Government support for small businesses and the self-employed

The Coronavirus (COVID-19) crisis has impacted us all.  And, whether you run a small business, are a contractor, or are self-employed, there’s no doubt you’ll be facing a mountain of new challenges.

On the 20th March the government announced support measures designed to protect the UK economy.  Since then, further announcements have been made, and more are expected.  To help make it easier to navigate this constantly changing information we’ve put together this COVID-19 hub.

5th May: Top up to Local Business Grant Funds Scheme

4^th April: Company director – updated furlough information

The government has clarified the support available to company directors by the Coronavirus Job Retention Scheme.  According to the government guidance:

As office holders, salaried company directors are eligible to be furloughed and receive support through this scheme. Company directors owe duties to their company which are set out in the Companies Act 2006. Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its individual salaried directors, the board can decide that such directors should be furloughed.

Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would be judged reasonably necessary for the purposes, such as, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.

This also applies to salaried individuals who are directors of their own personal service company (PSC).

Company directors still require further clarification on what is deemed ‘‘reasonably necessary’.  We will provide updates on this, and any other measures announced by the government to support company directors over the coming weeks.

3^rd April: Coronavirus Business Interruption Loan Scheme – Version 2.0

Government has announced changes to the Coronavirus Business Interruption Loan Scheme (CBILS) and hopes to help more ‘viable’ businesses.  So, what’s new?

• The scheme has been expanded to allow more smaller businesses to access the COVID-19 funding they need
• Insufficient security is no longer a condition to access the scheme
• Access has been relaxed to include smaller businesses who may have previously met requirements for a commercial facility but would not have been eligible for CBILS.

How do you prove you’re ‘viable’ and what information will you need to provide?

• Each lender in the scheme has its own process (often an online application). The information your lender will typically require includes:
  • Previous years accounts, management accounts, cash flow forecast, a business plan and details of any assets you can use to secure the lending (if applicable).
  • These requirements will vary from lender to lender, but one thing will remain consistent; you’ll need to prove that you had a profitable business before, and that you’ll bounce back.

It’s important to note that, as with any other bank loan, you will need to be up to date with all HMRC submissions and payments (prior to the Covid 19 crisis).

If you’d like help or would like to discuss these arrangements in more detail, or need assistance with an application, please contact us.

28th March: Wrongful trading rules suspended to help companies trade

Alok Sharma MP (Business Secretary) announced a series of changes to the insolvency rules enabling businesses going through a restructure to continue trading and avoid insolvency. The new rules mean that businesses seeking a rescue package cannot be put into administration by creditors and can continue to trade without the threat of personal liability to company directors.  The legislation will apply retrospectively from the beginning of March, with all other checks and balances that help to ensure directors fulfil their duties properly remaining in force.

26^th March: Self-employed financial support

The Chancellor Rishi Sunak announced a further package of support expected to help 95% of self-employed people (including partnerships).  The package includes:

• Self-employed taxable grant.  Up to 80% of trading profits up to a maximum of £2,500 per month for at least three months
• Trading profits averaged over (up to) last three years
• Unlike furlough, you’ll be able to claim these grants and continue to do business
• The scheme is expected to be open for at least three months
• Eligible to those who have lost trading profits due to COVID-19, and specifically:
• File a tax return for 2018/19 tax year as self-employed or as a member of a partnership.  *Those who have not yet filed for 2018/19 will have an additional 4 weeks from 27th March 2020 to do so*

To be eligible you:

• Must have traded in the 2019/20 tax year, be currently trading at the point of application (or would have expected to be trading were it not for COVID 19) and intend to carry on trading in the tax year 2020/21
• Have profits of less than £50,000 with more than half of total income coming from self-employment. This can be with reference to at least one of the following conditions:  Trading profits and total income in the 2018/19 tax year, Average trading profits and total income across up to the three years between 2016/17, 2017/18, and 2018/19.

*The scheme is not designed to support limited company directors who pay themselves through a combination of salary and dividends.

