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Tag: Coronavirus

Coronavirus

  • Coronavirus Dates To Remember – Just like yesterday’s Valentine date, make sure you don’t miss them!

    BBLs – Loan – apply by 31 March 2021

    Borrow between £2k and up to 25% of turnover up to £50k, very easily with no fees or security and pay annual interest of only 2.5% after 12m, with no repayments due for the first 12m.

    These remain the best loans a small business will ever receive and must be worth considering. We’re seeing the cash give small businesses valuable breathing space so they can focus on re-grouping and re-launching, as restrictions permit.

    Pay As You Grow improvements announced by the British Business Bank on 6 February, appearing to apply to existing BBLs borrowers, allow repayments to be delayed by a further 6m and after making only one repayment the option to pause repayments for up to 6m.

    This is in addition to the existing choices to extend the loan term from 6 to 10 years and/or pay interest-only up to three times during the loan term.

    CBILs – Loan – apply by 31 March 2021

    Designed for small businesses requiring finance for up to £5m, with no personal guarantees required for loans under £250k and even over £250k your home cannot be taken as security. No fees or interest due for the first 12m. These loans may also be extended to a term of up to 10 years.

    Local Authority Grants – current

    There are six schemes currently available:

    • Closed Businesses Lockdown Payment – from 5 January 2021
    • Local Restrictions Support Grant (Closed businesses) – businesses affected by Tier restrictions from 2 December
    • Local Restrictions Support Grant (Open businesses) – hospitality, accommodation and leisure businesses
    • Local Restrictions Support Grant (Closed businesses) – businesses affected by November and from 5 January national restrictions
    • Local Restrictions Support Grant (Sector) – nightclubs, adult entertainment venues and similar
    • Additional Restrictions Grant – discretionary

    For example, a small local authority discretionary Additional Restrictions Grant may be available to a home based business which has been severely impacted throughout, such as an events business.

    Business Rates Holiday (retail, hospitality & leisure) – to 31 March 2021

    Might this be extended in the Budget? We’ll let you know on 3 March…

    Full or Flexible Furlough – to 30 April 2021 – claim within 2 weeks of each month

    The government continues to pay 80% of furloughed non-working hours, the employer paying only employer NIC and pension contributions. Remember to claim within the specified 2 week date of the month end for each claim. 

    SEISS 4.0 – to 30 April 2021 – claim details due by 3 March 2021

    Details of the fourth self employed grant covering February, March and April are due to be announced by Budget day. 

    VAT Deferral – to 31 March 2021 or up to a further 12m – apply from 23 February

    VAT due between 20 March and 30 June 2020 is due by 31 March 2021 unless you apply to join the new interest-free instalment deferral scheme between 23 February to 21 June 2021.

    VAT Rate Reduction (hospitality & tourism) – 20% to 5% – to 31 March 2021

    This increases gross profit margins helping small businesses deal with other aspects of the virus such as bringing in safety measures or adapting their business model. Another one to look out for on Budget Day.

    Income Tax Returns – extension to 28 February 2021

    Apparently there are still quite a few to be submitted! If 28 February is missed, the usual £100 penalty is due, even if no tax is due, escalating after that for continuing delays.

    Income Tax Deferral – apply before 2 March 2021.

    If you’ve missed the 31 January payment deadline make sure you pay or enter an online deferral agreement before 2 March 2021 [EDIT: NOW AMENDED TO BY 1 APRIL 2021], to avoid a 5% surcharge. If you owe more than £30k in total, you’ll need to contact HMRC to agree a bespoke payment plan – known as Time To Pay.

    Other Taxes -Time To Pay – case by case – as early as possible

    This has always existed for taxpayers in difficulty. Approach HMRC as early as possible to agree a realistic payment plan. 

    Businesses have done well to keep going and many have improved their entire business model for the long term. Make sure you get the help for your long term success while you can.  

  • Let The Taxman Contribute To Your Virtual Christmas Party

    What are the limits?

