COVID-19 Government Support For Businesses
There have been constant announcements from the Government about the health and financial impacts of COVID-19 and it can be a minefield. I have put together the following summary of the support that has been announced for businesses to help guide you through it.
This information is up to date as of 5 April 2020.
Coronavirus Self Employment Income Support Scheme
Who is it for?
1. You must be either
a sole trader
in a partnership and
2. Your income has been adversely affected by Coronavirus. This can be having to close entirely or a drop in income.
Am I eligible?
1. You must have submitted a tax return for 2018/19.
2. You must have traded in 2019/20 and planning to continue trading in 2020/21 (if it weren’t for Coronavirus).
3. Your trading profits must be less than £50,000 and more than half your income must be from self employment. So either;
Your trading profits are less than £50k in 2018/19 and more than half your total taxable income. (such as employments, rental income etc). Or;
Your average trading profits for 2016/17, 2017/18 and 2018/19 are less than £50k and more than half your total taxable income for the same period. So, if your business had large growth in 2018/19 but was a lot lower the previous year you may still be eligible.
How much will I get?
1. You will get a grant of 80% of the average monthly profits of the tax years 2016/17, 2017/18 and 2018/19. The maximum will be £2,500 per month for 3 months.
2. If you only have one or two years tax returns then it will be calculated based on this.
3. This grant is taxable and will need to be included as income in the tax return for 2020/21.
How and When do I claim?
You can’t apply yet. HMRC will contact you when the scheme is open and you will apply online. They are hoping to have the scheme open by June.
What if I started trading after 6 April 2019?
Unfortunately, those who started trading in the tax year 2019/20 are not eligible. However, you may be eligible for Universal Credits.
What if I can’t wait until June?
If you need the cashflow before June then you may be able to apply for Universal Credits or there are other funding options available which I will discuss below.
What if my 2018/19 tax return is overdue?
If you are already registered for self assessment and your tax return is outstanding you have until 23 April to submit it and you may still qualify for the grant.
Self-assessment income tax payments on account
Who is this for?
Anyone who has a self-assessment tax payment on account due by 31 July 2020.
What is it?
The payment due can be deferred to 31 January 2021.
How do I apply?
You don’t need to apply and no penalties/interest will be charged in this deferral period. If they don’t receive your payment in July they will automatically assume you have taken up the deferral.
Who is this for?
Any business who has a VAT liability due in between 20 March 2020 and 30 June 2020.
What is it?
The payment due can be deferred to 5 April 2021.
How do I apply?
You don’t need to apply and no penalties/interest will be charged in this deferral period. If they don’t receive your payment in this period, they will automatically assume you have taken up the deferral.
Do I still need to submit my VAT return?
What if I have a VAT return with a refund?
If your VAT return shows a refund this time, then this will still be paid back to you.
Corporation Tax and PAYE due
HMRC TIME TO PAYE SCHEME
If you have any other taxes due to HMRC and you are concerned about being able to pay them due to issues caused by COVID-19 then call HMRC on 0800 0159 559 or 0800 024 1222 to discuss possible payment plans.
CORONAVIRUS BUSINESS SUPPORT GRANTS
Who is this for?
There are two different grants available for businesses who have a commercial premises;
Small businesses in England that qualify for small business rates relief
Businesses in retail, hospitality and leisure in England with a rateable value of less than £51k
How much is it?
Small businesses that qualify will get £10,000.
Retail, hospitality and leisure businesses will get £25,000 or £10,000 depending on their size.
When and How can I get it?
You must apply to your local authority and most have this online application open now. Many businesses are expecting to receive in early April 2020.
Retail, hospitality and leisure rates
All business rates on commercial properties in these industries should have had their business rates bill for 20/21 reissued by their local authority with 100% reliefs. (ie. Nil to pay)
Coronavirus Job Retention Scheme
This area is covered by employment law so it is important that you seek HR advice before undertaking this option.
What is the scheme?
This scheme is financial support for employers to reduce the number of employees being laid off during this time.
Who is it for?
All UK employers will be able to apply.
What can I claim?
80% of employees’ gross salary per month (capped at £2,500 gross) + employers national insurance costs and employers pension contributions.
You can choose to pay them 80% or pay them their usual amount with the addition 20% at your cost.
Which employees can I claim for?
1. Employees must have been employed at 28.2.20.
2. They can be full time/part time/zero hours or agency workers.
3. They must be ‘furloughed’ for a minimum of 3 weeks. Furloughed means made temporarily redundant and they must not do any work during this time.
4. If you have made an employee redundant since 28.2.20 because of COVID-19 you can reinstate them under this scheme.
When can I apply?
HMRC are currently setting up an online portal to claim through which they are hoping to have up and running by the end of April.
I am a sole director can I claim?
You can furlough yourself and claim 80% under this scheme. However, you are only allowed to complete statutory duties such as filing VAT returns and accounts. You will not be able to do any advertising/social media, communicate with suppliers/customers etc and as it is for a minimum of 3 weeks you will need to consider if this would have a more adverse impact on your business than the loss of earnings. This will really depend on your circumstances.
Cashflow is important!
Cashflow is vital in getting through this time financially.
I advise all business owners to prepare a cashflow for 3-6 months based on receiving no income. This can be as basic as a list of the expenditure you cannot cancel or pause, you will then know what finance you need to get through. If you need any assistance with this please contact me.
You may have savings or finance already in place. If you don’t then there are various options;
Current finance – ask if you can extend terms/increase limits/request payment holidays
New finance – ask if you can apply for new finance such as credit cards/loans
Coronavirus Business Interruption Loan Scheme – you can apply for loans with 12 months interest paid by the Government and these are partially guaranteed by the Government. They are offered by most of the main banks in UK. A full list and eligibility details can be found at British Business Bank website. You will need a viable borrowing proposal. Most people are finding these loans very hard to get and other finance options a lot more straight forward.
This is a claimable event. You should contact your insurance providers to see what you are covered for some businesses will be covered for pandemics and government forced closure. Unfortunately, I think most businesses will have standard cover which won’t include these but worth the call.
You may have opted out of receiving child benefits in the past because you have high income in your household and would have had to pay the high income child benefit charge. If the loss in earnings will be significantly enough to bring your income below that in the tax year 20/21 you may wish to consider contacting HMRC to reinstate this.
I know how challenging the last few weeks have been, it doesn’t matter what size your business is or the size of your family it has been tough and confusing for everyone but I hope you know we are all in it together.
Flo is a qualified accountant, director of Spring Accountancy Services Ltd and mum of 2 small boys. Flo is available to discuss any of the above or any questions you may have regarding accounting or business finance at firstname.lastname@example.org or 07972029614.