COVID-19 Financial Support

Please find below details of the major Government schemes available for individuals and businesses to support them financially during the COVID-19 crisis.

Should you have any questions, please contact us as soon as possible. 

 

For Individuals:

Mortgage Holiday / Tenants to not be evicted

On 17th March, it was announced that anyone facing financial distress due to the crisis will be eligible for a three-month mortgage holiday. Details as to how this will be implemented are yet to be announced, although this follows the announcement last week that RBS, Lloyds and TSB would allow mortgage holidays which would be assessed on a case by case basis. 

It would appear that whilst the interest will continue to run on the mortgage and which will be caught up with later on, the payment holiday may be assessed as an agreed holiday and should not affect your credit rating. We would suggest that you confirm this with your lender of course.

It has now been clarified that mortgage holidays will be available for residential mortgages and also for landlords with buy to let mortgages who are providing residential property to private tenants.

For those renting properties and struggling with rental payments, evictions are to be banned for at least three months (announced on 18th March).

 

Self-employed Income Support Scheme

The Chancellor, Rishi Sunak, has this evening announced a new Self-Employed Income Support Scheme to help financially support the majority of self-employed individuals in the UK.

The scheme will provide a taxable grant to self-employed individuals of 80% of average monthly profits up to a maximum of £2,500 per month, with the scheme to run initially for a period of 3 months.

The average monthly profits will be calculated from the profits of the last 3 submitted tax returns, although will be based on shorter periods where the person has been self-employed for less than the full 3 years.

To be eligible for this scheme, you must:

  • Have been registered as self-employed in the 2018/19 tax year
  • Have submitted your 2018/19 tax return
  • Have the majority of your income from self-employment
  • Have self-employed profits of up to £50,000

If the 2018/19 tax return has not yet been submitted, there will be a window of 4 weeks from 26th March 2020 to submit the tax return to obtain eligibility to the scheme.

All those eligible will be contacted by HMRC directly and asked to complete an online form to request the payment of the grant. The payment will be made directly to their nominated bank account.

It is expected that the first payments will be made in June 2020, but this will be comprised of 3 months of average monthly profit in one payment.

Those who are not eligible for this support will still be able to consider support via Universal Credit or the Coronavirus Business Interruption Loan Scheme, as well the deferral of July payments on account and mortgage payment holidays.

Those who pay themselves a salary and dividends through their own company are not covered by this scheme, but they will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes, and they can be furloughed.

It was however also mentioned that tax and National Insurance contributions for the self-employed may be increased to be in line with those of employees in the future.

 

Self-assessment - July payments on account deferred

The next payments for self-assessment would usually be due at the end of July, but these have also now been automatically deferred until January 2021. There is no requirement to apply for this deferment, and is available for all self-assessment taxpayers with payments on account due in July 2020.

This will of course mean that payments now due in January 2021 may be significantly higher and we would suggest that your self-assessment tax returns for the 2019/20 tax year are prepared as soon as possible in order that you may be able to prepare – as well as possible in the current circumstances – for this payment.

 

Universal Credit and Working Tax Credit

These will both be increased by £1,000 per annum with immediate effect.

Employed and self-employed individuals (including directors of owner-managed companies) may be able to apply for Universal Credit if they are 18 years old or over, under State Pension age, live in the UK and have less than £16,000 in savings between them and their partner.

More information including how to find our if you are eligible can be found at www.gov.uk/universal-credit

               

For Individuals and Business:

Dedicated HMRC Time to Pay Helpline

Anyone who is in financial distress caused by the fallout from Coronavirus and has outstanding tax liabilities, or has tax liabilities approaching in the next few weeks, can call the dedicated HMRC helpline on 0800 024 1222 to arrange a deferred payment plan.

  

For Business:

Coronavirus Job Retention Scheme

All employers will be able to apply to receive a grant to pay 80% of the wages of any employees who have been furloughed, and would otherwise be at risk of being laid off, up to a maximum of £2,500 per employee per month.

It has been confirmed by HM Treasury that directors of owned-managed companies without work will be able to furlough themselves provided that they are paid through a PAYE scheme and that this had been in operation on 28th February 2020. Statutory duties of a director will not be counted as work, so the statutory duties may continue whilst the director is on furlough. Note that the scheme does not cover anything taken as dividends.

The reimbursed amount will cover the gross wages (including PAYE and Employee's National Insurance) of any furloughed employees up to the maximum stated above, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.

For salaried employees, the actual salary before tax as of 28th February 2020 should be used to calculate the furloughed amount. Do not include commissions, fees or bonuses.

For employees with variable wages, the higher of the following can be used for the furlough calculation:

  • the same month's earning from the previous year
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, use the average of their monthly earnings since the started work for the business.