HMRC has advised that the scheme should be set up and providing payments by early June 2020.  These payments are expected as a lump sum, covering the three applicable months, paid directly into bank accounts.

HMRC will contact eligible businesses and we expect initial letters to land from 15th April onward.

25thMarch: Three-month extension to file accounts

Businesses down on resources and struggling to file accounts with Companies House due to COVID-19 can apply for a three-month extension.

If you’re worried you won’t meet the statutory deadline apply online (before the deadline date) to arrange an extension of up to three months.  This will be granted automatically in these circumstances.

However, if firms that have already extended the filing deadline, or shortened the accounting reference period, may not be eligible.

Late filing penalties will still apply if you don’t apply for an extension and are late.

20^th March: Deferred VAT & Income Tax Payments

The government has announced it will defer Valued Added Tax (VAT) payments for 3 months. This means that if you are self-employed, your Income Tax payments (due in July 2020) will be deferred to January 2021.

VAT

All UK businesses are eligible for an automatic VAT deferral, which will apply from 20th March 2020 until 30th June 2020. All UK businesses are eligible.  This means that your business will not need to make a VAT payment until after 30th June 2020.

You have until end of the 2020/21 tax year (5th April 2021) to pay liabilities that have accumulated during the deferral period.

All VAT refunds and reclaims will be paid by the government in the usual way.

The government is yet to publish a full list of the VAT periods covered, and we are yet to receive guidance on how the deferral process will be managed by HMRC.  Our advice as of right now is:

• submit VAT returns on time – it’s likely HMRC’s late submission process will still apply
• set sufficient cash aside to settle any deferred payments by the end of the tax year (this may be an alternative date HMRC specifies, as yet this is unknown)
• if you are due a refund, no action needed, we expect this to be provided in the usual way
• if you pay by direct debit, intend to defer, cancel your direct debit (remember to reinstate it after 30th June 2020)

You don’t have to defer.  We understand that you can keep paying VAT during the deferral period

Income Tax

31st July 2020 Income Tax Self Assessment payments will be automatically deferred until 31st January 2021 and you do not need to be self-employed to be eligible for the deferment.

No penalties or interest for late payments will be charged in the deferral period, however the deferral is optional. If you wish, you may still pay your account on 31st July if you’re able to do so.

We recommend Self Assessments are submitted by the deadline date. If you are yet to submit for 2018/19 tax year (which was due 31st January 2020) then you are already incurring fines and penalties.  Do not allow these to mount up. The Self Assessment for the 2019/20 tax year (due on 31st January 2021) should be submitted as normal.

20^th March: Coronavirus Job Retention Scheme

The government has announced a ‘Coronavirus Job Retention Scheme’.  The scheme is available from 1st March 2020 and will last at least three months. It’s designed to support all UK employers, and means that , if you’re an employer, you’ll be able to continue part paying employees’ salary for employees that would otherwise have been made redundant during this time of crisis.

To be eligible businesses will need:

• an operational PAYE payroll scheme (since 28^th February 2020)
• to re-designate any affected employees as ‘furloughed workers,’ making sure to notify each of the change
• to provide information about furloughed employees and their earnings through a new HMRC portal (we anticipate details of this in the coming weeks).

The Chancellor also confirmed the following:

80% of an employee’s regular wage or £2,500 per month (whichever is lower), will be covered by the government, in addition to Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the subsidised wage.

This does not include any fees, bonuses or commission.

Employers can choose to ‘top up’ an employee’s salary but are not obliged to do so.

Furloughed works must not carry out any duties during the furlough period.

The government will make the scheme available for at least three months, and it will be expanded if necessary.

HMRC is still developing a system for reimbursement. We expect this by end of April 2020 and will share more details once we receive them.

A full list of the business support measures available can be found on the gov.uk website.

​If your business as been impacted by the Coronavirus (COVID-19) outbreak and you are now struggling financially and operationally to deal with the increasing pressure of debtor, supplier and cash flow management, then we are here to help.