Coronavirus Update

Bounce Back Loan

Update as of 6 May 2020

The loan scheme is now operational. In summary:

  • You can borrow between £2,000 and £50,000 capped at 25% of your Turnover in 2019 (the calendar year, not your accounting year).

  • 100% government guarantee.
  • No fees, interest or capital repayments for 12 months. Interest capped at 2.5% thereafter.
  • Loan terms up to 6 years.
  • The business must be UK based and have been negatively affected by coronavirus.
  • You cannot claim if already in receipt of a loan under the Coronavirus Business Interruption Loan Scheme. However, if you have received a loan up up to £50k under CBILS, you can transfer this to the Bounce Back Scheme. This needs to be arranged with your lender before 4 November.

Applications can be made via the websites of the participating banks.

Self-employment Income Support Scheme

Update as of 17 August 2020

The claims portal for the second grant claim is now open and claims can be  made online here: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

To be eligible for the claim:

You are eligible if you are a self-employed individual or a member of a partnership and:

  • you traded in 2018/19 and submitted your 2018/19 personal tax return by 23 April 2020.
  • you traded in the tax year 2019/20
  • you intend to continue to trade in 2020/21
  • your business must have been adversely affected due to Coronavirus on or after 14 July 2020.

Your trading profits must be less than £50,000 and more than half of your total taxable income must be from self-employment. To meet this test, one of the following must be true:

  • Your profits in 18/19 were below £50,000 and were more than half of your total taxable income; or
  • your average profits in 16/17, 17/18 and 18/19 were less than £50,000 and were more than half of your total average income in the same period.

You cannot claim the grant if you trade via a limited company.

The Claim Process

In order to make the claim, you will need your Unique Taxpayer Reference (a 10 digit number found on your tax return and most HMRC correspondence) and your National Insurance number. If you cannot locate either of these, and Synergee complete your Personal Tax Return, please email synergee.admin@synergee.org.uk to request it. If you do not want the details sent via the secure portal, please include a contact phone number as we will not be able to use email due to GDPR.

You will also need a Government Gateway ID and Password as Synergee cannot make the claim via our client portal. If you do not have a user ID, you can create one when you start the claim process. The ID can take up to 7 days to set up so please ensure you start the process ASAP.

The claim must be made on or before 19 October 2020.

Update as of 1 June 2020

The SEISS has been extended. A second and final grant, capped at £6,570, can be claimed in August by eligible individuals. This will be based on 70% of average monthly trading profits.

Those eligible for the first SEISS grant have until 13 July to make that claim. Applications for the second grant will open in August.

The eligibility for the second grant is the same as for the first grant. However, you can claim the second grant even if you did not claim the first.

Update as of 6 May 2020

HMRC has launched an online tool for self-employed people (including partners in a partnership or LLP) to check whether they are eligible to claim a grant. The online tool can be found here:

https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

In order to use the tool, you will need your Unique Taxpayer Reference (a 10 digit number found on your tax return and most HMRC correspondence) and your National Insurance number. If you cannot locate either of these, and Synergee complete your Personal Tax Return, please email synergee.admin@synergee.org.uk to request it. If you do not want the details sent via the secure portal, please include a contact phone number as we will not be able to use email due to GDPR.

If you are eligible to claim, you will need a Government Gateway ID and Password as Synergee cannot make the claim via our client portal. If you do not have a user ID, you can create one when you check your eligibility to claim. The ID can take up to 7 days to set up so please ensure you start the process ASAP.

If you are eligible to claim, HMRC will give you a date to apply which will be on or after 13 May 2020. Once submitted and approved, payment will be made within 6 working days.

Update as of 27 March 2020

You can claim a taxable grant worth 80% of your trading profits for 3 months. The grant is capped at £2,500 per month. You are eligible if you are a self-employed individual or a member of a partnership and you:

  • have submitted your 2018/19 personal tax return. This was due by 31 January 2020 and you have until 23 April 2020 to submit if you missed the deadline.
  • have traded in 19/20, are trading when you apply (or would be except for the Coronavirus) and intend to trade in 20/21.
  • have lost trading profits due to the virus.

Your trading profits (we assume taxable trading profits) must be less than £50,000 and more than half of your total taxable income must be from self-employment. To meet this test, one of the following must be true:

  • Your profits in 18/19 were below £50,000 and were more than half of your total taxable income; or
  • your average profits in 16/17, 17/18 and 18/19 were less than £50,000 and were more than half of your total average income in the same period.

