Coronavirus – Chancellor’s Announcement – 20th March

On Friday 20th March, the Chancellor announced further unprecedented measures, with the aim of helping businesses and individuals alike protect themselves financially during this period of uncertainty.

Coronavirus Job Retention Scheme

The first measure announced was the Coronavirus Job Retention Scheme – meaning that for the very first time, the government is going help employers to pay their staff wages.

The chancellor has made it clear that any employer in the country will be eligible for this scheme, and the application for the grant will be made via HMRC.

While the grant won’t cover the full cost of the wages, the government is pledging to cover 80% of the salaries for retained workers up to a total of £2,500 per month. The employer will then have the choice to top up the remaining 20% if they wish to keep paying their staff their full monthly wage.

The scheme will be backdated to 1st March, and the chancellor has indicated that it will be open for at least 3 months – with scope to extend this if necessary.

There is also no set limit on the amount of funding available, to ensure that as many jobs are protected during this time.

What this means for businesses is that they will be provided with the means to keep their staff in employment, rather than letting staff go. This will be of benefit to both the business, and the individual employee, by providing peace of mind and financial security.

We await further announcement from the chancellor as to when this scheme will be up and running, with initial estimates running at the end of April. The difficulty that HMRC are facing is that this is the first time such a scheme has been announced in the UK, and there are no existing systems to support it.

Coronavirus Business Interruption Loan Scheme

As many businesses will not be able to wait until the end of April to support their ongoing staff costs, the chancellor has announced that he will be expanding on the Coronavirus Business Interruption Loan Scheme – which is available to UK based businesses with a turnover of no more than £45mil per year.

To lessen the burden of repayments, any loan taken out under the scheme will now be interest free for 12 months, rather than the 6 months originally stated.

The amount of finance available to businesses has also been increased from £1.2mil to £5mil.

The loans will be backed by the government, with a guarantee of 80% on each loan. By providing this, the government is giving lenders that much needed confidence and security in providing finance to businesses – making it easier for a business to secure funding.

To access a loan under the scheme, a business should speak to their bank or business provider at the earliest opportunity.

These loans will be available from Monday 23rd March, and full qualifying criteria will be provided once the scheme goes live. The existing criteria, set out by the British Business Bank can be found here.

COVID-19 Financing Facility

For larger businesses who do not qualify for the loan scheme, support is still available. Under the ‘Covid-19 Corporate Financing Facility’ the Bank of England will purchase short-term debt from these larger companies – this supports businesses who may have been faced with short-term cashflow issues due to the pandemic. The aim here is also to support corporate finance markets, and make it easier for businesses to access credit.

This scheme is expected to run for 12 months, and will also become available in the week commencing 23rd March, with full details on how to access it to be announced.

Further details on the Covid-19 Corporate Financing Facility can be obtained via the Bank of England.

VAT Payment Deferral

To assist businesses in managing their cashflow over the next few months, the government has made the decision to defer the next quarter of VAT payments for UK businesses.

This means that between now and 30th June, no business will be required to make a VAT payment to HMRC. Additionally, business will have until the end of the financial year to repay those bills.

It’s worth pointing out that this only applies to UK businesses, and any non-resident UK VAT registered business will be required to pay their liability by the usual deadline.

No application is necessary to defer VAT payments – HMRC will not chase any outstanding payment arising during this quarter until the end of the 2020-21 financial year.

During this period, businesses will still be required to submit their returns on time.

Time to Pay Service

In an effort to help businesses and the self-employed who may face difficulty in paying their tax liabilities, HMRC is stepping up their ‘Time to Pay’ service. Any business or individual who is unable to pay their tax due to COVID-19, should contact HMRC’s dedicated helpline on 0800 0159 559.

Each case is assessed individually, and the outcome depends on individual circumstances and the liabilities outstanding.

Business Rates Holiday & Cash Grants– Retail, Hospitality & Leisure Businesses

The government has announced that they are abolishing business rates for businesses that fall under these categories for the 2020-21 tax year. This means that no business rates will be payable at all by these businesses.

This will be a welcome measure, given the government’s recent announcement that all restaurants, cafes, pubs, bars, nightclubs, cinemas, gyms and leisure centres in the UK are to close in an effort to contain the spread of the Coronavirus.

There is no application process required, and your local authority will issue you with a council tax bill excluding the business rate charge. If you have already received your bill for the upcoming tax year, an updated version will be reissued as soon as possible.

In a further effort to assist retail, hospitality and leisure business, the government is offering a cash grant of up to £25,000 per property (although this is reduced to £10,000 for businesses with a rateable value of under £15,000)

You do not need to take any action to access this scheme, as your local authority will write to you if you meet the eligibility criteria. The government is due to issue guidance to local authorities imminently to start the process.

Small Business Grant Scheme

If you are a small business that already pays little or no business rates, due to small business rate relief, rural rate relief, or tapered relief, you are eligible for a one-off grant of £10,000 to assist with ongoing business costs under the Small Business Grant Scheme.

To be eligible for this scheme, you must be a business based in England that occupies property, and already receives small business rate relief/rural rate relief.

If you meet these criteria there is no action for you to take – your local authority will write to you once they have received guidance from the government.

Help for Individuals & the Self-Employed

Income Tax

The government will be deferring any Self-Assessment (Income Tax) payments due by 31st July to 31st January 2021 – there will also be no interest or penalties for late payments during this period.

There is no application process required, and you will not be chased by HMRC for any late payments on amounts originally due by 31st July so long as they are paid in full by 31st January 2020.

While this measure applies to any payments on account due in July, if you are currently facing difficulty in paying outstanding tax liabilities you should contact HMRC’s ‘Time to Pay’ service on 0800 0159 559.

Amendments to Universal Credit

The chancellor has announced that he will be making adjustments to the existing Universal Credit scheme to ‘strengthen the safety net’, which include:

  • Increasing the standard allowance, for the next 12 months, by £1,000 per year
  • Increasing the standard Working Tax Credit basic element, for the next 12 months by £1,000 per year.
  • To help the self-employed, the government is removing the minimum income floor used to calculate Universal Credit. This will enable the self-employed to receive as much financial assistance as possible, at the rate equivalent to Statutory Sick Pay.

Under new measures, you can now apply for Universal Credit online or over the telephone. You will no longer need to attend an interview, and you can receive a month’s advance up front to assist with living costs.

You can apply for Universal Credit here by visiting the dedicated Gov.UK webpage.

Mortgage Payment Holiday

If you are struggling, or will struggle, to make mortgage payments due the COVID-19 outbreak, the government has acted to ensure those who need it will have access to a payment holiday.

Should this apply to you, you will need to contact your lender to discuss your situation as soon as possible. It should be mentioned that you are not guaranteed a payment holiday, but if one is granted the unpaid interest will still be payable at a later date.

Payment holidays taken under these circumstances will not impact your individual credit rating.