*Information is correct as of 26.03.2020, this is an ever-changing situation so the information shared today, might not apply tomorrow*
Our friends at Bradleys Accountants have already shared their expertise with all their customers and supporters of #MidlandsHour following the government announcements about grants and funds available to businesses during the Coronavirus outbreak.
Evening #MidlandsHour The good people @MidlandsHour asked me to post the content from an email I sent to all of our clients today relating to Coronavirus and businesses. I’ll try and answer questions too! It’s an ever changing situation, so info today may not apply tomorrow!
— Bradleys Accountants (@BradleysAndCo) March 18, 2020
We’ve since had an update from them with further key information. If you have any further questions or want to keep in touch with Bradleys Accountants for future updates, make sure you follow them on Twitter @BradleysAndCo and join in our conversations on #MidlandsHour, Wednesdays 8pm – 9pm.
SELF EMPLOYED INCOME SUPPORT SCHEME
For those of you who are Sole Traders this scheme was unveiled today 26.03.2020. This is Bradleys Accountants understanding of how it will work based on information gathered this evening. More detail will come to light in the coming days. As the Chancellor said, it will help 95% of people, he acknowledged some of you won’t be helped by this.
- This is a taxable grant of up to £2,500 per month for 3 months.
- The grant will be based on 80% of your average trading profits from tax returns in 2016/17, 17/18 and 18/19.
- If you have only done 1 or 2 tax returns it will be averaged across what HMRC have available.
- If you have not submitted a tax return for 2018/19 as a sole trader then this scheme does not apply.
- Because of the complexities of the system payments won’t be made until early June. They will make 3 months of payments at once. This will cause problems for many, please see the below section on possible ways to ease the pressures on your personal finances.
- If your average trading profits are over £50,000 you are not eligible to this support.
- Do not contact HMRC at this time. Once the system is up and running they will contact you (or ourselves).
- If you have ceased trading and notified HMRC of this you will not be eligible.
- If you started trading AFTER 6th April 2019 I am afraid you currently don’t have any support available. I hope this will change in the weeks ahead. Universal Credit is one option open, see below.
- Currently, you continue to trade during this period, providing you are able to comply with the current Government guidelines at the time. Stay at least 2m away from anyone or work from home where possible.
HOW TO APPLY: HMRC will notify you.
POINTS TO NOTE:
- Because this is taxable, if you continue to trade be aware of the £50,000 threshold for higher rate tax. For some of you the grant of £7,500 may leave you with considerably more tax to pay in January 2022.
BEWARE. This will undoubtedly lead to an increase of scam emails and texts. If you get any message with a link saying you are entitled to a refund – do NOT click on it. Click on to www.gov.uk and proceed from there.
FINANCIAL SHORTFALLS / BUSINESS INTERRUPTION LOAN
As some trades dry up and with sole traders having to wait a few months for their grant it is going to be a tough period of managing personal finances. Here are some suggestions to help out in the short-term.
- Business Interruption Loan Scheme – Originally only made available to companies, in his speech Mr Sunak suggested that sole traders use this scheme in the short-term.
- These loans are interest free for 12 months. Loans are currently available from £10,000 within this scheme.
- You could borrow, say, £10,000 and when your payment arrives in June repay this loan in full without any penalty charges or interest.
- More information here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/
- Your current business bank may be able to help.
- Businesses based in the West Midlands could look here for a loan – https://bcrs.org.uk/coronavirus-loan-scheme/
- Before applying for a loan work out your cash flow for the next 6 months and determine what you need to survive. We will help with this if you need it.
- Consider applying for Universal credit. See below.
- Defer VAT payments until March 2021. See below.
- Defer your 2nd Payment on Account on Personal Tax until January 2021. See below.
- Contact HMRC on 0800 0159 559 if you are going to struggle with any payments to set up a payment plan.
- Talk to your mortgage lender and look to take a 3 month payment holiday. You will accrue interest on the missed payments, but this will not impact on your credit rating.
- Talk to anybody that you have finance agreements and see if they will give a similar holiday. Check with the lender to see if this will impact your credit rating, if it will then please think seriously before doing this.
- Some banks are offering 0% rates on overdrafts for 3 months. Check what your bank is offering. Also check if you are entitled to it before you use it.
- Sky Sports are allowing you to pause your contract. You will still have access to it as I understand.
HOW TO APPLY: All of the above are items you need to apply for.
CIS SUB-CONTRACTORS
Those of you who are deducted tax under CIS can submit the return after 5th April to HMRC to get your refund processed as quickly as possible. That refund will help cover the loss of income until your grant is received in June.
FURLOUGHED WORKERS – DIRECTORS
It is now my understanding that a director could be classed as a furloughed worker. This means that directors will be able to claim a grant from HMRC under the Job Retention Scheme. Please note the section below about employees and working. A grey area for directors who will rarely not be doing anything!
- If you feel that you can be classed as a furloughed worker, as below, please let Irene and myself know from what date you fall into this category.
- 80% of your salary can be claimed back as a grant.
