Guest blog by Phil Hall, AAT Head of Public Affairs & Public Policy, and shortlisted contender in the People category of the 2020 memcom membership excellence awards for the award of Outstanding Achiever in a Membership Organisation. Thank you to Phil for this clear, current and pertinent article which is a vital read for the membership sector.
Government, agencies and private sector companies have all made numerous promises to help British businesses and individuals get through the increasing challenges being presented by Coronavirus.
However, many remain unclear as to what help exists, what the eligibility criteria are and how to apply.
Membership bodies are increasingly being asked to provide guidance, and the following should provide a good starting point as to where to point both corporate and individual members.
On 11 March 2020 the Chancellor announced a £30bn range of financial measures to help British business, primarily the small business community, with the likely impacts of Coronavirus. These measures were confirmed in tandem with a Bank of England base rate cut from 0.75% to 0.25%. At the time, this approach was hailed as world leading and deemed by most commentators in the UK as being a generous and helpful response to an unfolding crisis. Just a week later, the measures were being criticised by some as insufficient as the magnitude of the situation rapidly began to be realised.
As a result, the Chancellor announced a far more ambitious and generous package of assistance on 17 March, including £330bn of government backed loans – equivalent to 15% of UK GDP. This was followed just three days later, on 20 March 2020, with an enormous package of additional support including a promise to pay up to 80% of a worker’s wages, up to a total of £2,500 per worker, each month. This generous package of assistance is to be backdated to 1st March and will run for at least 3 months.
Whilst understandably welcomed by most, there was some criticism that the self-employed appeared to have been largely forgotten. They had not. On 26 March, the Chancellor announced that the self-employed would be able to claim a direct cash grant of 80% of their profits, up to £2,500 per month.
The Government has not been alone in building on its initial actions to help more people. For instance, within 10 days of the first interest rate cut, the Bank of England cut rates again. This time to just 0.1%, the lowest in its 325-year history. The Bank also announced £200bn of quantitative easing.
Privately available help
Help from major UK lenders appears to be readily available for micro, small and medium sized businesses, with Lloyds Banking Group offering £2bn of assistance, HSBC and NatWest both providing £5bn each and lenders such as Barclays, Santander and the Co-operative Bank all offering assistance to their business customers. Mortgage lenders have also been compelled to help individuals that are experiencing issues with their finances as a result of Coronavirus, including through payment holidays of up to 3 months. This means they will not have to pay a penny towards their mortgage in the interim.
It is not just lenders who have been providing assistance. Large businesses are playing their part too. For example, supermarket Morrisons has confirmed it will be pay all its suppliers with a turnover below £1m immediately instead of between 14 and 30 days as was its standard practice. This will greatly help the cash flow of those small businesses. Let us hope other big businesses follow this lead.
Companies House has confirmed that any companies unable to file their accounts on time due to Coronavirus, can make an application to extend the period allowed for filing by up to three months. If stating Coronavirus issues, applicants will be granted an automatic and immediate extension.The extension process is fast-tracked and should not take more than 10-15 minutes.
Making an application is essential as any late filing companies will still receive an automatic penalty if they fail to do this.
More time to pay
HMRC has confirmed it will ensure that businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. The department has also set up a dedicated Coronavirus helpline to help those in need. This freephone number is 0800 0159 559.
The tax authority has also confirmed that in certain circumstances it will agree bespoke “Time to Pay” arrangements. The “Time to Pay” system has previously been used in response to flooding and the financial crisis and has proved successful. These arrangements give businesses a time-limited deferral period on HMRC liabilities owed and set a pre-agreed time period to pay these back.
Giving business the time they need to pay HMRC is eminently sensible and very much welcomed by AAT, as is the fact they have made an additional 2,000 experienced call handlers available to support firms when needed. HMRC have gone further still and committed to waiving late payment penalties and interest where a business experiences administrative difficulties contacting HMRC or paying taxes due to Coronavirus.
The Association of British Insurers (ABI) issued a statement on 17 March 2020 which made clear that, “…irrespective of whether or not the Government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by Coronavirus.”
The ABI went on to explain, “…standard business interruption cover – the type the majority of businesses purchase – does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to continue to trade.”
In other words, for the vast majority of businesses, insurance cover is unlikely to be of any help.
Grants for the smallest businesses
Approximately 700,000 of the smallest businesses in England will be entitled to a one-off grant. This was initially set at £3,000
during the Budget but less than a week later was increased to £10,000.
This is payable to those small businesses that are currently eligible for Small Business Rate Relief (SBBR) or Rural Rate Relief. Any business eligible for those reliefs can apply for the emergency funding direct from their local authority.
