See also our blog article regarding summary of extra government support regarding UK tax deferrals, the Kickstart Scheme and 5% VAT for the hospitality sector.
Original post dated 6 April 2020 (updates in blue)
New local lockdown payments (September 2020)
On 9 October 2020, further announcements were made regarding these payments under the auspices of the expanded Job Support Scheme.
The Treasury announced on 9 September that businesses in England that are required to close because of a government Covid-19 imposed local lockdown or similar targeted local restrictions are entitled to a new grant to help cover business rates. The payments are designed to provide a safety net to help businesses and to protect jobs where a business is required to close.
The amount of the grant depends on the rateable value of the business premises. Those businesses using premises with a rateable value of £51,000 or more are entitled to £1,500 for each three-week period. Businesses using properties with a rateable value below £51,000 are entitled to £1,000 for each three-week period.
The grant is available for each property used by the business. Even if a business [tenant] rents its business premises, and the landlord or someone else is responsible for the business rates, a business [tenant] can also claim the grant.
Businesses that were already closed at a national level, e.g. nightclubs, will not be eligible for the new lockdown payment.
Local authorities will be responsible for paying the grants to businesses where they are closed due to local restrictions.
Businesses that are not required to close due to a local lockdown, but which are financially affected by a lockdown, can also apply to their local authority for a discretionary payment on similar terms.
Local authorities will receive an additional 5% top up of their business support funding to enable them to help other businesses affected by business closures which may not be on the business rates list. Payments made to businesses from this discretionary fund can be any amount up to £1,500, and may be less than £1,000 in some cases.
Like all other government funded coronavirus grants, the amounts received by businesses are subject to Income Tax and Corporation Tax like other business income and profit. However, they are outside the scope of VAT.
Original post from 6 April 2020
Here is a quick summary of practical help notified by the Chancellor. You can read the latest advice and guidance from government for businesses on its coronavirus pages.
Whilst you may not be able to go about your usual daily activities; do remember to keep yourself as fit and healthy as you can.
Eat well and continue to exercise to help with your mental as well as your physical health.
If you are feeling stressed and anxious then you are not alone.
Whilst you may not be earning the same rate of pay or profits as you usually do, the government is pulling all the stops out to ensure that people have sufficient for the basic of survival. You should consider looking at universal credit and employment and support allowance. These amounts are not particular large but are designed to provide you with sufficient money for food, drink and daily necessities.
At the time of writing little help has been announced as available to the self-employed.
Directors of their own limited companies are not self employed. They are employees.
The information provided below is from the Institute of Chartered Accountants in England and Wales website. We would suggest using the following commentary to sign post yourself to other resources.
The Bounce Back Loan Scheme (BBLS) enables smaller businesses to quickly access finance during the coronavirus pandemic.
Small businesses struggling with their finances because of coronavirus can apply for a 100% government-backed loan of up to £50,000, with absolutely no interest or repayments due in the first year.
The scheme enables small businesses to borrow between £2,000 and up to 25% of their annual business turnover with a maximum available loan of £50,000. Loans are provided by the usual loan providers e.g. the High Street banks After 12 months the interest rate will be fixed at 2.5% pa.
Currently, the scheme is open for applications until 31 March 2021.
For a more comprehensive details see our article on the Bounce Back Loan Scheme.
Business Rates holidays and cash grants
No rates payable for the 2020-2021 tax year for any business in the retail, hospitality or leisure sectors.
In those sectors, if your rateable value is between £15K and £51k, you'll also receive a cash grant of up to £25,000 per property.
Any business which gets small business rates relief, including those in the retail, hospitality or leisure sectors, will receive a cash grant of £10,000 (increased from £3,000 announced in the 11 March Budget).
The rates holiday and cash grants will be administered by local authorities and should be delivered automatically, without businesses needing to claim.
Coronavirus Job Retention Scheme
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis.
The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February. See separate article.
To claim under the scheme employers will need to:
designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.
VAT payments
VAT repayment terms extended (update 24 September 2020)
The terms for paying the deferred VAT from early 2020 have been made more generous.
The VAT deferral scheme dealt with VAT payments that were due between 20 March 2020 and 30 June 2020. Originally, the amount deferred needed to be paid to HMRC by 31 March 2021.
However, on 24 September 2020, the Chancellor stated that businesses which had taken advantage of the VAT deferral scheme would no longer have to pay the deferred VAT in full by 31 March 2021. Instead, businesses will have an interest-free instalment option to allow payments to be spread over eleven months.
The Chancellor first announced a VAT payments deferral on 20 March to support businesses with cashflow during the COVID-19 pandemic.
This means that VAT registered businesses with have the option to defer VAT payments due between 20 March and 30 June. Businesses have until 31 March 2021 to pay any VAT deferred as a result of this announcement.
Businesses do not need to inform HMRC if they wish to defer payment. They can opt in to the deferral simply by not making VAT payments due in this period.
HMRC will not charge interest or penalties on any amount deferred as a result of the Chancellor’s announcement.
