Monthly Archives: March 2020

Coronavirus support for people working through their own limited company

If you work through your own limited company, you will no doubt have been disappointed to discover that the measures announced by the Chancellor last week for self-employed individuals do not apply to you.

However, the guidance for the use of the Self-Employed Income Support Scheme (SEISS) advises that there may be two further avenues of Government support open to you – the Coronavirus Jobs Retention Scheme (CJRS) and the Coronavirus Business Interruption Loans Scheme (CBIL).

Coronavirus Jobs Retention Scheme (CJRS)

The CJRS is open to all PAYE employees on the payroll on 28 February 2020 who have since been ‘furloughed’. This means that if you pay yourself through PAYE and designate yourself as ‘furloughed’, you will likely be eligible for a grant covering 80 per cent of your usual salary plus Employers’ National Insurance Contributions (NICs) and minimum employers’ automatic enrolment pension contributions.

However, being ‘furloughed’ means that you cannot undertake any of your employment duties, which may well be unfeasible if you are the only employee of the company. Moreover, the scheme is not expected to begin paying out until late April.

You should also bear in mind that it will not cover dividend income you would normally receive or any other performance-related pay you may receive.

Coronavirus Business Interruption Loans Scheme (CBILS)

The Coronavirus Business Interruption Loans Scheme (CBILS) is a potential option if you need funds to be able to pay yourself until the CJRS pays out in late April.

Facilities are available under CBILS £1,000 to £5 million, subject to a lender’s criteria. CBILS will be interest-free for the first 12 months, as the Government has guaranteed to cover these payments during this period.

CBILS may also be an option if accessing the CJRS is not appropriate in your circumstances.

  1. To access the scheme, decide which form of finance you require and identify which accredited lenders can offer it. This can be done by using the British Business Bank’s filter tool by clicking here.
  2. This filter allows you to put in the region where your business is based and the type of loan you require and will provide you with a list of suitable lenders.
  3. Research what each lender is offering via their website and decide how much funding you require.
  4. Collate all necessary information to make an application, including an up to date business plan, detailed management accounts and cash flow/financial forecasts.
  5. Make an application with your chosen lender that suits your requirements. The loan application process is likely to differ from lender to lender.

The British Business Bank has indicated that it may be beneficial to seek finance first through a lender that you have an existing relationship with.

Some lenders have advised that they may require personal guarantees from directors against any loans, although this cannot include your main residence.

Holiday rules relaxed to allow annual leave to be carried over to next two years

The Government has announced that existing rules around annual leave will be relaxed to allow workers who have not used their statutory annual leave entitlement this year due to COVID-19 to carry it over into the next two years.

Most full-time British workers are entitled to 28 days holiday each year, including bank holidays.

However, unless allowed for within an individual’s existing work contract or an employer’s workplace policies, this entitlement cannot normally be carried between leave years (the 12-month period during which holiday time is recorded), which means that a worker can lose their paid holiday time if they do not use it.

Employers are required by law to try and ensure their workers take their statutory entitlement in any one year, with penalties issued against those who fail to do so.

The new measure introduced by the Government will allow workers to carry up to four weeks of unused leave into the next two leave years, thus reducing the chance of an employer being penalised and freeing up the time for employees in key sectors.

It is hoped that this change will allow staff to continue working as part of a national effort against the Coronavirus without them losing out on missed holiday.

The changes amend the existing Working Time Regulations that apply to almost all workers, including agency workers, those who work irregular hours, and workers on zero-hours contracts.

Despite the change, there remains an obligation on an employer to ensure that their workers have an adequate opportunity to take their holiday.

This holiday cannot be replaced with a payment in lieu unless the worker is leaving their employment.

Suspension of director liability for wrongful trading

The Government has announced important changes to UK insolvency law that suspends director liability for wrongful trading.

Seeking to provide reassurance to business directors in light of the ongoing COVID-19 pandemic, the Government has retrospectively suspended restrictions around wrongful trading from the 1 March 2020 for three months

Under English law, where a company continues to trade, even in the face of unavoidable insolvency, the company’s directors can be found personally liable for the losses suffered to creditors as a result, potentially leading to a court-ordered contribution to the assets of the insolvent company.

By suspending the rules, directors of struggling business who continue to operate, in the full knowledge that they face the prospect of insolvency, will not be penalised for doing what they can to keep their business operational.

Business Secretary Alok Sharma announced the changes and said they would offer a ‘breathing space’ for companies undergoing a rescue or restructure process to help them avoid insolvency.

