supported:

  • term facilities;
  • overdrafts;
  • invoice finance facilities; and
  • asset finance facilities.

 

Eligibility Criteria

To be eligible you must:

  • be UK based, with turnover of no more than £45m per annum;
  • generate more than 50 per cent of your turnover from trading activity; and
  • have a borrowing proposal which, were it not for the COVID-19 pandemic, would be considered viable by the lender, and for which the lender believes the provision of finance will enable the business to trade out of any short-to-medium term difficulty.

The Enterprise Finance Guarantee Scheme has been temporarily suspended.

 

Finance Terms

Finance terms are up to six years for term loans and asset finance, and up to three years for overdrafts and invoice finance.

 

Must Borrowers Provide Security?

It has been confirmed that at the discretion of the lender, the scheme may be used for unsecured lending for facilities of £250,000 and under. The Government has now confirmed that personal guarantees cannot be taken for facilities below £250,000.

For facilities in excess of £250,000 lenders may require a borrower enter into a personal guarantee to cover the potential 20 per cent loss to the lender (i.e. the balance not guaranteed by the scheme). Please note Primary Residential Property (PPR) cannot be taken as security or to support a personal guarantee under the scheme.

 

Applications

To apply for this facility, businesses should approach a participating lender to discuss their borrowing needs. Link below:

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/

These lenders will pay a fee to access the scheme.

 

Coronavirus Large Business Interruption Loan Scheme

The Chancellor also announced a scheme to assist large businesses, which have previously been caught in the ‘stranded middle’ between the Coronavirus Business Interruption Loan Scheme and the COVID-19 Corporate Financing Facility.

This scheme is open to businesses with a turnover of more than £45m and will provide up to £200m of finance (limited to £50m for asset finance or invoice finance). Please note the borrower always remains 100 per cent liable for the debt.

It has been confirmed that the Government will provide a guarantee to the lender of up to 80 per cent for facilities under this scheme.

These facilities will not be interest free or fee free (as they are under the Coronavirus Business Interruption Loan Scheme for SME’s). However, borrowers will benefit from a proportionate reduction in pricing as a result of lenders receiving capital and risk benefits.

Facilities available under the scheme include term loans, revolving credit facilities, asset finance and invoice finance. Finance terms will range from 3 months up to 3 years.

Note that if borrowing exceeds £50m under this scheme, restrictions will apply for dividend payments, senior pay and share buy-backs during the period.

To be eligible:

  • your business must be based in the UK;
  • your business must have an annual turnover of more than £45m;
  • you must have a borrowing proposal which the lender would consider viable, were it not for the current pandemic, and for which the lender believes the provision of finance will enable the business to trade out of any short-term to medium-term difficulty; and
  • you must not have received a facility under the Bank of England’s Covid Corporate Financing Facility (CCFF), CBILS, or the Bounce Back Loan Scheme (BBLS).

The scheme launched on 21 April 2020 and applications can be made here - https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/clbils/clbils-for-businesses-and-advisors/

If your business is eligible, it is recommended that you contact your lender urgently to discuss any potential application.

 

Future Fund

On 20 April 2020, the Chancellor announced a new Future Fund to support the UK’s innovative businesses currently affected by COVID-19, specifically those businesses that have been unable to access other government business support programmes because they are either pre-revenue or pre-profit and typically rely on equity investment.

The scheme will deliver an initial commitment of £250m of new government funding which will be unlocked by private investment on a match-funded basis. The government scheme, which will be developed in partnership with the British Business Bank with the intention of launching for applications in May, will initially be open until the end of September.

The Future Fund will provide government loans to UK based companies ranging from £125,000 to £5m, subject to at least equal match funding from private investors. The company must also have raised at least £250,000 in equity investment from third party investors in the last 5 years.

Over the coming weeks the British Business Bank will work with government on the details on how the Future Fund will operate and how to apply for the scheme.

 

Bounce Back Loan Scheme

The Bounce Back Loan Scheme launched on 4 May 2020. This scheme is designed to help small to medium size businesses with loans in the range of £2,000 to £50,000, subject to a capped level equivalent to 25 per cent of business turnover.

Loans under this scheme will be 100 per cent guaranteed by government, with no capital repayments for the first 12 months and with no fees or interest to pay for that period. Thereafter, the applicable interest rate is 2.5 per cent per annum and loan terms will be up to six years.

Businesses will be liable for repayment in full of any loan advanced through the scheme.

The scheme will be delivered through accredited lenders but will not be subject to a credit review process, rather it will simply require a short self-certified online application form. It is government expectation that loans will be processed within 24 hours.

