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Support for Scottish businesses and the self-employed

MACO TPL business finance chartSome additional information has been published by the UK and Scottish Governments and HMRC on the measures announced to support businesses and the self-employed – it is still incomplete and we await further briefing papers. We will update you when we hear more.

We have summarised what support and help has been announced so far. Click on the links below to read more.

Support for the self-employed through the Self-employment Income Support Scheme (SEISS)

The UK Government has announced (26-3-20) a package of support for the self-employed >read more

Coronavirus Job Retention Scheme (CJRS)

We are still waiting on some details being announced by HMRC but here’s what you need to do now to get ready to apply >read more

You can now apply for grants to help with the impact of the coronavirus on your business

Small businesses in receipt of the small business bonus scheme or rural relief, as well as hospitality, leisure and retail business can apply >read more

VAT Deferral

This will apply to VAT payments due from 20 March 2020 until 30 June 2020. All UK businesses are eligible >read more

Short term cashflow support is available through the British Business Bank 

The Coronavirus Business Interruption Loan Scheme is offering loans of up to £5 million for SMEs >read more

Companies to receive 3-month extension period to file accounts 

Those citing issues around COVID-19 will be automatically and immediately granted an extension >read more

UK Government business and financial support

This website features the support, advice and information to help with the impact of coronavirus (Covid-19) on your business >read more. Additional websites and telephone support lines have been put in place >read more

 

Support for self-employed through the Self-employment Income Support Scheme (SEISS)office worker icon

If you’re self-employed, or a member of a partnership, with trading profits of less than £50,000 you will be able to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

You will be able to make a claim from March and the payment will be made by HMRC directly to your bank account in one instalment, but it will not be made until June. You must have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 and have traded in the tax year 2019-20.

The SEISS will support self-employed individuals (including members of partnerships) who have lost income due to the impacts of COVID-19.

Click here to read the eligibility criteria and the full terms and conditions of the scheme and how to apply >find out more

There is further guidance here: https://findbusinesssupport.gov.scot/coronavirus-advice/sources-of-funding

Support already announced. Read more >Self-employed Income Tax Deferral

 

Coronavirus Job Retention Scheme

Summary19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 01

  • All UK businesses are eligible for the scheme.
  • To access the scheme you must designate employees as “furloughed employees”.
  • Furloughed employees are employees who are kept on the payroll but carry out NO work for the business i.e. No P45 would be issued.
  • You must get agreement of employees to place them on furlough and to do this you must communicate with them and have a written agreement.
  • Written agreements should include: date that the furlough will commence; when this will be reviewed (i.e. weekly/monthly); how to keep in contact during the furlough period
  • As part of the scheme HMRC will reimburse employers 80% of furloughed workers’ wage costs up to a maximum of £2,500 per month. It will be the employers decision on whether they wish to top up wages.
  • We are still waiting on further details on: how to apply and how the payments will be made to employers.

 

Under the coronavirus Job Retention Scheme, all UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary for those that would otherwise have been laid off during this crisis. 

This applies to employees who have been asked to stop working, but who are being kept on the payroll, otherwise described as “furloughed workers”. HMRC will reimburse 80% of their wages, up to £2,500 per month. This is to safeguard workers from being made redundant. The Coronavirus Job Retention Scheme will cover the cost of wages backdated to 1 March and is initially open for 3 months but will be extended if necessary.

All UK-wide employers with a PAYE scheme will be eligible – this includes the public sector, Local Authorities and Charities. HMRC is aiming to have the scheme up and running by the end of April 2020. More detailed guidance will be published on these pages when it becomes available.

Guidance for employers on claiming wage costs has been published by the UK Government on 26-3-20 >read more

What we know so far

If your businesses has been severely affected by the Pandemic and you were about to make employees redundant, the CJRS offers the alternative of “Furlough”. The ‘furloughed workers’ will be on ‘furlough leave’. 

During this time, they will continue to be employed by the employer, but they will not be required to work for a temporary period of time. The CJRS will assist employers by reimbursing them up to 80% of the wages of each ‘furloughed worker’, up to a maximum of £2,500 a month. 

We will update you once the government confirms whether this means £2,500 a month before or after tax.

The CJRS will be backdated to 1 March 2020 (such that anyone who has been laid off since 1 March and has not left the business under redundancy can be caught by the scheme) and is expected to run from April for at least 3 months (although the government may decide to extend it as things progress).

The current guidance around the CJRS talks about “reimbursing” employers for wage costs and our expectation is that employers may need to pay their employees at least 80% of their normal wages during any lay off period and then they apply for a grant which will reimburse them. This means that employers are likely to have to deal with cash flow issues in the interim.

CJRS Guidance19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 09

We have had many clients asking us about the mechanics of the CJRS and below we outline (as best we can) the order of actions an employer should take to comply with the scheme:

1) Employers will need to designate affected employees as ‘furloughed workers’ and notify those employees of this change and agree this with them.

2) You should check employee contracts of employment to see if there is a contractual right to lay employees off if there is a downturn in work. If not you will need to discuss and agree with employees that they are “Furloughed”. This may involve a negotiation. Either way you will probably need employees’ consent. Given the alternative of redundancy one assumes common sense will prevail. Note if you have more than 20 employees, contracts may need to be changed on a more formal consultation process. We recommend legal advice is taken at this point.

3) Employers should notify employees in writing and explain why the decision was necessary (Covid-19 Pandemic).

4) Please note it is solely the employer’s choice to Furlough and not the employee. If the employee requests to be furloughed, the employer can refuse to agree e.g. if there is still work for them to do.

