Coronavirus update 2 – 23 March 2020
Further details on new measures

BUSBYS NEWS – URGENT UPDATE

Following the Prime Minister’s statement this evening, we shall now operate on a minimal staffing basis at our Tenterden office. Nikki Reardon will continue to provide our payroll service from the office, and we anticipate that one other member of staff will be at the office on a part time basis.

Carolyn and Debbie are already working from home, and I will now be based at home as well. If you need to speak to us, please email and we will call you back – please also provide the best number to call you on.

If you need to contact Nikki, please email or call her at the office. If you wish to contact another member of the team, please also copy in Debbie or Carolyn.

We will monitor and develop our working practices over the next few days and provide an update in our next newsletter. I am naturally sorry for any inconvenience, but we now have to manage our business as best as we can in these very difficult times.

GENERAL

I have personally received quite a few calls and emails today from clients, and the common answer to many questions is invariably “I don’t know yet!” We often have a broad idea of what the government is offering, but when one investigates further, there is remarkably little detail.

So when you read this latest update, please bear in mind that we do not yet know the detailed rules, and then if you do qualify for a particular initiative, we often do not know how to apply, or when the physical cash will arrive.

SUPPORT FOR EMPLOYERS

The government are very keen to ensure that employees are not laid off and are ready to work again once the crisis is over. So, the Coronavirus Job Retention Scheme has been launched and all UK based businesses qualify. The main features of this scheme are:

1. Rather than making employees redundant, the employer can designate affected employees as “furloughed workers” – effectively meaning that they are laid off.
2. HMRC will then reimburse 80% of the cost of employing the furloughed worker, up to a maximum of £2,500 per month.
3. The employer will then notify HMRC with details of the furloughed workers through a new on-line portal, which will need to be developed.
4. The employer will need to pay the furloughed employee a minimum of the cost reimbursed, but can top the salary up to its original level, if they wish to.
5. HMRC are working “urgently” on a system to reimburse employers.
6. If an employer has already laid off workers since 1 March, then these employees can be reinstated and will qualify for this scheme from the date on which they were made redundant, as long as they were on the payroll on 29 February.
7. The scheme will initially run from 1 March to 31 May, but the government say they will extend this if necessary.

Needless to say, the devil will be in the detail, and in particular:

• It is not clear whether the £2,500 threshold applies to gross salary only, or whether it includes pension contributions and employer’s National Insurance. If it does, then effectively the maximum gross pay that is covered will be approximately £2,250 per month, assuming minimum pension contributions. If it doesn’t (which seems less likely), then employers will still have to pay pension contributions as before, and employer’s NI as well, unless the latter is covered by the Employment Allowance.
• The employee cannot undertake any work for the employer whilst furloughed. One does hope that this rule will be relaxed, particularly if the employee is willing to do some work in exchange for a top up in salary.
• It is not clear if a business can operate a “one week on, one week off” type of arrangement, whereby the workforce are split into two (or more) separate teams, and the non-working team qualify for payment under this scheme. Many clients are experiencing a substantial drop off in work, but not to the extent that they wish to mothball the entire business.
• Similarly, we have no guidance yet on what to do with employees who have irregular earnings – e.g. those who earn commission, those on zero-hour contracts, and those who may have received a bonus recently. It is likely that an average wage, perhaps over the last 3 months, will be used to determine the amount to pay, but if a Christmas bonus was paid, would this need to be included? We do not know yet.
• It is very unclear how long it is going to take to be physically reimbursed under this scheme. It is all new, so anything before the end of April would seem unlikely.

Further details have been published on Statutory Sick Pay (SSP), which can be paid to employees who are self-isolating due to coronavirus. Businesses will be able to claim back all of the SSP cost, but it seems that this will be a stand-alone claim, and an application for repayment will have to be made. A rebate scheme is being developed, but at present it does not look as though the SSP reclaim can be deducted from the employer’s normal PAYE/NI liability. One hopes that this will be changed.

SUPPORT FOR BUSINESSES

VAT

The next VAT quarter’s payment will not need to be paid until March 2021. So, this will apply to VAT quarters ending on 29 February, 31 March and 30 April. A welcome help for cash flow, but this is only an interest free loan.

It is not clear what, if anything, needs to be done to implement this. We are fairly sure that businesses will still need to file their VAT returns on time as normal, but will not then pay the VAT. The press release just say that it is an “automatic offer with no applications required”. But they do confirm that refunds will be repaid as normal.

However, if you pay your VAT by Direct Debit, it is not clear whether HMRC will simply not take the money, or whether you have to cancel the direct debit. Hopefully guidance will be forthcoming very soon, as the first people affected will be due to pay their VAT by Direct Debit on 10 April. At this stage, we recommend that you do nothing, and wait for guidance; but if nothing is forthcoming by 3 April, then it will probably be safest to cancel the direct debit then.

INCOME TAX
If you are due to pay a second payment on account on 31 July 2020, and you are self-employed, then you can automatically defer payment until 31 January 2021. No application is required, and no interest will be charged during the deferral period. Once again, this is a loan, not a grant.

If you have to pay a second payment on account on 31 July 2020, but you are an owner-director of your own limited company, then there is no deferral. Likewise, if you make payments on account because you have rental income, or investment income, or for any other reason, there is no deferral.

BUSINESS RATES

We included some details of the reliefs available and the grants that are being given in the newsletter on Friday. We have some further details now:

• The business rates holiday for 2020/21 will now apply to all businesses in the retail, hospitality and leisure sectors, regardless of rateable value.
• The above sectors have been expanded to include qualifying nurseries.
• These reductions will be implemented automatically by local councils – there is no need to make a claim. They will issue revised bills “as soon as possible”

However, we are concerned that some businesses may be incorrectly classified, and will not obtain the relief, so if you think that you should qualify, and have not had a revised bill by 31 March, then you may need to consider stopping your direct debit, and/or contact your local council.

GRANTS

The grants payable to all businesses with rateable values below £15,000, and the grants paid to those in the retail, hospitality and leisure sectors, will now be paid automatically by local councils. Further details of the amounts involved (£10,000 or £25,000) were given in Friday’s newsletter. Sadly, it is not clear when these grants will be paid.

However, the government have now provided a more detailed list of businesses that will qualify, as properties that are wholly or mainly being used:

• as shops, restaurants, cafés, drinking establishments, cinemas and live music venues
• for assembly and leisure
• as hotels, guest & boarding premises and self-catering accommodation

We therefore assume that those operating holiday let businesses, who are liable to pay business rates rather than council tax, will qualify for the grant.

LOANS

The Coronavirus Business Interruption Loan Scheme has been launched today, whereby the government will guarantee 80% of loans taken out with the lenders who partner the British Business Bank, and this includes all of the major banks. Under these schemes, there will be no interest charged for the first twelve months, but ultimately the loan will have to be repaid. Applications must be made to your bank, not the British Business Bank.

OTHER MATTERS

At present there seems to be very little help available to those who work from home, and the self-employed generally. The only announcements so far are the extension to Universal Credit (see our Friday newsletter) and the deferral of the July payment on account. Hopefully this sector will get some good news soon.

If you have any questions, please do email your regular contact or at mail@busbys.co.uk. May I also thank many of you for your positive feedback to our Friday newsletter.