To be eligible for a loan under this scheme, your business must be based in the UK, negatively affected by coronavirus and not an ‘undertaking in difficulty’ at 31 December 2019. Applications can be made online here https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/

Note that a business cannot apply if already claiming under the Coronavirus Business Interruption Loan Scheme, though it is possible to transfer from that scheme to the Bounce Back Loan Scheme.

 

VAT Deferral Scheme

VAT payments for all businesses that would normally arise during the period from 20 March 2020 to 30 June 2020 will be deferred. This is an automatic deferral with no applications required, however, businesses will need to cancel their direct debit mandate if they wish to prevent the VAT liability being collected by HMRC. Where VAT has been deferred, businesses will be given until 31 March 2021 to pay any liabilities that have accumulated during the deferral period, with no interest/penalties being charged on the deferred amount.

A link is included below to our more detailed article on the VAT deferral scheme:

https://www.grantthorntonni.com/insights/articles/COVID-19--deferral-of-vat-payments-and-optimising-vat-cash-flow/

 

Self Employed Income Support Scheme

The Chancellor has confirmed that the Government will pay self-employed individuals, who have been adversely effected by COVID-19, a taxable grant equal to 80 per cent of their average monthly trading profits from the tax years 2016/17 to 2018/19, up to a maximum of £2,500 per month for the first three months.

Eligible self-employed people will be able to claim a second and final grant in August; this will be a taxable grant worth 70% of their average monthly trading profits for three months, paid out in a single instalment and capped at £6,570 in total.

 

Eligibility Criteria

To be eligible you must:

  • be self-employed or a member of a partnership;
  • have traded in the tax year 2019/20;
  • have an ongoing trade (or would have except for COVID-19);
  • intend to trade in the tax year 2020/21 (commencing 6 April 2020);
  • have self-employed trading profits of less than £50,000 in either the 2018/19 tax year or in the average of the 2016/17 to 2018/19 tax years; and
  • receive the majority of your total income from self-employment (over the same period).

Self-employed individuals should check their eligibility with HMRC using their Unique Tax Reference (UTR) number and National Insurance number here: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

If you are eligible, you will be told the date that you will be able to make a claim from and you will be asked to add your contact details.  If you are deemed not to be eligible, you can ask HMRC to review the online determination.

Claims for the first grant can be made online from 13 May 2020 until 13 July 2020 (these must be made by you personally and not by your agent) and if your claim is approved payment will be made within 6 working days.

The Self Employed Income Support Scheme was extended to provide eligible self-employed individuals with a second and final grant in August 2020.

This grant will also be a taxable grant and is calculated based on 70% of the individual’s average monthly trading profits for a period of three months and is capped at £6,570 in total.

Eligible individuals can claim for the second and final grant even if they did not make a claim for the first grant.

 

Self Employed Income Tax Deferral

If you are a self-employed taxpayer, your payments on account normally due on 31 July 2020 will automatically be deferred until January 2021. No penalties or interest for late payment will be charged in this deferral period.

 

Statutory Sick Pay (SSP)

Employers with fewer than 250 employees are now able to reclaim up to 2 weeks’ Statutory Sick Pay (SSP) per employee (starting from the first day of the sickness period) in relation to absences due to COVID-19. This scheme covers SSP paid to employees from 13 March 2020 in cases where the employee had coronavirus, had symptoms or was self-isolating because someone they live with had symptoms or, for payments from 16 April 2020, when the employee was shielding because of coronavirus. Employees do not need a “fit to work note” from their GP or medical practitioner for you to make a claim.

Please note the number of employees will be determined by the number of people the business employed as of 28 February 2020. Employers should maintain the following records for at least 3 years following a claim:

  • The reason why an employee could not work;
  • Details of each period when an employee could not work (including start and end dates);
  • Details of the SSP qualifying days when an employee could not work;
  • National Insurance numbers of all employees who have been paid SSP.

SSP relaims can be made online here https://www.gov.uk/guidance/claim-back-statutory-sick-pay-paid-to-your-employees-due-to-coronavirus-covid-19

Employers will also need to confirm that the amount of SSP rebate they are claiming will not take them above the temporary EU COVID-19 Temporary State Aid framework ceiling which is €800,000 for most employers, however there are lower ceilings for employers in Agriculture (€100,000) and Aquaculture and Fisheries (€120,000).

 

Support for Businesses Paying Tax – Time to Pay with HMRC

All businesses and self-employed people can be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. This can allow businesses and self-employed people extended periods of time to pay outstanding amounts.

