UK and covid-19: The Implications on Business and Employers

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last updated on 3 June 2020 | Reading time approx. 6 minutes
 
Due to the global pandemic and the effect it has on businesses, the UK government have set out a number of packages to support businesses and employers during this challenging time.

Support for businesses through the Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (CJRS) aims to support employers with adversely affected operations due to coronavirus (covid-19).  This is a temporary scheme open to UK employers from 1 March 2020.

Employers can use the online portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to a cap of £2,500 a month, plus the associated National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.  
 

Eligibility

You are eligible to apply for the scheme if:
  1. You are a UK organisation with employees 
  2. You have created and started a PAYE payroll scheme on or before 28 February 2020
  3. You have a UK bank account

Further, employers should write to their employee confirming that they have been furloughed and keep a record of this confirmation.  


Employees you can claim for

The furloughed employee must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract (eg, full-time, part-time, on agency contracts, flexible or zero-hour contracts).

Please note that to be eligible for the subsidy, the employee who has been furloughed cannot undertake any work for or on behalf of the organisation. 

Finally, if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme.  The employer will have to continue paying the employee though the payroll and pay their contractually agreed salary.

How to claim

Employers will need to make a claim for wage costs through this scheme.  Employers will then receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month. The employer must choose to top up the employee’s salary beyond this, but they are not obliged to do so under this scheme. 
 

Update May 2020

On Friday 22 May 2020 the Treasury published a further Direction modifying the legal framework for the CJRS.  Claims for payment under the CJRS made after the publication of the further Direction on 22 May will have to comply with the new, amended version of the Schedule.  Claims made on or before 22 May should comply with either the original Schedule published on 15 April. 

The 20 May Schedule extends the scheme until the end of October 2020 but will be subject to modifications from August. 
  • From August, the government will pay 80% of wages up to a cap of £2,500, whereas the  Employers will pay ER NICs and pension contributions. 
  • From September, the government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500 
  • From October, the government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
More specific details and information around the modifications are yet to be updated by the government. Many of the other changes are outline below: 

The written requirement

The 15 April Schedule required a written agreement between employer and employee that the employee would cease all work in relation to their employment, whereas the HMRC’s Guidance initially suggested that only written confirmation of being furloughed was required for the purposes of eligibility under the CJRS, and subsequent versions stated that furloughing should be consistent with employment law but didn’t otherwise need a written agreement.  

The new wording on the form of agreement removes the requirement that the employee's agreement must be in writing. Now, for the purposes of eligibility to make a claim, the required instruction to cease work is satisfied if:
  • The employer and employee have agreed that the employee will cease all work in relation to their employment (this includes by a collective agreement between employer and trade union).
  • the agreement/collective agreement specifies "the main terms and conditions upon which the employee will cease all work.
  • the agreement is "incorporated (expressly or impliedly) in the employee's contract"; and
  • the agreement is "made in writing or is confirmed in writing by the employer" (in writing includes an electronic form such as an e-mail); and
  • the agreement (including a collective agreement) or confirmation is retained by the employer until at least 30 June 2025.

Tax Treatment of the Scheme 

Payments received by a business under the scheme are made to offset deductible revenue costs.  Therefore, they must be included as INCOME when the business calculates its taxable incomes for Income Tax and Corporation Tax.  Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.  

More comprehensive guidance on the Job Retention Scheme is available online

 

Self-Employment Income Support Scheme

The government have announced that support will be offered to self-employed individuals. The government will pay self-employed people who have been adversely affected by the coronavirus a taxable grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month. The scheme will cost the government around £3bn a month.

This will be assessed on an average of what the individuals income has been over the preceding 3 years. It will only assist those who make the majority of their income from self-employment so only the “genuinely self-employed” would benefit.

The level of profit loss would not be calculated, so whether someone lost 5% or 100% of profit because of the coronavirus, they were still entitled to an 80% grant.

The government will contact people directly using their details from the self-assessment tax system from 2018-19. So individuals are advised not to contact HMRC themselves. The first payment of this is estimated to take place in June 2020 and anybody who could not wait until then, could apply for an advance payment of universal credit to avoid the normal five-week wait for the first payment of that benefit. The government has said it could be handed out within days.

Those eligible under the Self-Employment Income Support Scheme, will be able to claim a second and final grant in August 2020. The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

 

Business extensions with Companies House filing

Companies House have announced that from 25/03/20, businesses are able to apply for a three month extension for filing their accounts, if required, due to issues relating to covid-19. This is a joint initiative by the Government and Companies House.

 
Although companies will have to apply for this, they will automatically be granted this extension if citing issues surrounding covid-19. It is a fast-track, online system and will take approximately 15 minutes to complete.

 
Please note, if a company has already extended their filing deadline, or shortened their accounting reference period, they may not be able to qualify for an extension.

 

Companies House Services

The Companies house telephone helpline and Companies House same day have also been currently suspended due to covid-19.

Support for businesses who are paying sick pay to employees

The government 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

How to access the scheme

A rebate scheme is being developed. 
The latest guidance now suggests that the employer and employee can now agree to end a period of SSP in order to start furlough (notwithstanding continuing SSP eligibility) – this is likely aimed at allowing employers to agree to furlough individuals whose eligibility for SSP is due to being in the extremely vulnerable category advised to shield (but who are not actually unwell).

Support for businesses that pay business rates

The government 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. 

Eligibility: 

You are eligible for the business rates holiday if:
  1. Your business is based in England.
  2. Your business is in the retail, hospitality and/or leisure sector.
Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used:
  • as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
  • for assembly and leisure
  • as hotels, guest & boarding premises and self-catering accommodation

How to access the scheme

There is no action for you. This will apply to your next council tax bill in April 2020. However, local authorities may have to reissue your bill automatically to exclude the business rate charge. They will do this as soon as possible.
You can estimate the business rate charge you will no longer have to pay this year using the business rates calculator.

Further guidance for local authorities is available in the expanded retail discount guidance.

Cash grants for retail, hospitality and leisure businesses

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 and grants should be directed to the relevant local authority.

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. 

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. 

Eligibility

You are eligible for the scheme if:
  1. Your business is UK based, with turnover of no more than £41 million per annum.
  2. Your business meets the other British Business Bank eligibility criteria.

How to access the scheme

The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website. All the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.
You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments you may want to ask for a repayment holiday to help with cash flow.

The scheme will be available from early next week commencing 23 March.

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.

Eligibility

All UK businesses are eligible.

How to access the scheme

The scheme will be available early in week beginning 23 March 2020. We will provide information on how to access the scheme here shortly.

More information is available from the Bank of England.

Support for businesses paying tax: Time to Pay Service

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.

Eligibility

You are eligible if your business:
  • pays tax to the UK government
  • has outstanding tax liabilities

How to access the scheme

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.


* The UK government adheres to the EU definition of an SME, which is: micro-business = less than 10 employees and turnover under €2 million; small business = less than 50 employees and turnover under €10 million; medium-sized business = less than 250 employees and turnover under €50 million.

 

 

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