Businesses who normally pay by direct debit should cancel their direct debit with their bank if they wish to take advantage of the new arrangements and do not wish to pay the VAT due. This can be done through online banking. They should do so in sufficient time so that HMRC does not attempt to automatically collect the amount due on the submitted VAT return.
Businesses can continue to make payments as normal, including by direct debit, during the deferral period.
HMRC will also continue to pay repayment claims as normal.
Businesses must continue to submit their VAT returns as normal.
Given the deepening economic situation, it is entirely possible that there will be an extension in July to this VAT deferment. Direct debit payers should therefore avoid resetting up their direct debit.
Income Tax payment deferral
Extended Tax Return filing and tax payment deadlines (updated 19 February 2021)
In late January 2021, individuals were granted an extension to submit their Self Assessment Tax Returns by 28 February 2021.
The Income Tax is still due for payment by 31 January 2021. Interest at 2.6% runs from 1 February 2021.
Normally, a 5% late payment surcharge is also charged, in addition to interest, on any unpaid tax that is still outstanding on 3 March. However, on 19 February 2021, HMRC announced that Self Assessment taxpayers will not be charged the 5% late payment penalty if they pay their tax or set up a payment plan by 1 April 2021.
Further extension to Self Assessment tax due dates (update 24 September 2020)
On 24 September 2020, the Chancellor announced that individuals would be entitled to an additional 12-month extension from HMRC on the time to pay their Self Assessment tax. The new rules mean that payments deferred from 31 July 2020, and those due by 31 January 2021, will now both not need to be paid until 31 January 2022.
Deferment is not automatic. It must be claimed through the online Time to Pay service or by calling H M Revenue & Customs on 0300 200 3822 between Monday to Friday 8am to 4pm.
No specific announcement was made about whether interest will be charged. However, as this concession will be under the existing time to pay arrangements it is likely that interest will be due.
Based on the originally announced rules, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.
Income Tax Self-Assessment payments due on the 31 July 2020 will be deferred until the 31 January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
Universal credit
Self-employed people can now access full Universal Credit at a rate equivalent to statutory sick pay. You may also be entitled to Universal Employment and Support Allowance.
HMRC Time to Pay
HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559. See the HMRC website for more details.
Coronavirus Business Interruption Loan Scheme
For small and medium-sized businesses, a new Coronavirus Business Interruption Loan Scheme (CBILS), delivered by the British Business Bank, will provide support for businesses to access a wide range of funding facilities including: overdrafts, loans, asset finance and invoice finance.
The government will provide lenders with a partial guarantee of 80% on each loan to give lenders further confidence in continuing to provide finance to SMEs.
The government will not charge businesses or banks for this guarantee, and the scheme will support loans of up to £5 million in value. The first 12 months of these loans will be interest and fee free, as the Government will cover these payments.
Businesses will be able to get finance under the scheme from a large number of providers, including the main high street banks, as of next week.
To be eligible for the scheme the business must be based in the UK, with turnover on no more than £45 million per year.
There is a quick eligibility checklist on the British Business Bank website to help businesses understand if they are eligible to apply for a CBILS-backed facility,
More information on the scheme can be found on the website of the British Business Bank.
COVID-19 corporate financing facility
To support larger firms, the Bank of England has announced a new COVID-19 Corporate Financing Facility to provide a quick and cost-effective way to raise working capital via the purchase of short-term debt.
This will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms.
The Government will very soon be announcing further information on this facility.
Mortgage and rent holiday
Mortgage borrowers can apply for a three- month payment holiday from their lender. Both residential and buy-to-let mortgages are eligible for the holiday. It is important to remember that borrowers still owe the amounts that they don't pay as a result of the payment holiday. Interest will continue to be charged on the amount they owe.
Tenants can apply for a three-month payment holiday from their landlord. No one can be evicted from their home or have their home repossessed over the next three months.
Insurance claims
Businesses that have cover for both pandemics and government-ordered closure should be covered. The government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres, etc., is sufficient to make a claim as long as all other terms and conditions are met. Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers.
Some advice based on existing Income Tax and Corporation Tax rules
If you make a sole trader or partnership tax loss to 5 April 2020, generate a tax refund by carrying the loss back to 2019.
If you're a start-up sole trader or partnership, this loss can be carried back three years to generate a tax refund from your previous PAYE job or even from rental income.
If you're a limited company and make a loss in your current year end, carry it back by a year to generate a tax refund.
If you're working from home more than usual, claim more costs against your taxable income for your home office.
The sooner you get tax returns sent in, the sooner you can benefit from the above.
Getting your return in early doesn't bring forward any tax payment dates, but it does bring forward tax refunds.
An increase in Time-to-pay arrangements from HMRC, where you phone HMRC to agree a delay in paying your tax. Have a realistic proposal ready that you expect to adhere to.
Companies House reporting deadlines eased
On 18 March, Companies House announced that companies who were struggling to file their accounts on time could apply for a deadline extension under existing processes
Companies House should grant an automatic two-month extension to those in isolation who cannot file on time. Applications would be treated on a case-by-case basis.
Off-payroll working (IR35) deferral
Freelancers and consultants worried about getting taxed as an employee from 6 April 2020 have a year's reprieve until 6 April 2021.
See more at summary of extra government support.