The amount you will get will be 80% of the average profits from the tax years 2016/17, 2017/18 and 2018/19.

You cannot apply for this scheme. HMRC will contact you, if you are eligible, to invite you to apply online. 

Coronavirus Job Retention Scheme

Update as of 19 June

The Coronavirus Job Retention Scheme (CJRS) is changing from 1 July with the introduction of flexible furloughing. In essence, employees that meet the criteria can be brought back from full time furlough and can work on any part time basis and be furloughed for the rest of their standard working period.

Whilst that is reasonably straightforward, there are a number of complexities surrounding who can be furloughed and how to calculate their pay and the amount that can be reclaimed from HMRC.

Which Employees Can Be Furloughed From 1 July

From 1 July, you will only be able to claim for employees who have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March and 30 June. Employees starting furlough for the first time after 10 June will not be eligible for any claim. 

If an employee, who had previously been furloughed for at least 3 weeks, starts a new furlough period between 11 June and 30 June, it has to last for a minimum of 3 weeks otherwise a claim cannot be made for this period. They could stop at the end of June and start a flexible furlough from 1 July but a claim would not be possible for the sub 3 week period started in June.

From 1 July, the maximum number of employees that can be claimed for in a single claim cannot exceed the maximum number of employees that were claimed for in any period up to 30 June. There are limited exceptions such as employees returning from statutory parental leave post 30 June.

Claim Periods and Timing

From 1 July:

  • Claims cannot span calendar months. If a furlough period covers more than one month, separate claims will be required.
  • The minimum claim period will be 7 days (unless a claim is split because it spans a month end)

The deadline for making claims for periods up to 30 June is 31 July.

Claims for periods commencing on or after 1 July can be made from 1 July. The earliest a claim can be made is 14 days before the end of the period you are claiming for, subject to the 1 July earliest date. Payment will be made by HMRC 6 working days after the claim is submitted.

HMRC request that the claim periods should, as far as possible, match the payroll periods but this may not be possible. Only one claim may be submitted for any period.

Basis of Claim

If an employee remains furloughed full time, the calculation is fundamentally the same as pre 30 June.

If flexibly furloughed, a new calculation method has been developed which introduces the concept of ‘usual hours’. Once usual hours are calculated, the actual hours worked are deducted from this to arrive at the furlough hours.

The method of calculating usual hours depends on whether an employee is on a fixed or variable hour contract.

Fixed Hours

On a fixed hour contract, the usual hours will be the number of hours the employee was contracted for as at the end of the last pay period prior to 19 March 2020. The number of hours are divided by the days (all days, not working days) in the standard shift pattern (so someone employed for 40 hours per week will be 40/7 = 5.714). This is then multiplied by the number of days in the claim period and rounded up to the nearest whole number. This will be multiplied by the employee’s standard hourly rate to obtain the standard pay on which the 80% grant will be claimed.

Variable Hours

Variable hours are more complex. The usual hours will be the higher of:

  • The average hours worked in the 2019/20 tax year (up to the day before furlough if this was pre 6 April 2020). The average will be calculated by dividing the total hours by the total number of days in the period (not just working days); and
  • The average hours for the corresponding calendar period in 2019/20.

There are detailed steps for the above, as well as examples, on HMRC’s website here: https://www.gov.uk/guidance/calculate-how-much-you-can-claim-using-the-coronavirus-job-retention-scheme#work-out-80-of-your-employees-usual-wage

Pay Cap

The overall cap on the amount of gross pay that can be claimed was £2,500 per month. This has been revised to a daily total which is £2,500 divided by the calendar days in the month. This gives £80.65 for July and August then £83.34 in September. Bear in mind than the reimbursements are changing and the full £83.34 per day in September will not be fully reimbursed (see our previous update or click the ‘Coronavirus Information page’ link above)

Summary

The new scheme is more flexible, but much more complex is the calculation of what can be claimed.

Update as of 1 June 2020

Part Time Furloughing

From 1 July, it will be possible to bring employees back to work part time. This only applies to employees that have been previously furloughed. Employers will be able to claim for the normal hours not worked by the employees.

