Tag: Coronavirus

Advice and resources from Mouktaris & Co for employers and employees

Coronavirus: An Unprecedented Economic Intervention: Coronavirus Job Retention Scheme, VAT Deferral, Income Tax Deferral and Universal Credit

AN UNPRECEDENTED ECONOMIC INTERVENTION

In addition to measures announced in the Budget on 11 March 2020 and subsequently on 17 and 18 March 2020 (see our news releases here and here respectively), the Chancellor’s announcement on 20 March 2020 of a far-reaching package of measures allows businesses in this country to stand by their employees at a time of national emergency. Though this is not a helicopter money policy which would indiscriminately and radically boost the back pocket of workers and employers alike, such direct action by Government to encourage continued employment of people is a really good start. It is though to be read against the sombering order for all cafés, pubs and restaurants (dine-in, not takeaway), cinemas, gyms, nightclubs and leisure centres across the UK, to temporarily close.

Much of the detail is still being worked out and we expect more information to follow, including potentially wider measures to support the self-employed and the freelance economy.

You can continue to follow the latest advice and guidance from government for businesses on its coronavirus pages.

A summary of the practical measures announced by the Chancellor on 20 March 2020:

CORONAVIRUS JOB RETENTION SCHEME (CJRS)

If an employer cannot maintain its current workforce because its operations have been severely affected by coronavirus (Covid-19), the employer can furlough employees and apply for a grant that covers 80% of the usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. The scheme is designed to protect the UK economy by encouraging continued employment.

Timing
This is a temporary scheme in place for 3 months starting from 1 March 2020, but it may be extended if necessary and employers can use this scheme anytime during this period. The scheme, open to any employer in the United Kingdom, will cover the cost of wages backdated to 1 March 2020 and will be open on 20 April 2020 [UPDATE]. It can include workers who were in employment on 28 February.

Claiming
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.
  • 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. This is in addition to the £4,000 employer’s national insurance allowance.

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.

Directors [06/04/2020 UPDATE]
As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

New cut-off date [15/04/2020 UPDATE]
The government has announced a major change to the CJRS, moving the cut-off date from 28 February to 19 March. To qualify for the grant, the employer must now have created and started a PAYE payroll scheme on or before 19 March 2020.

Employees who were employed on 28 February 2020 and on payroll (ie notified to HMRC on an RTI submission on or before 28 February) and who were made redundant or stopped working for the employer after that and prior to 19 March 2020, can also qualify for the scheme if the employer re-employs them and puts them on furlough.

The government published further details on the intended mechanics of the scheme on 26 March 2020 [06/04/2020 and 15/04/2020 UPDATES].

Chancellor extends furlough scheme until October [12/05/2020 UPDATE]
In a boost to millions of jobs and businesses, Rishi Sunak said the furlough scheme would be extended by a further four months to October 2020, with workers continuing to receive 80% of their current salary. The proposal is for employer payments to substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.

VAT PAYMENTS

The next quarter of VAT payments will be deferred, meaning businesses will not need to make VAT payments until the end of June 2020. Businesses will then have until the end of the 2020-21 tax year (31 March 2021) to settle any liabilities that have accumulated during the deferral period.

The deferral applies automatically and businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.

Taxpayers will need to cancel their Direct Debit for VAT in order to avoid automatic payments from being made. This will of course need to be re-instigated following the deferral period.

VAT Returns must still be filed on time.

INCOME TAX PAYMENTS ON ACCOUNT

Income Tax payments due on 31 July 2020 under the Self-Assessment system will be deferred to 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.

This measure will benefit self-employed persons who have historically filed Tax Returns, but self-employed individuals who began trading after 5 April 2019 will not see an immediate benefit.

UNIVERSAL CREDIT

The measures announced by the government thus far fall short of shoring up the previously thriving self-employed- or freelance, economy. The policies seem to be resigned to the fact that some job losses are inevitable, but those affected will be helped to an extent by a marginally more generous welfare system- equivalent to an annual increase of £1,000.

One group of economic agents that will not gain any protection from the new measures is freelancers on relatively high incomes, if they have savings or other household income that would make them ineligible for Universal Credit.

We are doing everything we can to help our business community. If you would like to discuss how the changes or the coronavirus pandemic may affect you or your business, please do not hesitate to contact us on 020 8952 7717 or use our online enquiry form.

