Key measures announced to help small and medium enterprises through the uncertainty of COVID-19 and its impact on the economy.
As part of the Budget, the Government announced an array of measures to help small and medium enterprises (SMEs) in this period of economic uncertainty. These included help to cover Statutory Sick Pay, Business Interruption Loans, relief from business rates, grant funding through local authorities and potential for deferring tax payments. As the crisis continues to escalate, Chancellor Rishi Sunak has provided more detail on these measures and some important new measures to protect jobs, including a new Job Retention Scheme to cover part of the wages of people who are not working where he has stated he is “placing no limit on the amount of funding available for the scheme”, and a wholesale deferral of VAT payments.
Job Retention Scheme
Under this new scheme announced on Friday, HMRC will reimburse 80 percent of ‘furloughed workers’ wage costs, up to a cap of £2,500 per month. Employers can choose to top up this amount. To access the scheme employers need to (i) designate affected employees as ‘furloughed workers,’ and notify employees of this change; and (ii) submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. The details of exactly what information will be required are not yet available. HMRC are working urgently to set up a system for reimbursement and the intention is to start payments in April.
Whilst the precise steps are currently unclear, changing the status of employees to ‘furloughed workers’ remains subject to existing employment law.
Support with Statutory Sick Pay (SSP)
Legislation is to be passed to allow SMEs to reclaim SSP paid for sickness absences due to COVID-19 and absence due to self-isolating in line with Government advice. The repayments will be available for employers with fewer than 250 employees as of 28 February 2020. Our Employers Club Article provides further details on this measure.
We would recommend that employers keep clear records of staff absences to ensure the repayments can be claimed, but note that there is no need for employees to provide a Doctor’s note.
Business rates reliefs and grant funding from local authorities
The Budget announced that business rates would temporarily be scrapped for certain business premises with a rateable value of less than £51,000.
The Government has now gone further than this and introduced a 12-month business rates holiday for all retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year. Scotland announced an equivalent measure last week.
In addition, a £25,000 local authority grant will be provided to retail, hospitality and leisure businesses operating from smaller premises with a rateable value between £15,000 and £51,000 (£18,000 and £51,000 in Scotland).
Enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Government guidance was issued to local authorities last week on the English and Scottish business rates holidays.
Businesses in receipt of small business rate relief (SBRR) or rural rate relief will be entitled to a £10,000 local authority small business grant. If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply. Funding for the scheme will be provided to local authorities by the Government in early April.
In Northern Ireland no rates will be charged for April-June 2020 for all business ratepayers excluding public sector & utilities. There are also reliefs in Wales for retail, leisure and hospitality businesses.
Business Interruption Loan Scheme
A temporary Coronavirus Business Interruption Loan Scheme (CBILS) will be delivered by the British Business Bank to support businesses in accessing bank lending and overdrafts. The Government will be providing lenders a guarantee of 80 percent, free of charge, on each loan to foster confidence when lending to SMEs.
The Chancellor has announced that this has been extended to cover loans up to £5 million (previously £1.2 million) and no interest will be due for the first 12 months. This scheme is expected to be available as of Monday 23 March 2020.
We understand that CBILS will only be available for companies with turnover of up to £45 million and is designed for small businesses with a sound business proposal but insufficient security to get a lender comfortable without the Government guarantee. The Chancellor is intending to announce further measures this week to ensure that larger and medium sized companies can also access the credit they need.
Eligible businesses should apply through one of 40 banks that are British Business Bank accredited lenders, which include the main high street banks.
Managing tax liabilities
HMRC have a ‘Time To Pay’ (TTP) service available for businesses and self-employed people in financial distress, to agree deferred payments of tax (including Corporation Tax, VAT and PAYE). TTP arrangements are agreed on a case-by-case basis. In light of current circumstances, the TTP scheme has been scaled up and HMRC have set up a dedicated COVID-19 helpline for advice and support on this. You can reach this helpline at 0800 024 1222.
On top of the TTP process the Chancellor announced on Friday that there will be an automatic deferral of VAT payments which would have been due between 20 March and 30 June 2020 until 31 March 2021. At the same time he announced that self-employed individuals with income tax payments due in July 2020 under the Self-Assessment system can defer payment until January 2021.
Whilst there has only been a formal announcement about VAT, we understand that HMRC are treating other taxes in a similar way and accepting payment holidays for, in most cases, three months under TTP.
HMRC have no legal authority to compromise (reduce or write off) tax liability and so, absent a law change, all deferred tax payments will ultimately have to be paid to HMRC.
It is also worth noting that the planned IR35 changes have been postponed until April 2021. This is discussed in more detail elsewhere in this edition of Tax Matters Digest.
After Friday’s necessary and welcome announcement regarding the Job Retention Scheme, HMRC now have the vital task of firming up the details of the scheme and operationalising it as quickly as they can so it can make a difference for people employed by businesses which are already in distress. There are important elements of the scheme which will require clarification in the coming days and we will be providing feedback and support to assist HMRC with providing the necessary clarity to businesses.
Government representatives have repeatedly said they will “do whatever it takes” so we expect the position will continue to evolve in the coming weeks. Self-employed people will be hoping that there are further measures announced soon which would provide them with additional financial support.
You can track the COVID-19 tax developments around the world at our dedicated page, and find out more about your responsibilities as an employer in addressing the coronavirus outbreak in our separate article (note this article was written prior to the announcement of the job retention scheme). Please also see the COVID19 financial support overview for SME’s.
HM Treasury have also published guidance for businesses which we understand is being updated on a day-by-day basis.
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