COVID-19 and what it means for your business

23rd March 2020

The current coronavirus crisis presents a challenge for businesses of a type never seen before on this scale. We will all need to explore different ways of working and getting on with our lives, and for business owners this is likely to be a particularly worrying time.

For many businesses remote working technology will allow them to continue, if not quite as usual, at least without significant disruption. But some businesses will not be able to carry on or will suffer great disruption, such as those involved in the travel or hospitality industry. In addition, all businesses are likely to see an increase in staff absence, which will have a knock on effect on productivity.

The Chancellor unveiled a package of measures to support business in his Budget on 11 March and new announcements are being made daily of further measures to soften the impact of the crisis. It is important that businesses know what help is available, and we have summarised those most applicable to SMEs below.

Coronavirus Job Retention Scheme (CJRS)

In an effort to save jobs, UK employers will be able to continue paying part of their employees’ salary for those employees who would otherwise have been laid off during this crisis.

Affected employees will be designated as “furloughed workers” and notified of this change.  This change of status remains subject to employment law and may be subject to negotiation.

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.  This is available to all employers, and will cover an initial three month period from 1 March 2020.  Employers can choose to top up the amount paid to the employee’s usual salary but this is not a formal requirement of the scheme.

There are a lot of details to be worked through to determine how this will work in practice, for example what happens for someone on a zero hours contract or who has varying pay, or what if someone can do part but not all of their job?  Also, the systems for submitting relevant information to HMRC and for reimbursing employees do not yet exist, so this will unfortunately not be a quick fix.

Deferring VAT and income tax payments

VAT payments due between 20 March 2020 and 30 June 2020 will be deferred.  This is an automatic deferral and will apply to all businesses.  Businesses should continue to charge VAT as normal and prepare and submit their VAT returns by the due dates.  Taxpayers will be given until the end of the 2020/2021 tax year to pay any liabilities that have accumulated during the deferral period.

For income tax self-assessment, payments due on 31 July 2020 will be deferred until 31 January 2021.

Business rates holiday

Retail, hospitality and leisure, and nursery businesses in England will be given a 100% business rates holiday for the next 12 months.

Grants to small businesses

Grants of £10,000 will be made available to small businesses eligible for Small Business Rate Relief.

Further grants of £25,000 will be made available to retail, hospitality and leisure businesses, operating from smaller premises, with a rateable value over £15,000 and below £51,000.

Coronavirus Business Interruption Loan Scheme (CBILS)

A new temporary loan scheme will launch shortly to help businesses to access bank lending and overdrafts. The Government will provide lenders with a guarantee of 80% on each loan to help give them confidence in continuing to provide finance to SMEs. CBILS will support loans up to £5 million in value per business. The Government will also cover the first 6 months of interest payments, so businesses will benefit from lower initial repayments.

The scheme provides the lender with a Government backed guarantee, potentially enabling a “no” credit decision from a lender to become a “yes”. However, it is important to note that the borrower always remains 100% liable for the debt.

Mortgage payment holidays

Mortgage lenders have agreed that they will support customers that are experiencing financial difficulty as a result of COVID-19, including possible payment holidays of up to 3 months.

Statutory Sick Pay (SSP), Universal Credit and Contributory Employment and Support Allowance

SSP will now be available for eligible individuals diagnosed with COVID-19 or who are unable to work because they are self-isolating in line with Government advice. SSP will be payable from day 1 instead of day 4 for affected individuals.

For people that are not eligible for SSP, either because they are self-employed or are earning below £118 per week, they will more easily be able to claim Universal Credit or Contributory Employment and Support Allowance, with some of the requirements for a claim being relaxed.

Additionally, small- and medium-sized businesses and employers (with fewer than 250 employees) can reclaim up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19.

Payment of tax liabilities

A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities receive support with their tax affairs. Through this, businesses may be able to agree a bespoke Time to Pay arrangement. If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 024 1222.

IR35 changes delayed for 12 months

The IR35 tax reforms, which were due to come into effect on 6 April 2020, will be delayed by one year. The IR35 legislation, which is aimed at off-payroll working, remains in force, but the changes due to come in would have made private sector employers using contractors responsible for determining the tax status of those contractors under IR35 and deducting income tax and national insurance from their pay as if they were an employee. Similar rules have already been in place in the public sector for several years.

Three month extension for filing accounts

Companies can apply for a three month extension to file their accounts at Companies House, which will be automatically approved if they cite issues around COVID-19.

How can we help?

We understand that sometimes it can feel a lonely place when you are running a business, particularly in challenging times such as now. If you think we can help or just want to chat through a problem, let us know.

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