Coronavirus: Residential Property, Commercial Property and IR35

MORTGAGE AND RENT HOLIDAY – RESIDENTIAL PROPERTY

Residential tenants can apply for a three-month payment holiday from their landlord. As per the government’s announcement on 18 March 2020, no one can be evicted from their home or have their home repossessed over the next three months. The Residential Landlords Association and the National Landlords Association both reassuringly welcomed the news.

In turn mortgage borrowers (who are individuals) 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 and that interest will continue to be charged on the amount they owe.

In practice:

  • Tenants should continue to pay rent where possible.
  • Should a tenant fall in arrears, it is up to the landlord and tenant to come to a sensible agreement. The Tenancy Agreement and evidence of hardship can be used as a basis for agreement.
  • Where the three-month month payment holiday doesn’t apply, lenders may not be sympathetic and so if tenants withhold payments of rent, landlords will have to take action to recover it.
  • Landlords would face practical hurdles in finding a new tenant in this current climate, not least because the government is advising the public to, where possible, “delay moving to a new house while measures are in place to fight coronavirus”.

EVICTION PROTECTION – COMMERCIAL PROPERTY

Commercial tenants who cannot pay their rent because of coronavirus will be protected from eviction, the government announced on 23 March 2020. This protection may however encourage tenants not to pay rents for the coming quarter or to seek reductions. A corresponding relief may be needed to protect landlords from their lenders.

In practice:

  • Rent is due and remains governed by the lease agreement.
  • Landlords and tenants are already having conversations and reaching voluntary arrangements about rental payments.
  • An issue for property businesses is likely to be cashflow. Tenants may not be paying in full, while lenders are still requiring interest payments to be made. Property developers will likely be unable to sell property in the current climate.
  • Businesses can access funding through, for example, the “Coronavirus Business Interruption Loan Scheme”. The scheme has been designed precisely for the purpose of enabling businesses to continue meeting overheads such as rent.
  • Landlords would more-likely-than-not face even higher hurdles in finding a new, good-quality tenant in this current climate.

IR35 CHANGES HAVE BEEN POSTPONED TO APRIL 2021 DUE TO CORONAVIRUS

The Government has announced that it will be deferring new rules affecting contractors working for the private sector, directly or through an agency, that were due to come into force from 6th April 2020 until 6th April 2021.

The changes which would have affected all contractors working for medium or larger organisations, had initially been confirmed in The Budget.

The chief secretary said: ‘I can also announce that the government are postponing the reforms to the off-payroll working rules IR35 from April 2020 to 6 April 2021. The government will therefore not move the original resolution tonight, but it will shortly table an additional resolution confirming that we will reintroduce the off-payroll working rules provisions by amending the Bill, with a commencement date of the 6 April 2021. This is a deferral in response to the ongoing spread of covid-19 to help businesses and individuals. This is a deferral, not a cancellation, and the government remain committed to reintroducing this policy to ensure that people who are working like employees, but through their own limited company, pay broadly the same tax as those employed directly.’

What you should do next
The impact of this deferral will depend on your circumstances and actions taken to date by the company or agency you work for, but generally you should consider:

  • Reviewing the actions, you have taken and see if these are impacted by the deferral. For example, if you have started an insolvency process on the basis that you no longer need your company you may need to defer this.
  • Talking to the organisation you work for to see if the deferral has/will change their approach.
  • Reviewing any determinations sent out by your agency or firm in anticipation of the change. The deferral will mean that you will be responsible for determining whether your contract is inside or outside IR35 for a further 12 months.
  • Most importantly, talking to your accountant. The Government is issuing guidance regularly as it tries to keep pace with the current situation, meaning a review of your own circumstances is more important than ever.

If you would like to discuss how the IR35 changes or the coronavirus pandemic may affect you or your business, please do not hesitate to contact us on 020 8952 7717 or use our online enquiry form.

Coronavirus: SSP, Business Rates and the Coronavirus Interruption Loan Scheme

SUPPORT FOR BUSINESSES THROUGH THE CORONAVIRUS BUSINESS INTERRUPTION LOAN SCHEME (CBILS)

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch next week to support businesses to access bank lending and overdrafts. The government will provide lenders with a 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. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.

Further details on the scheme can be found on the government webpage which, as you can see, is in the process of being updated. Accredited lenders are set out here.

