HMRC and the Covid-19 Response

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As you are no doubt already aware by the fact the government has ordered you to stay in your homes, Covid-19 (Coronavirus) is currently working its way around the world and spreading quickly. By keeping you indoors, the government plans to slow this virus down and give it time to die off. But that’s not all they’re planning. HMRC have set up the following schemes and reliefs to help businesses survive this intermittent period of being closed.

Let’s have a look at some of these, shall we?

Job Retention Scheme

I suppose the first query you’ll have is whether or not you can claim this. Good news! You can.

All businesses can.

To apply for this, you will first need to designate your employees as ‘furloughed workers’. Furlough meaning to ‘grant leave of absence to’ is just a fancy way of saying that your employees aren’t here right now so please try again later.

You will also have to inform your employees that they will now be falling under this status so it would be good to have a standardised template ready to go for all of them. Then, you will have to inform HMRC of the employees you have furloughed and their income figures through a new online portal.

HMRC will then reimburse your business for 80% of the furloughed workers wage costs up to a cap of £2500 per month. It will help a lot of smaller businesses with fewer employees. For larger businesses, we’ll have to have a look at some of the other options made available by HMRC.

The thing is, this virus was so unexpectedly rampant and spread so quickly that HMRC has not even set up the online portal you will need to use to let them know about your furloughed workers. So until that gets going and you receive your pay-out, you’ll have to keep paying your workers as you previously already were. When HMRC roll this out, we’ll update our page with instructions on how to set up and use this portal so keep checking back here for more information as it becomes available.

In the mean-time, if your business is suffering from short term cash-flow problems (likely due to having to close as per the government’s request), then you may be eligible for a ‘Coronavirus Business Interruption Loan’ which will look at next.

Business Interruption Loan

To be clear, this ‘loan’ is more than it says on the tin. If eligible, you gain access to the loan, true, but also access to overdrafts, invoice finance and asset finance of up to £5 million and for up to 6 years. In case you’re wondering what these mean let’s break them down a little more for you below:

Loan – Easy enough, they lend you money, and you pay it back over a set amount of time, usually with interest.

Overdraft – Your bank balance reaches zero? No worries, you can now go into negative balances (to a certain degree), and you can pay back what you owe later. There may be interest/fees or not depending on the terms of the overdraft.

Invoice Finance – This is where you sell off your debts owed to your business to third parties for a percentage of the amount owed. For example, John Smith owes your business £1000. A third party is willing to buy that debt to you for £750. You receive £750 when you may not even have expected to receive any of the £1000 in the first place, and the third party then makes £250 when they get the full amount from John. Third parties that do this are usually well equipped to chase debtors for money and who better to do this than the HMRC that tracks everyone?

Asset Finance – This is where you borrow money (like a loan) and use a piece of equipment in your business as collateral (like re-mortgaging a house to get some money). If you don’t pay back the money within the set time, your asset gets taken.

Luckily, HMRC will also make a ‘Business Interruption Payment’ to cover the first 12 months of interest payments and any lender levied fees.

As for eligibility, this is only going to support SME’s (small to medium enterprises) where the business is UK based, with turnover no more than £45 million per year. Also, your business has to meet the other British Business Bank Eligibility criteria so you will also need to have a borrowing proposal that would be considered viable even if Covid-19 wasn’t currently a thing. A point to note here is that if a bank lends you money, it is you the borrower who is liable to pay it back, not your business, so you aren’t protected by your companies limited liability status. Be careful.

What you’ll get from HMRC is a guarantee of 80% on each loan to give lenders confidence in continuing to provide finance to SMEs.

There are 40 accredited lenders able to offer this scheme which includes all major banks.

Click here if you want to see the 40 accredited lenders

What about larger businesses?

If you’re a more prominent company, you can still get help, so let’s not all panic. The Bank of England will buy short term debt from larger companies as per the new Covid-19 Corporate Financing Facility. This will help by providing you with the means to pay off your short term liabilities.

larger businesses

Providing that your company (and your company’s finance subsidiaries) makes a material contribution to the UK economy, you can get in on this by contacting your bank to discuss CCFF (COVID Corporate Financing Facility) and the relevant commercial papers.

Deferral of VAT and Income Tax payments

A bit of good news for all of you affected by panic buyers forcing you to spend more on shopping than you usually would. HMRC is giving you some time off concerning paying them. Specifically, for VAT and Income Tax. Any income tax payments that are due by July 2020 (think second payments on account) can be deferred until January 2021. For VAT, the deferral will apply from 20th March 2020 until 30th June 2020. So if you have liabilities due in these periods, you now have a bit more breathing room.

Luckily there isn’t even an application process for this one; everyone gets it automatically. One thing to mention here is that if you have a direct debit set up to pay them, you should cancel this direct debit or your money will be collected as usual. Let’s be clear though; this is a deferral. You will still have to pay HMRC eventually on top of the amount you would usually pay them for the deferred period: Don’t go overboard and make sure you have the funds available to pay them when the time comes. This deferral is solely to help you prioritise what you are spending money on right now.

If you think you can still pay your liabilities in line with the regular deadline date, you should.

