UPDATES: VAT, Income tax, Corporation Tax, Furloughed workers & proforma letters and business support (loans)

Covid-19 Financial Update – Self Employed
March 26, 2020
Covid-19 updates – Business Rates, Self Employed, Brief Employment Law, Job Retention Scheme, Welsh Assistance, Contacts for Assistance and scams!
April 3, 2020

UPDATES: VAT, Income tax, Corporation Tax, Furloughed workers & proforma letters and business support (loans)

There’s plenty to get through, so no time to waste:

VAT deferred payments

Do I need to cancel direct debit authority myself, or will HMRC do that?

Smaller companies with direct debits to pay VAT to HMRC will also need to cancel these immediately otherwise the money will be deducted automatically.

The Treasury has said it could not cancel unilaterally or cancel direct debits.

Ensure HMRC does not collect the direct debit on the normal VAT due date when the business submits the VAT return.

Will businesses get VAT refunds in holiday period?

Yes, businesses will be receiving all VAT refunds as normal.

When will the revised collected date be?

Currently VAT payments are deferred until 30 June 2020.

Guidance indicates that 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, i.e. 5 March 2021 (unincorporated businesses) or 31 March 2021 (companies).

If the cash flow and the effect on business is unable to support these payments, businesses are likely to get a further extension.

Will non-payment of VAT in holiday period be automatically ignored in VAT default surcharge calculations?

Yes, the non-payment of VAT will be ignored for any VAT default surcharges and interest calculation.

How will this VAT holiday work for businesses who pay VAT monthly on annual accounting scheme?

Businesses making monthly payments for annual accounting scheme does not need to make any payments until 30 June 2020.

As the monthly payments does not start until the end of month 4, businesses will eventually be catching up payments after June 2020.

Normal VAT payments deadlines are:

You must make advance payments towards your VAT bill (either monthly or quarterly) during your accounting period and a final payment when you submit your VAT Return.

Payment:                            Deadline:

Monthly                               Due at the end of months 4, 5, 6, 7, 8, 9, 10, 11 and 12

Quarterly                             Due at the end of months 4, 7 and 10

Final payment                   Within 2 months of month 12

Income tax deferred payments

Will anything change about requesting a deferred payment in July under this new regime?

Deferral is automatic for self-employed.

They can defer their income tax self-assessment second payment on account for 2019/20 due on 31 July 2020.

It is deferred until 31 January 2021.

Corporation Tax

Will similar deferments be available for CT soon? If so, how will they work?

Deferral can be applied for under time to pay with HMRC on a case by case basis.


There are fraudsters purporting to be from HMRC offering a tax refund and directing victims to a fake website to harvest their personal and financial details.

The emails often display the HMRC logo making it look reasonably genuine and convincing.

Job Retention Scheme – Furloughed workers update and suggested proforma letters

Under the Coronavirus Job Retention Scheme, all employers in the UK will be able to access support to continue paying part of employees’ salaries who would otherwise have been laid off during the ongoing crisis.

Furloughed workers are employees whose employers cannot cover staff costs due to coronavirus, and as such they have been asked to stop working but have not been made redundant.

Such employers are now able to access support to continue paying part of their staff’s wages, to avoid redundancies and so they can retain their teams.

To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer.

Employers will be required to make one claim for the entire workforce, record how many workers are covered and will need to keep records.

How the scheme works

• The employer should discuss with affected employees and notify them (preferably in writing) that they have become ‘furloughed workers’.

   ACAS have a suggested information that should be included that we have adapted and is at the bottom of this article with suggested letters.

• The employer can claim a grant of 80% of workers’ wages up to £2,500 a month once they have been furloughed.

• The employees remain on the payroll deducting tax and national insurance under the pay as you earn (PAYE) system.

• If employers want to top up pay levels, they can, but will not be able to claim for more than 80 per cent of £3,125.

• The employer could choose to fund the differences between this payment and employee’s salary but does not have to.

• The furloughed workers should not undertake work for their employer while they are furloughed.

• The scheme is available to all employees.

• The employer needs to get agreement from the worker to do this, unless it’s covered by a ‘lay off’ clause in the employment contract.

• The employer needs to submit information to HMRC about the employees that have been furloughed and their earnings.

   The submission will be through a new online portal which is expected before the end April (HMRC will set out further details on the information required).

• If an employee’s salary is reduced as a result of these changes, the employee may be eligible for support through the welfare system, including Universal Credit.