    You can spend a maximum of £150 including VAT per staff member plus another £150 for a guest in total over a tax year. The main condition is that ALL members of staff at that location must be invited. A location is a bit more blurred this year, so keep your e-invite to show that all employees contractually employed at a certain site are invited.

    In addition to the £150 annual party limit, you may also send a gift to staff with a value up to £50 including VAT, such as a Turkey, wine or chocolates.

    What is the tax treatment and accounting required?

    The cost is fully tax deductible with no benefit in kind income tax or national insurance to worry about. Your staff will feel appreciated and you save 19% corporation tax. Ensure that the costs are called Staff entertainment or Christmas party in your Profit & Loss Account.

    The £150 includes all costs which this year may be a hamper sent to all attendees to link up on Zoom at the agreed time, possibly with the employer hosting a comedian, musician or quiz for attendees to enjoy.

    Divide the total cost of each function by the total number of people, including guests, to arrive at the cost per head.

    The VAT is fully recoverable when paying for staff entertaining. If you make a small charge to your staff’s guests and pay over a small amount of VAT, the VAT on the total cost for the guests is also fully recoverable.

    Similarly, small gifts up to £50 are fully tax deductible and VAT may be recoverable if only one small gift is made during a year. Perhaps these costs could be called Staff welfare to help keep them separate from your £150 calculations!

    NB Ensure you don’t go over the £150 or £50, otherwise the entire amount is taxable.

    I’m a director and don’t have any staff. Can I benefit from this favourable tax treatment?

    As you are the only director/employee you might think you can’t have a Christmas party – wrong! And it probably won’t need to be virtual if within the general Covid meeting up rules.

    You can avail yourself of the £150 per head exemption as a member of staff (the only one!) and also a guest. You can also have a gift with a value of up to £50, but you’re likely to be restricted to doing this up to an annual value of £300 so check what other company gifts you’ve taken so far. In this case, we would advise that VAT can’t be reclaimed.

    Now you can have a fabulous tax subsidised virtual Christmas party !

  • Coronavirus – Remember, remember the 5th November

    There will be new funding for:

    CJRS – Coronavirus Job Retention Scheme – August version applying to November [EDIT: EXTENDED TO END OF MARCH 2021]

    Employees agree to receive 80% of their reference pay, which the government pays up to £2,500 per month. Their employer pays employer national insurance and pension contributions, and may top up the basic pay beyond 80%. Training, voluntary work or work for another employer may be carried out during a furlough period.

    If there is some work to do, employees may be on flexible furlough, paid in full for the hours worked, with the government payment only applying for non-worked hours.

    Importantly, an RTI submission must have been made by close of 30th October, again emphasising government preference to use up to date information and to help prevent fraud.

    To date, the reference pay has usually been as it was on or before March 2020, with no pay rises expected. As new employees and employers may use this November scheme, the reference pay will need to change perhaps to the amount paid on or before October. We’ll be checking the details when they come out.

    For shareholder-directors on a tax year 2019/20 reference salary of £719 now finding there is no work for them beyond statutory duties, they should be able to claim at least £575.20 for November while paying themselves the 2020/21 recommended £732 monthly salary. Again, we need to see the details in due course.

    Business Grants – Premises based businesses

    Further business grants will be paid for businesses required to close with properties with a rateable value of: 

    • £15k or under, receiving £1,334 per month.
    • Between £15k-£51k, receiving £2,000 per month.
    • £51k or over, receiving £3,000 per month. 

    The reference to a monthly figure clearly suggests this lockdown may last longer than the hoped-for one month!

    Often used to pay rent and utilities, these are essential for businesses who can’t trade at all.

    If you can offer phone or online retails sales for your product or takeaway options for your food, this will help you survive. Together with 5% VAT still applying for takeaways, perhaps you can keep putting those fires out!

    There are also numerous grants for all sorts of businesses, nothing to do with Coronavirus, which may be worth a bit of research.