It is important to note that the £10,000 Coronavirus grant only applies to small businesses in England because business rates in Scotland, Wales and Northern Ireland are devolved to their respective administrations and so it will be for them to determine whether or not to offer anything similar. In fact, Scotland has already announced an £80 million fund to provide grants of £3,000 to small businesses in sectors that suffer the worst economic impact of Coronavirus. Any small business in Scotland that wants to apply for such a grant should contact the Coronavirus business helpline on 0300 303 0660.
On Tuesday 17 March the Chancellor also announced that smaller businesses without sufficient insurance cover would be eligible for a cash grant of up to £25,000 per business, providing they had a rateable value below £51,000.
Almost half (45%) of those currently paying business rates in England were to be exempted for the 2020-21 tax year as a result of Coronavirus assistance announced at the Budget for the retail, leisure and hospitality sector where businesses had a rateable value of less than £51,000.
Again, less than a week later the Government announced a drastic expansion of this policy, exempting all businesses in the hospitality, leisure and hospitality sectors (irrespective of rateable value) for the entire 2020-2021 tax year.
Further help for small businesses
Any business with fewer than 250 employees will have the cost of providing 14 days of statutory sick pay (per employee) refunded by the government in full. This will help 2 million businesses by providing up to £2 billion to cover sick leave costs.
Further help for individuals
Most employees compelled to work from home should be able to claim tax relief for some of the bills they have to pay, like lighting and heating costs, business-related telephone calls and so on.
Employers can pay employees up to £4 a week (rising to £6 a week from 6 April 2020) to cover additional costs if an employee must work from home and pleasingly, the employee does not have to keep any records to prove any of these costs. It is a small amount but in the current climate, every little helps. However, it is important to note that an employee cannot claim any of this tax relief if they choose to work from home rather than being asked to do so by their employer.
Different arrangements are in place for the self-employed. They have two options. The self-employed can claim a “simplified” option, which means they can calculate their allowable expenses using a flat rate based on the hours worked from home each month. Alternatively, they can calculate the actual running costs by dividing their costs by the number of rooms used and the amount of time spent working from home.
Government has established the Coronavirus Job Retention Scheme (CJRS), which commits to paying up to 80% of a worker’s wages, up to a total of £2,500 per worker, each month. This generous package of assistance is to be backdated to 1st March and will run for at least 3 months.
This scheme covers all employers, irrespective of size or sector. It includes membership bodies, charities and not-for-profits as well as listed companies and SMEs.
As the Chancellor, Rishi Sunak, explained when announcing this new intervention;
“Employers will be able to contact HMRC for a grant to cover most of the wages of people who are not working but are furloughed and kept on payroll, rather than being laid off. Government grants will cover 80% of the salary of retained workers up to a total of £2,500 a month – that’s above the median income. And, of course, employers can top up salaries further if they choose to. That means workers in any part of the UK can retain their job, even if their employer cannot afford to pay them, and be paid at least 80% of their salary.”
Help for the self-employed comes primarily in the form of a direct cash grant of 80% of a self-employed trader’s profits, up to £2,500 per month.
This is only payable to those with an average trading profit of less than £50,000.
It’s important to note that the self-employed should NOT contact HMRC. Instead, HMRC will identify all eligible taxpayers and contact them directly with guidance on how to apply.
As the government has repeatedly stated, this scheme is being designed from scratch and will therefore take time to become fully operational. The money will not be paid out until June 2020, which will cause short-term difficulties for some. The Government response to those worried about such a delay is to highlight that the £1bn support package for renters and the three month mortgage payment holiday are available for the self-employed and that there has been a £7 billion boost to Universal Credit, income tax and VAT deferrals.
The standard rate of Universal Credit and Tax Credits has been increased by £20 a week for 12 months from April 6th, meaning claimants will be up to £1,040 better off.
Income tax payments due in July 2020 under the Self-Assessment system have been deferred until January 2021, which should prove a big help to millions of the self-employed.
There remains some concern about owner-directors, those likely to be paying themselves a salary and dividends through their own company, as they are not covered by the self-employed support scheme.
However, these individuals can apply to have the salary element of their pay covered by the CJRS.
It is worth noting that HM Treasury has also confirmed that owner-directors can apply to “furlough” 80 per cent of the PAYE element of their income via this CJRS job retention scheme for salaried staff and still continue to perform their statutory obligations as company directors (filing accounts etc.) providing that is all they are doing.
This is a very fast moving area and further government and private sector action is very likely. The latest government guidance for employees, employers and businesses is available here.
Any membership body, business, or self-employed worker wanting financial guidance in this area should consider contacting their nearest AAT licensed accountant for financial help and advice.