There’s plenty to get through, as given on the subject bar above, so no time to waste; and anyway, what else is there to do this Friday:
Measures to support businesses experiencing increases in costs or financial disruptions
Financial Assistance – Business Rates holiday
Businesses in England in the retail, hospitality and/or leisure sector will have a business rates holiday for the 2020-2021 tax year.
To benefit from this relief, business must be in occupation of properties that are wholly or mainly being used:
a) as shops, restaurants, cafes, and drinking establishments,
b) for leisure; or
c) as hotels, guest & boarding premises and self-catering accommodation.
There will be no rateable value limit on the relief.
Ratepayers that occupy more than one property will be entitled to relief for each of their eligible properties.
Each Local Authority (LA) will adopt their own local scheme and base their decisions to grant relief via their discretionary powers.
The relief for businesses that the LA’s determine are eligible will be for 100% of their 2020/21 non-domestic rates bill for the occupied portion of their property.
No relief will be available for the time when the property is unoccupied for the business purpose
(e.g. if a premises is vacant for 3 months to March 2021, the 100% relief will only apply to their rates bill for the period April to December 2020).
Businesses that are deemed to be eligible for this relief will be issued a revised bill for 2020-21 reflecting the discount.
(COVID-19) Self-employment Income Support Scheme
This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month and is available for the next 3 months.
This may be extended if needed.
The grants can be claimed, and the self-employed person can continue to do business.
1. What is the support available due to the COVID-19 impact to those who are self-employed?
Those who are self-employed will get:
a taxable grant worth 80% of average monthly profits over the past three years, up to £2500 per month.
It is the same amount of income as has been announced last week for furloughed employees.
HMRC guidance states: Your self-employed trading profits must also be less than £50,000 and more than half of your income must come from self-employment.
This is determined by at least one of the following conditions being true:
• having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
• having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return.
2. Are there any conditions to claim this support scheme?
Yes, there are conditions to apply for this support. The self-employed can apply for the scheme if they:
• have submitted their Income Tax Self-Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when they apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• have lost trading/partnership trading profits due to COVID-19
3. When will the announced support be provided to self-employed?
It is expected that the grant will be released no later than June 2020, but it will be backdated from 1 March 2020 as incomparable to employees’ support.
HMRC will contact the business if they are eligible for the scheme and invite them to apply online.
Once HMRC has received the claim and checked the eligibility for the grant, they will contact the applicant to tell them how much they will get and the payment details.
4. Are the recently registered self-employed who have not filed any tax return yet (i.e. 2019-20 being first return) eligible for this support?
According to the Treasury, it is very difficult to assess the amount of the benefit for recently registered self-employed people.
They may have to look at the alternative financial support i.e. Universal Credit or Employment and Support Allowance.
5. Is there any extension on filing of 2018-19 if the taxpayer has missed the deadline?
Yes, if the tax return for 2018-19 has not been filed yet, the deadline is 4 weeks from 26 March 2020 i.e. 23 April 2020.
6. Can a taxpayer amend the already submitted returns?
To avoid the abuse of the scheme, HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
7. Can a director of a company claim this grant?
This is covered in the ‘employed guidance’ – Job Retention Scheme – Furloughed workers.
It highlights that a director of their own company who are paid through PAYE may be eligible to get support using the Job Retention Scheme.
Director can continue to run their business in terms of performing their statutory duties as officeholders, but they must be furloughed from other day-to-day activities for raising any revenue for the company.
The claim will be only for the 80% of their salary processed through PAYE. Dividends are not included for these calculations.
To avoid fraud, there are expected to be cross-checks between the applications for grants against PAYE records for each employer.
8. What should the self-employed do if somebody contacts them for the scheme?
The self-employed should access this scheme only through GOV.UK.
If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
9. Does this grant need to be included in the existing tax credit claims?
Yes, this is taxable grant hence it will need to be included as income for the existing tax credit claim.
10. Can a self-employed person still work while claiming this grant?
Yes, a self-employed person can continue to trade and be still eligible to claim the income support grant.
This is different to the claims made under Job Retention Scheme where employees who are being furloughed cannot work at all.
