COVID-19 Latest summary

UK Government financial support

The following provides a summary of the UK Government financial support packages that may apply to you.

Small Company Director

For these individuals, they normally pay themselves through a mix of PAYE and Dividends.

It is important to note that, at the current time, Dividends are not covered by any UK Governments financial support packages.

Coronavirus Job Retention Scheme

  • You will be able to contact HMRC for a grant to cover most of the wages of your PAYE part of your income if you decide to furlough yourself.
  • This will cover 80% of your usual monthly PAYE costs up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
  • Grants are backdated to 1 March 2020 and the scheme is expected to be up and running by the end of April 2020.
  • If you furlough yourself, you are not able to provide services to or generate revenue for, or on behalf of your company. This could include tweeting from an official account or on behalf of the company. Also, you cannot make phone calls or discuss the firm or its business.
  • However, you will be able to perform your statutory directorial duties while furloughed. For example, relating to filing documents to Companies House at the correct time.

Coronavirus Business Interruption Loan Scheme

  • Launched Monday 23 March 2020
  • Eligible for UK based SMEs with turnover of no more than £45 million per annum (although all lending decisions delegated to the lending partners)
  • The business must have a borrowing proposal which the lender:
    • would consider viable, were it not for the COVID-19 pandemic
    • believes will enable you to trade out of any short-term to medium-term difficulty
  • It will be interest free for 12 months
  • Further details included in the separate Coronavirus Business Interruption Loan Scheme document

VAT payments

  • If you’re a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to:
    • defer the payment until a later date
    • pay the VAT due as normal
  • HMRC will not charge interest or penalties on any amount deferred as a result of this change.
  • You will still need to submit your VAT returns to HMRC on time.
  • HMRC will continue to process VAT reclaims an refunds as normal during this time.
  • If you choose to defer your VAT payment, you must pay the VAT due on or before 31 March 2021.
  • You do not need to tell HMRC that you are deferring your VAT payment.
  • If you normally pay by Direct Debit you should contact your bank to cancel your Direct Debit as soon as you can, or you can cancel online if you’re registered for online banking.
  • VAT payments due following the end of the deferral period will have to be paid as normal.
  • Further information about how to repay the VAT you’ve deferred will be available soon. Income tax payments
  • If you’re due to pay a self-assessment payment on account by 31 July 2020, then you may defer payment until January 2021.
  • You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment.
  • The deferment is optional. If you are still able to pay your second payment on account on 31 July, you should do so.
  • This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until 31 January 2021.
  • During the deferral period you can set up a budget payment plan to help you pay the deferred payment on account when it comes due.

Income tax payments

  • If you’re due to pay a self-assessment payment on account by 31 July 2020, then you may defer payment until January 2021.
  • You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment.
  • The deferment is optional. If you are still able to pay your second payment on account on 31 July, you should do so.
  • This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until 31 January 2021.
  • During the deferral period, you can set up a budget payment plan to help you pay the deferred payment on account when it comes due.

Universal Credit

  • You may be able to get Universal Credit if:
    • you’re on a low income or out of work
    • you’re 18 or over (there are some exceptions if you’re 16 to 17)
    • you’re under State Pension age (or your partner is)
    • you and your partner have £16,000 or less in savings between you o you live in the UK.
  • You can apply for Universal Credit online. If you are eligible you will need to make an appointment for your new claim interview. This interview will take place by telephone with a work coach. You will be given the number to call to book this appointment when you have submitted your claim.
  • The Universal Credit standard allowance and working tax credit basic element will be increased for the next 12 months by £1,000 a year.
  • This means that for a single Universal Credit claimant (aged 25 or over), the standard allowance will increase from £323.22 to about £406 per month.

 

Statutory Sick Pay (SSP)

  • For your PAYE element, you can get £94.25 per week Statutory Sick Pay (SSP) if you’re too ill to work. It’s paid by your company/employer for up to 28 weeks.
  • If you are staying at home because of COVID-19 you can now claim SSP. This includes individuals who are caring for people in the same household and therefore have been advised to do a household quarantine.
  • The Government is legislating for SSP to be paid from day 1, rather than day 4, of your absence from work if you are absent from work due to sickness or need to stay at home due to COVID- 19. Once the legislation has been passed, this will apply retrospectively from 13 March.
  • If you have COVID-19 or are advised to stay at home, you can get an “isolation note” by visiting NHS 111 online, rather than visiting a doctor.
  • For COVID-19 cases this replaces the usual need to provide a “fit note” (sometimes called a “sick note”) after 7 days of sickness absence.

