There’s very clearly a need for us all to act responsibly during the Coronavirus outbreak. With the hospitality sector closing down temporarily from last Friday evening, and other businesses making decisions to distance their workers from each other and the general public, there’s inevitably a major impact on UK businesses and the economy in general.
Government’s announcement
The word “unprecedented” has been used an awful lot recently, and for very good reason. The UK government seems to be pulling out all the stops to help UK businesses in this time of crisis, and this certainly is unprecedented.
Introduction of a new Coronavirus job retention scheme
If any of your retained workers are unable to work due to the Covid-19 pandemic, the government is pledging to pay 80% of the gross pay, up to £2,500 per month, and employers are able to top this up to the full pay, if they are able and choose to do so.
The retention scheme is open to all businesses, charitable organisations and not-for-profit organisations. The aim is to allow employers to keep employees on the payroll, rather than making them redundant in potentially difficult financial times.
First grants are expected to be released within the next few weeks, open initially for three months, and backdated to 1 March.
Self-employed workers
There has been substantial concern voiced from self-employed individuals, who reportedly account for 15% of the workforce, and who don’t feel they’ve had the same reassurance about their own lack of income during the next 12 weeks or so. The likes of hairdressers and beauty salons, who are in close contact with the public on an hourly basis, will undoubtedly be affected. Should they take the decision to close to protect themselves and their clients? And how will they be financially compensated, if that is the case?
The government will suspend the “minimum income floor” for the duration of the Coronavirus outbreak, which means that universal credit payments will be based on what a self-employed person actually earns. Under normal circumstances, the DWP would make an assumption about a person’s earnings, irrespective of what they actually earn, in the first twelve months of self-employment. Those expected earnings are known as the “minimum income floor”.
For this temporary period, self-employed workers will be treated the same as employees within the universal credit system, receiving a rate equivalent to statutory sick pay, but they will not be part of the 80% earnings pledge made to employers.
Cash flow support through the tax system
The next quarter of VAT payments will be deferred until the end of June, with businesses permitted until the end of the financial year to repay the accumulated amount due. This assists with cash flow, but businesses need to be aware that this is only a deferral and they will therefore have to make provisions to eventually pay their VAT bill.
The Chancellor also pledged that the government will ensure that businesses and self-employed individuals in financial distress will receive support in paying other outstanding tax liabilities.
A dedicated Covid-19 helpline has been set up at HMRC with the aim of agreeing time to pay arrangements, although those arrangements will be considered on a case-by-case basis taking into account the individual circumstances.
HMRC’s dedicated helpline is 0800 0159559 (opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm), but please do get in touch with your usual contact if you would like to discuss your financial circumstances and tax liabilities in more detail.
Self-assessment payments will be deferred to January 2021
Those due to make payments on account of their tax liabilities by 31 July 2020, will be able to defer those payments to 31 January 2021.
Please remember, though, that, similar to the VAT deferral, full payments will be due at the later date, and therefore it’s important to factor into your cash flow forecasts.
Business Interruption Loan Scheme
A temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will shortly be launched to support businesses to access bank lending and overdrafts. The amount businesses can borrow will be up to £5 million, and the Government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
The Government will not charge businesses or banks for this guarantee, and the scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as the Government will cover the first 6 months of interest payments.
If you have any concerns, or would simply like to discuss your business’ cash flow requirements, please contact me or your usual UHY contact.
