Tax and Business Update

Our Managing Director, Tony Flanagan, thought it was important to write to you to give some clarification on the changes that the government have implemented in relation to taxation and business. This is information that should help assist you and your company during this financial crisis caused by Covid-19.This letter is not a marketing circular so please do read all the information that is laid out. We are sending this to all UK clients of Wilton and Hartley. If you have any questions please feel free to get into contact.

£330 Billion Worth of Loans

The government had announced that it will be making available up to £330 billion of loans and other forms of support 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 today, the rest will become available through the course of the next week.

These loans will be distributed through schemes, each aiming to help a company in a different way.

Business Interruption loan Scheme

The British Business Bank has launched a scheme on the week commencing 23 March 2020 to support businesses with a turnover of no more than £45 million per year. The government will provide lenders with a guarantee of 80% on each loan. This applies for loans of up to £5m in value 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 latest and 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. If you need any assistance please contact us.

Large Businesses

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

Cash Grants

The government has been offering a number of grants to business to help them. A grant is a lump sum of money that does not need to be paid back like a loanThe retail, hospitality and leisure sectors in England can also apply for a cash grant of up to £25,000 per property. For rateable values of under £15,000, they will receive £10,000. Between £15,001 and £51,000, they will receive a grant of £25,000.  No action is required as local authorities will write to eligible businesses. To find out your rateable value follow this link.

How can you take advantage of this?

Either you can contact your local authority to see if you are eligible and then it will be done automatically on your next business rates payment.

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 of indefinite leave, known as a ‘furloughed worker’. HMRC will reimburse 80% of a furloughed workers wage costs, up to a cap of £2,500 per month. The current plan is that this will be in place for 3 months, at which point it will be reviewed. This will be backdated to 1 March 2020. This scheme is open to any employer in the UK, regardless off size or sector.

Employers must set out which of their employees are ‘furloughed workers’ and inform the relevant employees. Furlough is the equivalent of lay off, therefore, you can lay off staff, continue to pay them and recover 80% of the cost to pay them up to a total of £30k per annum. The current guidance states an employee will remain employed and the employer may decide to pay the difference between this payment and the employee’s salary, this is not required though and is up to the discretion of the employer.

The Chancellor said the Government was aiming for the scheme to be up and running before the end of April 2020, with the first grants to be paid within weeks. The scheme will be in place for at least three months, but will be extended as needed. The Chancellor was silent on the tax and NIC consequences of the grant, particularly for the employer.

Statutory Sick Pay

Following Spring Budget 2020, Statutory Sick Pay (SSP) rules are to 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, before announcing 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 (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.

The full eligibility criteria for the scheme is 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 done 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 who 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.

Clients who believe their 2019/20 taxable income may fall due to the impact of coronavirus should consider making a claim to reduce their payments on account for 2019/20. Depending on the extent of such a fall in income, the claim could generate a partial refund of the first payment on account already made for 2019/20. If you believe your income for the 2019/20 has been adversely affected by the Coronavirus, please let us know so that we can advise on any possible payment on account reduction.

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. 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.

VAT Changes

  • VAT on e-publications will go to zero rate on the 1 December 2020, this includes e-books, e-newspapers and e-journals.
  • VAT on fund management. The government has stated that they will widen the scope of the VAT exemption for the management of special investment funds so that it includes the management of qualifying pension scheme.
  • The government confirmed that the implementation of the VAT domestic reverse charge for building and construction services has been delayed until 1 October 2020.

Mortgage and rent holiday

Tenants and mortgage holders can apply for up to 3 months worth of payment holiday. Interest will continue to be charged on any amount that they owe. The government has announced that their intention is that no one can be evicted from their home over the next 3 months where this applies.

We here at Wilton hope that you are keeping safe during this pandemic. If you need anything please get in touch with your usual contact or use one of the contacts below.

James Robson – Head of Wilton Wealth (JamesR@wiltongroup.com)
Denis McHugh- Director of Hartley (DenisMcHugh@hartleypensions.com)
Michael Baber- Technical director of Hartley (MichaelBaber@hartleypensions.com)
Theunis Bassage- Head of Corporate and Legal (Theunismanager@wiltongroup.com)
James Clerkin- Head of Taxation (TaxationServices@wiltongroup.com)