    SEISS – Already extended

    There was no mention of the self employed grant which was previously extended with a maximum payable for November-December-January of a total £3,750. [EDIT: INCREASED TO £7,500 OR 80% OF PROFITS IF LOWER] With many businesses not being eligible at all so far, such as those with historical profits over £50k, presumably those exclusions need to be revisited as time goes on, as well as the amount, in the light of this lockdown. 

    BBLs – Business Bounce Back Loan – to 30th November [EDIT: 31ST JANUARY]

    Remember, remember not only the 5th November, but the 30th. If you’ve not yet taken out a BBLs loan for up to £50k, you may need to revisit this to help see you through. If so, your application needs to be in by 30th. [EDIT: 31ST JANUARY]

    Businesses should revisit their particular business model, fixed and variable costs and how government, or other, assistance can help them put these fires out!

  • Coronavirus Grants 2.0 – Finding Your Exit – Small Businesses

    Apart from using the same £2,500 monthly maximum, the two schemes are very different with the self employed now compensated for a maximum of 6 months and employees a maximum of 8 months. This perhaps reflects the fact that the self employed can work as much as possible, but employees cannot work at all or, more likely, the government would prefer employers to take more time to make decisions about redundancies.

    What do I need to know?

    Self Employed (SEISS)

    The current version SEISS 1.0 closes on 13 July 2020 with the new version SEISS 2.0 opening in August 2020.

    The maximum drops from £2,500 per month to £2,187.50 per month, rounded up to a 3 month lump sum of £6,570 being 70% of £3,125 or your average profits, as currently calculated, if lower.

    You can claim both grants or only one: SEISS 2.0 is NOT dependent on claiming SEISS 1.0.

    Presumably if you were adversely affected early on, say in April, where your profits dropped in April, but they have since picked up, you can’t claim SEISS 2.0, but this isn’t yet clear.

    Coronavirus Job Retention Scheme (CJRS)

    June – carries on as now, except any employee who needs to be in a claim from July, must be in a claim in June. With the 3 week minimum, this is an effective last date for newly furloughed employees of 10 June. All claims for June (and presumably earlier) must be made by 31 July.

    July – carries on as now, except employers can choose not to claim for any hours/days employees work paying them their full pay as before the crisis.  

    This could be beneficial for shareholder-directors who may be able to generate good profit for their limited companies in a couple of days but pay themselves only their usual small salary.

    August – as July, except employers must pay any employer’s national insurance (NI) and pension contributions on furloughed pay.

    September – as August, except the government grant to the employer is 70% of pay up to a maximum of 70% of £3,125 = £2,187.50 adjusted for any hours/days worked.

    October – as September, except 70% is now 60%, being a maximum 60% of £3,125 = £1,875 adjusted for any hours/days worked.

    What are the figures for shareholder-directors who can’t work?

    Taking the typical reference salary of £719, the £575.20 current furlough claim will change as follows:

    • June £575.20
    • July £575.20
    • August £575.20 (no NI or pension)
    • September £503.30
    • October £431.40

    Unfortunately, a dividend replacement scheme for shareholder-directors wasn’t announced, with the Chancellor reminding us to use other measures such as business bounceback loans, VAT deferral and income tax deferral. HMRC is also being helpful where companies ask to defer corporation tax under general time to pay provisions.

    Further details on both schemes will be available on 12 June. In the meantime, businesses are still working their way through this, looking for their way out.

    Please ask your usual On The Spot contact for further assistance.

  • Small Businesses – May The 4th Be With You!

    How small businesses can strike back and win the Coronavirus war…

    Today is the day the most useful loan initiative for SMEs goes live, the Bounce Back Loan Scheme (BBLS). Coincidence? Parallel universe? It probably feels like it!

    Why are they so good?

