Here’s what we know (and what we don’t know) currently (30 March)
£10K grant for all businesses with premises with rateable value under £15K
East Riding Council sent letters out to qualifying businesses on Thursday 19 March. Their website has a section for businesses to input their bank account details in order to receive the grant ( www.eastriding.gov.uk/business-rates-grants ). We have seen an e mail from someone senior in Hull City Council stating their letters will be going out mid April. This seems to be the case with every other local authority too.
£25K grant for businesses with premises with rateable value between £15K and £51K in hospitality, retail and leisure
We now know it is a £25K grant (not up to £25K) – we presume it’s a similar process to £10K grant above. In meantime check rates bills and check correctly classified as retail etc.
2020 / 21 Business Rates Holidays for those in leisure, retail or hospitality
Should be automatic but same advice, check rates bills to ensure correctly classified. Now extended to bingo halls, estate agents and letting agencies but some confusion over whether need to be closed or not to qualify.
What if I’m not entitled to a business rates holiday but all my staff are working from home
You will qualify for empty building rates relief (ie 100% for 3m – indefinite if listed) if all furniture, equipment etc has been removed. Hull City Council are asking for photographic evidence that this is the case. We’re unsure if other councils are doing the same.
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Humber LEP grant for IT hardware , software and consultancy required to enable home working
40% of spend between £2,500 and £25,000 – www.humberlep.org for further info
Government Backed Funding – Business Interruption Loan Scheme
Govt will guarantee 80% of funding needed to support a business that was viable pre Corona Virus and can demonstrate it will be in the future. Banks seem to be going down overdraft route. Interest free loan of up to £5m. Borrowings to be repaid within 6 years. Available to companies and some sole traders / partnerships. 40 lenders have signed up to the scheme. Up to date accounts, management accounts and cash flow forecast required. There are Humber LEP grants available for ‘crisis management assistance’ which may cover some of this work. Businesses in other regions should check locally.
Contact firstname.lastname@example.org for further info on the above.
80% grant to cover wages of furloughed employees
This was only announced on Friday 20 March so there are still many unanswered questions. This is making the processing of March payrolls extremely difficult, particularly where employers have already furloughed employees. What we do know is:
There is a maximum grant of £2500 per employee per month towards gross wages. The government will also reimburse 80% employers’ NI and auto enrolment costs which should save businesses upto an extra £300 per employee per month.
Employer puts employee into furloughed status (ie told to stay at home and not work) – some template documents / letters have been produced by various trade organisations – our recommendation is to take legal / HR advice.
Employer may , if they wish, top up some or all of the 20%.
HMRC are building a website whereby employers can input details of furloughed workers and company bank account details in order to receive the grant.
Anyone who was in the company’s employment on 29 Feb can be furloughed – even those that have subsequently been made redundant or laid off.
Employers must pay wages then wait for the grant – what if can’t afford to pay the wages and loans / other grants don’t arrive in time?
What we don’t know:
How to treat furloughed employees on payroll, pay slips, Real Time Information submissions (software will need to be updated).
When the HMRC website will be ready.
How quickly the grants will be paid.
What if there are a pool of workers – how do you decide who is furloughed?
What anti abuse rules will be in place – checking turnover, asking employees to confirm not working, fines / prison or does the government just want businesses to survive?
Guidance for Director/Shareholders
Given the current financial climate you may wish to consider increasing directors salaries from March’s payroll and lowering or stopping any dividend payments due to there potentially not being the distributable reserves available to pay dividends and then utilise the furlough scheme from 1 April.
This would increase current PAYE and national insurance liabilities but does however safeguard directors’ personal incomes in the event any business becomes insolvent and has to close as a result of the on-going situation.
Directors salaries do however qualify for the newly introduced Government furlough scheme, a business can receive a grant of up to £2,500 per employee/director plus employers national insurance and minimum auto enrolment pension contributions. This works based on 80% of the employee/director’s previous month’s gross salary up to a maximum of a £2,500 grant per employee/director (so the maximum grant would be based on a gross salary of £3,125 per month or above). The remaining 20% of the employee/director’s monthly salary can be paid by the employer but this is optional.
Guidance for Casual Employees
For any employee not on a regular salary or on a ‘zero hours contract’ the 80% furlough grant can be based upon either their income for the same month last year or an average of their monthly earnings for the current 2019/20 tax year.
The furlough scheme is available from 1 March but this only applies to workers laid off or furloughed during this month. Any furloughed employee or director cannot work for the business during this period of being classified as furloughed.
This guidance is our recommendation but is not in any way us dictating what needs happen for any individual business or employee, in the event of a HMRC or Government investigation the responsibility still lies with the directors and/or business owners for any action taken within their business.
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HMRC Corona Virus Time To Pay Helpline
0800 024 1222 – open Monday to Friday 8am to 4pm.
This is a new, free to phone number, time will tell whether it is easier to get through than the old one. If you are unable to get through then we are recommending that clients write to HMRC with details of the liabilities they wish to delay, a proposal of when they can afford to make the payments, an explanation that they have tried to contact the helpline but couldn’t get through and a number for HMRC to contact them on to set up a direct debit. Sophie has produced a template which she will be happy to share with you.
On the occasions people have successfully got through HMRC has been extremely receptive (unlike in previous downturns) and not asked for proof of attempts to raise finance elsewhere, personal savings etc and very helpful instalment periods.
Any VAT payable for the next 3 months (20 March to 20 June) will be deferred until Apr 2021. We now know you must cancel your direct debit.
Self assessment tax due 31 July 2020
This has been deferred until 31 Jan 2021 for ALL taxpayers.
Contact firstname.lastname@example.org for further info on the above.
Self employed (ie sole traders and partnerships)
Announcement on 26 March of a new Self Employed Income Support Scheme as follows:
Taxable grant of 80% of normal earnings (average of last 3 years).
Maximum of 3 months (currently) with a maximum grant of £2500 pm.
Anyone with profits under £50,000 (ie 95% of the self employed) for both last year and average of last 3 years.
Self employment must be the ‘majority’ of their income (more than half).
Must already be in self employed (anti abuse measure).
Must have filed a 2019 Tax Return – if late must file in next 4 weeks in order to qualify.
HMRC will contact qualifying individuals early June at the latest – no cash until then! It will be back dated to 1 March.
Newly self employed WILL NOT QUALIFY.
Will be given 3 month mortgage holiday when it can be proved their tenants are unable to pay their rent due to Corona Virus.
Changes to insolvency rules
On 28 March the government announced it would be temporarily suspending the ‘wrongful trading’ laws to protect directors during the pandemic. The move will allow directors to pay employees and suppliers even if they believe the business is technically insolvent. This should give them the breathing space to claim government grants and access government backed borrowings.
A temporary block on creditors being able to put businesses into administration to give them time to restructure has also been introduced.
Insolvency rules are extremely complex and whilst these moves are welcome, if you are in any doubt whatsoever please speak to a licensed insolvency practitioner.
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