11. What happens if the self-employed individual has not lost any trading profits due to Covid-19?
It is possible for some businesses that they do not lose any profits due to coronavirus as they still must keep shops open.
Currently these self-employed businesses may claim the grant as announced if eligible without calculating profit for the current month for their lost earnings.
Nonetheless, when they would be completing their 2020-21 tax returns (including this taxable grant), they may need to repay some of this grant if their average earnings show that they did not lose any revenue.
The requirements and this aspect have not been addressed in the guidance issued to date.
Employment Law – the Coronavirus Job Retention Scheme and furloughing employees
The guidance given here is based on the legal position as it is understood at the time of writing, and that is subject to change, amendment and clarification.
In addition, we will need to make some assumptions, but where that is the case, it is clearly indicated.
The Contract of Employment
The legal position in relation to pay in the average contract of employment is straightforward.
• It is an unlawful deduction of pay to reduce an employees’ contractual pay, and possibly even to furlough them on full pay, unless you have either a short-time working or lay off clause in the contract, which are quite rare.
• The breach of contract could also justify a claim for constructive dismissal in normal times
• Thus, if you wish to change the terms of the contract, and in particular to reduce pay you will need the employee’s consent
• Having said that, it is difficult to justify a claim if an employee is sent home on full pay, but if they are missing bonuses and commission, this should be considered as potential loss
• It is lawful for the employer to reduce pay if the employee consents, and this will be the way ahead for most employers.
• This will be particularly important where elements of the contract provide for other benefits which the employee will not now be receiving, such as commission or bonuses, or non-cash benefits (although it is assumed that most non-cash benefits such as the company car, and medical insurance or life assurance will continue during the furlough)
• Even without consent, there is a body of law which allows employers to change terms for all or most of their employees.
This is usually used where the business is in financial difficulties, and the employer needs to reduce costs across the board. It is not going to be difficult for the employer to prove hardship at the moment. If the employer cannot obtain the individual consent of all of their employees to the proposed change, it will need to go through a formal collective procedure, which is laid out below.
• There may be other elements of remuneration that are discretionary, such as bonuses and commission which have not yet been declared, and which the employer may be able to remove or reduce without breaking the employment contract
• It is, of course, lawful to make redundancies where the business can show that there is a reduction in the need for employees going forward, subject to a consultation procedure and to the payment of redundancy compensation, where the employee qualifies for it.
The employee may argue that they ought to be furloughed, but ultimately the decision is for the employer
• The guidance clearly states you do not need to retain all your staff to qualify for furlough, you can make some redundant and place some on furlough
• The employer might also consider other cost saving measures such as reducing pay across the board while retaining staff and/or removing some benefits.
The Coronavirus Job Retention Scheme
• The new legislation introduces the concept of ‘furlough’ into the UK. It is a US term and involves the employer putting the employee on a specific period of paid leave.
The contract of employment continues, and the employee is paid, but is not required to attend work or provide work while the furlough continues.
• It is intended that the scheme will be operating by the end of April 2020, but will be effective from 1st March 2020 for three months, subject to any extension
• It applies to all UK employers, regardless of business type or size, as long as they have a UK bank account and operate a UK payroll as of 28 Feb 2020
• It will apply to employees furloughed since 28th February. They will have to be designated as furloughed by the employer; it is not an option to insist on being furloughed.
• Also, employees made redundant since 28th February will be able to be reinstated, and recoup income, although there is no obligation to reinstate them
• A new online portal is being set up on HMRC’s website to receive employer’s applications, and should be live by the end of April
• The essence of the scheme is that
o HMRC will reimburse up to 80% of what are being termed ‘furloughed’ employee’s pay, in respect of their usual monthly pay or £2,500pcm (£576.92p pw) per employee, whichever is the lesser.