Small business rates grant

  • The government will provide additional Small Business Grant Scheme funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), 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.
  • You are eligible if:
    • your business is based in England
    • you are a business that occupies property
    • you are receiving small business rate relief or rural rate relief as of 11 March
  • You do not need to do anything. Your local authority will write to you if you are eligible for this grant. Any enquiries on eligibility for, or provision of, the reliefs and grants should be directed to the relevant local authority.

Scottish Government support for business

  • £10,000 grants for small businesses in receipt of the Small Business Bonus Scheme or Rural Relief.
  • 1.6% relief for all properties, effectively freezing the poundage rate next year.

 

Northern Ireland Executive support for business

  • COVID Small Business Grant – small business grant of £10,000 to be issued immediately. This is for all businesses with a NAV up to £15,000. Landlords and renters

 

Landlords and renters

  • From 26 March 2020, landlords will have to give all renters 3 months’ notice if they intend to seek possession (i.e. serve notice that they want to end the tenancy) – this means the landlord can’t apply to start the court process until after this period.
  • This extended buffer period will apply in law until 30 September 2020 and both the end point, and the 3-month notice period can be extended if needed.
  • This protection covers most tenants in the private and social rented sectors in England and Wales, and all grounds of evictions. This includes possession of tenancies in the Rent Act 1977, the Housing Act 1985, the Housing Act 1996 and the Housing Act 1988. After 3 months if the tenant has not moved a landlord needs to apply to court in order to proceed.
  • Tenants are still liable for their rent and should pay this as usual.
  • Landlords will be protected by a 3-month mortgage payment holiday where they have a Buy to Let mortgage.
  • Landlords remain legally obligated to ensure properties meet the required standard – urgent, essential health and safety repairs should be made.

Personal Credit

  • If you need additional financial support because of coronavirus with an existing arranged overdraft, you will be able to request from your provider that up to £500, on your main personal current account, is provided at 0% for up to three months.
  • You can ask for a three-month payment freeze or to pay a nominal payment on credit cards, store cards and catalogue credit.
  • If you have a personal loan, you can ask for a three-month freeze if needed.
  • Further details included in the separate Regulatory support for individuals with consumer credit document.

 

Tax Question Of The Week – Entertainment & Promotional Costs

Last year my client launched a new product and arranged a marketing event to publicise it. The expenditure was a mixture of food, drink, and promotional gifts and the hire of a conference center. I am preparing the tax computation for the company and so would any of this expenditure be disallowable?

When preparing the tax computation, you should adjust the trading profits by adding back disallowable items, such as any element of client entertaining as explained below.

Statutory background

The general rule is that no tax deduction is allowed in calculating the profits of a trade for expenses incurred in providing entertainment or gifts in connection with the trade (s1298 CTA 2009)

The term ‘entertainment’ is defined to include ‘hospitality of any kind’ and the expenses incurred in providing entertainment or a gift are defined to include ‘expenses incurred in providing anything incidental to the provision of entertainment or a gift’.

Establishing whether the costs are promotional or entertainment

HMRC’s view is that the food and drink costs are hospitality and so always disallowable under s1298 CTA 2009 – unless the hospitality provided is “minimal” (BIM45050).

In the case of Netlogic Consulting Ltd v HMRC (2005) SpC 477, the costs were split between food and drink provided and the cost of hiring the room. The courts found that the room hire was an allowable tax deduction because based on the facts of the case it was established that ‘the entertainment was incidental to the promotional purpose of the meeting, rather than the hire of the room being incidental to the provision of the entertainment’.

Check that the costs of advertising and marketing do not fall within the definition of entertaining. HMRC’s view at BIM45050 sets out to clarify the matter:

An example of allowable expenditure is an event arranged by a car manufacturer to allow potential customers to test drive new cars. However, if the manufacturer arranges a golf day at which test drives are available then only the direct costs of the test drives and of any publicity material provided are not disallowed by the legislation.

Similarly, the costs of a book launch at which food and wine are provided and where the author and invited guests are entertained together with journalists and booksellers is disallowable under the legislation. However, where any hospitality provided is minimal no disallowance need be made.’

Gifts provided at the event

If gifts were provided at the event there are four sets of circumstances within s1300 CTA 2009 (see BIM45065) which will not deny a tax deduction and relief will be due. These are:

  • Case A is where the gift is of an item which it is the trader’s trade to provide, and the item is given away in the ordinary course of the trade in order to advertise to the public generally.
  • Case B is where the gift incorporates a conspicuous advertisement for the donor.

