As promised, here’s this week’s update on how we see the state of play – including changes from our last circular on 30 March
There’s less updated information to report this time
Please see the caveat at the foot of this email
HMRC & other scams
A reminder to everyone to be hyper-cautious about and communications purporting to originate from HMRC
In normal times (remember them?), HMRC do not contact any taxpayers by email and generally do not have an open email channel for communications inwards either (apart from for VAT). As there are so many grants and claims about to start being processed in the coming weeks, it’s golden opportunity for scammers to attempt either to get you to click on a link for a viral upload or to try to elicit your bank details. The “usual” scam emails about fake tax repayments are doing the rounds again but with the forthcoming claims for grants, SEISS and CJRS, you and any employees need to be extra careful not to follow these in a moment of reduced concentration. If in doubt about the validity of an alleged HMRC email, do please contact us first
Keep in touch with your customer base. It is very likely that there will be delays to delivery to your customers, so let them know in advance to avoid frustration and loss of goodwill
Let your staff know your policy on self-isolation and their pay – see below. If they are able to work from home, also ensure that they have the equipment and support they need as it’s going to be difficult for them to adjust if they are not used to working from home.
You can keep in touch with a call or Skype / WhatsApp video meeting and there are multiple video conferencing apps (such as Zoom) while those operating from multiple locations may be able to set up remote links (to access office based IT) as well as tools like MS Sharepoint / Teams so that single files can be worked on simultaneously by multiple users. You will be appreciating the value of good IT support by now…..
With falling turnover but continued fixed overheads, there will be growing pressure on cash resources. Review spending now and avoid or postpone anything non-essential
With overdraft facilities, check the expiry date and plan now to renew/extend if this will be needed. You may want to consider putting in place a protective overdraft facility to provide a cushion, even if you do not normally need one
See below Government financial help re other funding options
If you think you may face difficulty with mortgage or other borrowing payments, talk to your lender now about payment holidays.
Government financial help
The Budget announced a Coronavirus Business Interruption Loan “CBIL” scheme with the intention of easing liquidity for affected businesses. Details have now been published on the British Business Bank website – link below. This loan will be substantially underwritten by the Treasury. It will still be a repayable loan, though, not a grant but offers interest free borrowing for 12 months
Note that many of the banks have taken the stance that this CBIL is only to be offered to those businesses who would not normally meet the qualification conditions for their existing lending facilities – where the bank say that clients would normally meet their lending criteria, they are pushing their own lending products which do carry interest costs and, in many instances, are demanding loan security either in the form of a charge over the business’ assets or, more worryingly, by requesting personal guarantees. There is growing public pressure for the banks to reverse this policy.
There will be a potential grant available to businesses in receipt of Small Business Rates Relief or Rural Rates Relief. You should receive contact from your local authority – many businesses have already had this first contact letter with links to the grants to be claimed, although some councils seem confused as to the actual scheme category for your business
Note that if you don’t operate from premises subject to Business Rates (even if you don’t pay any, due to Small Business Rates Relief) you will not qualify for this grant
There is a higher level of grant available for those in the Retails, Hospitality and Leisure sectors (Scheme 2)
Access to these grants will be via your Local Authority and direct payment made by them. Again, see our note about vigilance over scam emails
Staff & employees
The Employment Allowance, currently £3,000, can be offset against Employer’s Class 1 National Insurance contributions on salaried staff and this increases to £4,000 from April. Not all businesses qualify. Ensure that your payroll systems claim this in full as early as possible
STATUTORY SICK PAY “SSP”
SSP for eligible employees will become an entitlement immediately on the start of sickness rather than after the current 3-day waiting period. Budget 2020 announced plans to enable employers to recoup this SSP, probably by offset against normal PAYE payments, Details to follow once the Budget speech has been turned into the Finance Bill.