5) Employers then need to submit information to HMRC about those employees who have been designated as ‘furloughed’ and their earnings via a new online portal which is being set up. If you are doing this for the March payroll run you should keep a list of Furloughed employees and salary details.

6) HMRC will then reimburse 80% of wage costs for ‘furloughed workers’ up to a cap of £2,500 per month, per ‘furloughed worker’. Exactly when these funds will be available is currently unknown. (We will advise you when the Portal is “live”).

7) Furloughed employees could be paid 80% of their pay or higher if the employer chooses.

Points 8 and 9 need further Government clarification and we will publish guidance when available.

8) In the government’s guidance to employees on this subject, it mentions that employers can claim a grant of up to 80% of a ‘furloughed employee’s’ wages ‘for all employment costs, up to a cap of £2,500 per month’. This suggests that this covers thing such as pension contributions, employer’s NICs etc.

9) Further information on this point is awaited so it can be confirmed whether employers can only use the CJRS grant in respect of an employee’s basic pay or their average take-home pay (which may, for example, include overtime and commission too).

10) Employees should not undertake any work for their employer while they are ‘furloughed’. The fact that the employer is unable to give its employees any work for the time they are ‘furloughed’ is what allows them to claim up to 80% of the employee’s wage for all employment costs (up to £2,500 a month).

11) Guidance is needed on whether employees can work “elsewhere” to make up the 20%

12) Further guidance is awaited on employees on holiday, maternity, sick or self-isolating.

13) Directors of owner-managed businesses and companies who pay themselves by a combination of salary and dividends can only claim the salary that has gone through PAYE. 

Key points for employers

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Ensure that you document your thought processes and discussions when deciding which employees are to be designated at ‘furloughed’ - treat it as if it is a redundancy situation and think about how you would need to evidence your decision.

Consider if putting employees on furlough leave is absolutely necessary and reasonable to do in the circumstances. Again, make sure you record your reasons (in writing).

Ensure that you notify employees being designated as ‘furloughed’ in writing, giving your reasons, making clear any terms that will apply during this period, and offering reassurance that financial support via the CJRS will be available.

The CJRS is intended to be a reimbursement scheme so it is envisaged that the employer will have to make the payments to employees first and then seek reimbursement from HMRC.

Where employers receive public funding for staff costs, and that funding is continuing, it is expected that employers will use that money to continue to pay staff in the usual fashion and correspondingly not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.

Guidance for employers on claiming wage costs has been published by the UK Government >read more

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12-month business rates holiday and small business grants

You can now apply for grants to help with the impact of the Coronavirus (COVID-19) on your business.

Small businesses in receipt of the small business bonus scheme or rural relief, as well as hospitality, leisure and retail business can apply.

You need to apply directly through your Local Authority >You can find out more and apply here: https://findbusinesssupport.gov.scot/coronavirus-advice/sources-of-funding

To break this down, support in Scotland includes:

  • small firms receiving the small business bonus or rural relief will be eligible for a £10,000 grant19796 MACO FINANCIAL ACUITY NEWSLETTER WEB FILES 17
  • 12 months relief for businesses in hospitality, leisure and retail. Grants will also be available for companies in this sector
  • a £25,000 grant for buildings in those sectors with a rateable value between £18,000 and £51,000 - effectively freezing the poundage rate next year
  • All properties across Scotland will receive a 1.6% rates relief, thereby reversing the planned inflationary increase in the poundage from April 2020.

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VAT Deferral

For VAT, the deferral will apply for VAT payments due from 20 March 2020 until 30 June 2020. All UK businesses are eligible.

This is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 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.

Clients who normally pay by direct debit should cancel their direct debit with their bank if they are unable to pay. Please do so in sufficient time so that HMRC do not attempt to automatically collect on receipt of your VAT return.

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Companies to receive 3-month extension period to file accounts during Covid-19

From 25 March 2020, businesses will be able to apply for a 3-month extension for filing their accounts. This joint initiative between the government and Companies House will MACO projectmean businesses can prioritise managing the impact of Coronavirus.

As part of the agreed measures, while companies will still have to apply for the 3-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension. Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.

Read more here: https://www.gov.uk/guidance/apply-for-more-time-to-file-your-companys-accounts

Applying for an extension here: 
https://beta.companieshouse.gov.uk/extensions?_ga=2.135485106.227783380.1584965618-962621089.1583406783

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Short term cashflow support is available through the British Business Bank

The Coronavirus Business Interruption Loan Scheme is offering loans of up to £5 million for SMEs.

The UK Government will provide lenders with a guarantee of 80% on each loan up to £5m. UK based businesses with a turnover up to £45m are able to access the scheme. All the major banks will offer the scheme when it is launched on 23 March 2020. >British Business Bank (CBILS)

You should talk to us if you are considering applying for the loan and we’ll help you to prepare your business plan, financial projections and associated application. 

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HMRC and Scottish Enterprise Support Helplines

A new telephone support line has been set up by Scottish Enterprise for businesses seeking guidance on the virus and coping with the impacts. The number is 0300 303 0660 (currently open 8.30am-5.30pm Monday to Friday).

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 015 9559. Lines are open from Monday to Friday, 8am to 8pm and on Saturday, 8am to 4pm.

Useful website links

 

If you would like to discuss any of the support measures announced already please get in touch with your usual adviser at Martin Aitken >get in touch or Stranville John >get in touch

Martin Aitken busines operations during Covid-19 >read more

Support for the Third Sector
Covid-19: Martin Aitken business operations update