These are unprecedented times, with workers being laid off or simply unable to work from home, businesses struggling to function, and the self-employed facing an empty sales pipeline. The Government has released a substantial financial support package to help wherever possible. Here’s a jargon-free guide to help you understand it…
JOB RETENTION SCHEME FOR EMPLOYED PEOPLE
As you have probably heard by now, HMRC will pay 80% of employees’ wages. This is up to a maximum of £2,500m, and we are hearing the term ‘furloughed’ regularly. Furloughed simply means workers who are granted a leave of absence – so this support package only relates to people who are NOT working; ie, those who cannot work from home.
The employee must not do any work for the business during the time that furlough claims are being made. Examples of work that will make the claim disallowable are:- job-specific training, rescheduling events, and marketing. If an employee is working on reduced hours or reduced pay then they will not be eligible for this scheme either.
Employers should write to their employees to let them know that they are on this scheme and make it clear what is allowed and not allowed. Unfortunately the portal to allow claims for this grant will not be open until the end of April.
HOW DOES THE PAYE SIDE AND OTHER ASPECTS WORK?
These payments will be subject to the normal PAYE and other deduction rules. And an employee must have been on the payroll as at 28 February 2020. If the employee receives irregular amounts you can claim the higher of the same month’s earnings for the previous year or the average monthly earnings for the 2019/20 tax year.
As for owners/directors of companies who usually pay themselves a mix of dividends and salary, some good news – you are also eligible. HOWEVER, the claim can only be on the salary part of this income. Dividends cannot be included.
In terms of work regarding the owner/directors – they’re only allowed to complete work that fulfils their statutory obligations as business bosses.
EMPLOYMENT ALLOWANCE & LIVING WAGE
Employment Allowance is being raised to £4,000 for the 2020/21 tax year reducing the amount of Employers NI payable, and regarding the Living Wage increase; this will go ahead as planned on 1 April 2020.
There is a deferral scheme now available for the payment of VAT for amounts due between 20 March 2020, through to 30 June 2020. This scheme allows you to defer any amount due for this period until 31 March 2021.
You don’t have to apply to HMC&E to be on this scheme, you simply just pay it later. If you want to opt for this deferral please cancel any direct debit you have with the bank. Otherwise it will still be taken! VAT returns, however, must still be made. It’s only the payments you can make later.
There are grants and reliefs available from your local authority if you are paying business rates or are eligible for small business rates relief. These grants and reliefs include
- A 12-month business rates holiday for all retail, hospitality, leisure and nursery businesses in England
- Small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
- Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
Local authorities will be writing to businesses on 1 April 2020 about claiming these grants. So not an April Fool! Look out for your letters.
WHAT ABOUT THE SELF EMPLOYED?
On a par with employees, there will be 80% (up to £2,500 per month) available. This is based on average monthly earnings using your trading profit figures submitted by tax return for the last three years. If you only started being self-employed in 2018/19 then that return will be used.
This will be available for three months but may be extended if necessary. It is only based on actual self-employment figures, so income from any other schedule – such as rental income – won’t be included.
The good news is that if you qualify, as a self-employed earner you can keep working. Not only that, you’ll be spared the aggro of having to prove the impact of coronavirus on your work. You can just apply.
Unfortunately if you became self-employed in 2019/20 you won’t be eligible for this scheme. This is harsh, but the Revenue say that administering new businesses would be too difficult. To qualify for this scheme your income from self-employment must equate to at least 50% of your earnings and your profits must be less than £50,001.
You do not have to apply for this scheme but will be contacted by the Revenue. Unfortunately these grants won’t be available until June 2020 and again, they have requested that people do not contact them. You will hear from them.
INCOME TAX PAYMENTS
If you have any income tax due by the end of July 2020, usually the second payment on account for 2019/20, you can defer this to 31 January 2021. And no interest or penalties will be payable. This is another scheme that you don’t have to apply for. If possible though it’s advisable to make this payment or a part payment if you are able to do so. Otherwise there will be this payment, any balance for 2019/20 and the first instalment for 2020/21. So try not to build up a big bill! This scheme is not just available for the self-employed.
HOPE THIS HELPS!
This is just a summary of some of the rules and conditions. Please do not hesitate to contact me if you have any specific queries. The Revenue has requested that people don’t contact them as they are trying to get all these things set up, but I can help. Drop me a message using our online form here.