    From today, to enable the smallest of businesses to easily access cash, after answering only 7 questions, loans will be available for between £2k to £50k capped to 25% of your turnover, 100% government guarantee and interest and fee free for a year, after which the interest rate is only 2.5%. Therefore, next year the annual interest will be only £25 for each £1,000 borrowed. Loans to sole trader and partners between £2k and £25k may be the easiest to access. 

    These Bounce Back Loans are clearly earmarked to help the smallest of sole traders, partners and limited companies survive the coronavirus disruption.

    But why would I take on any debt at such a difficult time?

    Understandably you may not want to take on debt. Consider what will happen if you don’t?

    It’s right to be cautious, but this may be the occasion where to survive you need to Strike Back!

    If your business was doing well and profitable and only the coronavirus has affected its recent results, it’s likely to maintain its underlying viability in the long run, admittedly with some adjustments.

    Yes, you will have a debt to pay back and probably less cash than before, but your business will have survived. Think of it is a medium term investment.

    What should I do with this cash?

    You may need it to pay suppliers whose services/products you can’t do without, such as rent, utilities, phones, IT, repairs, insurance, non-furloughed staff.

    Record your income and outgoings in detail, day to day, for say the next 3 months to ensure you ask for what you need to see you through, allowing for any further grants you’re expecting from the government. Beyond that in less detail.

    Make prudent assumptions about when your sales will pick up and therefore when you expect to repay the loan, likely a small manageable amount each month spread over a few years.

    The affordable low interest rate gives you time and space to update your business model to thrive in the new adjusted world.

    How do I update my business model?

    Think about what you’d have done if you’d planned a 3 month lifelong dream trip exploring space on a Star Destroyer which needed to be paid for somehow. What would you have thought about in advance?

    Perhaps it would be a list like this:

    • Establish the availability of different and new communications operable from ‘space’.
    • How to carry on looking after existing clients in a different way.
    • How you can continue to make new connections and build up new leads.
    • How to sell product or services remotely eg sub-contract deliveries, try online services.
    • How to deal with a missed meaningful marketing date eg father’s day if you sell gifts.
    • Offer a different product or service as a one-off eg sell personalised father’s day online videos.
    • How to still send relevant marketing messages.
    • How to use the change of venue to your advantage.
    • Do you need some new focussed advice that will pay for itself?
    • How and when to pay your bills with reduced income? Can some be delayed?
    • What cash is needed on each of the days that you’re away?
    • How will you make sure you have enough cash every day?
    • Are you eligible for grants or loans? You are exploring space after all!

    What should I expect the future to look like?

    It will be different and probably, initially, harder work than before you went into space. On the other hand, you may find permanent, new markets and customers expanding your business even further. You can make decisions and change direction quickly and have the satisfaction that the success was yours. Anyway, you didn’t set up your own business, which you can run exactly as you see fit, for an easy life. Did you?

    At the risk of upsetting Star Wars fans: Live long and prosper 😊.

  • Coronavirus – Limited Companies – What Are Your Choices?

    Now we’ve probably heard all the major Coronavirus announcements from the Chancellor, what choices do Director-Shareholder Limited Companies have to help them through this crisis? We provide a checklist below with signposting to the relevant part of gov.uk.

    Time To Pay

    Applicable to all companies and all taxes, you can call HMRC and agree a scheduled delay to paying your taxes. Have a realistic proposal that you can stick to. Signpost: https://www.gov.uk/government/news/tax-helpline-to-support-businesses-affected-by-coronavirus-covid-19

    Time To File

    Companies house will allow you to send in your accounts 3 months later than normal, a increase from the usual 9 months to 12 months, as long as you ask before the 9 month deadline.

    This may help if you’re finding it hard to get your figures prepared, but we would urge all companies to keep their figures and accounts up to date to help them keep on top of their finances particularly cashflow. Signpost: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts#coronavirus-covid-19

    Corporation Tax

    Using an existing, normal rule, remember that if you make a trading loss during your current year end, you can carry it back 12 months and generate a corporation tax refund from the tax you paid in your previous accounting year.  Your loss may be increased by making a higher home office claim, due to working from home more often than usual.

