This article was last updated on 27th April 2020.
On Friday 20th March the Chancellor announced a wide range of new measures designed to help businesses through the Covid-19 crisis. Our chief accountant, Emily Coltman FCA, explains what these latest developments could mean for you and your business.
Upcoming VAT payments to be deferred
If you were due to make a VAT payment between 20th March 2020 and 30th June 2020, that payment won’t be collected. You must still file your VAT returns on time so that HMRC can see how much it can expect to collect once the deferral period ends, but you won’t have to pay any VAT.
This is an automatic extension, so you don’t need to apply for it. However, if you pay VAT by direct debit, you should cancel the direct debit if you wish to take advantage of the deferral. HMRC will not cancel your direct debit if you wish to continue making payments.
HMRC’s guidance currently says that taxpayers will be given until the end of the 2020-2021 tax year (i.e. 5th April 2021) to “pay any liabilities that have accumulated during the deferral period”. However, the Chancellor’s statement on Friday referred to the deferral of payments until the end of the financial year (i.e. 31st March 2021). We’ll provide an update when the deadline for making deferred payments has been clarified.
If you were due to receive a VAT refund during the payment deferral period then don’t worry, you will still receive it within the normal timeframe.
Self Assessment payments to be deferred
If you were due to make a payment on account on 31st July 2020, you won’t have to make that payment until 31st January 2021 and HMRC won’t charge penalties or interest for late payment. This is another automatic extension so you don’t have to apply for it.
Universal Credit for self-employed people
From 6th April 2020 sole traders and partners - who won’t benefit from the Statutory Sick Pay (SSP) reclaim announced in the Budget earlier this month - will be able to access Universal Credit at £94.25 per week, a rate equivalent to SSP. There’s more information about how to claim this on the government’s Universal Credit website.
Coronavirus Job Retention Scheme
All employers will be able to claim a grant to cover 80% of their employees’ wages, capped at £2,500 per worker per month, under the new Coronavirus Job Retention Scheme. Employers can choose to make up the remaining 20% of their employees’ wages but are not obliged to do so.
This scheme will cover staff who were employed until 19th March, as long as both the following conditions are also met:
- They are still on their employer’s payroll or were re-employed if their employer had already let them go.
- They are not carrying out any work as a result of the Covid-19 crisis (e.g. their employer’s business has been ordered to close).
While the scheme is in place, employees in this position will be deemed to be “furloughed workers”. They will remain employed but must not do any work for their employers. HMRC has clarified that limited company directors who are employees of their own companies will be eligible for the scheme and has provided some guidance about how it will work for them.
Grants provided through the Coronavirus Job Retention Scheme will be backdated to 1st March 2020 and will initially be available for four months. The government’s website states that HMRC is “working night and day to get the unprecedented Coronavirus Job Retention Scheme up and running” and that it expects the first grants to be paid “within weeks”. Here at FreeAgent, we’re working closely with HMRC to make sure that we implement any necessary changes to our software as quickly as we can.
We also have a furlough calculator on our website that you can use to work out how much you can claim.
More guidance on grants for businesses with properties
In England and Wales these grants will be awarded automatically through local authorities. Businesses in Scotland and Northern Ireland, however, must apply for the grants. Businesses in Scotland can apply through the Scottish government website, while businesses in Northern Ireland can apply though the Northern Ireland Department for Economy website.
More on the Coronavirus Business Interruption Loan Scheme
On Friday, the Chancellor also announced that loans provided through the new Coronavirus Business Interruption Loan Scheme will be interest-free for 12 months rather than six months.
The scheme is open to businesses that make annual sales of up to £45m. It covers loans, overdrafts, asset finance and invoice finance. The government will pay the first year’s interest on this borrowing, as well as any fees charged by lenders. The government will also guarantee the first 80% of the loan to the lender, though your business will still have to repay the full 100% of the loan.
To qualify, your business must have a business plan and a borrowing proposal that the lender would accept if it were not for the Covid-19 pandemic. In other words, your business must be viable in normal trading circumstances.
Businesses in almost all sectors qualify for the scheme, with the exception of:
- banks and building societies
- insurers and reinsurers (insurance brokers qualify)
- public sector businesses, including schools
- employment, political, religious and professional membership organisations
To apply, speak to your bank directly or to another participating bank or lender.
If your business is a limited company or limited liability partnership and you’re worried that you might not be able to file its accounts at Companies House on time, you can apply for an extension. You can find out more about this development on the government’s website.
To learn more about what the coronavirus crisis could mean for your business and to stay up to date with the latest news, take a look at our small business coronavirus hub.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.