With the ongoing COVID-19 situation, the UK government has announced the ways in which it plans to support UK individuals and businesses through this challenging period.
Starting with the release of the Budget 2020 by Rishi Sunak, the Government announced a £12 billion plan to provide support for public services, individuals and businesses, whose finances are affected by COVID-19. For individuals this included an extension to Statutory Sick Pay (SSP) and for businesses this included a Business Rates relief, a Coronavirus Business Interruption Loan Scheme and a £2.2 billion grant scheme for small businesses.
Since then the funding has been increased significantly and further information has been provided which we summarise below.
Small businesses paying sick pay
Small- and medium-sized businesses and employers will be able to reclaim up to two weeks paid for sickness absence due to COVID-19. Eligible employers are those with less than 250 employees as of 28 February 2020 and should maintain records of staff absences, although GP fit notes are not required, and payments of SSP.
The government will work with employers over the coming months to set up the repayment mechanism for employers as soon as possible.
Business rates holiday for retail, hospitality and leisure businesses
Initially a 12-month business rates exemption for occupied retail properties with a rateable value of less than £51,000, the Chancellor has now extended the relief to all properties in the retail, hospitality and leisure sectors with no boundaries on rateable value. This means a 100% exemption from rates for the 2020 to 2021 tax year.
Businesses that received the retail discount in 2019/20 will be re-billed by their local authority. However, those businesses that did not receive the discount can still apply through their local authority to get the discount.
The latest guidance provided to Local Authorities is that in broad terms, the properties that will benefit from the relief will be those that are being used:
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues;
- for assembly and leisure; or
- as hotels, guest & boarding premises and self-catering accommodation.
Support for businesses paying tax
The self-employed and all businesses in financial distress may be able to take advantage of a time-limited deferral period on HMRC liabilities owed and a pre-agreed time period to pay these back through the HMRC Time to Pay scheme.
This is on a case by case basis and could result in agreeing an instalment arrangement, suspending debt collection proceedings, or cancelling penalties and interest where there have been administrative difficulties.
July income tax payments have been automatically deferred to January 2021, interest-free, which assists the self-employed.
A cash grant of up to £25,000
The government is funding a £25,000 cash grant to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value of less than £51,000. To find and check your business rates valuation, please click this link which will take you directly to the gov.uk website: https://www.gov.uk/correct-your-business-rates.
A £10,000 cash grant will be provided to companies that are eligible for small business rate relief (SBRR) and/or rural rate relief (RRR).
- You are eligible for SBRR if your property’s rateable value is less than £15,000 and your business only uses one property. You are eligible for RRR if it is in a rural area with a population below 3,000; it is the only village shop or post office, with a rateable value of up to £8,500, or the only public house or petrol station, with a rateable value of up to £12,500.
As the funding for this will be provided by Central Government, there will be no impact on your local services. The funding will be available from April however there is no action for businesses seeking this as Local Authorities will be writing to businesses that are eligible for this grant.
Loans of up to £5m
Known as the Coronavirus Business Interruption Loan Scheme (CIBLS), this new scheme will make available a loan of up to £5m for businesses with turnover of less than £45m. To incentivise lenders, the government will be guaranteeing up to 80% of the value, there will be no loan charges and the first twelve months will be interest free, with the government footing the interest bill.
The financial products on offer include: term facilities, overdrafts, invoice finance facilities and asset finance facilities. To be eligible the business should:
- be UK-based with turnover of less than £45m per annum;
- generate more than 50% of turnover from trading activity; and
- have a comprehensive borrowing application but have insufficient security to meet the lenders requirements on normal commercial terms.
Almost all business sectors are eligible, however there are a small number of excluded/restricted sectors which can be found here: https://www.british-business-bank.co.uk/wp-content/uploads/2020/03/Ineligible-and-Restricted-Eligibility-Sector-2017.pdf
It will be provided by the British Business Bank through participating providers. Details of the accredited lenders and partners can be found here: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/
COVID-19 Corporate Financing Facility (CCFF)
In order to help larger firms, the CCFF has been put in place with the Bank of England to provide short term debt. The CCFF will purchase commercial paper (CP) of up to one-year maturity, on terms comparable to market terms prior to the impact of COVID-19 and access will be based on credit ratings prior to this also.
The fund will purchase, at a minimum spread over reference rates, newly issued CP in the primary market via dealers and after issuance from eligible counterparties in the secondary market.
Further details of the Facility, including application forms, terms and conditions, operating procedures and final documentation for the scheme including a pricing schedule are published on the Bank’s website.
The obligation to report travel to the UK for the 2019/20 tax year and undertaken as part of the Short Term Business Visitor Reporting (STBV) scheme is still required. However, importantly, the deadline has been extended from 31 May to 31 July 2020. This is welcome news for all businesses with overseas employees.
Where a business visitor travels into the UK from overseas to physically perform work in a UK group company, they trigger a Pay-As-You-Earn (PAYE) withholding obligation for the host UK Company. There is a responsibility on the UK Company to manage STBVs if the overseas company falls within the same group, is an overseas subsidiary, parent or other connected organisation. Even where there is an available exemption from UK income tax under a double tax treaty, PAYE withholding obligations still apply.
PAYE is included within Senior Accounting Officer reporting, and therefore failing to operate PAYE correctly can constitute a serious failure in the eyes of HMRC. In order to benefit from the concessions in place under a STBV agreement, HMRC requires organisations to keep strict records and track their overseas business visitors. There are some simple ways of doing this. We can help businesses take advantage of the extension and create processes to enable easy and effective tracking.
Please note that there is a separate process in place for visitors coming to the UK from overseas branches of UK companies, employees coming from a non-double taxation agreement country or where the treaty conditions may not be met.
Government and Tax legislation, sourced from HMRC and gov.uk, is that prevailing at the time, is subject to change without notice and depends on individual circumstances. Clients should always seek appropriate tax advice from their financial adviser before making financial decisions.
For more details contact our Employer Solutions team.
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.
This article was previously published on www.smithandwilliamson.com prior to the launch of Evelyn Partners.