However, this relaxation does not apply if:

  1. the item consists of food, drink, tobacco or of any token or voucher exchangeable for goods; or
  2. the cost of the gift to the donor, taken together with the cost to him of any other such articles given by him to that person in the same ‘basis period’, exceeds £50. In calculating this total, the cost of such items as are referred to in (a) above (food, etc.) are ignored;
  • Case C is where gifts are provided for the trader’s employees unless gifts are also provided for others and the provision for employees is incidental to the provision for others; and
  • Case D covers gifts given to a charity, to the Historic Buildings and Monuments Commission for England, and to the Trustees of the National Heritage Memorial Fund

Exceptions

S1299 CTA 2009 provides an exception to the business entertaining rule that concerns the entertainment of employees. Staff entertaining is allowable, so long as it is wholly and exclusively for the purposes of the trade and is not merely incidental to entertainment which is provided for customers (see BIM45033 and BIM45034) This includes a staff Christmas party or other event open to all employees provided by the employer.

There may, of course, be other tax repercussions involving VAT input tax recovery and BIK issues for employees.

Self-employment Income Support Scheme

On Thursday 26 March the government announced their intention to provide further support for the self-employed in the form of a taxable cash grant.

The scheme allows individuals to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the 3 months from March to May 2020. This may be extended if needed.

The taxable cash grant will be in the form of a single lump sum to cover the three months from March to May 2020. It will be paid in June 2020 to those that are eligible directly into their bank account.

The self-employed including members of Partnerships will be eligible if their trading profits for 18/19 were less than £50,000 and more than 50% of their income stems from self-employment.

Alternatively, they will be eligible if their average trading profits for the tax years 16/17, 17/18 and 18/19 were less than £50,000 and more than 50% of their income stems from self-employment. For those that started trading between 2016-19 HMRC will only use those years for which a Self-Assessment tax return has been filed.

The scheme will be open to those that have submitted an income tax self-assessment tax return for the year to 5 April 2019 (the 18/19 tax year). Worth noting that HMRC’s guidance does state that the 18/19 tax return must be filed by 23 April 2020 in order to eligible! For those that have yet to file their 18/19 tax return, it represents something of an opportunity.

Additional eligibility criteria include the requirement that the individual must have lost trading profits due to Covid-19 and they must have traded in 2019/2020, intend to trade in 2020/2021 and are trading at the point of application or would have been except for Covid-19.

Individuals that claim Tax Credits would need to include the grant as part of their income.

It is crucial to observe that HMRC will contact and invite those that are eligible to apply. Applications will need to be made online when the invitations have been issued by HMRC.

Individuals do not need to contact HMRC now.

This seems an opportune moment to remind readers that HMRC does not send texts or make calls asking for bank or credit card details. If this happens then it is likely to be a scam. Please be wary.

We will update this guidance as and when HMRC issue further guidance of their own.

VAT Question – A friends has said that I should register voluntarily for VAT! Is this true?

Answer:

Some industries that offer zero rated supplies find it beneficial to register for VAT even if they haven’t reached the VAT threshold.

This means that they can claim any VAT on purchases and reclaim this VAT on their VAT return.

This is very common in the building industry because a New-Build house is a zero rated supply, so there is no VAT added when selling the house (Residential)

Check out our blog for more related questions:

https://aescott.co.uk/blog/

Tax Question Of The Week – CGT and Gifts

My client wants to gift property to her children during their lifetime but does not want to use a trust. What are the main Capital Gains Tax (CGT) implications particularly in view of the compliance changes applying from April 2020?

A gift is a disposal for Capital Gains Tax (“CGT”) purposes. Furthermore, a gift from an individual to his/her children would constitute a disposal to a connected person (as defined in s.286 TCGA 1992) and so the deemed proceeds are the asset’s market value under s18 TCGA 1992.

CGT due on direct disposals of UK residential land by UK residents from April 2020 will be reportable and payable within 30 days of the completion date – Sch. 2 FA 2019.  This change is likely to create compliance and cash flow difficulties for many.

To assist with cash flow, clients who have an immediate CGT liability can make an election to pay the CGT in ten annual installments with the first installment being payable on the normal due date. The legislation can be found at s.281 TCGA 1992 and for gifts, the rules are as follows:

The installment provisions apply to assets that are disposed by way of gift where s.165 TCGA 1992 or s.260 TCGA 1992 cannot be claimed or where they have been claimed, have not been enough to defer the gain or in limited circumstances, where gift relief has been clawed back.

The assets on which relief is available are as follows:

  • land, or an estate or interest in land;
  • a controlling shareholding of a company’s shares or securities; or
  • shares or securities not comprising a controlling interest, but which are not listed on a recognised stock exchange. Shares traded on the Alternative Investment Market (AIM) do not fall under this definition (CG50255).

The installments include interest which runs from the normal due date and is compounded on the unpaid portion of the tax. The taxpayer can pay off any part of the outstanding balance at any time.