The furlough scheme will close to new entrants from 30 June unless they have been furloughed for a period of at least 3 weeks prior to 30 June. Therefore, the last date an employee can be furloughed for the first time is 10 June.
 
Changes to Government Reimbursement

Currently, the government grant covers the 80% of standard salary paid to the employees plus the employer’s NIC and pension contribution. This is changing as follows:

From 1 August

The government will continue to pay the 80% of the salary paid (capped at £2,500) but will no longer pay the employer’s NIC and pension costs.

The employer will pay the employer’s NIC and pension.

From 1 September

The government contribution will reduce to 70% of the salary (capped at £2,187.50).

The employer will pay 10% of the salary plus the employer’s NIC and pension.

From 1 October

The government contribution will reduce to 60% of the salary (capped at £1,875).

The employer will pay 20% of the salary plus the employer’s NIC and pension.

The scheme is scheduled to end on 31 October.

Update 15 April 2020

HMRC say the portal will be open from 20 April with first claims paid by 30 April. Future claims will be paid within 4-6 days. After the initial backdated claims, future claims can be made up to 14 days before the payroll run so that funding will be received in advance of salary payments.

Update 4 April 2020

The full details of how to claim under the scheme are now available here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

The guidelines have amended the treatment of commission as follows:

You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.

You can therefore include any commission payments that employees are contractually entitled to.

We have prepared a spreadsheet to assist you with the calculation of what can be recovered which you can download here: Anchorhttps://mcusercontent.com/472b0a9aaca501223867b2b40/files/fb10db90-e204-4470-97d3-2e35342c09cc/Furlough_Calculator.xlsx

We have also been provided with a furlough letter template. We are not solicitors or HR advisers and recommend that you take appropriate advice before furloughing staff. The template can be accessed here: https://mcusercontent.com/472b0a9aaca501223867b2b40/files/13d74b7a-3780-4d10-9853-16ef683b14fb/Furlough_Leave_Agreement_TEMPLATE.docx

A director is not excluded from being furloughed. However, as with employees, the furloughed director cannot undertake any work for the company. We understand that statutory duties can be carried out but no services or revenue-generating work. If furloughed, the amount that will be reimbursed by HMRC will be based on the PAYE salary and will not include dividends.

In our view, it is not possible to furlough a sole director if they are undertaking ongoing tasks for the company such as dealing with post, emails, bookkeeping etc. If information is published that changes this view, we will let you know.

Update as of 27 March 2020

HMRC have now issued detailed guidance on how to claim.

The amount that can be claimed is 80% of an employee's regular wage capped at £2,500 pr month. In addition, HMRC will reimburse the employer's NIC and minimum auto-enrolment pension cost on the 80% (or £2,500 if capped) paid. 

For full time and part time salaried employees, the employee's actual gross salary at 28 February 2020 should be used. This should exclude fees, commissions and bonuses. (now amended - see update 4/4/20)

If the employee's pay varies and they have been employed for a full 12 months, you can claim the higher of:

  • the same month's earnings from the previous year; or
  • the average monthly earnings from 2019/20.

If the employee has been employed for less than a year, use the average of their monthly earnings since they started.

The minimum furlough period is 3 weeks.

Update as of 26 March 2020

  • Employees need to be entirely non-active to qualify. There is no provision for partial furloughing.
  • All individuals on PAYE are eligible - this therefore includes directors. Whilst directors can be furloughed:
    • Dividend income is not included in the 80% calculation; and
    • Directors are unlikey to meet the 'entirely non-active' criteria if they continue to manage the business.
  • Whilst relief can be backdated to 1 March, it will be limited to the date the employee completely stopped undertaking the duties of employment.
  • The grant paid will be 80% of the total wage cost in the reference period. Total wage cost = Gross Pay + Employer's NIC + Employer's Pension. Superseded - see update 27/3/20.
  • The payments to the furloughed employees will be subject to tax, NIC and pension deductions as normal. The employer will pay NIC and pension contributions on the payment as normal.
  • Zero hours contract employees - the reimbursement will be based on an average of preious pay periods but the period has not been specified as yet.

Original Post 21 March

HMRC will reimburse 80% of the wage costs of workers who have be laid off due to the coronavirus crisis.

