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Coronavirus update – latest Government support package for businesses

Update 20/3/20

On Friday evening the Chancellor Rishi Sunak announced a further package of Coronavirus support for businesses.  The measures announced are entirely unprecedented and take the country into uncharted waters in terms of the level of support now being offered.  The key points for businesses are:

Job retention scheme

Employers will be able to apply to HMRC to be placed on a Coronavirus job retention scheme which is open to all UK employers irrespective of size or the number of employees.  The scheme (backdated to 1 March) will cover 80% of the salary of workers who are retained on the payroll but are not actually working – described as “furloughed” workers.  The payment will be capped at £2,500 per employee per month and the scheme will run for an initial 3 months with the potential to be extended if required.  It appears that employers who have previously made employees redundant as a result of the Coronavirus outbreak may be able to bring those employees back onto the payroll and still qualify for the support in respect of those employees. 

In order to qualify for the scheme employers will need to:

  • Designate affected employees as furloughed workers, and notify your employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)

HMRC will reimburse 80% of furloughed worker’s wage costs, up to a cap of £2,500 per month (which we assume will include employer’s NIC, auto-enrolment pension contributions etc.  HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

Employers should work quickly to identify employees who may need to be included within the scheme and prepare to submit the required information as soon as possible – this will presumably largely be drawn from existing payroll records.  We will provide details of the information required and on accessing the new online portal as soon as they are available.  Precise timings are not available at this stage but the Chancellor indicated the first grants will be payable before the end of April.  Clearly this is still some time away and businesses will still need to consider their cash flow for the period between now and the payment of the grants.

Deferral of VAT payments

Businesses with VAT payments due in the period between 20 March 2020 and 30 June 2020 will not be required to pay their VAT during this period.  Businesses will have until the end of the financial year (presumably 31 March 2021) to make the payments which fall due during this period.

This is an automatic relief and does not need to be applied for.

Deferral of self-assessment tax payments

Those self-employed individuals with income tax self-assessment payments due on 31 July will not need to make those payments at that time.  These payments will instead be deferred until 31 January 2021 in line with the normal self-assessment balancing payment date. 

At this stage, the announcement states that this is an automatic relief but it is specifically indicated that it is only available to self-employed people.  It may, therefore, be that those with self-assessment payments due on 31 July who are not self-employed (for example landlords and those with significant amounts of investment income) may still be liable to make their payments as normal.  We will clarify this as more information becomes available.

Business interruption loan scheme

The Chancellor announced an extension of the interest-free period for loans under this scheme from 6 months to 12 months with the government covering the interest for this period.  Further details of the loan scheme can be found at the link below but broadly it is available to businesses with a turnover up to £45 million (note this was previously £41 million) for loans up to £5 million.  There are certain limited exclusions – further details of the eligibility criteria are on the website linked below. 

https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

There have been references in various publications to the loans being available to “SMEs.”  It is important to note that this does not refer to the usual definition of SMEs for accounting and tax purposes but is driven by the level of turnover.

The loans are provided by third-party lenders is expected to become available this week.   From conversations with our banking contacts, it is clear that the banks are also looking to support their customers through this period in other ways and we would strongly recommend any business which is concerned about servicing their debt with their banks to get in touch with their normal contact at the bank asap.

Clearly, there is more detail to come on all of these measures but businesses should be assessing the extent to which they are eligible for support and preparing to access it as soon as possible once it becomes available.  We will provide further updates as soon as new information becomes available and are able to offer our clients a range of support in assessing the financial impact of the current disruption on their business, including what steps they can take to manage it.  

Contact your normal WR Service Delivery Manager in the first instance to discuss how we may be able to assist or visit our Contact Us page.

See other Coronavirus Updates here.

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