- No dividends or bonuses paid can be claimed.
- So, if you are currently paying yourself £750 per month you will be able to claim £600 per month from HMRC for up to 3 months.
- As soon as available we will claim for the grant from HMRC.
JOB RETENTION SCHEME / FURLOUGHED WORKERS
We now have more details as to how this scheme works:
- A furloughed worker is someone who would otherwise have been laid off because there is no work for them. You can only categorise someone as furloughed if they are not carrying out any work for your company.
- Employers can claim for 80% of a furloughed employees’ usual monthly wage costs, up to £2,500 per month. This is only their wage, not commission, bonuses, etc.
- You can top up the wage should you wish.
- You will also be able to claim the Employer NIC and the standard 3% employer pension contributions.
- The employee’s salary before tax as of 28th February is used to calculate the 80%.
- If the employee’s salary varies, you can claim the higher of the same months’ earnings in 2019 OR the average monthly pay from 2019/20.
- A furloughed employee must have been on your PAYE payroll as of 28th February. This includes full-time and part-time employees, employees on agency contract and employees on zero-hour contracts. Any new starters after this point do not qualify.
- Employees will still be deducted Income Tax and National Insurance.
- You must discuss furloughing with staff. We have a template letter should you require it. Keep a record of these letters.
- If an employee is working, even on reduced hours/pay, you cannot put them as a furloughed worker.
- A furloughed worker remains an employee and is eligible for the same benefits as they would normally receive. This includes SSP, maternity rights, redundancy pay and so on.
- If someone has been on SSP then you can furlough them after that period.
- Claims can be backdated to 1st March.
- Grants should be paid towards the end of April.
- If you made someone redundant after 28th February you can rehire them and furlough them so that they are able to claim 80% of their wages as a grant.
- Furloughed employees can take part in voluntary work elsewhere, so if they have volunteered after the recent request from the government they can be paid.
- If at the end of the government funding the employees are still without work then it may be necessary to make them redundant.
- You must advise us of the start and end dates and the names of furloughed staff.
- You should also advise if you are paying the employee in full or 80% of their salary.
- There will be more work involved in carrying out this furloughing.
- For those who do their own payroll, you will need the following information at the time of claiming: Claim period start and end, number of employees furloughed, amount claimed, bank details, contact details.
HOW TO APPLY: This is not yet live.
POINTS TO NOTE:
- HMRC will likely audit a high percentage of submissions and seek redress for incorrect claims. Ensure you keep accurate records.
- Grants received by your business are classed as income and will count towards your profits and possibly increase your Corporation Tax liabilities.
- Be aware of any employment contract issues around furloughing your staff.
The intent of this scheme is to ensure that employees can get through the coming months without fear of losing their job or most of their income. Please use this scheme as it is intended. I am already aware of some companies (not clients) trying to persuade employees to become furloughed workers but paying them just a statutory minimum (£145) and keeping the rest for the company. I have heard of some companies telling staff they must carry on working on site or in offices or they won’t get paid at all. This is scaremongering. These are trying times for all business owners, but employees too. You can do your bit by using the Job Retention Scheme funding to look after employees.
UNIVERSAL CREDIT
The rules for applying for Universal Credit have been loosened for a short period. In some cases it would be worth you considering applying for this benefit to reduce the shortfall in your income. Detailed information here – https://www.gov.uk/universal-credit
- Must be aged between 18 and your state pension age.
- Have less than £16,000 in savings between you.
- An allowance worth up to £500 per month. There are additional payments if you have children. And also the possibility for help with housing costs and Council Tax.
- Be aware that there are long queues for applying for this benefit at the moment.
HOW TO APPLY: You can do this online via the above page
GRANTS
I understand local councils are starting to contact businesses who are eligible for these grants and payments will follow shortly afterwards.
- If your business pays little or no business rates because of small business rate relief a cash grant of £10,000 will be paid by your council.
- If yours is a retail, hospitality and leisure business with a rateable value of between £15,000 and £51,000 you will receive a cash grant of £25,000.
- The letter from the council will tell you how to claim this grant.
- It is my understanding that this money won’t have to be repaid, just used to help cover business expenses in the short-term.
HOW TO APPLY: Your local council will notify you.
VAT DEFERRAL
Your next VAT payments can be deferred until March 2021 to aid cash flow.
- If you wish to defer your next VAT payment you must cancel your Direct Debit via your bank before the payment date.
- Please remember to reinstate that Direct Debit ahead of the following VAT payment so as to avoid any issues with missed payments.
- If you want to make the payment as normal just leave the DD in place and it will be taken out on the usual date.
- This is a deferral and will remain a debt to be paid at a later date.
HOW TO APPLY: You must cancel your Direct Debit.
PERSONAL TAX
For those of you who have to make Payments on Account towards the following years tax these can be deferred.
- You don’t have to do anything, just not make the payment on the due date.
- Please remember that this money will still need to be paid on 31st January 2021. It is not being cancelled.
HOW TO APPLY: Automatic. You can pay voluntarily if you wish.