Sick Pay to employees

When it comes to Covid-19, if your employees are off sick with it, you can claim back the sick pay from HMRC. To be eligible though, you need to have fewer than 250 employees (this will be determined by the number of employees you had as of 28th February 2020). The eligible period itself will start from the day after the regulations on the extension of SSP to those staying at home comes into force.

This refund will cover up to 2 weeks of Statutory Sick Pay per eligible employee who is off sick with the Corona Virus. Your company will need to maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note (to avoid the further spread of Covid-19). If as an employer, you require evidence of an illness from your employee, they can provide you with an ‘Isolation Note’ from the NHS 111 online site. For those employees of yours that are self-isolating as someone in their household has the symptoms, they can get a note from the NHS website too.

Once this scheme is fully set up and HMRC provide a way to make the repayments, we’ll include details here on what you need to do.

Business Rate Support for Retail, Hospitality and Leisure Businesses

If you have a business that falls under the retail, hospitality or leisure categories, congratulations, you are getting a holiday. A business rates holiday, so you don’t have to pay for them. This will be for the 2020 to 2021 tax year.

If your business received the retail discount in the 2019 to 2020 tax year, you would get rebilled by your local authority as soon as it becomes possible.

To be eligible for this, your business must be based in England and be in one of the three sectors mentioned above. You don’t have to do anything to apply for this either. This will be automatically applied to your business rates bill. If you already received one, they’ll update and send you a new one.

Cash Grants for the Retail, Hospitality and Leisure businesses

Hospitality and Leisure businesses

There is a Retail and Hospitality grant that you may be able to benefit from. This grant scheme provides businesses in these sectors with a cash grant of up to £25,000 per property.

To break this down a bit more, if the property has a rateable value up to £15,000, that property will be given a grant of £10,000.

For a property where the rateable value is between £15,000 and £51,000, it will receive a grant of £25,000.

Eligibility for this is much like the business rate support. Your business must be based in England and fall under one of the three sectors mentioned above. However, your business has to have a rateable value under £51,000 also. Businesses that do not pay business rates will not be included in this.

Again, there is nothing you need to do to apply for this. Your local authority will write to you if you are eligible. If you do want to chase them up on this though, you can contact them first.

Nursery Businesses and Business Rates

Just to clarify, we’re talking baby nurseries here, not plant nurseries.

Exactly like the retail, holiday and leisure sectors, the nursery business sector is also getting a business rates holiday for the 2020 to 2021 tax year.

To be eligible, your business will need to be based in England, occupied by providers of Ofsted’s Early Year Register and wholly or mainly used for the provision of the Early Years Foundation Stage.

Again, no action is required from you. Your local authority will send you a business rates bill for that year, including your discounted figures.

Businesses that pay little or no Business Rates

Even the businesses where there are little or no business rates are getting helped out.  Providing that you are eligible, you’ll get a one-off grant for £10,000.

To be eligible for this, your business will need to be based in England, be considered a ‘small’ business, already receive small business rate relief and/or rural rate relief, and occupy a physical property.

No action is needed to apply for this. Your local authority will contact you if you are eligible. Though, if you want to query this to see if you could become eligible for this, you can contact your local authority directly.

Extra time to pay your liabilities

While HMRC has always been on the ball when it comes to getting money off of taxpayers, they are willing to listen and compromise if you need a little more time to pay. The Coronavirus is no exception. If your business is in distress with outstanding liabilities which have not been paid yet due to Covid-19, you can call HMRC on 0800 0159 559 to discuss your options with them.

Commercial Insurance Coverage

You’re probably aware that your insurance policy is not going to cover you for the Coronavirus pandemic. There might be some hope, though. If your insurance policy covers’ government-ordered closure and pandemics’ or ‘government-ordered closure and notifiable diseases’ then you should be able to make a claim. We recommend that you check your insurance policy terms and conditions to see what your available options are.

Commercial Insurance Coverage

In case you were wondering a notifiable disease is one where the registered medical practitioner that diagnoses it has a statutory duty to notify the ‘proper office’ at the local authority when they come across it. There is a list of these notifiable diseases, and Covid-19 has been added to this. Some policies will only cover some of the diseases on this list. Considering how quickly the virus spread, it would likely fall under the ‘future/unknown diseases’ section of your policy so you should check if you are covered for that. If you are then great, you should be able to make the necessary claim.

As the government has confirmed to insurers that they have advised certain businesses to close, this is enough for your companies insurance policy where clarity on if this was government-ordered is questioned. Adding to this, police intervention or any other statutory body is not required to trigger cover concerning Covid-19.

Commercial Eviction Protection

If you are a commercial tenant and you cannot pay your rent because of Covid-19 you are protected from eviction.  No business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until the 30th of June 2020. The government can extend this period if they choose to do so.

You are still liable for the amount; however, you just get a bit more time to pay.

This covers every business in England, and you do not need to do anything to apply for it.

Business Improvement Districts (BIDs) Arrangement Extensions

 Any BID in England due to a ballot between now and 31 December 2020 will be able to extend their duration up until 31st March 2021 by delaying BID ballots due to take place this year. This gives the local authorities that administer the ballot time to work on the Coronavirus crisis instead.

No action is required for this, and all BIDs in England are eligible.

That’s it. That’s all the information we have from HMRC so far. Please keep checking back here for more updates and if you should have any further questions, call us, and we’ll do our best to help.

If you need to speak to someone you can call our London Accountants office.