In normal circumstances, discussing matters of tax is rarely any business owner’s favourite subject. However, over the next few months, HMRC will be the single largest source of support available to businesses and the self-employed as all parties continue to feel the impact of coronavirus and a lockdown on movement in the UK.
With Statutory Sick Pay reclaim, VAT deferral, Time-To-Pay (TTP) arrangements, the Job Retention Scheme and the Self-employment Income Support Scheme (SEISS) in place, now is the time to see HMRC as a form of cashflow support in the battle to avoid critical loss of income, redundancies, closure or insolvency.
So what are the options to do so?
This scheme is open to all businesses and will support the payment of wages to staff on their PAYE scheme who would otherwise have been made redundant due to the impact of COVID-19. There is a cap of £2,500 per month per employee and the government will cover 80% of the cost.
While the finer, practical details of the scheme are still being finalised, staff must be “furloughed” or temporarily laid off to be covered. This means that the staff cannot continue to work for the business and must be notified of their change in status, which remains subject to employment law.
You can find guidance to claim for wage costs through the Coronavirus Job Retention Scheme on the GOV.UK website by clicking here.
Inform staff that this measure is being taken to protect their longer-term employment and allow payment of their wages in the short-term. Request their voluntary agreement to this change in their status and consider if you will need to reduce their wages in the period they are furloughed.
It is not yet possible for businesses to make a claim under this scheme as the HMRC portal is currently being set up. The cash funding is unlikely to be available before late April and, given this will be a new system with significant demand, we can see payment of claims being delayed until May.
If you have already laid off staff, the backdating of the scheme to 1 March 2020 will potentially allow those employees to be retained and paid a wage. The scheme initially covers wages incurred to 31 May 2020.
Expected to be operational by June 2020, this scheme will be open to the self-employed and members of partnerships, providing a taxable grant worth 80% of personal trading profits up to a maximum of £2,500 per month for at least the next three months. This will be particularly relevant where a business uses subcontractors or freelancers as it will provide those suppliers with support whilst the business’ cash flow is tight.
To be eligible profit must make up more than half of the individuals taxable income and a self-assessment tax return for the 2018-19 tax year, must be submitted. Trading must also have continued to the current tax year and ultimately have lost profits due to COVID-19.
The SEISS will apply to those with average taxable profits of less than £50,000 over the last three tax years or with trading profits less than £50,000 last year.
The scheme will operate online, with those eligible being contacted directly by HMRC with application details.
For Income Tax Self-Assessment, payments due on the 31 July 2020 may be deferred until 31 January 2021.
No business in the UK will need to pay their VAT returns that fall due between 20 March 2020 and 30 June 2020. There is no need to contact HMRC as this is automatic and businesses have been advised to cancel their direct debit. The amount owed will need to be cleared by 5 April 2021.
For any VAT which was due before 20 March 2020, PAYE/NIC or corporation tax HMRC is offering support through its existing TTP arrangement scheme.
Should you miss a payment or expect to have challenges meeting your next payment, contact the HMRC’s helpline on 0800 0159 559.
Given the current uncertainty, it may be very difficult to forecast when payments can be made and it may be necessary to request a long delay before commencing payments – especially if a business is mothballed.
Businesses with fewer than 250 employees (as of 28 February 2020) can reclaim SSP for up to 14 days per employee as long as their absence is due to COVID-19, be it because they have symptoms themselves, in their household, are vulnerable or caring for others with symptoms. SSP should be paid to staff (and can be reclaimed) from day one of the absence.
The scheme is not yet in place to make reclaims. However, it will have retrospective effect to 13 March 2020.
The coronavirus outbreak is likely to affect everyone’s day-to-day lives and the impact of this will vary from person to person. It’s important to take care of your mind and body, and to seek further support if you need it. Advice and information has been published on the GOV.UK website on how to look after your mental health and wellbeing during the coronavirus outbreak, along with an easy-to-read guide with useful tips.