Last updated: 9th April 2020 17:00
Every day, governments and central banks around the world are announcing new measures to support the economy through the COVID-19 crisis. Set out below is a summary of the UK measures which we will be keeping you up to date with as updates are published. It is critical that businesses apply for direct cash assistance as soon as it is available and understand the impact of cash flow assistance measures such as tax payment deferrals and loans as well as other tax and regulatory announcements affecting employers as they arise.
Our dedicated, multi-disciplinary COVID-19 Assistance Team (“CAT”) is available to help you understand and access all the critical support you are entitled to.
1. Direct Cash Assistance
The government have announced four key initiatives for employers to enable them to apply for cash assistance:
- The Coronavirus Job Retention Scheme
- A Statutory Sick Pay relief package for small and medium sized businesses
- Small business grant funding of £10,000 for all businesses in receipt of small business rate relief
- Grant funding of £25,000 for retail, hospitality and leisure businesses with property with a ratable value between £15,000 and £51,000
More detail on the Coronavirus Job Retention Scheme and Statutory Sick Pay relief package including how we can help are set out below. The grant funding will be automatically provided by local authorities.
The Coronavirus Job Retention SchemeWhat is available?
All UK employers are eligible to access support to continue paying part of their employees’ wages if they would otherwise have been made redundant.
Her Majesty’s Revenue and Customs (HMRC) will reimburse the lower of 80% of workers’ regular wages or £2,500 per month where employees are kept in employment but not working (furloughed employees). In addition HMRC will reimburse employer National Insurance contributions and employer’s auto enrolment pension contributions. The employee’s furloughed pay will be subject to PAYE and employee NIC’s as normal through the payroll. At present this arrangement is intended to last for up to three months, backdated to 1 March 2020 and to be extended if necessary.
For the purposes of the scheme fees, commissions, bonuses, benefits in kind and salary sacrifice arrangements are excluded for the calculation of wages. There are also particular rules for calculating wages of employees on zero hours contracts or with irregular pay.
The furloughed pay is tax deductible for the employer, however, any reimbursement from the scheme is taxable.When is it available and how do I apply?
HMRC have announced that the scheme will be launched on Monday 20 April 2020 and expect to make payments under the scheme before 30 April 2020. Guidance on the parameters of the scheme is being updated regularly. You may need to use other funds from the VAT deferral or loans (see below) to fund the cost in the short term. You will need to send HMRC information through an online portal about all employees who have been furloughed. The information you should expect to need is:
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
You will need to calculate and pay furloughed employees using your payroll and you can pay more than £2,500 to each furloughed employee should you opt to at your own cost.What are the conditions?
You will need to notify employees that they have been ‘furloughed’ and apply to HMRC. This will require a review of the employment contract and may require negotiation. The minimum period of furlough is three weeks and the furloughed employees must undertake NO work for their employer.
Please refer to our addition document about eligibility requirements by type of employee.How can we help?
We can help advise you on all employment law aspects of furloughing employees, help you track your entitlements and with your authorisation, apply to HMRC for access to the funds you are entitled to under the scheme as soon as it becomes live. Get in touch for further advice.
Statutory Sick-Pay relief packageWhat is available?
All UK-based small-and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19 from 13 March 2020.How do I apply?
A rebate scheme is in development and further details will be announced shortly. Existing systems are not set-up to issue employer refunds of SSP.What are the conditions?
The eligibility criteria for the scheme will be as follows:
- employers with fewer than 250 employees will be eligible - the size of an employer will be determined by the number of people they employed as of 28 February 2020
- employers will be able to reclaim up to two weeks’ SSP for any eligible employee who is absent as a result of COVID-19 including those who are required to self-isolate
- employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note.
- eligible period for the scheme will commence the day after the regulations on the extension of SSP to those staying at home comes into force
We can help you establish a system of tracking eligible employers and, with your authorisation, apply for the rebate on your behalf as soon as the scheme is launched. Get in touch for further advice.
2. Cash-Flow Assistance
The measures above provide cash assistance to businesses. Some will take time to implement and therefore businesses will need to use loans and tax deferrals to manage cash flow. The government have announced a series of additional measures and loan schemes to support businesses. To date these are as follows:
- Deferral of VAT and Income Tax payments
- The HMRC Time to Pay Scheme
- The Coronavirus Business Interruption Loan Scheme
- A Bank of England lending facility for larger firms
Deferral of VAT and Income Tax paymentsWhat is available?
Business will not be required to make a VAT payment during the period 20 March 2020 until 30 June 2020. VAT refunds and reclaims will be paid by the government as normal. The deferred payments will need to be made by 5 April 2021 instead.
Income Tax Self- Assessment payments of account due on 31 July 2020 will be deferred until 31 January 2021. The payment due in July is the 2nd payment on account for 2019/20, it is generally equal to one half of the tax for 2018/19.How do I apply?
Both deferral measures are automatic, no application is required. No interest or penalties will be charged in the deferral period.What are the conditions?
The VAT deferral applies to all UK businesses. The payment on account deferral applies to the self-employed.How can we help?