This type of loan may be helpful for businesses that continue to pay overheads against little or no income stream, where income streams are expected to resume following a period of interruption (e.g. Covid-19). Please reach out if you are unsure of how your business may benefit. If you believe that this scheme could benefit your business, we urge you to contact your banking or finance relationship manager to flag your interest at this relatively early stage.

Personal Guarantees
Insufficient security is no longer a condition to access the scheme. Lenders will not take personal guarantees for facilities below £250,000. For facilities above £250,000 personal guarantees may still be required, at a lender’s discretion, though will excllude the Principal Private Residence (PPR).

Companies claiming R&D Tax Credits
The CBILS is deemed to be a Notified State Aid (an EU-approved government subsidy), as are Research & Development (R&D) tax credits. A company cannot have two Notified State Aids for the same project and therefore companies already in receipt of R&D tax credits may be restricted from claiming loan scheme support as well (and vice versa).

Viability [21/04/2020 UPDATE]
Borrowing proposals must be viable were it not for Covid-19. Viability is tested for loans above £30,000. For small and medium-sized businesses, accumulated losses at 31 December 2019 cannot exceed 50% of subscribed share capital, though these rules do not apply to businesses less than three years old. For larger businesses the EBITDA/interest ratio must be more than 1.0 and the debt/equity ratio less than 7.5.

Evidence Requirements Relaxed [29/04/2020 UPDATE]
To speed up the provision of finance to small and medium-sized businesses under CBILS, the largest seven SME lenders (Barclays Bank UK, Danske Bank, HSBC, Lloyds Bank, NatWest, Santander and Virgin Money) have stated that rather than relying on businesses providing forecasts and business plans in applications, lenders will use their own information. While the exact details of the changes are still to be released, the moves should make the scheme easier to access and make the application process quicker. However, businesses should still assess carefully the implications of taking on debt finance and be comfortable that this is the right solution for them at this time.

SUPPORT FOR BUSINESSES THAT PAY BUSINESS RATES

  • The retail discount is 100% for 2020-21 for properties with a rateable value below £51,000. Businesses in this category should pay no rates for the year beginning April 2020. Please review your direct debit arrangements if necessary.
  • No measures have yet been announced for businesses with a rateable value above £51,000 though these could soon follow.
  • Businesses that received the retrospective retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible. This has already taken effect for some local authorities. We advise our clients to request, in writing, that any credit in your business rates account is paid back to the business by BACS, rather than offset against future liabilities. You should contact your local authority for advice on executing this.
  • A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000. Details on the mechanism of this measure are yet to be released by the government.
  • A £10,000 grant (previously £3,000) is available for businesses that do not pay rates. Details on the mechanism of this measure are yet to be released by the government.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.

SUPPORT FOR BUSINESSES WHO ARE PAYING SICK PAY (SSP) TO EMPLOYEES

  • The cost of providing 14 days of SSP per employee will be refunded by the government in full. The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.
  • SSP will be payable from day 1 instead of day 4.
  • Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.

Remember that by law, employers must pay Statutory Sick Pay (SSP) to employees and workers when they meet the following eligibility conditions (agency, casual and zero-hours workers can also get SSP):

  • they’ve been off sick for at least 4 days in a row, including non-working days (reduced to 1 day for Covid-19)
  • they earn on average at least £118 per week, before tax
  • they’ve told their employer within any deadline the employer has set or within 7 days

Another option is to tell employees to take their holiday entitlement now whilst your business closes temporarily. Please refer to this guidance from ACAS. We are also available to answer employment-related queries. For our clients who subscribe to our HMRC investigation service, we offer access to legal employment advice.

If you are considering temporarily closing the workplace and reducing staff hours or laying off staff, it’s important to talk with staff as early as possible and throughout the closure. Unless it says in the contract or is agreed otherwise, you will still need to pay employees for this time.

SUPPORT FOR BUSINESSES PAYING TAX

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. If you are concerned about being able to pay your tax due to Covid-19, call HMRC’s helpline on 0800 0159 559.

Our page on Negotiating time to pay with HMRC is a useful first port of call.

INSURANCE

Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim. Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.

We are here to support you, and we will do all that we can to ensure you receive the guidance you need.

We wish our entire community the very best for your health and wellbeing during this challenging period.

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