Article Updated 27th March 2020
After a long and difficult week last week, the Chancellor's announcement regarding additional business funding provided some much needed relief for everyone. All businesses in England and Scotland will be offered the same funding which helps to simplify the information about available grants and funding.
Again we are still missing full details regarding some of the funding but will keep the below information updated as this information is released.
Employee Wage Support (Job Retention Scheme)
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020.
This scheme applies to employees and directors who receive a salary through PAYE.
Full details of the scheme and FAQs can be found here:
We expect the scheme to be up and running by the end of April.
Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month.
You must furlough your employee (temporary lay off) for them to get this grant. You MUST notify them of this. We have a template letter you can use to do this. If you would like a copy of the template please email us on firstname.lastname@example.org
The scheme is not yet live. You should aim to pay salaries as best you can this month (March) or explain to staff that you will be applying for funding from the government but this is unlikely to be available until the end of April.
Make sure you read all the details here https://www.mintaccounting.co.uk/page/job-retention-scheme/
Funding for VAT Registered Businesses
VAT for the next quarter is being deferred. This deferment applies to VAT due from now until the end of June. Any VAT due from returns generated during this time will need to be paid by 31st March 2021.
If you pay VAT by direct debit you must cancel this.
If you are considering paying this anyway it would be worth discussing this with us. Though you may currently have the cash to pay your VAT bill and though you will need to pay this at a later date, it is important to consider whether you may need this money for salaries or director drawings during this time. This is especially important for director only businesses as even if you are eligible for the 80% salary funding, you are likely to be on a low salary so may not have access to all of the funds you need.
Funding Available to Business with Premises
You must be required to pay rates on your premises to qualify for the below funding. This includes businesses who get the small business bonus relief so don’t end up paying their rates. Basically, if you receive a bill for rates and you meet the criteria below, then you are eligible for grant funding:
- a full year’s 100% non-domestic rates relief for retail, hospitality and tourism
- Grants of up to £10,000 for small businesses in receipt of the Small Business Bonus Scheme or Rural Relief (Rural Relief applies to Scotland only)
- Grants of up to £25,000 for hospitality, leisure and retail properties with a rateable value between £18,000 and £51,000
- 1.6% relief for all properties, effectively freezing the poundage rate next year
If you rent an office in an office block and all your costs are included in your rent then you will not be eligible for this funding. You need to contact your landlord / the company you rent from immediately to see if they can offer you a rent holiday or even a reduced rent for a few months.
All businesses should discuss rent holiday options with landlords. This is likely to aid your cash flow further over the coming months. Just remember to agree how you will pay any missed rent and that you allow for this within your plans for later in the year.
These grants are going to be administered by local councils.
Scottish Businesses can apply here https://www.mygov.scot/non-domestic-rates-coronavirus/
The application process is different across each council in Scotland. It can also be hard to find the information on your local council page, so ensure you look at the pages providing information and updates on Coronavirus. Below are some direct links for the areas where we have a number of clients:
Business based in England will have to wait for the council to write to them at the rateable address. This is not ideal so we hope they change this. You can keep up with the process in England here https://www.businesssupport.gov.uk/coronavirus-business-support/
Funding for all businesses
All businesses will be eligible for the government's Business Interruption Loan Scheme, offering loans of upto £5million. Loans will be interest free for 12 months and available from Monday 23rd March 2020.
This is a loan and we strongly recommend you consider your other funding options before applying for this loan. The loan may be the best option for businesses who do not meet the requirements of the grants and who have to retain the majority of their staff during this time.
The loans are proving difficult to secure and businesses are expected to provide detailed cashflows to the bank. These loans are being positioned as loans of last resort. If the bank can lend to you on commercial terms then they will look to do this first.
Funding for Sole Traders / the Self-employed
On the evening of March 26th the chancellor provided an update regarding funding support for the self-employed who have been effected by coronavirus.
- There will be a taxable grant of 80% of profits for self-employed people.
- The grant will be up to a maximum of £2500 per month
Who is eligible
- This grant will be available to the self-employed/sole traders and partnerships who have profits of up to £50K per year. This is based on an average over 3 years.
- Self-employed income must be more than half of your total income.
- You must traded in 2019-20; be currently trading at the point of application (or would be except for COVID 19) and intend to continue to trade in the tax year 2020 to 2021.
- You MUST have submitted a 2019 tax return to access this support.
- If you are yet to do this then we now have 4 weeks to file the 2019 return.
How much will you get?
You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable): 2016 to 2017, 2017 to 2018 and 2018 to 2019
To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
It will be up to a maximum of £2,500 per month for 3 months.
How to Apply
You cannot apply for this scheme yet.
HMRC will contact you if you are eligible for the scheme and invite you to apply online.
Fund will not be available until the end of June.
What is a taxable grant?
The grant money you receive will be included as income in your 2020-2021 tax return. HMRC are essentially replacing your average monthly profits and therefore will tax the grant in the next tax year.
What to do now?
Given the time frame for accessing this grant, we would strongly recommend you seek universal credit support at this time. You should also consider taking other actions such as:
- Contact your mortgage provider and ask for a three month mortgage payment holiday;
- Contact your council to request a three month delay on your council tax payments;
- Contact any other lenders or providers of HP and ask for a payment holiday.
If you do not meet the criteria above we suggest you seek support from universal credit ASAP.
Don't forget If you are due to pay a personal tax bill in July 2020 you can defer this payment until January 2021.
Note this all applies to partners in partnerships too.
This scheme does not apply to personal service companies. It is only for the self-employed and does not apply to directors of limited companies.
Personal Tax Payment on Account July 2020
The Self- Assessment payment on account, that is ordinarily due to be paid to HMRC by 31 July 2020 may now be deferred until January 2021.
Anyone due to make a payment on this date can opt to defer.
HMRC would like those who can pay to pay. Though deferring means you will need to find the money later in the year we would highlight that this cash may be required over the coming months.
It is important that all businesses try to reduce their costs as much as possible. You need to strike a balance between paying for what you need to support your business and paying for things that do not provide actual support to your business.
If you rent a property you should contact your landlord immediately to see if they will reduce your rent or even give you a rent holiday (this has happened for some clients).
Other things to look at cancelling payments for:
- Marketing support services
- Advertising costs
- Music streaming services / commercial licences
- Business TV licence
- Subscriptions for online magazines, newspapers, industry updates etc