Many business are now facing a stark choice in an uncertain future. There will be the need to retain valuable staff, manage reputation and preserve the business and sometimes these will be in conflict. The link below sets out some of the staff options
Where staff are able to continue to work because there are facilities to work from home, then they will continue to be entitled to pay as per their employment contract
Where staff are staying at home because of C-19 (either because they are sick or are caring for a family member) then they will be entitled to Statutory Sick Pay for up to 28 weeks. As an employer, this SSP can be reclaimed from HMRC. The employee should provide an isolation note as evidence and these should be requested by them from NHS111 online. Do please ensure that your payroll team (or us, if we run your payroll) are aware of any staff members where this claim can be made so that the Real Time Information submissions to HMRC can deal with this
CORONAVIRUS JOB RETENTION SCHEME “CJRS”
Where staff are unable to work at all, you may be eligible for CJRS which is available initially for a three month period, starting 1 March 2020, but which is potentially subject to extension. The principle is to avoid making staff redundant and will provide conditional support (not a loan) to cover some of the payroll costs. HMRC are currently working on a portal where details can be reported and claims lodged: their stated intention is that this should be up & running and the first payments made by the end of April. We’ll update you once we have more details of this. Link below:
At present, the headline details of CJRS are:
- You need to notify your employees in writing that they are being categorised as a “furloughed worker” and this does not have to be applied to the whole workforce, but on a person by person basis
- The employee must agree to that status so it would be sensible to have an email evidence trail as a minimum. Please find attached a suggested template for the wording for this notifcation
- The initial period of furlough is a minimum of 3 weeks (after which the furloughed employee may return to work or be subject to a fresh furlough agreement) and during that time the employee may not do any work for the business (there are exceptions for training etc)
- The claim for CJRS can be backdated to 1 March, presumably as long as the employee was actually furloughed at that point. Otherwise, keep a note of the date that each employee was furloughed
- The employee must have been on the payroll at 28 February
- The maximum grant is for the lower of 80% of usual wage costs or £2,500 per month, per furloughed employee, then plus the associated employer’s NIC plus the minimum employer contribution under your auto enrolment pension scheme.
- If the employer does not pay the full normal pay entitlement per the contract of employment, be aware that there is potential for a subsequent claim by the employee that they have been underpaid. I would recommend you take employment legal advice if you intend to pay below the current contract level
- The scheme is currently open for 3 months, to be reviewed
- CJRS is paid in respect of normal wages paid via PAYE – “normal wages” does not include any bonus amounts, commission or dividends (where the director is also a shareholder)
Inevitably there will be wrinkles, exceptions and oddities which will continue to emerge. See notes below re Personal Service Companies and Limited Liability Contractors
Reward structures for Limited companies
PERSONAL SERVICE COMPANIES & LIMITED COMPANY CONTRACTORS
The latest guidance from www.gov.uk states that office holders (including company Directors) who are paid via PAYE can also be eligible for the furlough CJRS scheme, as long as they meet the other conditions
HMRC have stated that they will have the right to audit these claims and, given the scale of the payments they will be making nationally and their obvious exposure to fraud, I would expect these audits to be widespread and that you should bear in mind the risk of being forced to repay the CJRS in the event that your grant is paid but then subsequently denied
For those operating from a Limited company with a reward structure comprising salary plus a regular dividend, the HMRC support for furloughed pay would not cover any of the dividend and, as above, there is a risk that it may be disapplied to the salary element.
A reminder that dividends can only be declared by a company director after reviewing the availability of retained profits (life to date post-tax profits, less life-to-date dividends taken, less any losses). As a director, if losses can be anticipated then this should be factored into that decision. Given that for most businesses, future profits are currently less certain and losses can be anticipated (if not necessarily quantified) at this stage, this will make declaration of a dividend more problematic. You may therefore want to consider switching some of your reward back to salary for a period of time
Payment of taxes
VAT due for payment during the period 20 March to 30 June can be deferred until the end of the financial year, 31 March 2021 – this is an automatic option and you don’t need to apply for it or notify HMRC
For those of you paying VAT by Direct Debit (so that HMRC take the funds from your account once your VAT return has been submitted), you may need to contact your bank to suspend the Direct Debit collection: although we have anecdotal reports that HMRC have cancelled some of these Direct Debits from their side, we don’t think you should rely on that at this stage until HRMC confirms this is their policy so it would be a sensible precaution to cancel form your side.
For those of you paying VAT by BACS transfer, payment is in your control.
For those normally receiving VAT repayments, these will continue to operate as normal
It is entirely possible that there will be a further extension in July, as events unfold.
VAT returns should continue to be submitted in the normal way. For those businesses obliged to submit VAT returns within the Making Tax Digital process, Phase 2 of the MTD process (where all records should be kept electronically with no cut &paste / manual intervention) this Phase 2 has now been postponed until April 2021
SELF-ASSESSMENT INCOME TAX DUE 31 JULY 2020, INCLUDING TAX ON RENTAL INCOME
Where you would be due to make an instalment payment of self-assessment income tax on 31 July you may now automatically defer this until 31 January 2021 – this now includes instalments due on property rental profits, investment income etc (it was previously only open to the self-employed). You do not need to apply for this
If you believe you will face difficulty paying any other taxes on time, it is always best to be upfront with HMRC before the due date for payment: not just because they are more amenable to those who take the problem to HMRC but also because putting in place a formal Payment Plan also eliminates some of the late payment penalties. See note at the end of this section…..
