Notes on measures announced on 20 March 2020 and 26 March 2020 based on available information on HMRC website and Government advice
Coronavirus Job Retention Scheme
- All UK employers will be able to access the scheme for employees who would otherwise be laid off. They will be classed as “furloughed workers” i.e. they are kept on the payroll instead of being taken off the payroll (as would be the case if they were laid off).
- To qualify for the scheme the employees must not undertake any work whilst they are “furloughed” for their employer. The employee appears not to be able to undertake any work where it would affect the ability to be available for work for their employers at all times, except for activities carried out following public health guidance.
- If the contract of employment does not provide for “layoffs” whether paid or not, then the employee needs to agree to the furloughing, otherwise the employer could be in breach of contract. The employer will need to write to each employee confirming that they have been furloughed, once the employees have agreed to this (recording employer meeting notes is recommended, so it is clear that when the employees sign the letter attached (if this is to be used) they fully understand the implications). If the employee does not agree then redundancy will need to be considered, if appropriate. Wyatt Morris Golland suggests that you seek legal advice before implementing a furlough scheme, where contracts of employment do not permit furloughing. We have some suggested letters relating to furloughing so please contact us if you need examples, however please note that Wyatt Morris Golland Ltd are not lawyers and we suggest that you seek the appropriate advice if you wish to rely on these.
- The employee will remain employed while furloughed and we understand that furloughing will not alter the existing contract of employment for example holiday pay entitlement, sick pay entitlement etc. However, we suggest that you take legal advice if this is relevant to the business.
- The employee must have been on the employer’s payroll as at 28 February 2020 and the employer must have a UK bank account.
- Employees paid via PAYE can be on any type of contract, including a Zero-hour contract or a temporary contract.
- Some public sector funded businesses may not be included in the scheme for example full NHS dentists, who we understand are to be paid their average contracts by their public body, for further information see GOV.UK website.
- The payment per employee (before the 20% deduction) is based on the employee’s salary/wage as at 28 February 2020 (where broadly they receive the same standard salary/wage per month). Where the employee’s pay varies for example because of overtime pay, then the payment (before the 20% deduction) is based on the higher of the amount earned in the same month last year or an average of their monthly earnings based on the tax year 2019/2020. The maximum claim is (3,125 x 80%) therefore £2,500 (gross) plus related employers national insurance cost and the minimum auto enrolment employers contributions per employee.
- Bonuses, commissions and fees are not included as part of their monthly earnings.
- The employer can choose to pay the difference between this payment and the employee’s salary but does not have to.
- Normal payroll deductions will be made from the gross amount.
- The employee must be furloughed for a minimum of 3 weeks to a maximum of 3 months. HMRC have pledged to extend the 3 month period if necessary. If the employer may need the employee to work after three weeks, then we would recommend that the wording in the suggested letter furloughing employees in “General – number 3)” above is used, subject to legal advice, so that if required the employee can work after the initial minimum 3 week furloughing period and can later be furloughed again if necessary.
- The employer will be reimbursed and HMRC are currently devising a system to be able to reimburse employers for this direct via a grant. This is not yet available, however, it is thought that the earliest it will be up and running is the end of April 2020.
- If employees from 1 March 2020 were laid off they can be put back on the payroll and workforce and instead the date that they were laid off to the date that they were put back on the payroll will be “a granted leave of absence”.
- Some employees may be able to claim additional “means tested” benefits via the welfare system and the link for this is: http://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-guidance-for-employees#claiming-benefits.
- This is intended to run for three months from 01/03/2020 but will be extended if necessary.
- As regards limited company sole directors, it appears that they qualify so long as they do not receive a fee instead of a wage/salary. It is hoped that further guidance will be given. Please note that the directors cannot undertake work of any kind for the company in this period and this may be hard to prove especially for sole directors. It may be necessary for the director to notify all its suppliers and customers and other business contacts that the business has been suspended pending the end of the Corona Virus.
- The Government is to amend regulations to allow annual leave to be carried over into the next 2 years leave, to ensure workers will not lose their annual leave. This is aimed at staff currently working around the clock for example the food and health care industries, but may also apply to furloughed employees, if all their employment rights and entitlements are due during their furloughed period. Legal advice may be required in this regard.