    Business Interruption Loan

    Applicable to all companies, you may borrow from your current bank or another in the scheme, interest free and fee free for 12 months without providing any security up to £250k. If your company should be viable for the long term, this must be worth a look as a flexible option. Signpost: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

    Director Personal Income Tax Payments Deferral

    You may be due to pay income tax on your dividends on 31 July 2020 on account for the 2019/20 tax year. HMRC will not charge interest if this isn’t paid on 31 July, as long as it’s paid by 31 January 2021, the next income tax payment date. Again, this is designed to provide some immediate breathing space, but will need to be paid 6 months later along with any other income tax due by 31 January 2021. Signpost: https://www.businesssupport.gov.uk/deferral-of-self-assessment-payment/

    If your dividends are less than expected for this tax year to 5 April 2020, it should be worth sending in your income tax return as soon as possible after 6 April to generate an income tax refund from your January 2020 payment on account.

    Director Personal Mortgage Or Rent Deferral

    To help your personal cashflow further, reducing the need to rely fully on your company’s finances, you may ask your mortgage company or landlord for a mortgage or rent deferral for 3 months. This will need paying back in due course, so be confident this is something you should be able to manage.  

    If your personal finances are very stretched you may want to claim state benefits which can also help with housing costs, if you’re eligible.

    VAT Deferral

    If your company is VAT registered, you won’t have to pay any VAT due between 20 March and 30 June 2020. This covers VAT quarters ended 29 February, 31 March, 30 April and possibly 31 May.

    If you pay by direct debit, remember to cancel your direct debit in good time, and then reinstate it afterwards. HMRC won’t ask for any explanation, charge interest or penalties as long as you repay this VAT by 31 March 2021. This may provide good breathing space for the next couple of months, but do have a plan to refund it before 31 March 2021. Signpost: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19 

    Your VAT returns are due as normal, refunds will be paid as usual and VAT due outside of this period remains due. 

    Job Retention Scheme

    If you have employees whose jobs are at risk due to a downturn in your business, you can keep them on the books by labelling them as ‘furloughed’ employees for a minimum of 3 weeks at a time for a maximum of the three months March, April and May. They cannot do any work at all for you during the period they are furloughed.

    You need to pay your staff and operate PAYE on either full pay or 80% of their pay. The government will refund you, starting at the end of April, 80% of their pay, up to £2,500 per month, plus the associated national insurance and 3% auto-enrolment pension contribution if the employee is enrolled. Sign post: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

    We are still waiting to hear whether owner-directors can ‘furlough’ themselves where their business is on hold but they need to continue to carry out statutory duties such as preparing VAT returns or filing annual returns. If such a director was on a salary of £719 per month, this should mean a maximum refund of £1,725. [EDIT: It has been confirmed that owner-directors can furlough themselves, as long as they don’t work on the business and confine themselves to statutory duties. This is easy to demonstrate for freelancers and consultants who have no contracts at all or if a high street retailer has closed and isn’t carrying out any alternative business activity. The company through the Board of directors needs to make this decision and record it in the minutes of the meeting.]

    Separate to this, if your employees are off work due to being ill from the Coronavirus you can reclaim their sick pay for up to 2 weeks. This is also available to you as a director. Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-who-are-paying-sick-pay-to-employees

    Business Rates

    If you pay business rates, your company may be entitled to receive a £10k or £25k grant, which we assume will be taxable as for most other grants. 

    A £10k grant is available to any business which receives small business grant relief (SBRR) Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-that-pay-little-or-no-business-rates

    If you’re in the retail, hospitality or leisure sectors, you’ll pay no business rates from 6 April 2020 to 5 April 2021. If your rateable value is up to £15k, you’ll receive a grant of £10k, or if it’s between £15k and £51k a grant of £25k. Signpost: https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-retail-hospitality-and-leisure-businesses-that-pay-business-rates 

    You don’t need to take any action because your local authority will contact you.