On top of this suspension, the Government will also introduce new emergency legislation that will:

  • Create new restricting ‘tools’, including a moratorium, for companies giving them a holiday from creditors enforcing their debts for a period of time whilst they seek a rescue or restructure.
  • Introduce a new restructuring plan, that binds creditors to that plan;
  • Allow companies to buy essential supplies while attempting a rescue or restructure.

The Government hopes that by taking these measures they can reduce the number of contract cancellations, supply chain issues and a wide range of other issues that are affecting the UK economy.

Soft-landing period for MTD for VAT extended to April 2021

HM Revenue & Customs (HMRC) has announced that the second phase of Making Tax Digital for VAT will now be postponed until 1 April 2021.

The first year of MTD was subject to a one-year “soft-landing period”, which has seen HMRC holding back from pursuing businesses that should have signed up.

Similarly, HMRC has taken a lenient approach in cases where businesses that have signed up to MTD have had problems with making their first returns for whatever reason.

However, from 6 April this year, this soft-landing period was due to come to an end. The latest announcement from HMRC in response to the COVID-19 pandemic means that businesses now have until their first VAT return period starting on or after 1 April 2021 to put the necessary digital links in place and comply with the MTD rules fully.

The change also means that penalties for failing to report VAT via MTD will also be postponed. These fines could have been up to £400, depending upon the size of the business.

Despite the changes to the rules, it is important that businesses still prepare themselves for MTD for VAT. If you haven’t taken action already to become compliant, it is important that you do so now.

The Coronavirus Jobs Retention Scheme and employers’ National Insurance and Pension contributions

Much of the coverage of the Coronavirus Jobs Retention Scheme (CJRS) has focused on the Government’s commitment to cover the cost of 80 per cent of the usual wages of ‘furloughed employees’ – those who remain on the payroll but are not working.

In fact, the CJRS will pay employers more than 80 per cent of an employee’s gross monthly salary while furloughed, because it will also meet the cost of Employers’ National Insurance Contributions (NICs) and the minimum automatic enrolment employers’ pension contributions that are attracted by the 80 per cent figure.

If you choose to top-up a ‘furloughed’ employee’s salary to 100 per cent, you will also need to meet the additional costs in terms of the NICs and pension contributions attracted by the additional 20 per cent payment. Employees will pay Income Tax and their own NICs from their gross salary as usual.

The Government has said that before the scheme goes live in April, it will issue guidance on calculating claims for Employers’ NICs and minimum automatic employment pensions contributions.

What expenses are taxable when working from home?

If any of your employees are working from home due to Coronavirus because your workplace has closed or you are following advice to self-isolate then you may be able to deduct some of the costs of home working as a taxable expense.

The rules around expenses and whether or not they are taxable differs depending on the type of equipment, service or supply used and so we have covered the main categories below:

Mobile phones and SIM cards (no restriction on private use)

If you provide a mobile phone and SIM card without a restriction on private use, limited to one per employee, this is non-taxable.

Broadband

If your employee already pays for broadband, then no additional expenses can be claimed, but if a broadband internet connection is needed to work from home and one is not already available, then the broadband fee can be reimbursed and is non-taxable.

The broadband must be provided primarily for business use and any private use must be limited.

Laptops, tablets, computers, and office supplies

Where any of these items are used for business purposes and not significant private use, these are non-taxable. Where an employee has brought office equipment or supplies and wishes to be reimbursed this is taxable and should be reported via PAYE Settlement Agreement.

Electricity or heating

Employees are entitled to a payment or reimbursement of up to £4 a week (increasing to £6 a week from 6 April 2020), which is non-taxable. This is intended to cover additional household expenses incurred when your employee is working from home.

Where a claim exceeds this amount then an employee should check with you beforehand to see if you will make these payments and you should keep receipts.

Employer-provided loans

A salary advance or loan to help your employee at a time of hardship counts as an employment-related loan. Those loans with a value less than £10,000 in a tax year are non-taxable.

Temporary accommodation

If your employee needs to self-isolate but cannot do so in their own home, you can reimburse hotel expenses and subsistence costs, these are taxable.

Use of a private vehicle for business

Employers can pay approved mileage allowance payments of 45p per mile up to 10,000 miles (25p per mile thereafter) free of tax and National Insurance contributions.

If you do not pay mileage allowance, your employee can claim tax relief through their Personal Tax Account.