Details for employers of the scheme
- The employer decides which workers are to be “furloughed workers” and then needs to notify the employees of this change. Changing the status of the employees as furloughed workers remains subject to existing employment law, depending on the employment contract and maybe subject to negotiation.
- When considering furloughing employees the selection process should be made taking into account employment law and staff negotiation.
- The employer then needs to submit to HMRC – their PAYE reference number, the number of employees who have been furloughed, the claim period (start and end date), the amount claimed, bank account number and sort code, contact name and telephone number. These details we understand will be audited by HMRC. When the online portal has been devised, which is expected to be mid to the end of April 2020, the grant payments will be made. We will update you as and when further announcements are made.
- Employers will only be able to submit 1 claim every three weeks, which is the minimum period an employee can be furloughed (applies to for example weekly paid staff).
- There does not appear to be a facility under this scheme for employers to be given grants before the payment of salaries. Employers who do not have the funds to pay salaries maybe able to obtain funding via the Business Interruption scheme or grants for certain businesses. We await further information regarding this point.
- At this stage we do not know whether there will be an agent portal to make these claims on our client’s behalf or whether the employer has to make the claim themselves. We will keep you informed of any changes as and when announcements are made.
- If businesses are struggling to pay the PAYE payment due 19 March 2020 and/or the 19 April 2020 (when it falls due), there is a dedicated coronavirus helpline (0800 0159 559) which is currently open 8am to 4 pm and is hoping to extend its hours to 8am to 8pm Monday to Friday and 8am to 4pm on Saturday, as soon as possible. All options will be discussed, which will include a “Time to Pay Arrangement” and suspension of any ongoing debt recovery. If your business manages to secure a time to pay arrangement then you should not be charged any late filing penalties once the agreement is in place, however you will still be charged interest. It may be wise to do this if you wish to claim the grant at the end of April 2020, if the online portal is open at this stage.
- The grant received will be taxable income of the business and does not require to be paid back.
Help for the self employed
If you are self employed and off sick with the corona virus or need to self-isolate (for example you have come into contact with someone with the coronal virus) then you should be able to claim employment and support allowance from day one. If you do not qualify for the new help listed below then you may be able to claim universal credit, however, please ensure that by making a claim for universal credit that it does not affect any claim that you make under the Self Employed Support Scheme or affect any other benefits that you may be claiming.
New Measures announced on 26 March 2020 for the self employed
Self Employed persons and members of a partnership can make a claim for a taxable grant under the Self Employed Income Support Scheme, if the following apply to the relevant individual:
- Has submitted a 2018/2019 Self Assessment Tax Return. Any individual who has not filed a return for 2018/2019 have until 23/04/2020 to file a return. These late returns will be scrutinised by HMRC for any abnormal higher than normal profits returned.
- Has traded in the tax year 2019/2020.
- Are trading when you apply, or would be except for COVOD-19.
- Intend to continue to trade in the tax year 2020/2021.
- Have lost trading/partnership profits due to the COVID-19.
- The self employed profits are less than £50,000 for the tax year 2018/2019 or have an average trading profit of £50,000 (averaged over the tax years 2016/2017, 2017/2018 and 2018/2019). If you started trading between 06/04/2016 and 05/04/2019 then HMRC will average over those years for which a return has been filed.
- More than half of the individual’s income is derived from self-employment.
Each self employed individual will receive a taxable grant based on 80% of the averaged profits for 2016/2017, 2017/2018 and 2018/2019, or if they started trading between 06/04/2016 and 05/04/2019 the average of the profits for all relevant tax returns filed, up to a maximum grant of £2,500 per month, for three months from 01/03/2020 to 31/05/2020. This will be extended by the government if necessary.
HMRC will identify all relevant eligible self employed persons and invite them to apply online for the scheme. The three month payment will be made in one instalment. The date of payment is expected to be sometime in June 2020. The online service is not expected to be available until sometime in June 2020. As and when further announcements are made we will update you.
Any income received in relation to the above scheme will be treated as income for the purposes of universal credit and tax credits.
It has yet to be confirmed that the test of profits where a partnership is concerned is the profits per partner not the total partnership profits (for the test for the £50,000).
Please be aware of Fraudsters in this period and beyond. You can only access this scheme via GOV.UK.
HMRC Support of businesses through VAT and Income Tax deferral etc.