    In summary, please take appropriate advice to ensure you optimise your company’s particular situation. We’re in a fast moving situation and HMRC might amend its guidance without any signposting at all! 

    Stay well.

     

  • Coronavirus – A New World! – Grants For Sole Traders

    The Chancellor today announced probably his final major finance coronavirus package.

    The self employed find themselves in a new world requiring state support when they need very little in normal times. However, many remain excluded and will need to turn to other measures previously announced. 

    What Is The Grant Based On?

    Your grant will be based on 80% of the average of your profits showing in your income tax returns for the 2019, 2018 and 2017 income tax years. 

    How Much Will I get? 

    You’ll get up to £2,500 per month, so you may receive £7,500, assuming the grant runs for the 3 months March, April and May. This seems to be convert into a maximum annual average profit of £37,500.

    How Does Other Income Affect This?

    • If you’ve mostly been living on second property income, with a bit of sole trader income, you’re not eligible.
    • If you’ve earnt more from an employment alongside being self employed, you’re not eligible.

    Helpfully, it appears that you’re still eligible if more than half your income in 2019 was from self employment trading income, but the previous two years it wasn’t.

    What If My Profits Were Over £50k?

    If the average of your profits over the three tax years 2019, 2018 or 2017 is over £50k, you’re not eligible, unless your recent 2019 profit is under £50k. The average of £50k exceeds the average of £37,500 anyway, so this seems to apply in practice to the profits of a partnership. 

    Can I Carry On Working In My Business?

    Unlike furloughed employees, you can carry on running your business and in fact it is a condition of the grant. Your business needs to have been affected by the Coronavirus so that you’ve lost trading profits. We don’t yet know how this will be proved.

    Are Partnerships Included? 

    Yes, partners of trading partnerships will be included in the same way, as long as the partnership’s profit is less than £50k.

    What If I Set Up My Sole Trader Business After 6 April 2019?

    It appears that you won’t be eligible for any grants under this scheme. 

    What About Sole Director-Shareholder Limited Companies?

    Limited companies can benefit from the previously announced furloughed package for employees. It appears that the government is happy for director salary, usually low, to be included. However, this may refer to companies with a few directors where there’s not enough work for all of them.

    We need confirmation where a sole director is carrying out basic director duties until the company’s trade is restored.

    How Do I Apply?

    You need to wait until HMRC contacts you and ‘invites’ you to make an application.

    When Will I Get It?

    The payment will be made in one lump sum in June. Until then, you need to apply for Universal Credit. We don’t yet know whether any Universal Credit payments made will be deducted from the lump sum paid later. 

    Where Does This End Up?

    The Coronavirus has caused a lot of us to change our world view in all sorts of ways.

    Today’s announcement may prove to be the day the Chancellor was given permission to bring in higher taxes for sole traders in the future on the basis that state support requires funding somehow.

  • Coronavirus – Without The Gym, Learn To Exercise Your Cashflow

    The Chancellor yesterday evening announced further measures to help businesses with their cashflow to bridge the gap during this extended period of reduced income. Now the gym is closed make sure you ‘work out’ which the best ones for you.

    Income Tax and VAT Deferrals

    The self employed July 2020 income tax payment on account for the 2019/20 tax year, will be automatically deferred until January 2021 with no interest or penalties accruing. This appears to be for sole traders and partnerships only, and not include directors or employees also due to make payments on account. [EDIT: This has been amended and now seems to include anyone making payments on account under self assessment including directors or employee].

    Similarly, VAT due between 20 March and 30 June 2020 won’t be collected by HMRC. [EDIT: HMRC have amended their guidance and now state that if you pay by Direct Debit you need to cancel it in good time and reinstate it later]. You will have until 5 April 2021 to catch up with this deferral. VAT refunds will be made as usual. If you’re on an annual VAT scheme to end of March, any VAT due will be deferred and if you’re due a refund, that will be paid. You’re still required to prepare your VAT return so you’ll receive a refund as normal if one is due. 