There is the risk of any unpaid installment becoming due immediately, with accrued interest if the asset gifted to a connected person is later disposed of for valuable consideration. Therefore the asset gifted to my client’s children should not be disposed of for consideration during the installment period otherwise all remaining installments become due and payable.

The taxpayer must give notice to HMRC in writing and HMRC state at CG66452 that this can be made at any time before the tax becomes payable.  If accepted, the tax can be paid by ten equal yearly installments the first of which is due on the day the tax would have been payable.

Where the property is disposed of before 6th April 2020, CGT is generally payable under self-assessment and payable on 31st January after the end of the tax year of gift. This leaves plenty of time to make the election.

The above-mentioned 2020 changes will create a practical problem in giving notice before the tax becomes due. Where a property is disposed of on or after 6th April 2020, a CGT return and the tax payment must be made within 30 days of the completion date – a much shorter notice period for the installment election. Even for those taxpayers within self-assessment, a CGT return and payment is still required unless its filing date falls after the date someone has either already filed a self-assessment tax return or is due to submit a self-assessment return (this latter date is usually 31st January after the tax year unless a notice was issued late by HMRC).

There are exceptions to the CGT return requirements e.g. no gain/no loss transfers and gains wholly covered by PPR. However, in view of the 30-day compliance deadlines, it will be important that clients are aware they must contact their agents early in the disposal process if they need assistance.

£10k Grant

The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.

If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.

Funding for the scheme will be provided to local authorities by the government in early April. Guidance for local authorities on the scheme will be provided shortly.

SMALL BUSINESS RATES RELIEF

If you work from home, you cannot get this grant, its if you have actual work premises.

 

COVID-19 Emergency Fund

What’s Included in COVID-19 Emergency Funding?

  • Government backed loans with attractive terms for payment of rent, salaries, suppliers or stock.
  • For businesses in retail, hospitality and leisure, rates will be waived for 12 months for 2020/21.
  • The Coronavirus Business Interruption Loan Scheme expanded from £1.2m to £5m with an interest waiver for first 6 months.
  • Grants to small businesses eligible for Small Business Rate Relief will be increased from £3,000 to £10,000.
  • Further £25,000 grants for retail, hospitality, and leisure businesses operating from smaller business premises defined as those within a rateable value between £15,000 and £51,000.
  • £10,000 one-off grant to businesses that pay little or no business rates due to small business rent relief or rural rate relief.
  • Small and medium sized business will be able to reclaim SSP for sickness due to COVID-19.
  • Support for liquidity for larger business with a new scheme from the Bank of England.
  • The advice to avoid pubs, clubs and theatres is sufficient to trigger a claim under business interruption insurance.
  • Pubs and restaurants are able to provide a takeaway service without a planning application.

COVID-19: support for businesses (Grants etc)

The Chancellor has set out a package of temporary, timely and targeted measures to support public services, people and businesses through this period of disruption caused by COVID-19.

This includes a package of measures to support businesses including:

  • a statutory sick pay relief package for SMEs
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000
  • the Coronavirus Business Interruption Loan Scheme offering loans of up to £5 million for SMEs through the British Business Bank
  • a new lending facility from the Bank of England to help support liquidity among larger firms, helping them bridge coronavirus disruption to their cash flows through loans
  • the HMRC Time To Pay Scheme

Support for businesses who are paying sick pay to employees

We will bring forward legislation to allow small- and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:

  • this refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
  • 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 expenditure for any employee who has claimed SSP(according to the new eligibility criteria) as a result of COVID-19
  • 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 Statutory Sick Pay to those staying at home comes into force
  • the government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible

Support for businesses that pay business rates

We will introduce a business rates retail holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.

Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.

A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.

Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March

Support for businesses that pay little or no business rates

The government will provide additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBBR). This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.

If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.

Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.

Support for businesses through the Coronavirus Business Interruption Loan Scheme

A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch next week to support primarily small and medium sized businesses to access bank lending and overdrafts. 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. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments. Further details, including on the lenders providing access to this scheme will be announced in the coming days, and the scheme will be available from early week commencing 23 March 2020.

Support for larger firms through the COVID-19 Corporate Financing Facility

To support larger firms, the Bank of England has announced a new lending facility to provide a quick and cost effective way to raise working capital via the purchase of short-term debt. This will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms. Further details, including on how to access this funding will follow in the coming days, and the scheme will be available from the week commencing 23 March.

Support for businesses paying tax

All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.

If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559.

Insurance

Businesses that have cover for both pandemics and government-ordered closure should be covered, as the government and insurance industry confirmed on 17 March 2020 that advice to avoid pubs, theatres etc is sufficient to make a claim.

Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics.

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