You need to have submitted to HMRC any return that identifies the amount of tax due. You will also need to have on hand the details of the amount due and the particular tax (whether income tax, VAT, PAYE, corporation tax etc) and the tax reference (VAT registration number or corporation tax UTR or self-assessment UTR, for example). Then consider the payment timetable that could realistically be achieved – in normal times, HMRC are usually pretty open to a six month payment timetable and will sometimes consider twelve months but we can’t predict at this stage how their stance may change over the coming weeks. You would normally be charged interest on the late payment
Once you have this, call the HMRC Payment Support Service on 0300 200 3835 (Mon – Fri 08:00 to 20.00, Sat 08:00 to 16:00). These lines will be deluged with calls and waiting times protracted. It is not yet known whether penalties will continue to be imposed if you are unable to contact HMRC but I would recommend keeping contemporaneous notes that you have tried to contact them.
This is not the same as operating from your own Limited company.
Self-assessment income tax instalment payments due from the self-employed on 31 July 2020 will automatically be deferred until 31 January 2021. You do not need to apply for this. There will be no penalties or interest charges
SELF-EMPLOYMENT INCOME SUPPORT SCHEME “SEISS”
The current SEISS support of up to £2,500 per month for 3 months is not expected to pay out until the end of June. HMRC will initiate contact with taxpayers using submitted self-assessment return information. Link below:
Qualification conditions are currently a cliff-edge £50K of profits and at least 50% of your total income must be from self-employment: if you fail the tests, you cannot claim
For those who qualify for this grant, it will apparently pay out up to 80% of the average profits from the last three completed tax years (2016/17, 2017/18 & 2018/19), up to a maximum of £2,500 per month
If you need our help to establish eligibility, please let me know
In addition, you may be entitled to claim Universal Credit or Contributory Employment and Support Allowance.
Accounts for Limited companies filing at Companies House
Companies House has announced that they will accept applications for a three-month extension to the normal filing deadline (for example, a private Limited company usually has nine months to file and this could now be extended to twelve months). This concession is by application only and will not be granted where the filing deadline has already passed. Link below:
If you think that you may need to apply for an extension and need our help, please contact me
Protection from eviction for commercial tenants
Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.
These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.
There is the option for the government to extend this period if needed.
This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.
Directors – protection for wrongful trading
Measures have been announced (but not yet enacted) for a temporary suspension of “wrongful trading” provisions. In normal times, these provisions mean that a company’s directors can become personally liable in the event that a company continues to trade after the directors know ( or ought to know) that the company will be unable to avoid insolvent liquidation or administration and where they do not take all reasonable steps to minimise creditors losses
If any supplies are mission-critical, talk to your suppliers about time-lines
Continuity of business
Let customers know that you are still in business. If any of your processes can be carried out by staff working remotely from home, make sure they have the equipment and tools to do this – it’s fairly easy to set up a remote link
All businesses are going to be affected by this. Although inevitably there will be frustrations and difficulties, remember that others are in the same boat, or worse, so try to be patient, understanding and kind.
Braywood support & further updates
The Braywood team is facing the same challenges as you but we will endeavour to continue to provide support & advice without interruption and will keep you updated regularly. If any member of our team is unable to reply to you, please reroute any enquiries to me on email@example.com or call me on 07866 044636
I’ll continue to circulate updates. In the meantime, our regular Newsletter is also publishing regular articles and these are now also being published as events unfold. If any of you do not receive that Newsletter but would now like to , please drop me an email and I’ll add you onto the list – this is a free service to all Braywood clients and contacts
Caveat & disclaimer
As you’ll be aware, the government support information has necessarily been hurriedly put together and therefore is short on detail. As a consequence, we are basing our views on our current interpretation of information available as of today but there is no common consensus within the profession on the interpretation of many of the details. Therefore we cannot be certain this is best advice and therefore we disclaim liability if the support criteria change or our interpretation differs from another: we offer this circulation in the spirit of a general update and not as specific to your circumstances. We can all be brilliant in hindsight but our aim is to give you the broad headlines now – to paraphrase Rishi Sunak, we’re aiming for “good” now instead of “perfect” later.
Stay safe, stay sane & stay at home
With best wishes
Chartered Certified Accountants
35 Station Approach
Surrey KT14 6NF
Tel 01932 336690
Mob 07866 044636
Fax 01932 355445