Fees, commission and bonuses should not be included, and probably not tips and overtime payments, although the guidance does not mention them;
o HMRC will also reimburse 80% of Employer NI and automatic enrolment pension contributions on top of that
o Employers can choose to top up the additional 20%, but do not have to
• The scheme applies to full and part-time employees, employees on agency contracts and zero hours workers
• It does not matter if the 80% takes the worker below the NMW as the requirement to pay it only applies to hours worked
• It applies to directors of companies, regardless of their size or type, but only extends to the part of their pay which is salary subject to PAYE and NI
• This underlines the fact that repayment is only made in respect of payments made via payroll
• Within the public sector, employees whose pay is financed by public funding will not be entitled to use the scheme, neither will any organisations who are publicly funded in order to respond to COV-19
• The CJRS is available to all UK employers with a UK bank account for each furloughed employee on a PAYE payroll schemes as at 28th February 2020 (to exclude potentially fraudulent claims such as subsequent employment of family to increase household income);
• The minimum period of furlough is three weeks, and employers cannot claim more frequently than every three weeks
‘I want to furlough employees – how do I do it?’
If you look at the combination of the two sections above, the safest way ahead legally becomes reasonably clear.
• The employer will write to the employee, stating that it intends to place him or her on furlough and ask for their consent
• It may be possible to get the consent of all staff to the furlough proposed, in which case the employer should retain evidence of that consent eg ask employees to sign a letter or a furlough agreement, or send an e-mail confirming their consent
• There is no standard template, but at the very least the letter/agreement should record the length of the furlough, any review period and the details of the variation of contract.
• Consent is needed because otherwise the employer is technically in breach of contract and if pay is not being made up, is liable for an unlawful deduction from wages.
This would be a continuing loss if the employee then carried on working under protest.
• In situations where the employer has 20 or more employees who do not accept the furlough, they will need to carry out collective consultation with those employees, asking them to elect two or more representatives (depending on the size of the employer) to discuss matters with the employer.
The normal consultation period for 20+ employees is 30 days and 45 days for more than 100 employees – it is not clear whether these will be relaxed but it seems likely.
Full details of the collective consultation process can be seen at https://www.gov.uk/staff-redundant/redundancy-consultations.
The penalty for failing to consult is considerable; a protective award of up to 90 days’ gross pay for each affected employee.
• The argument that the employer is reacting to a sudden steep drop in demand, the need to close premises etc etc is likely to justify the decision to furlough in most cases, and the tribunals are likely to regard this as a justifiable and proportionate response to an unexpected emergency.
• Where an employer is choosing some staff to go on furlough and others to continue to work, there is no particular method by which this must be done, other than to ensure that selection is not unlawful in terms of discrimination eg allocating people on the basis of sex, race, disability etc
• It seems clear that employers may rotate staff on furlough, but it is suggested that the minimum rotation period should be three weeks
What happens during furlough?
• The employee cannot work at all for their employer while in receipt of pay from their employer
• It seems likely that they can take on work at times they would not be working for their employer, provided they are doing nothing for them eg an office worker takes an evening job picking in a supermarket
• Employees on furlough can certainly volunteer or take part in training
• Employees continue to accrue annual holiday.
• It is not clear whether the employer can require the employee to take some or all of their holiday during furlough, but it seems unlikely since if they are not working, they are not taking leave from work.
• The government has relaxed the rules preventing carry over to the next holiday year in response to the crisis
• If a worker falls sick, they will be entitled to SSP rather than continue to receive their furlough pay (this makes it very unlikely that most workers will report any sickness)
• Employees on maternity/paternity pay continue to be entitled to those benefits, but presumably not if the employer is making up any of those sums to eg half or full pay.
It may be possible to place them on furlough but since they are already on eg maternity leave, this seems unlikely
• Many employees are now working from home and employers must not neglect their duty to take reasonable care of their health and safety.
Employers who have employees who are working from home should carry out a risk assessment of the work activities and take appropriate measures to reduce any associated risks.
• The employer does not have to attend at each employee’s home to carry out the initial risk assessment and any follow-up risk assessment required.
Instead, the risk assessment can be conducted by the employee from home.
A useful checklist for employers https://gowlingwlg.com/getmedia/fddccae5-bff7-4726-9738-a8978cc53a2e/Working-from-homechecklist.pdf.xml
Covid-19: Resources: Welsh Government Announces Economic Resilience Fund for Wales
The Welsh Government has announced a new £500m Economic Resilience Fund to provide extra support to the Welsh economy, businesses, social enterprises and charities experiencing a drop in trading as a result of covid-19 outbreak.