  • All UK businesses are eligible.
  • The latest guidance says that employers can choose to top-up pay, either for the unfunded 20% of pay or the amount above £2,500 for higher earners, but this will not be a formal requirement to obtain access to the scheme.
  • There is a cap of £2,500 per employee per month.
  • It will be backdated to 1 March 2020.
  • You must notify the affected employees that they have been designated ‘furloughed workers’ - N.B., this may be subject to negotiation, dependent upon the terms of the individual employment contracts.
  • A new online portal will be provided by HMRC to report details of the employees furloughed and the payments made.
  • This will be available initially for at least 3 months.
  • The system is not ready yet, meaning refunds will not be made immediately. It is expected that reimbursements will be made in April.

VAT Deferral

Update as of 26 March 2020

  • The deferral will apply to the quarters ended 29/2/20, 31/3/20 and 30/4/20.
  • HMRC  have not confirmed that Direct Debit Payments will not be collected during the deferment period. We therefore recommend that you cancel your DD for the time being.

Original Post 21 March

The deferral will apply from 20 March to 30 June 2020. There is a lack of clarity on the Gov.uk website and we are interpreting this as payments due by 30 June rather than quarters ended 30 June.
This means that May quarter VAT Returns, where payment is due by 7 July, will still be payable as normal. We will update this when more detail becomes available

Any payments deferred will become payable by the end of the tax year (31/3/21 Company or 5/4/21 Unincorporated)

Income Tax Deferral

The self-assessment second payment on account, due by 31 July 2020, will be deferred to 31 January 2021. No penalties or interest will be charged.

Cash Grants

There are two grants proposed for businesses.

  1. A grant of £10,000 to all businesses that currently receive small business rate relief (SBBR) or rural rate relief. In general, SBBR is available to businesses with a rateable value of up to £15,000.
  2.  A grant of £25,000 for businesses in the retail, hospitality or leisure industry if their rateable value is between £15,000 and £51,000.

No action is required for the £10,000 grant. If you are eligible for the £25,000 grant, you should contact your local authority.

Loan

Update as of 4 April 2020

The Chancellor has announced some updates to the scheme. The main changes are:

  • Insufficient security is no longer a condition of access to the scheme. Previously, businesses that had adequate security were steered towards standard commercial loans outside of the CBIL scheme.
  • Personal guarantees will not be taken for loans up to £250,000.
  • Personal guarantees may be required for loans above £250,000. This will be at the lender's discretion. If a PG is required, it will be limited to 20% of the loan balance and cannot include the Principal Private Residence.

The British Business Bank's website states:

"Access to the scheme has now been opened up to smaller businesses facing cashflow difficulties who previously would not have been eligible for CBILS because they met the requirements for a standard commercial facility.

You may therefore consider re-contacting your lender if you have previously been unsuccessful in securing funding."

Original Post 21 March

A temporary Coronavirus Business Interruption Loan Scheme will launch shortly. The Government will provide lenders with a guarantee of 80% on each loan and will pay the interest for the first 12 months. Even with the Government underwriting 80% of the loan, normal lending criteria will apply. The guidelines state, amongst other things, that the borrower must have a sound borrowing proposal but insufficient security to meet the lender’s requirements. Full details are not yet available but I have heard that personal guarantees may be required in addition to the Government guarantee.

There are 40 accredited providers and further details can be accessed here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/

The first point of contact for this will be your own bank or finance provider.

Business Rates Holiday

There is a 12-month business rates holiday (April 20 to March 21) for all retail, hospitality and leisure businesses in England.

No action is required as councils will automatically apply this.  

Statutory Sick Pay

HMRC will reimburse up to 2 weeks SSP for employees who have been off due to coronavirus. This is available for businesses with fewer than 250 employees at 28 February 2020.

Time to Pay Arrangements

If you have outstanding tax liabilities (Corporation Tax, VAT or Income Tax) due to coronavirus, you may be able to agree a time to pay arrangement. Arrangements will be agreed on a case by case basis. To discuss your options, contact HMRC on 0800 0159 559.

Subsequent to the Time to Pay arrangements being announced, VAT and Income Tax deferral schemes were also proposed as noted above.

Mortgage Holiday

If your finances have been affected by coronavirus, you can request a 3-month mortgage holiday from your finance provider. This will have the effect of extending your mortgage term by 3 months.

You need to be up to date with payments to access the holiday. Not making scheduled payments without agreeing this first could affect your credit rating.

Speak to your finance provider to discuss your options.