COVID-19 Business Advice
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March 31, 2020
- Posted by: Michael Winkelmann
Here is an update on Henry and Banwell’s plans in what is a rapidly changing situation.
We have also added notes on the measures taken which are to help small businesses.
The advice has been updated to reflect the Chancellor’s announcements on 20 March 2020 regarding Job Retention Scheme and 26 March 2020 relating to Self-employed tax payers and we will add further updates daily. Latest news on the Furlough Scheme from the Chancellor states employees can now Volunteer if they wish and those made redundant after 28 February 2020 can be re-employed and placed on furlough.
We are now working remotely so all services can be provided as normal over the coming months. Broadband will be under pressure so our ability to reply may be delayed, please bear with us.
We can also offer Skype and Zoom calls if required.
Government continues to make announcements regarding the impact of the COVID-19 virus and we address the economic measures below. Please note there is always a delay to the ‘how ‘ part of any announcement and we will update as we learn more.
Summary of important points for business ( with detail below):
- Coronavirus Job Retention Scheme
- HMRC will reimburse 80% of ‘furloughed workers’ ( employees who are stood down) wage costs, up to a cap of £2,500 per month. HMRC will do this by paying a Grant , starting in April 2020 and firms will need to apply.
- HMRC are working on a system to manage this so we have no details at the moment.
- Goverment have announced Business interruption loans ( CIBLS) –see below.
- High Street banks will be offering support.
- Business grant of £10,000 if you quality for Small Business rate relief – see below for links to local Councils in the South West.
- Sickness pay – 14 days of sickpay related to Covid-19 will be paid by Government (software yet to be updated so keep a record).
- Business rates exemption for 2020/21 – see below.
- Staff – HMRC subsidy ( Employment allowance) has increased to £4,000 for 2020/21.
- Time to pay (TTP) arrangements – this has been reintroduced and allow you to negotiate with HMRC about spreading the payment of taxes.
- Self-employed – Below is the latest announcement made on 26 March 2020 from the Chancellor.
Other important points for business
- Bank Base rate has dropped to 0.1% ( from previous reduction to 0.25% ).
- Insurance – Government has finally ordered hospitality businesses to close but standard business interruption insurance policies are dependent on damage to property and will exclude pandemics. You need to check the terms of your policy if you have this insurance as it is an ‘opt in’ and often not taken up due to cost.
- VAT Payments will be delayed until after 30 June 2020.
- Companies House – Filing of Annual accounts– you can apply for a 3 month delay to the filing deadline due to the impact of Corona Virus: https://beta.companieshouse.gov.uk/extensions
To update you on the latest Government measures and practical steps that businesses can take now to protect themselves economically as much as possible.
GOVERNMENT SUPPORT (as at 27 March 2020)
Whilst many of the measures mentioned below are new, some already exist or have simply been extended.
Coronavirus Job Retention Scheme
- Employers may claim a grant of up to 80% of the salaries of employees plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage, provided they keep the worker employed who have been laid off during this crisis.
- This is subject to a cap of £2,500 per month.
- Employers must designate affected employees as ‘furloughed workers’ and notify the employees of this change.
- To qualify for this scheme workers should not undertake work while furloughed.
- Employers submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
- HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.
What does the government mean by furloughing
- ‘Furloughing’ is an alternative to laying people off.
- Employees are kept on the payroll instead of dismissing them as redundant or laying them off without pay.
- It is relevant for employees who are not off sick or claiming other statutory employment benefits. Sick workers are instead eligible for government support under the Statutory Sick Pay (SSP) rules.
Who can be furloughed?
- Any employee, apprentice or director.
- Full time, part time or casual or zero hours workers.
- Provided that they were engaged under an existing employment contract on 28 February 2020.
How does it work?
HMRC will reimburse 80% of the wages costs of furloughed employees, subject to a cap of £2,500 per month per employee.
- In the guidance dated 27 March 2020, government confirms that the additional costs of associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage will also be refunded.
- Payment is by a grant provided by HMRC via the RTI system
- This measure applies for three months from 1 March 2020 but may be extended.
What to pay?
As an employer you may need to renegotiate the employee’s contract: the need to do this may well reflect your financial circumstances.
- It is up to you whether you pay the 20% difference so that your employees receive their full pay.
- Higher earners may be adversely affected.
- The amount paid to a worker when furloughed is a decision for you as an employer and may be a matter of negotiation with your employees.
The employees you furlough must not work for you during the furlough period. They remain your employees. It is not clear whether they are allowed to take temporary work elsewhere during the furlough period, but it may be that their employment contract currently forbids it. See 4. below for how you might wish to deal with this.