Reporting expenses to HMRC

Any expenses or benefits which are related to Coronavirus can be reported via a PAYE Settlement Agreement, which will allow you to settle tax and National Insurance contributions on any expenses or benefits, even though the responsibility would usually be on your employee, or on both you and your employee. This applies to Coronavirus related items only, for example, a new desk can go onto a PAYE Settlement Agreement.

Where you are already including benefits in kind in your payroll reporting you can continue to report expenses and benefit this way, or they can be reported through P11D returns.

It is important to keep a record of all expenses claimed, although you do not have to report of every instance of private use to prove a claim for exemption.

Any non-taxable expenses or benefits should not be reported to HMRC.

Preparations Checklist

To help you plan through this pandemic, we have put together a checklist to help you mitigate some of the business impacts:

  • Consult with employees, on matters including:
    • Statutory sick pay
    • Coronavirus Job Retention Scheme
    • Redundancies and layoffs
  • Defer tax payments by establishing Time to Pay agreements with HM Revenue & Customs (HMRC), for:
    • PAYE
    • NIC
    • CIS (Construction Industry Scheme)
    • VAT
    • MGD (Machine Games Duty)
  • Claim business rates reliefs and grants announced by the Government, via your local authority
  • Consider using the Government’s Coronavirus Business Interruption Loan Scheme
  • Consider using the three-month rental moratorium on commercial leases
  • Prepare new or updated bank facilities, including overdrafts and capital holidays
  • Liaise and notify customers, suppliers, contractors and trading partners of your contingency plans
  • Defer capital expenditure
  • Defer finance payments, hire purchase and leasing
  • Accelerate income, where possible
  • Update credit control procedures
  • Reduce stock levels
  • Review insurance policies
  • Review all contractual obligations and advanced orders
  • Review your business’s terms & conditions

More details regarding the Government’s measures outlined above can be found on our COVID-19 Business Support Hub by clicking here.

Here to Help

This checklist, while detailed, is not comprehensive and we recommend that you speak with us to put a clear plan of action in place to address the short and medium-term impact of this crisis on your business.

We are helping a number of businesses with their preparations for Coronavirus and are standing by to assist you. To find out how we can help you and your business, please contact us.

Coronavirus Business Interruption Loan Scheme (CBILS)

Small to medium-sized businesses in the UK are now able to apply for finance via the Coronavirus Business Interruption Loan Scheme (CBILS) to help them deal with the operating costs of their business and to assist with maintaining cash flow.

To help you apply for a loan, we have answered some common queries below:

Am I eligible?

The scheme is available to businesses with turnovers up to £45 million with UK-based business activity. At least 50 per cent of the business’s turnover needs to be in the form of trading activity.

Decision-making on whether you can obtain a CBILS has been delegated to the accredited CBILS lenders, which range from high-street banks to smaller specialist local lenders. As such, businesses must go through the full credit assessment process for each application they make.

The lender will consider your application and is likely to check first whether you qualify for a loan on normal commercial terms or whether the CBILS is more suitable.

Some sectors will not be eligible to apply for a loan under the scheme. Full details of eligibility and an FAQ link to the British Business Bank can be found here.

What finance can I access?  

Funding can be in the form of loans, overdrafts, invoice financing or asset finance, although each lender will be able to choose which elements of the scheme it supports.

Facilities will be made available from £1,000 to £5 million, subject to a lender’s criteria. CBILS will be interest-free for the first 12 months, as the Government has guaranteed to cover these payments during this period.

The Government and the British Business Bank, which is helping to administer CBIL, have confirmed that no setup fee will be charged.

Am I liable for all of the debt?

The borrower will remain 100 per cent liable for the debt. An 80 per cent guarantee offered by Government is simply to provide some recourse for the lender in the event of a borrower defaulting on their debt.

How do I apply?

The scheme will be delivered through existing commercial lenders, backed by the Government-owned British Business Bank. There are currently 40 accredited lenders able to offer the scheme, but more are being added regularly.

These are the steps that you should take in applying for a loan:

  1. Decide which form of finance you require and identify which accredited lenders can offer it. This can be done by using the British Business Bank’s filter tool by clicking here.
  2. This filter allows you to put in the region where your business is based and the type of loan you require and will provide you with a list of suitable lenders.
  3. Research what each lender is offering via their website and decide how much funding you require.
  4. Collate all necessary information to make an application, including an up to date business plan, detailed management accounts and cash flow/financial forecasts.
  5. Make an application with your chosen lender that suits your requirements. The loan application process is likely to differ from lender to lender.

