COVID-19 tax measures: advice for businesses



In these difficult days as we all struggle to adapt to new ways of working, it’s important we offer each other as much support as we possibly can.

While we at The Miller Partnership don’t usually get involved in compliance tax advice, we’re well placed to point businesses in the right direction.

In recent weeks, as the coronavirus crisis has deepened, the UK Government has introduced a raft of new measures designed to keep businesses operating and staff in employment, where at all possible.

This financial aid package also includes assistance for the self-employed as well as specific help for some of the industries hardest hit by COVID-19, including hospitality and retail.

According to latest media reports, up to a fifth of small and medium sized UK businesses fear they will run out of cash within the next four weeks, so it is vital that they are able to access this aid  without delay.

More detail on what’s available can be found here, on the Government website.

The Coronavirus Business Interruption Loan Scheme (CBILS)

One such initiative is the Coronavirus Business Interruption Loan Scheme (CBILS), which aims to ease the burden on businesses suffering cash flow problems caused by higher costs and disruption.

The CBILS provides lenders with a government-backed guarantee of 80% of the loans, so that they can lend smaller businesses up to £5m over a repayment term of up to six years. Interest and fees on the loan will be paid by the Government for one year.

For larger companies there is a separate corporate financing facility.

Aid for retail, hospitality and leisure businesses

The hospitality sector has been particularly badly affected by the pandemic, with pubs, hotels, bars, cafes and restaurants all having to close their doors.

To reduce pressure on all retail, hospitality and leisure businesses, the Government is allowing them to take a business rates holiday for the next 12 months.

Cash grants of up to £25,000 are also being made available to businesses in this sector who operate from premises with a rateable value of under £51,000.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (CJRS) enables employers to access Government support so they can carry on paying staff whose jobs don’t allow them to work from home.

The scheme, which allows employers to put staff on “furlough leave” rather than making them redundant, is open to all UK businesses. It is intended to run for at least three months initially but the Government has said it will be extended if necessary.

Under CJRS, HMRC will reimburse 80% of furloughed workers’ wages costs to a ceiling of £2,500 a month.

It is important that the relevant staff are furloughed, as once they are on this leave, they  cannot carry out any duties for the company. We understand that this rule may be relaxed slightly in the case of directors of owner-managed businesses, who may have to undertake certain statutory duties.

Unfortunately, directors/shareholders will only qualify in respect of their salaries in the relevant period. If they have taken most of their income in the form of dividends from the company, this won’t count towards either the CJRS or the CSEISS (below). This seems very unfair to people who chose to operate through a company, which is a perfectly legitimate business vehicle.

Employers will need to claim payments under the scheme, although you won’t be able to do so until the online service is available, at the end of April (we hope).

Small Business Grant Scheme

If your business premises qualify for Small Business Rate Relief or Rural Rate Relief, then you could be eligible for a one-off £10,000 grant under the Small Business Grant Scheme.

Qualifying businesses are set to receive the funding via their local authority in early April.

Coronavirus Self-Employment Income Support Scheme

Financial help is also available through the Government’s Coronavirus Self-Employment Income Support Scheme (CSEISS).

If you are self-employed or in a partnership, you might be able to claim a taxable grant amounting to 80% of your trading profits, capped at £2,500 a month for the next three months.

To be eligible, you must have submitted a self-assessment tax return for the 2018-2019 tax year, have traded in 2019-2020 and intend to carry on trading in 2020-2021.

Additionally, your trading profits from self-employment or partnership for 2018-2019 must be below £50,000 and must make up more than 50% of your total taxable income.

HMRC will look at 2018-2019 tax returns to assess who might be in line for this support. If you are eligible, HMRC will get in touch with you directly and ask you to apply.

It is, sadly, the case that people who have only just started a new business, or who started in 2019-2020, will not be eligible for this scheme. This appears to have left a large gap in the level of support being offered to the newly self-employed.

Three-month deferral for VAT payments

VAT due between March 20th 2020 and June 30th 2020 will not have to be paid until April 5th 2021. The three-month deferral is automatic – you don’t have to apply for it.

To take advantage of it, however, you should ensure you cancel your direct debit during this period.

July 31st self-assessment payment deferral

Any income tax payments and NICs you were due to make on account on July 31st 2020 have now been deferred until January 31st 2021.

Again, this deferral is applied automatically and you won’t receive any late payment penalties from HMRC. Since self-assessment tax is not paid via direct debit, you should not need to take any action.

Changes to IR35 rules postponed

The reform of the 1R35 rules for off-payroll working has now been postponed for 12 months.

These controversial changes, which will see off-payroll working extended to the private sector, will not now come into force until April 6th 2021.

The postponement is part of moves to support businesses during the Covid-19 pandemic but, says the Government, it is definitely a delay and not a cancellation.

Changes to the insolvency rules

New measures, designed to prevent businesses from having to file for bankruptcy because of coronavirus, have also been announced.

They will enable those companies which might need to undergo restructuring, or a rescue deal, to carry on trading during the current crisis.

Laws on wrongful trading will also be put on hold, allowing company directors to continue to pay their employees and suppliers.

Help for directors of small companies?

As we have explained, if you’re a director of a small company, you may not get any help from the above schemes, or you may get less help than you had hoped.

As a director, you may not also be an employee, so you may not be eligible under the rules for furloughed employees under the Coronavirus Job Retention Scheme. Also,  as you are not classed as self-employed, you  won’t qualify for assistance under the Coronavirus Self-Employment Income Support Scheme.

Even if you do qualify, in common with most directors of limited companies, you might draw a small salary from their company, with the lion’s share of your income coming from dividends.  Dividend income does not count as salary or as self-employment income for the purposes of the schemes, so you might only qualify – if at all – for a grant of 80% of your salary.

A lack of government financial support for directors of small companies is a big problem for many people at the moment, and it needs addressing.

And there’s more bad news!

In offering support to the self-employed, there was a strong hint from the Chancellor that the slightly favourable tax regime enjoyed by the self-employed might change when the crisis is over. One obvious possibility is that the lower rate of NICs paid by self-employed businesses might increase to something closer to the rates paid by employees.

Key messages

The most immediate message is that you must remember to cancel the direct debit for the quarterly VAT payment to take advantage of the deferral of payment.

In more general terms, keep an eye on the Government website, here, for more details about each of these measures.Finally, if you need more information on the measures  which are available – and how they might apply to your business –  please get in touch. We’ll do all we can to help you. Either email me at pete.miller@themillerpartnership.com or call on 0116 208 1020.