Tax and Business Update

We are aware that many of our clients and contacts will be aversely affected by the financial problems cause by Covid-19. I thought it was important therefore to write to you to help clarify the taxation and business measures that the government has introduced. I hope this information will assist you and your business. This is not a marketing circular and we are sending this to all UK clients of Wilton and Hartley. If you have any questions, please do contact us.

£330 Billion Worth of Loans

The Government has announced that it will make available loans and other forms of support of up to £330 billion to help companies and businesses. The loans will bear interest, at a rate yet to be determined and the loans will have to be repaid, again over a period yet to be determined. Some of the loans are available now and the rest will become available through the course of the next week.

These loans will be distributed through the various schemes set out below, each of which aims to help companies in different ways.

Business Interruption loan Scheme

The British Business Bank launched a scheme during the week commencing 23 March 2020 to support businesses with a maximum turnover of £45 million per year. The government will provide lenders with a guarantee of 80% on each loan. This applies for loans of up to £5million and for up to 6 years. No interest will be charged for the first 12 months.

How do you access this scheme?

To apply for this scheme you should speak directly to your bank as soon as possible. You will have to discuss your business plan with them to go over how this loan will help you. You will find the best way to contact them on their website. Alternatively you can look at the list of accredited finance providers that the British Business Bank has provided. All of the lenders within the scheme are accredited to the British Business Bank. As you would expect, different lenders apply different criteria.  If you need our help, please call or email.

The size of the loan you are taking will affect the form of guarantee you will need to provide, as set below:

  • £25k – £100k (Short Form Guarantee)
  • £100k – £250k (Short Form Guarantee & Debenture)
  • £250k + (Full Personal Guarantee and tangible security where available)

Please note that the form of guarantees could change and the various lenders’ particular requirements may differ.

In general it will be easier to apply for loans of up to £100,000. We are aware of clients where the business requires a more substantial influx of capital but is nonetheless applying for the smaller loan. The feeling here is that this loan will be accessible much more quickly and more importantly it does not preclude the business from going back and seeking to further access higher levels of loan capital.

Other Funding Sources

Another way to generate essential finance may be through pension scheme lending. The benefit of loans organised in this way is that the business pays the interest to your pension scheme and not to the bank. We will be posting more information on this on our website in the near future.

If cash flow is really difficult, you could also consider writing to your suppliers and landlords asking for a payment holiday. You should ask your lenders if it is possible for you to pay back any outstanding loans in instalments. This will help you spread your costs out, so you will not have to pay big lump sums at once and can budget your funds carefully.

 

Large Businesses

The schemes available to large businesses and companies are different. We will be writing a separate article that covers large businesses and companies. Please notify us if you would like to receive this.

Business Rates Reliefs

The Government has also announced packages of Business Rates Reliefs in relation to the retail, hospitality and leisure sectors which provide a business rates holiday from 1 April 2020 to 31 March 2021. To qualify for this your business must be based in England and fall under the relevant sectors. Different rules apply in the rest of the UK.

How to access this scheme? No action is required and the relief will apply to your next council tax bill in April 2020. If you have a standing order or direct debit in place please write to your bank to cancel these. If you have already received your bill then ask your local authority to re-issue the bill with the rates removed.

Cash Grants

The Government is offering a number of grants to businesses to help them. A grant is a lump sum of money that does not need to be paid back, unlike a loan.

These include:

  • Small business grants funding of £10,000 for all businesses in receipt of small business rate relief or rural rate relief grants. The funding of 10,000 per property.
  • Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000. The funding of £25,000 applies per property.

To find your rateable value enter your postcode into this Link. Then select the address that applies to you and that will give you your rateable value.

How do you apply? No action is required as local authorities will write to eligible businesses.

Coronavirus Job Retention Scheme

All UK employers, regardless of size, will be eligible for assistance where an employee has been laid off or has been given indefinite leave, known as a ‘furloughed worker’. This employee must be expected to return to work at a later date to qualify. HM Revenue & Customs (HMRC) will reimburse 80% of a furloughed worker’s wage costs, up to a cap of £2,500 per month. The current plan is that this will be in place for 3 months, after which it will be reviewed. This scheme will be backdated to 1 March 2020 and is open to any employer in the UK, regardless of size or sector.

Employers must set out which of their employees are ‘furloughed workers’ and inform the relevant employees. The current guidance states an employee will remain employed and the employer may decide to pay the difference between this Government funded 80% payment and the employee’s salary, although this is not required and is at the discretion of the employer.

How can you access this scheme? You will be able to make a claim on this scheme once a portal goes live on Gov.UK’s website. This portal is expected to go live later this month.