    I wonder where we’ll be next January and April 2021 when businesses simply can’t afford to pay the deferred amount, as well as the next payment on account. Therefore, where possible, it might be less painful to pay your income tax and VAT as normal. However, if your business is facing difficulty, take advantage of this to see you through, and we’d expect HMRC to be helpful once the imminent health and economic problems have improved. 

    These can be thought of as a simple Time To Pay arrangement without having to agree payments plans with HMRC on a case by case basis. Time To Pay still remains available and you may need to contact HMRC regarding your other tax bills.

    Business Interruption Loan

    These will be available from your bank early next week and will now be interest free for 12 months, a recognition that businesses need more breathing space to get their cashflow in order. They are also unsecured up to £250k meaning you don’t have to put your personal assets on the line. This is the most flexible way to help your cashflow where you decide how to use the money for the long term benefit of your business.

    Mortgage and Rent Deferral 

    You can apply to defer your personal mortgage for 3 months and landlords are offered a mortgage holiday to allow them pass on 3 months rent deferral to their tenants. These are only deferrals, with mortgage interest still accumulating and the rent ultimately due, so again very much temporary cashflow help, not a permanent saving.

    Employee Wages 

    For at least 3 months from 1 March 2020, if your employees aren’t working, because you can’t open your business due to the Coronavirus or your business has suffered a significant loss of business, and you cannot cover their wages, you need to classify them as ‘furloughed workers’ and HMRC will refund 80% of your staff’s wages, up to a £2,500 maximum per month.

    This appears to mean that if you pay your employee a gross salary of £30,000, you can apply to HMRC for a refund of £24,000. We don’t yet know how this links with the PAYE system, which presumably will operate as normal and continue to deduct taxes which apply to the £30,000. We’ll let you know as soon as more details are issued. 

    This should be claimed by all eligible businesses which need their staff to be available to them when they  continue to trade as normal. 

    Business Rates

    Not forgetting the 12 month rates holiday for the retail, hospitality and leisure sectors, and grants of between £10,000 and £25,000 previously announced, which are actual cash savings to keep. We don’t yet know if these grants will be included in taxable income, but we can save that for another day!

    SSP, Universal Credit, Employment and Support Allowance

    These are also payments to keep and are now easier to claim for the duration of the Coronavirus outbreak. The previously announced SSP refund scheme for up to 2 weeks is in place to help your employees. SSP is £94 per week. For the self employed with the virus or who need to self isolate or on low income, Universal Credit and/or a new style Employment and Support Allowance is available. ESA is £73 per week. Being eligible for some benefits opens the door for other benefits such as housing benefit, so is often worth a bit more than at first appears.

    Summary 

    Not all initiatves will be helpful for all businesses. Be clear which are deferrals and therefore need to be repaid someday or those which are cash payments or savings. Employee salary refunds and grants for small property based businesses, should always be claimed where eligible. VAT, income tax, mortgage and rent deferrals, Time To Pay, and loans need to be taken with care with a simple outline plan as to how you think these will eventually be repaid.

    You as a business owner will know which of these weighty options to pick and how to work out the best route for your business with help from trusted advisers, where appropriate.

  • Coronavirus – Loans, Grants & Tax – Small Businesses

    Here’s a quick summary of the sort of practical help notified this afternoon by the Chancellor. Together with a reminder of some useful tax rules which may also help with your cashflow.

    Business Rates:

    • No rates payable for 12 months for any business in the retail, hospitality or leisure sectors.
    • In those sectors, if your rateable value is less than £51k, you’ll also receive a cash grant of up to £25,000.
    • Any business which gets small business rates relief, will receive a cash grant of £10,000 (increased from £3,000 announced in the Budget).

