Updated 27.03.2020
As your local tax advisors, we understand just how worrying the start of the year has been. As the threat of the new Coronavirus has got closer, many have started to fear the unknown upcoming times. Lack of confidence has led to markets decreasing and economic uncertainty.
Aside from the panic buying, the business world has seemed to grow quieter and people are increasingly staying in and not going out or spending.
Just these past few weeks have seen changes to the way of life that many will have never experienced before and as accountants we’ve obviously had our eyes and ears on the numbers that matter for businesses.
The economy was discussed in full on March 17th as Prime Minister Boris Johnson and Chancellor Rishi Sunak addressed the media, as well as those at home worried about their businesses.
As travel, events, hospitality, and retail industries have taken blow after blow, this was a moment where they needed to hear some positive news amidst a deliberate stranglehold on their world.
How does the Chancellor’s updated Coronavirus (COVID-19) measures affect your business?
It is very early days and there will be further updates over the coming weeks and probably months, but here are the main points and what it means for your business…
Job retention scheme
One of the key messages throughout the Governments updates has been that they want to retain jobs by keeping viable businesses afloat and try and prevent them having to be made redundancies.Here’s what the job retention scheme looks like for your employees:
80% of any furloughed employees’ wages (up to £2,500) will be covered.
A furloughed worker must not undertake any work, so no emails, phone calls, digital marketing or suggestions of income generating activities.
This is why we were initially unsure whether company directors would qualify for this but – good news – company directors are eligible for this, but it will be for wages only and not dividends.
For full and part time salaried employees, the actual salary before tax as of 28.02.2020 should be used to calculate the 80%. This should not include any additional earnings, such as bonuses and commissions.
For those employees who’s pay varies and have been employed for more than 12 months, you can claim the higher of:
- The same months earnings from the previous year. (This will help with seasonal workers, such as event workers)
- The average monthly earnings from the 2019/20 tax year.
If the employee has been with you less than 12 months, you should use the average monthly salary since they started.
We’re still waiting the new HMRC portal and reimbursement system to be set up and this will give us more detail and clarity on all this. This is expected to be released before the end of April, ready for payroll run April.
SSP Employers rebate
One clear issue for companies is Statutory Sick Pay (SSP) and covering this cost for the businesses. Companies will be reimbursed for any SSP paid from day one. They must be a small employer with less than 250 employees.
Again, the system for allowing this reclaim is still in development, so more details to come soon.
Retail, leisure and hospitality
Shops, pubs, and leisure businesses will have a ‘business rates holiday’ for 12 months. However, a lot of small independents get small business rates relief anyway or don’t pay any rates at all!
Further grants of £25,000 to retail and leisure-based businesses to be made available in the future. More details will be announced over the coming weeks regarding this.
Small Business Rates Relief and Rural Rate Relief – Small business help!
Nearly 700,000 businesses will be able to claim a one-off grant of £10,000 if their business is currently eligible for SBRR or Rural RR.
Announced in last week’s budget, this grant is being put in place to support long-term viable businesses who might be struggling and need to respond to cash-flow issues caused by the obvious disruption.
This one-off cash grant of £10,000 will be made available for all small businesses that currently receive Small Business Rate Relief or Rural Rates Relief.
Please note, this grant will only be given to businesses where the business premises do not have any residential use.
We understand you will receive information from your local authority to your postal address within the next few weeks.
Business insurance update
The Chancellor confirmed that he had spoken with insurers and assured business owners that their insurance should pay out if they have Business Interruption pandemic cover.
They also confirmed that the Government didn’t mean to confuse this by ‘suggesting’ pubs, bars and restaurants close; leaving the decision to the public not to go or the business to take a voluntary closure.
Mortgages
A mortgage holiday of 3 months is to become available to help those struggling to pay the bills during the economic downturn. This is great news for those with a mortgage, but renters are asking about what measures are being put in place for them. We expect further announcement’s to be made around Universal credit very soon.
IR35 is postponed
Well… for now anyway!
The Government announced that changes to IR35 will be postponed until April 2021 because of the uncertain climate.
Chief Treasury Secretary, Steve Barclay said, “The measures will come into effect on 6 April next year.” Barclay said that “The move is part of a broad package of measures the Treasury has announced to protect the economy from the coronavirus outbreak.”
So that’s good news for contractors for now. However, we would recommend that you speak with your agent as soon as possible to clarify the situation, as we have found that several large businesses are still pushing ahead with the changes regardless.
VAT Deferral
If you have a VAT payment due from 20.03.2020 to 30.06.2020 this can be deferred until 31.03.2021.
This will be automatic, so there’s no need to apply, but please do not forget to submit your VAT Return by the due date as normal. Clearly you will need to work with your accountant to ensure that you build up your reserves for the extra payment next year.
HMRC support
HMRC will also be able to help and although there is news about extra support from them, the business payment support will continue to be offered on a case by case basis. Contrary to popular belief, HMRC are really helpful and are very reactive to businesses when they get into trouble. Our advice is always to go into the conversation with all of your financials and knowing what you absolutely can afford to pay or worst-case scenario.
Call HMRC’s dedicated helpline on 0800 0159 559 if you need help, but always speak to your accountant first to ensure that this is the best option.
You can find all this and more information which will be updated as the Government release more news so keep an eye on this page. https://www.gov.uk/government/news/coronavirus-covid-19-guidance-for-employees-employers-and-businesses
Stay safe and please don’t panic.
It looks like the UK Government are taking this situation incredibly seriously and they’ve even promised to ‘go further’ with these measures.
Ask for help if you need it and please do email us if you’d like to talk about your tax or accounting in these challenging times.
We have made the decision to stop all face to face meetings and office visits until further notice. We will, however, be offering scheduled phone and zoom calls so business can continue in an almost normal fashion.