The British Business Bank has indicated that it may be beneficial to seek finance first through a lender that you have an existing relationship with.

To help you with this process we have prepared a helpful infographic, which can be downloaded and shared.

cbils-infographic-25-march

Here to Help

If you feel you may need to access this scheme you should be putting together the information you need to make an application. We can assist with the preparation of supporting evidence to support your claim.

To find out how we can assist you with your CBILS application or for any advice on the facilities being offered by a lender, please contact us

Business rates relief extended

Two significant elements of the measures announced by the Government to ease the financial impact of the Coronavirus crisis have been business rates reliefs and grants to certain ‘at risk’ businesses.

These include grants for businesses in the hospitality, leisure and retail sectors, a grant for businesses that pay no or little business rates and 100 per cent business rates relief for businesses working in certain sectors.

Details of this are available in our earlier update which is available on our COVID-19 Business Support Hub by clicking here.

Estate agents, lettings agencies and bingo halls

Businesses in a wide range of sectors that have been particularly badly hit by the Coronavirus crisis are now eligible for a 100 per cent discount on their business rates from 1 April 2020 to 31 March 2021.

The Government has now confirmed that this list of sectors now includes estate agents, lettings agencies and bingo halls, as they have been adversely affected by the pandemic and were not in the original list of industries.

The full list of sectors to receive a discount is as follows:

  • Shops
  • Cinemas
  • Restaurants
  • Gyms
  • Music venues
  • Small hotels
  • B&Bs
  • Guesthouses
  • Sports clubs
  • Night clubs
  • Nurseries
  • Estate agents
  • Lettings agencies
  • Bingo halls

Where a property has been closed owing to the crisis, it will still be treated as occupied.

However, where a property becomes vacant in the next 12 months, a 100 per cent full rate will be charged after three months of void rate holiday, unless the rules are amended.

Local Billing Authorities will administer the application process and they should already have knowledge of which properties are eligible, so it would be best to contact them in the first instance.

Employment

Many businesses will be struggling with a variety of issues due to the impact of the Coronavirus outbreak, but a key consideration for many will be employment costs and staff safety.

The Government has taken significant steps to help businesses protect jobs by introducing measures that seek to subsidise wages and provide refunds for those on sick pay as a result of the virus.

Coronavirus Job Retention Scheme

The Chancellor has announced a scheme to reimburse up to 80 per cent of the cost of the wages of ‘furloughed workers’ up to £2,500 per employee per month.

This scheme will initially run for three months from 1 March 2020 and will be backdated. The Scheme will be administered by HMRC and all UK businesses and charities will be eligible.

HM Revenue & Customs (HMRC) has now published detailed guidance for operation of the Coronavirus Job Retention Scheme, which confirms that:

  • The scheme applies only to workers who were on the payroll on 28 February 2020;
  • Workers made redundant since 28 February 2020 can be included in the scheme, if you agree to take them back on; and
  • The scheme covers full-time and part-time employees, employees on agency contacts and employees on flexible or zero-hour contracts.

Read the guidance for employers on the HMRC website

Read the guidance for employees on the HMRC website

If businesses are unable to wait until the scheme is fully implemented then they may wish to seek immediate financial assistance via the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime.

Statutory Sick Pay (SSP)

Anyone who contracts Coronavirus, or who is required to self-isolate under the Government’s current guidance may be entitled to statutory sick pay (SSP).

Only qualifying employees, whose average weekly earnings are above £118 are entitled to SSP. SSP is paid at a rate of £94.25 per week.

Full details of the new measures can also be found on our COVID-19 Business Support Hub.

The Government has provided further advice to employees, which can be found by clicking here.

Contractual Sick Pay

It may be necessary to pay additional sick pay in circumstances where this is provided for in a contract of employment, in the employee handbook, or even where it is usual practice to do so.

Layoffs owing to reduced work

It is possible that businesses, especially those in certain sectors, will see a reduced workload as a consequence of Coronavirus.

In these circumstances, and where allowed for in the contract of employment, employees can be laid off temporarily.

Employees who are laid off must be paid a guaranteed payment of up to £29 a day, for five days in any three-month period up to a maximum of £145. After four weeks, employees may be able to request that they are made redundant.

In most cases, businesses are likely to make use of the Coronavirus Job Retention Scheme now that it is available to employers.

Here to Help

If you require assistance with your payroll or have queries regarding any of these measures, please contact our team today.