Latest Updates (16th April 2020)
CBILS Loans extended and approved to more providers. No financial guarantees required for loans less than £250K.
CBILS now support lending even if bank may offer loan on normal commercial terms.
Job Retention Scheme to open on 20th April 2020 with first grants expected by 30th April. HMRC have provided initial details of process . Applications will need to be made online.
Job Retention scheme is eligible to employees on payroll on 19th March 2020 (previously 28th February).
VAT deferral timelines are from 20th March to 30th June 2020 and have until 31st March 2021 to pay any liabilities resulting from the deferrals.
Employees forced to work from home due to Coronavirus pandemic are covered by the home working expenses rules. These rules do not apply to furloughed employees.
HMRC have confirmed they wont charge late filing penalties ( up to July 31st) for delay in filing of the new 30 day reporting requirements of Capital Gains Tax on sale of UK properties.
Dear clients and friends,
Not wanting to understate the situation, but a lot has happened in the last few weeks as governments around the world have responded to the Covid-19 outbreak by putting in place economic lockdowns in attempt to flatten the curve of the pandemic. Totally unprecedented, it is impossible to predict how and when this will end.
Given the UK government has to shut down the country, they are trying to put in place measures to minimise the economic impact by supporting the businesses and people affected. For many firms in the UK, it will be critical to their survival to get both grants and funding to manage their cashflow which all too often has just dried up. Even highly profitable firms suffer when clients stop paying and businesses have had to work on innovative ways to obtain cash while waiting for funding support from banks.
A lot of information has been sent out by the government and I therefore don't propose to detail all the information here but I wanted to highlight a few key initiatives that I think are most relevant to small and medium sized owner managed businesses. It's worth highlighting that none of this guidance has been legislated, so is subject to change (as we have seen over the last couple of weeks).
Please feel free to reach out if need any support in this difficult time but most importantly stay safe.
Zac
CBILS Loan Scheme
The scheme which is intended to provide funding through various forms (overdrafts, loans, asset financing etc) has been slow to get off the ground and had issues with banks initially requiring personal guarantees is starting to now provide financing to companies as more providers are approved and the bad press has pushed for the banks to act.
Advice is to talk to your own bank first (as banks are prioritising their own customers first given the demand) and to be prepared with cashflow forecasts taking into account all the other support available to enable swift approval and access to the funding.
Key features
Multiple banks now approved for CBILS loans (Over 40 lenders).
Lending banks are provided with a guarantee of 80% of lending. The guarantee is between the government and the bank and so the borrower is liable for 100% of the debt.
The government will make a business interruption payment to cover the first 12 months of interest and any lender levied fees.
Banks must not ask for personal guarantees for loans less than 250K.
Banks can ask for personal guarantees above £250K but guarantee is capped at 20% of the loan value ( the amount not guaranteed by the government).
Businesses can self certify that they have been impacted by Covid-19.
CBILS now support lending even if bank may offer loan on normal commercial terms. This allows more small businesses to benefit from the benefits (no fees etc) of the scheme.
Some lenders indicated they will not charge early repayment fees.
If loan less than 30K can benefit from streamlined semi automated process.
For further details see theBritish business bank guidanceon CBILS funding.
Coronavirus Job Retention Scheme
This is one of the key schemes that offers grants rather than loans. Given the relative complexity and size to administer the first payments aren't available until the 30th April but will pay up to a max of 80% of a furloughed employees wages up to a maximum of £2500.
The latest guidance for who can claim and how much can be found on the government's website.
Key points to highlight
As long as employee on the payroll on the 19th March 2020 (previously 28th February) they are able to claim.
Employee must however be furloughed (covered separately by employee law) and not doing any work for the employer.
Company directors can be furloughed and also directors of personal service companies. The guidance states that certain statutory work can still be performed as long as employee is not providing services or doing any revenue generating activity for the employer.
Claims will need to be made online and HMRC are developing the software to enable this and this is expected to be ready by the 20th April with first grants provided by the 30th April.
Employers NI and statutory employers pension contribution can be claimed up to the amount that is payable on £2500 wages. (Max claim is therefore £2804pm.)
Holiday pay is still accrued while furloughed and current understanding is that this is accrued at the pre furloughed rate. HMRC guidance is silent on this matter.
Employees can be on training while furloughed but if so must be being paid the minimum wage.
The legal framework has now just been published and can be found here.
Other support available for businesses:
VAT payments due between March 20th and 30th June 2020 deferred until March 2021 (automatic).
Businesses in distress may be able to defer PAYE or Corporate Tax payments through the time to pay scheme.
Small business grant funding for businesses which pay little or no rates.
Business rates holiday for hospitality, retail and leisure businesses.
Up to £25K cash grant for hospitality, retail and leisure businesses.
Statutory sick pay rebate for small and medium sized businesses where employee off sick due to coronavirus.
Other support available for the Self Employed:
Deferral of 2nd self assessment payment due by 31st July 2020 deferred to 31st January 2021.
Self employment income support scheme to provide grants to self employed people worth up to 80% of profits up to a cap of £2500 per month. Note your trading profits must be less than £50K to be eligible for the grant.
More time for 30 day reporting of Capital Gains Tax
The rules from 5th April 2020 require that any UK resident disposing of a UK property which is liable for CGT will need to report it and pay the tax within 30 days of completion. The new obligation arises where the disposal is after 5th April 2020 and there is a liability for CGT ( so properties entitled to principle private residence relief are exempt).
HMRC stated:
“To help those selling properties familiarise themselves with the change in the rules and a new on-line process, HMRC is allowing a period of time to adjust and will not issue late filing penalties for CGT payment on account returns received late up to and including 31 July 2020.
“For UK residents, this means transactions completed between 6 April and 30 June 2020 and reported up to 31 July 2020.
“Transactions completed from 1 July 2020 onwards will receive a late filing penalty if they are not reported within 30 calendar days.
“Interest will accrue if the tax remains unpaid after 30 days."