The payment on account due on 31 July 2020 is the 2nd payment on account towards the 2019/20 tax. Many of the self-employed will set aside money for payments on account. Such funds can now be used for other means in the short-term. However, the payment will be due on 31 January 2021, the due date for the filing of the tax return for 2019/20.
We can help individuals plan for these liabilities and look ahead to the 2020/21 tax year to assess future liabilities and manage cash-flow. Get in touch for further advice.
The HMRC Time to Pay SchemeWhat is available?
All businesses and self-employed individuals in financial distress and with outstanding tax liabilities may be eligible to receive support through HMRC’s Time To Pay Service, allowing scheduled payments without penalty.
HMRC will discuss the following:
- agreeing an instalment arrangement
- suspending debt collection proceedings
- cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately
If you have missed or could miss a tax payment due to COVID-19 you can call HMRC’s dedicated helpline on 0800 024 1222.What are the conditions?
You are eligible to apply if you are self-employed or a business that pays UK tax and has outstanding tax liabilities. Arrangements are agreed on a case-by-case basis.How can we help?
We can support you or your business with reviewing all forthcoming tax payment due dates to identify any payments you may miss and help you set up the arrangement with HMRC. Get in touch for further advice.
The Coronavirus Business Interruption Loan SchemeWhat is available?
All UK-based small and medium sized businesses may be supported with access to loans, overdrafts, invoice and asset finance of up to £5 million pounds for 6 years. As part of the scheme, the government will make a Business Interruption Payment to cover the first 12 months of interest payments and any fees.How do I apply?
The scheme is open. To apply you should talk to one of the 40 accredited finance providers.What are the conditions?
The full rules of the scheme are available on the British Business Bank website. You are eligible to apply if your business has a turnover of no more than £45 million per year and you will require a plan.
A new scheme for larger businesses with turnover of between £45 million and £500 million was also announced on 3 April where such businesses can apply for a loan of up to £25 million, More detail on the terms of this scheme are expected shortly.How can we help?
Our business and financial consultancy service can offer direct assistance by helping you pull together and make the application for the loan. Get in touch for further advice.
COVID-19 Corporate Financing FacilityWhat is available?
The Bank of England will buy short-term debt from larger UK businesses. The scheme will operate for at least 12 months.How do I apply?
The scheme is open. You will need to contact your bank or other banks that are able to issue commercial paper. More information can be found on the Bank of England’s dedicated site.What are the conditions?
The scheme is open to companies and their Finance subsidiaries that make a material contribution to the UK economy. Full details of the eligibility criteria is available on the Bank of England’s dedicated site.How can we help?
Our COVID-19 Assistance Team can out you in touch with advisers who can help you to determine eligibility for the arrangements and to make the necessary applications. Get in touch for further advice.
3. Other COVID-19 Tax and Regulatory Announcements
Delay to IR35
These measures were set to be introduced in April 2020 and will be delayed to April 2021.
Businesses will not have to deduct PAYE and NICs from the fees they pay to the Personal Service Companies of individuals they determine are employees until April 2021.
This deferral will provide some breathing space for the many businesses who use contractors. Some businesses were very advanced with the implementation of the planned new regime for April 2020. They may need to reverse some of the changes they were set to make, such as payrolling contactor fees; however this will save businesses employer national insurance costs.How can we help?
This welcome deferral will free up time to focus on more pressing and urgent business issues. They will be introduced next April and we can support you with preparing for the change once the current crisis passes.
UK Tax residence
With many UK citizens on overseas assignment returning unexpectedly returning to the UK as a result of COVID-19, there are two potential impacts:
- How many assignees may unexpectedly become tax resident in the UK?
- Will any work undertaken in the UK whilst here give rise to a tax charge in the UK?
This could lead to administrative and additional cost burdens for the employee and employer such as applying Pay As You Earn both in the UK and overseas where the assignee is based.
Under the Statutory Residence Test individuals can ignore up to 60 days spent in the UK in any tax year for exceptional circumstances. This provision may become important in ensuring some assignees do not become UK tax resident as a result of current and future travel restrictions. These restrictions could otherwise lead to unexpected additional tax and social security costs for both employees and employers. As the legislations refers to 60 days in a tax year a new 60 days count will start from 6 April 2020 (start of the new UK tax year). Clearly the longer the restrictions are in place, the more risk there will be of individuals becoming UK tax resident.
HMRC has confirmed that days spent in the UK that can be disregarded for the purposes of the Statutory Residence Test due to ‘exceptional circumstances’ will (depending on the facts and circumstances of each case) include:
- quarantine or advice by a health professional or public health guidance to self-isolate in the UK as a result of the virus
- restricted by official government advice not to travel from the UK as a result of the virus
- inability to leave the UK as a result of the closure of international borders, or
- request by employer to return to the UK temporarily as a result of the virus
Our team can help you identify any specific cases where there are risks of additional potential costs and help you identify any additional compliance burdens / mitigation strategies.
Many individuals have heeded advice to return home. However, some have not been and may not be able to for some time. This could lead to some employees overstaying the duration of their VISAs. At this stage there has not been any announcement in the UK on this issue. You may wish to identify any employees who are travelling for business purposesHow can we help?
We can help you identify any ‘at risk’ employees under current rules and keep you informed of any announcements and help your employees apply for any extensions should they need to.