• For employees on zero-hour contracts, the employer can use the monthly pay in February 2020 as a benchmark for each person’s pay when furloughed.

   If any employee did not work in that month, they should claim Universal Credit.

• If employees have to stay at home to look after young children, the employer is likely to be allowed to claim compensation if they furlough these workers.

The Coronavirus Job Retention Scheme will run for at least 3 months from 1 March 2020 but will be extended if necessary.

HMRC are working urgently to set up a system for reimbursement.

Existing systems are not set up to facilitate payments to employers.

It is expected that employers borrow or self-fund in the short term to provide the wage package.

If a business needs short term cash flow support, it may be eligible for a Coronavirus Business Interruption Loan.

Suggested wording (drawn and adapted from the ACAS suggested content)

The furlough agreements should be in writing and it’s a good idea to include:

• the date furlough starts

• when it will be reviewed

• how to keep in contact during furlough,

• a statement that a worker will stay employed while they are furloughed, but they must not work.

Suggested letters:

Letter 1

Dear xxx

As discussed, and [agreed/under terms of contract] to keep our business running we are placing a number of members of our team into the government backed Coronavirus Job Retention Scheme.

This will allow us to keep you on the payroll and as a business we receive a grant of 80% of workers’ wages up to £2,500 a month.

We will be paying a salary of £xxxx.

The date you will be placed under the scheme is xxx and it will be reviewed with you at xxx.

We will keep in contact during the period by [insert method].

During this period you will stay employed but a condition of the scheme is that you must not undertake work for our business.

Letter 2

Employee Name

Employee address

Re: Notice of Furlough

Dear [employee name],

We regret to inform you that because of the current level of work available as a result of COVID-19, we have opted to place you on furlough (temporary layoff) during the next [number] weeks.

You are not authorised to work during the furlough without advance written authorisation from your [manager, supervisor, or director].

The furlough will begin on [date].

We are hopeful that we will be able to restore you to your prior position with our company on or around [date].

However, it is important to note that we reserve the right to change this date based on our business needs.

During this period:

1. You will retain your seniority with the company.

2. You may be eligible for unemployment benefits during this time.

3. [Remove if not applicable] If you have available holidays time that you would like to use during this time, you are welcome to use such time, but are not required to do so.

    If you would like to use some or all of your available holidays during this time, contact [insert name].

4. It is important to us that your transition into furlough and back to work goes as smoothly as possible.

    Therefore, if you have any questions or concerns regarding these transitions, contact [insert name].

We very much appreciate your contributions to the organisation this year.

We wish you all the best during this unprecedented time and are looking forward to your return to work following this furlough period.

Best regards,

HR Department/Director/Park Owner/Park Manager

Company name

Measures to support businesses experiencing increases in costs or financial disruptions

Financial Assistance – Loans

Following last week’s update, further details have emerged on the Coronavirus Business Interruption Loan Scheme (CBILS).

Applications are now open to all SME businesses (small and medium-sized enterprises) and resources have been trebled to process the increased demand expected for these loans.

SMEs will qualify if turnover does not exceed £45m and number of employees does not exceed 250.

Applications can be made with your bank directly (there are currently 40 accredited lenders and the British Business Bank will be working to accredit new lenders) and SMEs will pay no arrangement fees to access this finance.

Schemes will be available for both term loans of up to 6 years and overdraft or invoice financing for up to 3 years.

The government will pay for any lender-levied fees and cover interest payments for the first 12 months, lowering the initial repayments for smaller businesses.

In addition, some lenders are likely to offer capital deferment schemes of up to 6 months as well.

Term loans from £10,000 to £5m will be available under this scheme for a maximum repayment period of 6 years.

Overdraft financing to ease working capital requirements will be available for a maximum period of up to 3 years.

Borrowings of up to £250,000 can be accessed without security, at the lender’s discretion, and whilst the lenders will have a government-backed guarantee of 80% of the loan value, the borrowers will be liable to repay 100% of the debt.

Importantly the scheme does not require personal guarantees of a Directors PPR, this is though at the discretion of lenders.

Lending decisions will be based on most existing lending criteria and businesses will be expected to have been viable before CV19 and have a positive outlook medium to long term (traditional lending criteria such as customers and profits).

Many lenders are stating that they will only look at businesses they currently support, and we have also had reports that some lenders have amended lending policies and criteria.

We trust you will find the above useful and remember to join us at www.nhhpa.co.uk

Kindest regards to you.

David Prince FCCA