Statutory Sick Pay

Following Spring Budget 2020, Statutory Sick Pay (SSP) rules will be changed temporarily to help workers affected by the coronavirus outbreak. The Chancellor confirmed the Prime Minister’s previous announcement that SSP will be paid from day 1 rather than day 4 of sickness and announced the following new measures:

  • SSP is extended on a temporary basis to cover individuals who are unable to work because they have been advised to self-isolate, as well as people caring for those within the same household who display coronavirus symptoms and have been told to self-isolate
  • Self-isolating employees are able to obtain a notification via NHS111, which they can use as evidence for absence from work ― this is intended to take pressure away from GPs.
Repayment of SSP

In addition, to help insulate businesses against the impact of coronavirus, small and medium-sized businesses (those with less than 250 employees) will have the costs of SSP for any employee off work because of coronavirus for up to 14 days refunded by the Government in full. Note you cannot get repayment if your employee is sick for any other reason.

The full eligibility criteria for the scheme are as follows:

  • this refund will cover up to two weeks’ SSP per eligible employee who has been off work because of coronavirus
  • employers with fewer than 250 employees are eligible ― the size of an employer is determined by the number of people they employed as of 28 February 2020
  • employers are able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of coronavirus
  • employers should maintain records of staff absences, but employees do not need to provide a GP fit note
  • eligible period for the scheme commences the day after the regulations on the extension of SSP to self-isolators come into force
  • while existing systems are not designed to facilitate employer refunds for SSP, the Government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Improved Time to Pay Arrangements

The Government have acknowledged that the current climate will make it difficult for everyone to make their tax payments on time. They have declared they will be waiving or deferring any late penalties and interest that relates to the difficulties caused by Covid-19, as detailed below.

VAT

Many businesses have experienced a rapid and unexpected decrease in their revenue streams as a result of coronavirus. As a result, they may be suffering cash flow problems that could impact their ability to pay any VAT due in respect of their VAT return period ending 31 March 2020 and later, depending on the severity of the ongoing situation.

As a result of these ongoing concerns, the Chancellor has announced a delay in the requirement to remit VAT payments that applies from 20 March 2020 until 30 June 2020. All UK businesses are entitled to delay payment of any VAT due automatically with no requirement to formally apply for the extension. Businesses are not required to make a VAT payment during this period.

Businesses will be given until the end of the 2020/21 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. We understand that further guidance will be published shortly to assist businesses with deferring VAT payments and this guidance note will be updated to reflect this as soon as it is published, as the measures announced are somewhat vague and cause businesses considerable uncertainty on how they should be applied.

It may be prudent for businesses which pay their VAT via direct debit to cancel the direct debit for the moment, as it is unlikely that HMRC will take any steps to cancel any existing direct debits for businesses who decided to take advantage of the VAT deferral arrangements.

Income Tax

The second self assessment payment on account for the 2019/20 tax year is deferred from 31 July 2020 to 31 January 2021. In effect, this means that the 2019/20 balancing payment due by 31 January 2021 will be the total income tax, capital gains tax, Class 2 and Class 4 NIC due for the tax year less the first payment on account. No interest will be applied for the period between 31 July 2020 and 31 January 2021. Initially, the Government guidance suggested that this deferral was available to the self-employed only. However, the HMRC Press Office has confirmed that this deferral applies to all those required to make payments on account under the self assessment system. The deferment applies automatically without the need to make an application.

Companies House

If a company’s accounts are unlikely to be filed on time owing to being affected by Coronavirus then an application can be made to extend the period allowed for filing by up to 3 months. Here is a link. If an application is not made and there is a late filing then the normal penalty regime would apply, so it is important to make the application ahead of the deadline.

Tax Residence – amount of days spent in the UK

The Government is also relaxing the rules around whether an individual is considered present in the UK for a day under the Statutory Residency Test. The government is allowing up to 60 days to be ignored if they are the result of ‘exceptional circumstances’ which include enforced days of UK presence due to the crisis.

This will be assessed on a case by case basis, as HMRC will look at the facts that relate to each individual.

Summary

To help your business survive what will prove to be a very challenging period you need to consider and address the following.

  • Access government backed loans.
  • Do not pay business rates.
  • Access the government grants.
  • Furlough employees.
  • Reclaim Statutory Sick Pay.
  • Defer VAT.
  • Defer income tax second instalment.

Helpful Links

Our Facebook and Twitter for updates.

Gov.Uk Website on what to do

British Business Bank

Contact Us

If you have any queries, please do feel free to get in touch with me or our Taxation team whose email is below.  You can also contact your usual Wilton or Hartley contact or any of the individuals listed below.

Tony Flanagan – Managing Partner (Tony@wiltongroup.com)

Benjamin Bassage – Taxation Team (TaxationServices@wiltongroup.com)

James Robson – Head of Wilton Wealth (JamesR@wiltongroup.com)

Denis McHugh – Director of Hartley Pensions (DenisMcHugh@hartleypensions.com)

Michael Baber – Technical director of Hartley Pensions (MichaelBaber@hartleypensions.com)

Theunis Bassage – Head of Corporate and Legal (Theunismanager@wiltongroup.com)

 

I hope the above is helpful. If we can assist any way contact us. Please stay safe during this difficult period.