Offering business guidance and action planning during these uncertain times.
The spread of the Coronavirus (COVID-19) continues to dominate the news, with major implications for businesses across Sussex, the UK, and the World.
The current economic conditions mean businesses are having to trade under extremely challenging and unprecedented conditions. We would urge businesses foreseeing a requirement for additional support or finance to act promptly, even as a precautionary measure.
Our approach to managing the impact
Our priority is the health of our staff and clients, and we are taking actions to help keep our workplace healthy, while maintaining our high levels of customer service.Read our full statement
Government support for businesses summary
The Government continues to announce new measures to support businesses during the COVID-19 outbreak.
The latest announcement from the Prime Minister on 31st October sees England enter a four week ‘stay at home’ order, effective from 5th November.
Coronavirus Job Retention Scheme (CJRS)
The Coronavirus Job Retention Scheme (CJRS), which was due to end on 31st October, has now been extended to the end of March 2021. This means that employers can carry on furloughing their employees and claiming a furlough grant from the government throughout this period.
The CJRS will broadly follow the same rules as they stood in August, where employers can furlough (wholly or partly) their staff and pay at least 80% of their usual pay for hours they did not work in the pay period. The employer can then reclaim 80% of an employee’s wages for unworked hours back from the government (up to a cap of £2,500), although the employer is required to pay employer pension and employer national insurance costs without reimbursement, in addition to an employee’s pay for worked hours.
In November the main difference to the scheme is that the criteria for staff being furloughed has now changed – employees are not required to have been on a CJRS claim previously, and the scheme is also now open to employees who were employed at 30th October 2020 and were included on the employers payroll on or before 30 October 2020 (and notified to HMRC via an RTI submission on or before 30 October 2020). This could potentially mean that you are now able to furlough employees who were previously not eligible for the furlough grant.
Further detailed guidance from the government is expected on 10 November. Therefore at this stage, specific details of the calculation and the date when claims can be submitted cannot be confirmed.Find out more about the CJRS
Job Support Scheme (Open) and (Closed)
The Job Support Scheme Open and Closed which was due to commence 1 November 2020 has been delayed until the CJRS has ended.
The Job Support Scheme (JSS) was amended on Thursday 22nd October by the Chancellor. The key changes are as follows:
1) The JSS is being split into two different types:
- The JSS (Open) for employers who are suffering decreased demand
- The JSS (Closed) for employers whose premises have had to close due to legal restrictions
2) Large employers will have to show reduced sales to use the JSS (Open)
Large employers with more than 250 employees will have to be able to show that their “income” has remained equal to, or been negatively affected, compared to the same period in 2019.
In practice, it is expected that this will be carried out by using VAT returns which are to be filed from 31 August 2020 to 7 November 2020 and comparing those to the VAT returns for the same period in 2019.
3) No JSS claims by large employers where shareholder distributions made
The guidance states that where large employers (i.e. those with >250 employees) are claiming JSS (Open) or JSS (Closed) then they will not be able to make capital distributions in the form of dividends, charges, free distributions or any equivalent payment a partnership may make to its partners.Find out more about the JSS (Open) and (Closed)
Self-Employed Income Support Scheme (SEISS)
The third Self-Employed Income Support Scheme (SEISS) grant will cover 80% of average monthly trading profits (up to £7,500) for the period from November 2020 to the end of January 2021.
An additional grant, which may be adjusted to respond to changing circumstances, will cover February 2021 to the end of April 2021.Find out how to make a claim
How to qualify
In order to qualify for SEISS the individual must have satisfied all of the following:
- Income tax return for 2018/19 must have been submitted by 23 April 2020
- Must be self-employed or a member of a partnership
- Must have traded in the 2019/20 tax year
- Must be intending to trade in the 2020/21 tax year
- Must be trading at the time the grant application is made, or would be trading if it weren’t for COVID-19
- Trading profits from self-employment must be at least 50% of total income
- Trading profits from self-employment must be less than £50,000 in the 2018/19 tax year OR less than £50,000 on average over the 3 tax years 2016/17 – 2018/19
- Must have lost trading profits due to COVID-19
This scheme does not apply to company owners or directors who pay themselves dividends. However, company directors can be furloughed on the Coronavirus Job Retention Scheme just like other employees.
Bounce Back Loan Scheme (BBLS)
BBLS is a small loan scheme launched on 4th May 2020 for businesses experiencing cashflow disruption as a result of the COVID-19 outbreak. The scheme is aimed at providing access to loans from £2,000 up to 25% of a business’ turnover, capped at a maximum loan of £50,000.