    Government Backed Loans:

    • These should be available from your bank early next week starting 23 March and further details will be issued shortly. 
    • The government guarantee is for 80% of the loan, so your bank is likely to need some security for the other 20%.
    • No interest will be charged for the first 6 months.
    • The interest rate will be favourable and the term from 3 months to 10 years.
    • If you expect your business to recover from the disruption because you have a sound business, you may wish to take a loan out.

    Mortgage Holiday:

    • At least a 3 month mortgage holiday for those in difficulty, from your lender.

    Insurance Claims:

    • Insurers will pay out against policies that cover pandemics.

    Universal Credit:

    • If your income has dropped you may wish to access the benefit system.
    • This was made easier as announced in the Budget.

    Statutory Sick Pay (SSP):

    • If you’re a director of your limited company, you can pay 2 weeks if you need to self isolate.
    • The government will refund this £94 per week, maximum £188, to your company.
    • It will also refund SSP for your staff for up to 2 weeks to your business or your company.

    Using Existing Income Tax and Corporation Tax Rules:

    • As we’re near the end of the tax year, get your income tax return in as soon as possible from 6 April 2020, for a possible refund of some of your January 2020 tax payment. And know the exact amount due in July.
    • 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 3 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.
    • A return of Time To Pay help 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.

    Off-Payroll Working (IR35) Delay:

    • Freelancers and consultants worried about getting taxed as an employee from 6 April 2020, have a year’s reprieve until 6 April 2021.

    Thank you and stay well.

  • Budget 2020 – A pot-hole free drive in your electric car through magic money trees?

    There is much to be happy about in today’s Budget, where the magic money trees are well and truly thriving!

    Businesses will benefit from many announcements, particularly those who trade from a property, have one or two employees, and need a new car!

    Business rates are abolished for a year for rateable values of less than £51k and these same businesses will receive a £3k grant, as a response to the Coronavirus but it’s also part of the overall picture of dealing with competition from Amazon and other online retailers.

    Where possible and appropriate for your business model, businesses going forward may need to embrace online retail further. Having said that, many can provide a niche, local, personal service perhaps relying on online marketing, such as Facebook, but not online sales.

    With the money saved, and assuming you needed one already, an electric car is very tax efficient. The 100% write off against your tax bill has been extended beyond 2021 to 2025 with no benefit in kind until March 2021 and then minimal after that. VAT still can’t be recovered, however, apart from 50% through leasing.

    Your employees earning over £9,500 will pay less national insurance from April 2020, but you’ll still pay 13.8% national insurance on their salaries over £8,788 with a £4k offset from the increased employer annual allowance of £4k. For example, if you have one employee earning £37,774, the £4k annual allowance will offset all the employer national insurance due. Even employ a veteran where you save employer’s NI for a year. And remember to claim the statutory sick pay for up to 2 weeks if your employees need to be away from work due to the Coronavirus.

    If you’re a sole trader, your Class 4 national insurance of 9% will, from April 2020, only kick in after you’ve earnt profits of over £9,500. If the Corornavirus reduces your profits, however, remember to claim Universal Credit. You may need to pay Class 2 national insurance voluntarily to maintain your state pension credit.

    If you also carry out Research and Development, R&D, the new restriction on cash refunds for loss making businesses is still coming in, but delayed until April 2021, and if your claim is less than £20k, there’ll be no restriciton at all. So, as you were! Carry on with R&D and cash claims even if you are just a one or two director company on minimal salary.

    If your business survives the Coronavirus, perhaps with funding help from HMRC Time To Pay or your bank and one day you’re ready to sell your business, you’ll pay capital gains tax of 10% on the first and only £1m business capital gain in your lifetime, and 20% on the rest of the gain. Many small businesses are sold for less than £1m, so this is a welcome compromise effective immediately.

    Some of the good news is ofset by confirmation of the corporation tax rate remaining at 19%, but also HMRC being given 1,300 more staff to get tax HMRC believes it’s entitled to! Be careful you don’t get caught up in that, where HMRC have been known to go for low hanging fruit, possibly hanging on a magic money tree 😀, rather than trickier cases. 

    Stay well!