Business Support
Owner/director of a small limited company
The following schemes are relevant:
- business grants of £10k for those small enough to receive rates relief (SBGF); £10k per property for retail businesses with rateable values under £15k or £25k for rateable values under £51k – all administered by the local authority (RHLG);
- business retail rate discount (BRRD) has been extended and will discount business rates for 2020/21, through locally managed arrangements;
- business loans for companies with turnover below £45m (CBILS), can borrow up to £5M with 80% guaranteed by the government and interest free for the first 12 months;
- business retail rate discount (BRRD) – business rates on retail premises discounted for 2020/21 according to local arrangements
- deferment of taxes due (VAT) for 3 months but not payable until Jan 2021. Any refund claims will be paid as usual;
- HMRC will look favourably on time to pay agreements to manage tax liabilities
- self-assessment income tax: advance payment due in July 2021 deferred to January 2021
- up to 14 days SSP now paid from day 1 at £94.25 per week also covers those self-isolating from 13th
- Job Retention Scheme (CJRS): pays 80% per employee who is furloughed but would otherwise have been made redundant; (capped at £2500 per month plus the employer contributions to National Insurance (NIC) and Workplace Pension (WPS));
- universal credit: where individuals are facing severe hardship, they may be covered by Universal Credit, and they may be able to receive a loan against future payments to shorten the lead time;
- mortgage providers have been encouraged to look favourably on requests for mortgage holidays and landlords have been given protection to ensure renters will not be evicted;
- changes to wrongful trading law to protect director responsibilities for companies facing insolvency because of Covid 19, who would otherwise be sound.
Commentary
Business Grants:
These will be taxable at the year end, just like any other income.
Furloughing Employees:
Employees who would otherwise be made redundant because of loss of business due to the pandemic can be retained using the furlough scheme and employers will receive 80% of their pay up to £2500 (plus WPS and NIC). The employer can fund the additional 20% but will need to pay the relevant share of WPS and NIC. Employment law continues to apply throughout this process and if some staff will continue work and others be furloughed, that there is a transparent selection process consistent with employment law. Furloughed staff are free to volunteer and may choose to undertake training (e.g. CPD) provided that this is not contributing to their employer’s business. It is still unclear whether an audiologist on furlough may volunteer to offer an essential service such as battery replacement, and if so, what restrictions would apply.
If 80% of earnings for low-paid employees on furlough fall below minimum wage this does not breach pay legislation.
The claims portal for furloughed workers wage claim-backs should be opening on 20 April 2020:
For all other employers using the portal directly, the following will be needed:-
- ePAYE reference number
- number of employees being furloughed
- claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- bank account number and sort code
- contact name
- phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
Directors
may also furlough themselves whilst continuing to undertake their statutory duties as a director but must be careful not to undertake work or deliver services beyond those required to comply with the directors’ code. They should not undertake work which could be construed as productive employment designed to generate future income. This would include activities designed to maintain active client relationships such as handling battery deliveries and repairs without seeking further professional advice or approval from HMRC. A furloughed director will only receive 80% of the remuneration paid through PAYE and will not be compensated for income drawn through dividends.
Many businesses are experiencing difficulty accessing the promised business loans (CBILS). To benefit from the scheme, businesses are expected to show that they are not able to obtain funding through normal routes, and banks are required to ensure that loans are only made through the scheme to organisations that are financial sound but for the impact of Covid 19. There is concern that loans which do not clearly comply with these rules may not subsequently receive the promised 80% underwriting from government. Business may find that their applications are treated more sympathetically and speedily where they have existing relationships and if they address these concerns effectively in their applications.