The scheme is delivered through a network of accredited lenders. Lenders receive a 100% government-backed guarantee, as such lenders cannot take personal guarantees or take recovery action over a borrower’s personal assets. However, the borrower remains 100% liable for the debt.
BBLS loan terms are set at 6 years with no capital repayments during the first 12 months, and interest rates fixed at 2.5%per annum. While BBLS loans are have a 6-year term, early repayment can be made without early repayment fees. Interest for the first 12 months of the loan is paid by the government via Business Interruption Payments (BIP).Find out more about the Bounce Back Loans
Coronavirus Business Interruption Loan Scheme (CBILS)
As with BBLS, CBILS provides financial support to SME businesses experiencing cashflow disruption as a result of the COVID-19 outbreak. It is being delivered by the British Business Bank.
The main support is as outlined:
- Loans of up to £5m are available to SMEs
- Support can be in the form of term loans, Invoice or Asset Finance or overdrafts
- Security is 80% backed by the Government and will not be charged to lenders or businesses
- First twelve months of interest rate and lender-levied charges covered
To be eligible for lending the business must:
- Be UK based with a turnover of less than £45m
- Operate within an eligible sector and generate more than 50% of turnover from trading activity
- Have a sound borrowing proposal but insufficient security to meet a lender’s normal requirements
From 30 July 2020, criteria around the classifications of businesses in difficulty changed following recent EU changes in State Aid Law around the test for businesses.
Updates to CBILS:
- No personal guarantees in any form for facilities under £250k
- Personal guarantees for facilities above £250k (capped). Personal guarantees may still be required (lender’s discretion) but recoveries under these are capped at a maximum of 20% of the outstanding balance of the CBILS facility after the proceeds of business assets have been applied.
- A Principal Private Residence (PPR) cannot be taken as security to support a personal guarantee or as security for a CBIL backed facility.
- Insufficient security no longer a condition to access the scheme. CBILS can now support lending to smaller businesses even where a lender considers there to be sufficient security, making more smaller businesses eligible to receive the business interruption payment.
Coronavirus Large Business Interruption Loan Scheme (CLBILS)
For mid-sized and larger UK businesses suffering disruption due to the Covid-19 outbreak and with turnover of more than £45m, CLBILS provides finance facilities of up to £200m for term loans and revolving credit facilities, or up to £50m for invoice finance and asset finance facilities. Finance terms under CLBILS are for 3 months to 3 years.
As with the other schemes, CLBILS is delivered through a network of accredited lenders who receive a 80% government-backed guarantee, with the borrower remaining 100% liable for the debt.
Businesses looking to apply for CLBILS will need to have a borrowing proposal which the lender would consider viable, were it not for the current pandemic, and for which the lender believes the provision of finance will enable the business to trade out of any short-term to medium-term difficulty, supported by other financial documentation.
Those borrowing more than £50m will be subject to restrictions on dividend payments, senior pay and share buy-backs during the period of the loan.
The Future Fund will support innovative UK companies who typically rely on equity investment, have been hit by the effects of Covid-19 and have been unable to access other Government business support programmes because they are either pre-revenue or pre-profit.
The scheme is open for applications until 31 January 2021.
How it works:
- Applications to be submitted via an online platform.
- The Future Fund programme is investor led. An application on the platform is initiated by a lead investor who will provide information about itself, other investors and the company.
- The company confirms that the information is correct and then submits the application.
- Funding will be provided by way of a convertible loan of between £125k and £5m, with third-party investors at least matching the Government commitment.
- The loan will be subject to an interest rate of at least 8% per annum which will accrue until the loan converts.
- The loan will mature after a maximum period of 36 months.
- The loan will automatically convert into equity on the company’s next qualifying funding round, or at the end of the loan if not repaid.
- Companies must be UK-incorporated and if part of a corporate group, only the parent company is eligible.
- Companies in receipt of the loans will be required to have previously raised at least £250k in equity investment from third party investors in the last five years.
- Only eligible companies that can attract at least 50% of third-party investment will receive funding.
- Companies cannot have any of their shares traded on a regulated market or other listing venue.
- The company must have been incorporated on or before 31st December 2019.
At least one of the following must be true for the company:
- Half or more employees are UK based;
- Half or more revenues are from UK sales.
During the recent Budget, the Chancellor announced help for businesses struggling because of the Coronavirus.
HMRC has set up a dedicated COVID-19 helpline to help those in need. To ensure ongoing support, HMRC have made a further 2,000 experienced call handlers available to support firms when needed.
