A summary of the financial aid available to individuals and businesses with practical guidance on how to access it.
I have held off commenting on COVID-19, and the various financial aid packages the government is offering until now as firstly, it is an ever-changing landscape and secondly, there are far better experts out there to guide you. But here we are, over a week into the lockdown phase in the UK in our efforts to flatten the curve and I’ve put this together. I feel that not only has some sort of granted, weird, stability been achieved but that the organisations and councils tasked with executing the disbursement of the financial aid have begun to put some of the processes in place. On top of that my accountants (yes, even accountants use accountants on occasion), Kirk Newsholme, have been superb at keeping us updated. They have created a dedicated page with practical advice on how to go about obtaining said support and I thought I would have a go a summarising this all below.
Please be aware this article is accurate at the time of publication on 31 March 2020 and may well be rendered irrelevant within a matter of days. Having said that, this is what we know now. There are a number of key forms of financial assistance available depending on whether you are a business, or an individual, or for a great many of us…both.
Those registered for PAYE:
The best scenario of course is that you are either a “keyworker” or in a position to work from home. For the lucky ones (although given what keyworkers are having to do, ‘lucky’ is a matter of perspective), in this position, it’s business as usual – at least in terms of your income.
For those whose position has become temporarily obsolete, during the COVID-19 Pandemic, speak to your employer about being furloughed, even if you have already been made redundant. You do not have to agree to being furloughed, but consider the alternative and 80% of your salary whilst not having to work, looks rather attractive. It does however, not apply to those who have commenced work after 1 March 2020.
What period can you receive furlough pay for?
The scheme is currently running for 3 months, but may well be extended. If you were already made redundant during March, your employer is able to backdate the furlough pay to 1 March 2020. It is our understanding that the majority of employers will furlough their employees for the remaining 2 months of April and May.
How much will you receive?
Pay is calculated based on your pay as at 28 February. For those on a fixed salary, this is should be simple. For those where it varies or it has changed dramatically from February to March (for example a return to work following maternity leave) then as long as you were employed for a full twelve months prior to the claim you can claim the higher of either:
- the same month’s earning from the previous year (April 2019 provides the April 2020 amount and so on)
- average monthly earnings from the 2019-20 tax year
When will I receive the money?
Technically you should only need to agree to the furlough with your employer, after which 80% of your salary should be paid as usual – there is nothing more for you to do.
Those that are self-employed and do NOT run their business through a limited company:
The Coronavirus Self Employed Income Support Scheme (SEISS) has been established to assist those individuals that are self-employed. The key point to note here is you are allowed to continue to work / trade during this time. HMRC will contact everyone eligible for the scheme directly, inviting them to apply for the support via an online portal. Until then, read further to see if you are likely to qualify for the scheme.
What are the qualifying criteria?
You must be self-employed or a member of partnership (those operating through a limited company do not qualify); have lost trading/partnership profits due to COVID-19; have filed a tax return for 2018-19; have traded in 2019-20; be currently trading at the point of application (or would be except for COVID-19) and intend to continue to trade in the tax year 2020 to 2021. Crucially you must have trading profits of less than £50,000 and more than half of your total income come from self-employment.
What period of trading is covered?
The scheme is currently running for 3 months from 1 March 2020 to 31 May 2020.
How much will you receive?
Funding is calculated at 80 per cent of your average monthly trading profits, capped at £2,500 per month. The average will be based upon tax returns from 2016-17, 2017-18 and 2018-19. Thus, in order to receive the full £7,500, you need to be achieving an average of £37,500 profits per annum.
When will I receive the money?
The money will be paid in a single lump sum. Given the need to firstly establish a working system at HMRC, as well as the sheer volume of applications to process funds will only begin to be paid in June after first applications are made. You will need to find other ways to manage your cashflow in the interim.
Payment on Account
The second payment on account for those that are Self Assessed that is due in July 2020 has been deferred for those that are unable to make this payment. There is no application for this allowance, you simply do not need to make your payment in July and HMRC will not apply any interest for the late payment. This means that in January 2021 the full and final payment for the 2019-20 year as well as the first payment on account for the 2020-21 year will be due.
Those that run their own business, take a small salary and pay yourself predominantly via dividends:
Alas there is a little black hole for those falling into this category as no specific relief is currently being provided. The main route available would be to furlough yourself (see above), although bear in mind that if furloughed, you are unable to work during this period. This is also unlikely to provide too much in the way of financial relief as it is based on your salary as at 28 February 2020.