This measure will be backdated to 1st March 2020 and initially apply for a period of 3 months. Details of how to apply via HMRC - expected to be an online portal - will be available shortly, with the first grants expected to be paid before the end of April.

Anyone who was employed on 28th February 2020 - but who has since been made redundant as a result of Coronavirus - may have this employer apply for the grant on their behalf, provided that employer is able to take that employee back on as furloughed (as if the redundancy did not take place).

Employers will be free to top up the payments to 100% as they wish, but they are not obliged to.

Please do seek assistance from your HR or employment law adviser as Employment Law will still apply, and some contracts may have to be negotiated further before an employee is furloughed.

 

Coronavirus Business Interruption Loan Scheme (“CBILS”)

In the Budget last week, the Government announced that it would launch the Coronavirus Business Interruption Loan Scheme (“CBILS”) to help SMEs with cashflow issues. The details of this scheme are still being hammered out - with the expectation that this will be readily available to eligible businesses from the start of next week - but below we have included some of the key details and criteria.

CBILS encourages lending to viable UK businesses that would otherwise be turned down for a loan or other form of debt finance, due to inadequate security.

It does this by providing accredited lenders with a Government-backed guarantee for 80% of the funding amount (subject to some limits below), and covers all of the following funding options:

  • Overdrafts
  • Invoice finance facilities
  • Asset finance facilities
  • Term Loans

To be eligible for support via CBILS, your business must:

Be UK based, with turnover of no more than £41 million per annum

Operate within an eligible industrial sector (a small number of industrial sectors are not eligible for support – see list of ineligible business sectors)

Have a sound borrowing proposal but have inadequate security to meet a lender’s normal requirements

Be up to date in respect of any accounts and tax filings due (even if tax is not necessarily fully paid)

Be able to confirm that they have not received other public support of de minimis state aid beyond €200,000 equivalent over the previous three years

CBILS guarantees facilities to fund the future growth or expansion of a business from £1,000 to £5 million (increased on 17th March from £1.2million as announced in the Budget). Finance terms are from three months up to 10 years for term loans and asset finance and up to three years for revolving facilities and invoice finance.

No interest will be due for the first 12 months of any CBILS backed lending.

How to Apply?

Any small business interested in CBILS should, in the first instance, approach one of the 40+ accredited lenders with their borrowing proposal. Note that a business plan and financial forecast will be required and we can assist you with this if you wish. We recommend that existing available plans are used as a starting base point to illustrate the impact of the virus on the trading and cash flows of the business.

If the CBILS lender can offer finance on normal commercial terms without the need to make use of CBILS, they will do so. Where the small business has a sound borrowing proposal but no, or inadequate security, the lender will consider the small business for support via CBILS.

Please contact us if you require assistance in your application for funding as we have a number of relationships with lenders who may be able to assist. 

 

Larger firms - Covid-19 Corporate Financing Facility

To support liquidity amongst larger firms, a new lending facility - Covid-19 Corporate Financing Facility (CCFF) means that the Bank of England will buy short-term debt from larger firms, who are in otherwise sound financial health but suffering short-term cashflow difficulties.

The CCFF will operate for at least 12 months and for as long as assistance is required to relieve cash flow pressures on larger firms. 

The minimum size of funding per firm will be £1million and all offers must be rounded to the nearest £0.1million.

To obtain further details, it is recommended that you first discuss your options with your current bank, but our Corporate Finance specialists will also be able to offer their assistance if you wish to access this funding.

 

VAT payments to be deferred

VAT payments due between 20th March and 30th June 2020 are to be deferred automatically, with businesses then given until the end of the 2020/21 financial year (i.e. 31st March 2021) to catch up with any deferred liabilities.

VAT returns should continue to be filed in the normal manner in the meantime, and any VAT refunds during this time will continue to be honoured.

If you currently pay your VAT by Direct Debit, it is recommended that this is cancelled to ensure that payment is not automatically taken.

   

Business Rates Holiday and Grants

All businesses in the retail, hospitality or leisure sector will be provided with a 12-month business rates holiday

In addition, those businesses in these sectors with premises on which the rateable value is less than £51,000 (and are not eligible for Small Business Rates Relief) will be eligible for a cash grant of up to £25,000. As with all grants, this will not be repayable.

Any enquiries on eligibility for, or provision of, the business rate relief should be directed to the relevant local authority.

For those businesses – in any industry sector - who already qualify for the Small Business Rates Relief in England and thus pay no business rates, a cash grant of £10,000 will be available. This figure was increased on 17th March from £3,000 as announced at the Budget.

Local authorities will contact all businesses who are eligible for Small Business Rates Relief automatically and there will be no need to apply for this. Funding for the scheme should be provided to local authorities in early April.

 

IR35 Update – Private Sector Off-Payrolling Delayed

The off-payrolling rules that would have been applied to private sector contractors has been deferred by one year to commence from 6th April 2021.

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