The number for HMRC’s dedicated helpline is 0800 0159 559.
Make sure you have the following information to hand for that call:
- VAT or UTR number
- The amount of the debt on file (so you must have submitted and not paid the VAT return)
- The number of staff employed and what the payroll costs are for the next 6 months to a year
- What overdraft facility is available
- What the directors/partners/sole prop are doing personally to support the debt (eg, business loans and funding)
- Cash flow projections and plans of how to support business continuity
Statutory Sick Pay Relief Package
In response to the coronavirus outbreak, new Regulations known as The Statutory Sick Pay (General) (Coronavirus Amendment) Regulations 2000 came into force on 13 March 2020. These will remain in force for a period of 8 months.
The government will bring forward legislation to allow small and medium-sized businesses (SMEs) and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- This refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
- Employers with fewer than 250 employees will be eligible. The size of an employer will be determined by the number of people they employed as of 28 February 2020.
- Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
- Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
- The eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to self-isolators comes into force.
- The Coronavirus Statutory Sick Pay Rebate Scheme launches Tuesday 26 May.
Business Rates Holiday
The Government has proposed a 12-month Business Rates holiday for the retail, hospitality and leisure business in England for the 2020 and 2021 tax years. Any business receiving this holiday should have been re-billed by their local authority.
HMRC Time to Pay
The Government is highlighting it’s Time to Pay Scheme whereby all businesses with outstanding tax liabilities may be eligible to receive support in extending their payment terms.
A Time To Pay arrangement is an instalment plan agreed with HMRC that allows businesses to temporarily bridge financial difficulties in paying their tax on time.
Time to pay arrangements allow businesses to spread the payment of outstanding tax liabilities over a period of normally 3-6 months and exceptionally may allow up to 12+ months.Find out more about Time to Pay
All VAT payments due between 20 March and 30 June 2020 will be automatically deferred until 31 March 2021 – details of how to pay will follow at a later date. Business can choose to pay VAT normally if they wish.
The scheme does not cover sales of digital services in the EU (VAT MOSS).
This deferral will apply to all businesses and there is no need to contact HMRC. However, any business that pays VAT by Direct Debit must cancel it, otherwise HMRC may collect VAT due as normal.
For the avoidance of doubt, VAT returns should still be submitted on time as usual. For any business that is unable to file on time, a default surcharge may apply, though there may be grounds to appeal assuming it is COVID-19 related.Find out more about the VAT Deferral Update
Individuals within Self Assessment can apply online to spread their 2019/20 tax liability, without the need to call HMRC.
Unlike the July 2020 payment on account, this is not an automatic deferral of the tax.
Any clients wishing to make such an arrangement would need to use the online self-serve Time to Pay service through gov.uk to set up a direct debit. This can only be done once their 2019/20 return has been submitted. The liability must be paid in monthly instalments over a maximum of 12 months.
The following requirements must be met:
- no outstanding tax returns
- no other tax debts
- no other HMRC payment plans set up
- Self Assessment tax bill between £32 and £30,000
- it is no more than 60 days since the tax was due for payment
If a client does not meet the above conditions, a Time to Pay arrangement might still be possible, but they would need to call HMRC to set this up.
Interest applies to all Time to Pay arrangements and will run from 1 February 2021, until the liability is settled.
Extension to MTD ‘digital links’ deadline
Due to the impact Covid-19 is having on businesses, HMRC have granted an extension for those businesses participating in Making Tax Digital for VAT, meaning that those required to have ‘digital links’ within their record-keeping, now have until 1 April 2021. Businesses now have until their first VAT return period starting on or after 1 April 2021 to implement digital links.
Information for businesses
Information on funding
Information for individuals
Information for sectors
Coping with Covid Podcast
The Retirement Gym Podcast has released a special 2-part series entitled ‘Coping with Covid’.
Part 1: Business
Part 2: Individuals
In Part 2, Roy is joined by Kelvin Riches, a Chartered Financial Planner at MHA Carpenter Box Wealth Management. Kelvin speaks about what individuals can do to help with their personal finances during the Coronavirus crisis.
Financial Planning Webinar
On 17 April 2020, Roy Thompson (Partner) and Kelvin Riches (Chartered Financial Planner) from MHA Carpenter Box Wealth Management held a webinar discussing what individuals can do to help with their personal finances, including investments, savings and financial assistance provisions available.Watch the webinar
Our team are ready to assist any of our clients who may need our help.
If you are worried about your business or your finances, please get in touch on 01903 234094 to speak to one of our professionals, or get in contact with your usual MHA Carpenter Box contact.
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