Mortgage holidays - of up to three months may be requested from your mortgage provider. Each lender will have their own application process so contact your mortgage provider directly. Be aware that you remain liable for the full mortgage and interest will still be incurred during this time.
Universal Credit - remains open to many people and from 6 April the requirements of the Minimum Income Floor for self-employed people have been relaxed. There are, of course, significant delays in the processing of these claims.
A number of measures have been announced for businesses to assist during the COVID-19 Pandemic.
The Coronavirus Job Retention Scheme
This allows businesses to furlough their employees rather than make them redundant, and the HMRC will cover 80% of their employment costs up to £2,500 per month. Key points to note are as follows:
- This scheme currently operates for a 3-month period from 1 March to 31 May, allowing you to back date the furlough period to the beginning of March if you have already made employees redundant and wish to reconsider that position. Many may choose to furlough their employees from April 2020 for the remaining 2 months.
- You will need your employee’s agreement to the furlough period
- During this time the employee may not work for the business but their rights, such as accruing annual leave and maternity rights etc. will continue as usual.
- You will be able to top up the balance of an employee’s pay if you choose to but you are not obliged to.
- The £2,500 includes other employer costs such as pensions and Employers National Insurance
- You will need to pay your employee(s) as usual and then apply for the funding from HMRC separately. HMRC are currently working on the online portal and expect to have this ready so that funds are received in time for the April payroll. You will have to wait a minimum of 3 weeks between each application.
For those businesses that have VAT periods ending between 20 March 2020 and 30 June 2020 you will be able to defer this payment by simply not paying it. Where you have a direct debit for VAT set up, HMRC will still collect the funds as usual so you MUST cancel your direct debit with HMRC in the interim. You do not need to tell HMRC that you are delaying payment but you must submit your returns(s) as usual for this period. The VAT due for this period will need to be paid to HMRC within a year of its original period end date.
Statutory Sick Pay relief package for small and medium sized businesses (SMEs)
Employers with fewer than 250 employees, as of 28 February 2020, will be able to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19. You should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note. HMRC will make contact with employers in the coming months on how to claim this refund as the system for doing so is yet to be established
Companies based in England and operating in the retail, hospitality and/or leisure sector are eligible for a business rates holiday. You do not need to take any action, however, local authorities may have to reissue your bill to provide this support. They will do this as soon as possible. Properties that will benefit from the relief must be occupied and wholly or mainly being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure
- for hospitality, as hotels, guest & boarding premises or self-catering accommodation
Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief. Your local authority will write to you if you are eligible for this grant. They will be writing to the business premises, which for many of you, you will no longer be operating out of. In which case, I recommend you go on to your local authority’s website as the majority of them will have information on how the process will work for them. These will differ by local authority, for example, ours has said that an online application form will be available shortly.
Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000. In order to be eligible for the grant your business must:
- be based in England
- operate within the retail, hospitality or leisure sector
- have a rateable value of under £51,000
Please be aware that all grants received must be declared as income and will be subject to corporation tax as appropriate.
The Coronavirus Business Interruption Loan Scheme
This scheme is offering loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years for SMEs through the British Business Bank. The government will also make a Business Interruption Payment, effectively to ensure the first 12 months of interest payments and any lender-levied fees are free to you, as they have paid them. This scheme will be delivered through 40 accredited lenders, including all the major banks. The application process will differ by lender but are all likely to require an up to date business plan, detailed management accounts and financial projections.
The HMRC Time To Pay Scheme
is a simple scheme for all businesses and self-employed people struggling to pay their outstanding tax liabilities. HMRC will evaluate and agree, such circumstances on individual merit and you may be eligible to receive support with time to pay. You will need to call HMRC directly on their dedicated helpline, 0800 0159 559, to access this.
Protection from eviction for commercial tenants
Those businesses (not individuals) who cannot pay their rent because of COVID-19 will be protected from eviction. They will not forfeit their lease nor can they be forced out of their premises if they miss a payment. This protection is currently in place up until 30 June, but may be extended. This is not a rental holiday and all commercial tenants will still be liable for the rent.
I would like to remind you to seek advice from appropriate professionals and to go direct to the various websites for the most up to date information on each of these schemes.
Director, Fellows Finance