CORONAVIRUS - BUSINESS FINANCIAL SUPPORT

The Chancellor has announced a range of financial measures aimed at helping businesses through the coronavirus crisis. These measures aim to reduce the disruption the crisis will have on business cash-flow and solvency.

 

VAT AND INCOME TAX DEFERRAL

 

There is now a formal deferral of any VAT payments that fall due between 20 March and 30 June 2020. Any liabilities that fall due in this deferral period do not have to be paid until 5 April 2021.

 

VAT refunds and reclaims will be paid by HMRC as normal. This measure is automatic and no application to defer is required. It is open to all UK VAT registered businesses.

 

Please note that VAT returns still need to be completed and filed by the normal deadlines.

 

Following the recent Government announcement, any client wishing to defer their VAT payment will need to contact their bank and cancel their direct debit, otherwise HMRC will still collect the payment. This needs to be done before the direct debit is collected.

 

Businesses will also need to reinstate the direct debit mandate once the deferral period is over. Please note it is still necessary to file VAT Returns as normal. Refunds and repayments due from HMRC will be processed as normal.

 

Income tax payments on account that were due to be made by 31 July 2020 will now be deferred until 31 January 2021.

 

Relief is automatic and no application needs to be made. This is available to the self-employed and no interest or penalties for late payment will be levied in this deferral period.

 

HMRC have also scaled up their Time to Pay offer by investing in more call handlers to cope with demand. HMRC have a dedicated line (0800 0159 559) where tax payers with outstanding and overdue tax can call to discuss revised payment terms.

 

CORONAVIRUS BUSINESS INTERRUPTION LOAN

 

This is a new scheme announced by the Chancellor, and as the name suggests, is aimed at small businesses who are experiencing lost or deferred revenues due to coronavirus, leading to disrupted cash-flow.

 

Key features of the scheme include:

 

  • Loan facility of up to £5m
  • Repayment terms of up to 6 years
  • Interest and setup fee initially paid by the government for 12 months, so businesses have no upfront costs and lower initial repayments.
  • Available finance options include term loans, overdrafts, invoice finance and asset finance.

 

To be eligible the business must be UK based with a turnover of under £45m.

 

Also a business should present a finance proposal that would be viable under normal trading conditions but is needed specifically to help trade out of short to medium term difficulties caused by the coronavirus. If the lender can offer finance on normal commercial terms, they will do.

 

Forty banks have signed up to the government backed scheme and you should contact your bank directly if you feel this could be suitable. A list of participating banks can be found here.

 

100% BUSINESS RATES HOLIDAY

 

A twelve-month business rates ‘holiday’ for retail, hospitality and leisure businesses in England has been announced. This applies to any occupied property used in trades like restaurants, shops, cafes, pubs and bars, cinemas, hotels, guest houses and properties used for assembly and leisure.

 

The relief covers the year starting 1 April 2020 and covers the subsequent 12 months. There will be no rateable value limit on the relief and if a business operates from more than one property the ratepayer can claim for each eligible property they use.

 

No specific action needs to be taken. Your local authority should reissue your 2020/21 bill showing the exclusion of the business rates.

 

CORONAVIRUS GRANTS

 

A small business grant funding scheme has been introduced. Up to £10,000 will be available to any business in the retail, hospitality and leisure sector with a rateable value under £15,000.

 

Any business, irrespective of its sector, who is in receipt of small business rate relief or rural rate relief will also be eligible for the £10,000 grant. 

 

Funding will be made available to local authorities who will in turn contact relevant businesses.

 

Also there is grant funding of up to £25,000 per property for retail, hospitality and leisure businesses with properties with rateable values between £15,000 and £51,000.

 

No action needs be taken, your local authority will write to you if you if you’re eligible for the grant, however any enquiries you have should be made with the relevant local authority.

 

PAYROLL SUPPORT AND THE JOB RETENTION SCHEME

 

Measures have also been announced surrounding statutory sick pay and the new job retention scheme. Details of these can be found here: https://www.lentells.co.uk/services/business/payroll-and-pensions

 

 

FINANCIAL SUPPORT FOR THE SELF-EMPLOYED

On 26th March, the Chancellor announced measures to help the self-employed in the Covid-19 crisis.

 

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus.

 

The scheme will enable you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month, initially for 3 months. The scheme payments will be backdated to March, and it is the Government’s intention to make the lump sum payments by June.

 

This is only available to the self-employed who have filed a 2018/19 tax return and have average trading profits of under £50,000.  It is not available to those who have commenced as self-employed since 5th April 2019, and also, not available to those that have ceased trading.  

 

How much will be available?

You can claim a taxable grant which will be 80% of the average profits generated in your last 3 tax years. To work out the average, HMRC will add together the total trading profit for the 3 tax years, then divide by 3, then divide this by 4 to give 3 month’s profits.

 

The grant will be up to a maximum of £2,500 per month for the 3-month period. The scheme will be extended if needed. If you don’t have 3 years of tax returns because you may have started trading more recently, HMRC will calculate the average upon what has been filed to date.

 

Am I eligible?

You should be eligible if you’re a self-employed individual or a member of a partnership and you:

 

  • have submitted your tax return for the tax year 2019*
  • traded in the tax year 2020
  • are trading when you apply, or would be except for Covid-19
  • intend to continue to trade in the tax year 2021
  • have lost trading/partnership trading profits due to Covid-19
  • have self-employed trading profits less than £50,000
  • have more than 50% of your income coming from self-employment

 

*If you have not yet submitted a tax return for the tax year 2019, the Government have given an additional period of grace to file this by 23 April 2020.

 

How to apply?

You cannot apply for this scheme yet. HMRC will contact you directly if they think you are eligible - and invite you to apply online.

 

When launched the scheme can only be accessed through GOV.UK. HMRC will use data on 2019 tax returns already submitted to identify those eligible. Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.

 

Once HMRC has received the online application and agree you are eligible, they will contact you to tell you how much you will get and request your bank details. HMRC will then pay the grant directly into your bank account, in one instalment.

 

 

We are in uncharted territory with the Government’s response evolving each day. As more details are released we will update our guidance.