Chancellor Rishi Sunak announced several measures to support both employees and businesses during our current lockdown. Health is obviously everyone’s priority concern, as we face the Covid-19 epidemic.
But individuals also need the financial security of knowing where their next pay check is coming from. And those businesses that are non essential and now closed need to face their new financial reality.
The Chancellor’s main support strategies so far are grants to cover furloughed workers and the deferment of certain tax payments. Let’s have a look in more detail.
Furloughed, instead of sacked, employees
The Coronavirus Job Retention Scheme means that businesses badly affected by the current closures can apply for a government grant in order to keep paying their staff. The grant will cover 80% of employees’ monthly salary, up to £2,500 maximum. There is no limit to the amount of this grant businesses can apply for.
This is backdated to March 1st and will be available for at least three months, with the potential for it to be extended as needed.
As Mr Sunak said, this scheme is “unprecedented for a government of this nation.”
Interest free business loans
The new Coronavirus Business Interruption Loan Scheme has been extended to 12 months interest free, from the initial six months. These loans are available immediately.
Eligibility for these loans is quite clear: “The Coronavirus Business Interruption Loan Scheme (CBILS) supports small and medium-sized businesses, with an annual turnover of up to £45 million, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to 6 years.”
You must be based in the UK and have “a borrowing proposal which the lender would consider viable, if not for the coronavirus pandemic.”
Business Rates Holiday
Any businesses in the leisure, retail and hospitality sectors will not have to pay business rates for 12 months.
Deferred VAT payments
No business will need to pay VAT from now until June, with the payment deferred until the end of the 2020-21 tax year. There is a precedent for this action. During the foot and mouth disease outbreak, the government of the day did the same thing for businesses in the framing sector. It is the simplest, and therefore the quickest, way of keeping that money in businesses now. Rather than trying to implement any changes to VAT rates.
Mr Sunak said this is “a direct injection of £30bn of cash to employers, equivalent to 1.5% of GDP.”
The detail of the document is clear: “This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.”
VAT refunds and reclaims will be paid by HMRC in the usual way.
Deferred self assessment income tax payments
The next self assessment payments on account are due on 31st July. The government has decided move this deadline to January 2021. This should help some self employed people.
The minimum level for Universal Credit has been taken away, so it’s accessible to self employed people at the same level as employed people under PAYE.
Also, the IR35 in the private sector regulations will no longer start this month, but are postponed until next year.
What do you think?
Most people are welcoming the support from HMRC and the Chancellor. For example, the chief executive of the ICAEW, Michael Izza, said: “The real battle now is for public confidence: if we can sustain that, the economics will follow. The chancellor’s announcement of direct action by government to keep people in employment is a really good start. This should make a difference to how people feel, and keep them working and spending.”
Mr Sunak has made it clear that things are being reviewed and updated at speed. There are always groups that are accidentally left out, or not prioritised initially. If you feel that you are in this category, don’t assume that help isn’t coming. Check all of the government information, which is listed here. If you’ve got questions about your business and its eligibility for government help, you can always give us a ring. We’re still here, on the end of the phone, appropriately socially distanced.
There is no instruction manual for anyone to follow during this crisis. We have to work on the assumption that everyone is doing their best. You are doing your bit by following all the health instructions and by taking stock of your financial position. Figure out what’s best for you and your business. We’ll do our best to answer any questions and we know that HMRC are working incredibly hard to get things in place for everybody.
Stay safe.