An announcement on 30 March 2020 by the Government confirmed :
- That those made redundant after 28 February can be reemployed and placed on furlough.
- Those on furlough will also be permitted to volunteer without risking their pay and will be able to join those members of the public who have signed up to help the NHS during the coronavirus outbreak.
Do not forget about employment law. This is for your protection as an employer (against claims by employees once this is all over) as well as the protection of your employees.
*We are unable to give employment law advice but have included some suggestions below which should help manage your risk here. If in doubt you must seek independent legal advice.
Steps to take when furloughing workers
- Decide which employees are to be furloughed and designate them as such. If this is not all your employees, you should ensure you use a fair selection process*:
- You could start with any employees who cannot work from home, if this is appropriate, or those who need to stay home to look after children.
- Ask for volunteers.
- You could adopt the same sort of process you would if making people redundant, using pooling and selection criteria.
- Decide whether you will top up the amount being reimbursed by HMRC and if so by how much.
- Decide whether you are furloughing employees for a fixed period e.g. the full three months or whether you need to keep it flexible. This means less certainty for everyone but allows you to call employees back if the situation changes and restrictions on working are lifted.
- Decide whether you would agree to employees taking temporary work elsewhere during the furlough period. You may wish to only address this if asked by your employees.*
- If their contract currently forbids this, you should advise them of your decision in writing.
- If the contract does not forbid this it would seem, unless the government advises otherwise, that employees are free to do this.
- Monitor your cashflow position to see if you have sufficient funds to pay your employees until the HMRC grant comes in, likely to be sometime before the end of April. If you do not, you may wish to consider a business interruption loan or deferring your VAT payment.
- Check the employment contract for each employee you intend to furlough.
- If you intend to top up their payments to maintain their normal pay you should not need the employees’ consent as you are not deviating from their contractual terms.
- If you do not intend to top up their payments then you will need the employees’ consent unless their contract allows for you to reduce or stop their pay when there is no work for them to do. If in doubt you may wish to take legal advice.
- Notify the designated employees that they are furloughed. Tell them whether you are topping up their wages or whether they will just get the 80% amount reimbursed by HMRC/£2,500 per month, whichever applies. It is advisable to do this in writing.
- If required (see above) obtain consent from the employees, in writing, to be furloughed.
- If you do have sufficient funds, make payments to your furloughed workers accordingly.
- This should go through the payroll as normal with tax. Employee NICs should be deducted as normal. HMRC confirmed this on Twitter on 25 March 2020.
- It is not yet clear how the grant will work for employers who are unable to pay their furloughed workers until the grant comes in and whether they can delay wages payments until HMRC pay them.
- Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. This is not yet available and we do not have details of what information will be required.
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis.
How to access the scheme
You will need to:
- designate affected employees as ‘furloughed workers,’ and notify your employees of this change – changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required)
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement as existing systems are not set up to facilitate payments to employers.
Business loans – application details to be announced on 23 March 2020 (Loans are referenced ‘ CIBLS’ – Corona Virus Business Interruption Loan Scheme)
Small and medium sized businesses (turnover under £12.9 million and 250 employees or less) can now apply for loans of up to £5 milllion under the coronavirus business interruption loan scheme. This is similar to the Enterprise Finance Guarantee (EFG) scheme and, like EFG, is delivered by the British Business Bank. Further details will be made available on their website as they are published;
High Street banks
The banks will offer different levels of support such as interest fee overdrafts
and loans . Watch out though for Personal Guarantees ( PGs) which some banks are demanding (even though there is a Loan Guarantee scheme up to 80%) as this means you could lose your home if it is enforced. Consider trying another bank if they ask for a PG.
Business grants
Businesses that are entitled to Small Business Rates Relief or Rural Rates Relief are now entitled to receive a grant of £10,000, administered by the local authority to whom they apply for the relief.
A firm can benefit from business rate relief if its property’s rateable value is less than £15,000. This would typically not apply to individuals working out of big offices, nor those working from a home office, but rather those working from a property separate to their house with a low rateable value.
The Chancellor also announced a £25,000 grant for retail, hospitality leisure businesses operating from premises with a rateable value for tax purposes of between £15,000 and £51,000.
Here are links to 3 South West Councils, please check your local Council website if different as details should now be published:
Bristol City Council
https://www.bristol.gov.uk/business-rates/grant-funds-application-form
Bath and North Somerset Council/BANES
https://beta.bathnes.gov.uk/register-business-grant-due-covid-19
North Somerset Council
https://forms.liberata.com/business-rates/covid19-grant-request/north-somerset
Statutory sick pay
The Chancellor announced last week that statutory sick pay will be extended to cover from day one of someone being off sick due to coronavirus for a period of two weeks without the need for GP sick note. This will be recovered by businesses through their PAYE and National Insurance monthly returns.