This will also support those have been temporarily forced to stop trading altogether.
The support package comprises two separate funds including:
1. A £100m fund via the Development Bank of Wales, available to those experiencing cash flow problems, or may need cash support to adapt to a remote way of working.
a) Limited companies, partnerships and sole traders trading for no longer than two years will be able to access loans up to £250,000 fixed at 2% interest and a capital repayment holiday for the first 12 months.
b) Applicants will need to demonstrate that they were able to service the debt prior to the outbreak.
c) The loan amount will be calculated based on number of people employed by the business or alternatively based on profit or turnover.
d) Loans of £5,000-£100,000: applicants will need to provide three months bank statements.
e) Loans of £100,000 to £250,000: applicants will need to provide two years annual accounts, management information and a cash flow forecast.
f) Security taken will be a 20% personal guarantee to a maximum of £25,000 for all investments and for deals over £100,000 a debenture will also apply.
Applications can be made online via the Development Bank of Wales’s website.
2. An additional £400m emergency funding providing:
a. Grants of £10,000 for businesses employing up to nine people, including sole-traders – open by mid-April 2020.
b. Grants up to £100,000 for businesses employing 10-29 employees – open from week commencing 6 April 2020.
c. Support for larger Welsh businesses of critical social or economic importance to wales – open within next two weeks [30/03/2020 – 13/04/2020]
This support comes in addition to support measures announced by the Welsh Government in March 2020. Current measures include:
• Business Rates Holiday for one year beginning 1 April 2020, for retail, leisure and hospitality businesses in Wales with an RV less than £51,000;
• A grant of £25,000 for retail, leisure and hospitality businesses with a RV of between £12,001 and £51,000;
• A £10,000 grant to all businesses eligible for small business rates relief with a rateable value of £12,000 or less.
Who can I talk to if I need further clarity or guidance on covid-19 business support?
HMRC has set up a helpline for businesses and self-employed people who are concerned about paying their tax due to COVID-19, open Monday – Friday from 8am until 4pm. Call 08000 241222 for help and advice.
England: For non-HMRC related issues and general business support businesses can call 0300 456 3565, open 9am to 6pm.
Wales: Businesses in Wales requiring further business support can visit Business Wales or call 03000 6 03000 for general enquiries. Social Enterprises and Businesses in Wales can seek further guidance from Social Business Wales on 0300 111 5050 or email firstname.lastname@example.org.
Scotland: If you run a business you can get advice by calling the Scottish Government helpline, open Monday to Friday, from 8.30am to 5.30pm. Call 0300 303 0660 and select option 1 to speak to the COVID-19 team.
The Find Business Support website also gives the latest information and advice.
Northern Ireland: Businesses in Northern Ireland can call the HMRC helpline above (08000 241222) or visit NI Business Info. For help with getting your business online call NI Invest Helpline on 0800 181 4422.
Avoiding fraud and scams
There has been a surge in opportunistic coronavirus related scams. The National Fraud Intelligence Bureau (NFIB) reported this trend in fraud related to Coronavirus, or COVID-19. Look out for online shopping offers from unreliable websites, emails from unrecognised senders asking you to open an attachment or click a link and unofficial email addresses claiming to be government departments.
HMRC have provided the following guidance:
“If someone texts, emails or calls claiming to be from HMRC, saying that you are owed a tax refund or can claim financial help, and asks you to click on a link or to give information such as your name, credit card or bank details, it’s a scam.”
Recognise the signs – genuine organisations like banks and HMRC will never contact you out of the blue to ask for your bank details, PIN or password.
Stay safe – don’t give out private information, reply to text messages, download attachments or click on links in emails you weren’t expecting.
This technical article is for guidance purposes only.
It is not a substitute for obtaining specific legal advice.
While every care has been taken with the preparation of the technical factsheet, neither NHHPA nor its employees accept any responsibility for any loss occasioned by reliance on the contents.
Stay safe and well.
Kindest regards to you.
David Prince FCCA