The government has announced a raft of measures to aid businesses through this unprecedented time. Below are the main categories of support.
On Friday 20th March 2020, the government announced a scheme called the Coronavirus Job Retention Scheme, under which all UK employers will be able to access support to continue paying part of their employees' salary for those employees that would otherwise have been made redundant during this crisis. HMRC will reimburse 80% of "furloughed workers" wage costs, up to a cap of £2,500 per month.
HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. There are several details that still need clarifying, including whether zero-hour workers count? Does the cap of £2,500 per month include employer National Insurance?
The grants will be available to all employers regardless of size, and charities and non-profit organisations will also be able to apply. They can be backdated to 1st March and will initially be available for three months, although the government has said it will extend the scheme if necessary.
The real challenge now is the speed with which employers can access these funds to avoid redundancies being made, given it could be a few weeks before they become available.
Defer of taxes
For Income Tax Self-Assessment, payments due on the 31st July 2020 will be deferred until the 31st January 2021. This covers both relevant employees and the self-employed. No action is required as this is automatic and there will be no penalties and interest for late payment will be charged in the deferral period.
VAT deferral will apply from 20th March 2020 until 30th June 2020 for all UK VAT paying businesses. Again, this is an automatic offer.
Further business rate support:
Business rates holiday for retail, hospitality and leisure businesses for the 2020-21 year.
Funding for local authorities to support small businesses (Small Business Grant Scheme) that already pay little or no business rates because of small business rate relief (SBBR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs. The business must be based in England, the business must be small, the business must receive SBBR and/or RRR and the business must occupy a property.
The new Coronavirus Business Interruption Loan Scheme supports SMEs with access to working capital (including loans, overdrafts, invoice finance and asset finance) of up to £5 million in value and for up to 6 years.
The government will pay to cover the first 12 months of interest payments and any lender-levied fees. So smaller businesses will not face any upfront costs and will benefit from lower initial repayments.
The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs.
As this scheme is being delivered through commercial lenders, (backed by the British Business Bank) there is concern of how quickly it will take lenders to agree the loans.
Many businesses are unlikely to be covered as standard business interruption insurance policies will exclude pandemics.
However, for those businesses that do have cover for both pandemics and government-ordered closure they should now be covered. This was confirmed on the 17th March. Initially some insurance companies were not covering the Coronavirus as it was not on the list of pandemics.
Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers or brokers.
Self-employed, freelancers and limited company contract workers
More support is needed for both self-employed and contract workers. It is expected there will be an announcement in due course. As with most things the devil will be in the detail. How will small businesses who are advised by their accountants to take a small salary and then dividend be looked after? Will support be based on the salary or salary and dividend? What happens if they can do some work but not all work?
There is now a petition asking for the government to create an emergency fund to support freelancers.
Rob Weaver is an author for accountingcpd. To see his courses, click here.