Business rates holiday
Where the rateable value of a Business premises is between £15,000 to £51,000 there will be a one-year business rates holiday 2020/21 for the retail, hospitality and leisure sector. This is automatically in place and being administered by the local authority to who you pay your rates to.
Employment allowance (EA)
EA is available for employers with a total qualifying employer’s (secondary) Class 1 National Insurance Contributions (NICs) of less than £100,000 per year. The EA was £3,000 for 2019/20 but has been increased to £4,000 for 2020/21.
EA is administered as de minimis state aid so anyone in a sector that already receives state aid needs to check the amount of aid they are receiving and their de minimus threshold/ ceiling to ensure that they qualify.
Time to pay (TTP) arrangements
HMRC has reintroduced TTP, having very quietly phased it out for many businesses over the last 3 years. Businesses and the self-employed who are struggling financially and have tax liabilities to meet can call the HMRC dedicated helpline to discuss a TTP arrangement on 08000 159 559.
STATUTORY SELF-EMPLOYMENT PAY SCHEME – COVID-1 (announced 26 March 2020)
What is available:
A taxable grant will be paid to the self-employed or partnerships, worth 80% of their profits up to a cap of £2,500 per month.
Initially, this will be available for three months in one lump-sum payment, and will start to be paid from the beginning of June 2020.
It will be called the Coronavirus Self-employment Income Support Scheme, and is open to those who were trading in the last financial year, still trading now, and planning to continue doing so this year.
Who is eligible?
More than 50% of a claimant’s income needs to come from self-employment.
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2017-18.
Those who are recently self-employed and do not have a full year of accounts will not receive any help under this scheme and will have to rely on benefits.
The government’s new help comes on top of a six-month delay for tax payments through the self-assessment system.
How?
HMRC will contact you directly and ask you to complete and submit a Form. Once processed they will pay the funds directly to your bank account.
Tax return 2018/19 not submitted?
If you have not submitted a 2018/19 tax return but have tax returns for the previous 2 years you have 4 weeks ( so 26 April 2020) to file your 2018/19 tax return so that you qualify for support.
Tax payment due 31 July 2020 postponed
The July 2020 Payment on account is now payable on 31 January 2021.
Please get in touch if you need assistance to file your 2018/19 Tax return.
PRACTICAL ADVICE
What can businesses do to help themselves during this difficult time? We have a number of suggestions to minimise costs and try to keep cashflow at manageable levels
Services and supply contracts
If a business is closed during the coronavirus outbreak then management need to look closely at all of the service and supply arrangements and only pay for those which the business is bound into and which are necessary.
Arrangements with landlords
Rent is often the biggest expense for any business so, if you have concerns about being able to meet your rental obligations speak to your landlord before you fall into arrears. Most leases require any variations to be agreed in writing and signed by all parties so please ensure that any arrangements you agree with your landlord are properly formalised in accordance with the terms of your lease to ensure you are fully protected.
Any necessary supplies and services where the business is not bound into a contract should be reviewed and renegotiated to minimise the ongoing cost. Remember, your suppliers are in the same position as you and will wish to preserve their own cash inflows as much as possible.
Zero hours contracts
Employers generally have no responsibility to offer work to casual staff and those on zero hours contracts. Unless such staff are essential to a continuing business activity this is an expense that is easily avoided
Contracted hours staff
These are full and part-time employees who, generally, will have to be paid whether they work or not, unless you can require or persuade them to take unpaid leave and/or holiday.
If contracted hours staff are self-isolating due to coronavirus then the only obligation will be to pay them two weeks statutory sick pay, unless their contract provides otherwise. As mentioned above this can be recovered for up to 2 weeks without a GP sick note from NIC returns. To continue receiving sick pay after this period the employee will need a sick note from their GP.
Staff
It is always an option to seek to lay off staff or place them on short time to reduce the cashflow burden. Specialist employment advice should be taken before such measures are implemented as employees can acquire a statutory right to redundancy if they are laid off or placed on short time. Redundancy obligations could increase the burden on cash flow instead reducing it.
CONCLUSIONS – Keep calm
If you need help or advice please feel free to contact us , we are here to help and please remember the whole country is affected so everyone is in a similar position to you.
Finally, we believe this will be a tough period and we will get back to a ‘new’ normal. In the meantime we need to preserve what we have for when that happens rather than abandon it.