- Business can defer VAT payments for three months (20/03/2020 to 30/06/2020). No application is necessary VAT payments will not be required during this period. The payment will need to be made by 05/04/2021. No interest or penalties as with 2) should be applied. All business affected will need to file their VAT returns on time and should cancel their direct debits.
- Income Tax payments due in July 2020 under self assessment can be deferred until 31 January 2021. No application is necessary, payment will not be required until 31 January 2021. No interest or penalties will be charged during this period (31/07/2020 to 31/01/2021).
- Any pre 31/07/2020 self assessment liabilities which businesses are temporarily struggling to pay because of the Covid-19 virus, will be offered a time to pay arrangement based on the individual’s circumstances.
- SSP paid by all small and medium sized businesses (essentially employees with fewer than 250 employees) due to sickness absence because of COVID–19 will be reclaimable from HMRC for the first two weeks of sickness per employee. The government is working to set up a repayment mechanism to facilitate this as soon as possible.
- No business rates payable in 2020/2021 for all businesses in the retail, hospitality and leisure industries and nursey businesses. No claim is necessary, any bill raised pre this change will be automatically updated as soon as possible.
- Small businesses grant funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief. Small business rate relief is given in relation to property’s whose rateable value is less than £15,000 and is usually given to businesses that only use one property. If your business acquires a second property then you will still keep any existing relief on your main property for 12 months. You can still get small business rate relief on your main property after this if both the following apply:
a) None of your other properties have a rateable value above £2,899.
b) The total rateable value of all your properties is less than £20,000 (£28,000 in London).
Rural rate relief is available where your business is in a rural area with a population below 3,000 and your business either is the only village shop or post office with a rateable value up to £8,500, or the only public house or petrol station with a rateable value up to £12,500.
- Cash grants will be available for the retail, hospitality and leisure industries of up to £25,000 per property (rateable value of between £15,000 and £51,000). Qualifying businesses (essentially those based in the UK and receive retail discount relief) will receive a grant of £10,000 per property with a rateable value of under £15,001 and a grant of £25,000 per property with a rateable value between £15,001 and £51,000. No claim is necessary and your local authority will write to you if you are eligible for this grant. If you think that you qualify for the schemes in 6) and 7) above but have not heard anything from the council by mid April 2020, we suggest that you contact your local council to query this.
- For grants being issued by Rochdale Council the procedure is detailed on the link below and letters inviting you to make a claim should be received by all qualifying businesses by 3 April 2020: http://www.rochdale.gov.uk/business-and-industry/business-advice-and-support/Pages/business-grants-and-loans.aspx.
- If businesses need short term cash flow support then they may be eligible for a Coronavirus Business Interruption Loan. The link for this is as follows: http://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses#support-for-businesses-through-the-coronavirus-business-interruption-loan-scheme. This should be made available as from early week commencing 23 March 2020. Main criteria is that the business must be UK based with a turnover of no more than £45M per year and meets other “British Business Bank eligibility” (no further details of what the other BBB eligibility” is). It has come to light that some banks are requesting personal guarantees (except personal guarantees on the borrower’s home). This was not intended and we await the government’s response. However, in the meantime we understand that the Royal Bank of Scotland (who also owns the NatWest) has confirmed that they will offer Business Interruption Loans without asking business owners for personal guarantees. We understand that the four big banks will not request personal guarantees for borrowing below £250,000 (excluding personal guarantees on the borrower’s home which is not permitted).
- We understand that the rules on wrongful trading have been temporarily changed to allow a business to pay staff and suppliers even if this could make the company insolvent, during the pandemic.
- Commercial tenants unable to pay rent due to the Corona Virus will be protected from eviction if they miss a payment within the next three months.
- Check out any business insurance policies to see if income is covered for pandemics and government ordered closures. This is a long shot but worth a check of your business policy.
- Nobody can be evicted from their home if they rent a property for the next three months (date unclear but appears to start from 24/03/2020).
- Home owners and buy to let property owners are to be allowed a three month mortgage holiday (date unclear but appears to start from 24/03/2020).
- We are not aware of any announcements made by the government for mortgage holidays to help commercial landlords.
- Businesses will be able to apply for a 3 month extension for filing their limited company/LLP accounts at company’s house, provided that they apply before the original filing date.