Separately, the Government has confirmed that it will be cancelling penalties and interest where you have administrative difficulties.

These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances of each business. HMRC has a dedicated helpline to assist (0800 024 1222).

 

Property rates

The NI Executive have announced an emergency rates package totalling £313m to assist Northern Ireland ratepayers impacted by COVID-19.

For businesses, there will be a four-month holiday for all business ratepayers (excluding public sector and utilities). This means that no rates will be charged for April, May, June and July 2020 for business ratepayers.

In addition, the sectors hardest hit by the coronavirus pandemic will pay no rates for the full financial year up until 31 March 2021. Those sectors are:

  • hospitality, tourism and leisure
  • retail (excluding certain supermarkets and off-licences)
  • childcare
  • Belfast City Airport, Belfast International Airport and the City of Derry Airport 

For domestic ratepayers, their rates bills (which were due to be issued in April 2020) will now not be issued until June2020. Ratepayers can still choose to pay their bill in monthly instalments between June 2020 and March 2021, with monthly direct debit plans automatically updated.

The NI Executive has announced a 12.5 per cent reduction in non-domestic property rates for 2020/21.

 

Grant scheme

The grant scheme announced by the Northern Ireland Executive will come in two parts:

  • an immediate grant of £10,000 will be provided to all small businesses who are eligible for the Small Business Rate Relief Scheme; that is all businesses with a Rateable Net Annual Value (NAV) up to £15,000; and
  • an immediate grant of £25,000 will be provided to companies in the retail, tourism and hospitality sectors with a NAV between £15,000 and £51,000.

The first payments under the £10,000 Small Business Support Grant Scheme have already been made to those eligible businesses who paid their business rates by Direct Debit (as their bank details were already held by LPS). The remaining payments will be sent as soon possible after bank account details are provided through the online form.

Applications for both grant schemes closed on 20 May 2020.

Grant income received by a business is taxable therefore the Small Business Grants, and Retail, Hospitality and Leisure Grants will be subject to tax.

 

NI Micro Businesses Hardship Fund

The NI Executive has launched a new NI Micro-business Hardship Fund to help Northern Ireland based micro-businesses and social enterprises unable to access other regional and national COVID-19 support measures.

The funding is available to businesses unable to access the £10,000, £25,000 and Covid-19 Childcare Support grant schemes.

The level of Hardship Fund grant will be up to £10,000 for businesses which pay business rates on premises and up to £5,000 for those that do not pay business rates. Businesses within each category will receive the same amount.

Only one grant will be paid to each eligible business, irrespective of how many properties the business occupies.

 

Eligibility Criteria

To be eligible the business must:

 

  • be based in Northern Ireland;
  • have employed between one and nine employees paid via PAYE at 29 February 2020. Businesses, where the sole employee is the business owner or company director, are not eligible for this scheme; and
  • have experienced a reduction in turnover in excess of 40% (since 1 March 2020) as a direct result of the COVID-19 pandemic or associated Government restrictions.

Claims can be made from 20 May 2020 until 16 June 2020 here https://www.investni.com/ni-micro-business-hardship-fund?_ga=2.21763323.1117612680.1589914079-835843509.1584561303

 

Universal Credit and Working Tax Credit

The universal credit allowance and working tax credits have been increased by £1,000 for the next 12 months.

Those who are self-employed will also be able to apply for a full Universal Credit at a rate equivalent to statutory sick pay, with the suspension of the minimum income floor. However, this is not without criticism as the UK statutory sick pay scheme at just £94.25 per week, is one of the lowest in Europe.

The Chancellor also pledged £1bn to help cover 30 per cent of house rental costs by increasing the housing benefit and Universal Credit.

 

IR35

The Government has provided some breathing space for businesses that are reviewing the impact of ‘off payroll workers’ by delaying the introduction of IR35 until 6 April 2021.

 

Making Tax Digital (MTD)

The Government has also extended the ‘soft landing period’ in which VAT registered businesses must comply with the second phase of MTD (the requirement to introduce digital links between all elements of the software used to create the VAT returns). The new deadline is the beginning of the first VAT period starting on or after 1 April 2021.

Grant Thornton will continue to closely monitor the evolving situation regarding COVID-19 and will issue further updated guidance for businesses when received from Government or HMRC.

In the meantime, you may also find the following links helpful:

UK Government: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-COVID-19/COVID-19-support-for-businesses

 https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-COVID-19/COVID-19-support-for-businesses

British Business Bank: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/

Republic of Ireland assistance: https://www.grantthornton.ie/insights/blogs/COVID-19---government-supports/