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COVID-19: government support for individuals and businesses

31 March 2020

While the package of help for business will evolve over time, the key elements of the current proposals are summarised below:

Government-backed loans to businesses 

A new, temporary Coronavirus Business Interruption Loan Scheme (CBILS), delivered via the British Business Bank, will support SME businesses to access lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £25 million in value.  All SME businesses can apply for a CBILS loan – those with a turnover of up to £45m can apply for loans up to £5m. The terms of the loans will be ‘attractive’ and the Chancellor has stated no interest will be charged for the first twelve months of the loan period. Banks will not be able to refuse to lean on the basis that businesses could borrow on normal financial terms and will not be able to insist on personal guarantees from business owners for loans of up to £250,000. For larger loans, personal guarantees will be limited to 20% of the borrowing: lenders are prevented from taking a charge over the business owner’s home.

A further Coronavirus Large Business Interruption Loan Scheme (CLBILS) is to be developed for those businesses with an annual turnover of £45m - £500m, they will be able to apply for a loan of up to £25m. The CLBILS will also feature the 80% guarantee but loans will be at commercial rates of interest.

The British Business Bank will be working with its current Enterprise Finance Guarantee delivery partners and the government to make the new schemes available and to implement the package of enhancements. Read more.

For large businesses there is also a special funding arrangement, the COVID Corporate Financing Facility (CCFF), available through the Bank of England. Businesses will need to issue special 1 year corporate bonds which the Bank of England will purchase to give businesses liquidity.

Read more on the proposals.

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Business Rates reliefs

The Chancellor extended the package of Business Rates relief again in his announcement on 17 March. Retail businesses in England with a rateable value below £51,000 will pay no business rates for the year to 31 March 2021. This is expected to apply to up to 90% of independent shops, pubs, restaurants and other qualifying businesses.

For businesses in the hospitality, leisure and retail sectors who use premises with a higher rateable value, there will be full business rate exemption for the year to 31 March 2021. The Business Rates Local Authority Guidance, which instructs authorities on who is eligible for relief from business rates, originally excluded ‘casinos and gambling clubs’ and classified retail betting shops as financial services, meaning they were also ineligible, but this exclusion has now been reversed. The government has also stated that hospitality businesses should be able to claim on their business continuity insurance as a result of government guidance to the public: as always, businesses should check their insurance cover and contact their insurer about the extent of their cover. 

Local newspapers in England will also continue to benefit from a business rates discount of £1,500 for their office space until 31 March 2025, and there will be a new 100% relief for all public lavatories in England from April 2020.

Local authorities will be fully compensated for these business rates measures. It is assumed that the reliefs will be processed automatically by each Local Authority. Read more on eligibility for relief.

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Direct business grants

To support the many small businesses that pay little or no business rates because of Small Business Rate relief (SBRR), the government will provide funding for local authorities in England, who will provide the business grants.This will provide up to £10,000 each to around 700,000 business currently eligible for SBRR or Rural Rate. 

Businesses that use premises with a rateable value of up to £51,000, and will therefore pay no business rates for the current year, will receive grants of up to £25,000 from their Local Authority. Businesses should contact their local authority for further details of eligibility and payment arrangements.

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Supporting the self employed

On 26 March 2020, the Chancellor announced initial details of a Self-Employed Income Support Scheme. The scheme is intended to mirror the support given for furloughed employees and will pay qualifying self-employed individuals up to 80% of their average monthly income (as a taxable grant) up to a limit of £2,500 per month.

Self-employed individuals (including partnership members) will qualify for the scheme if:

  • They have made at least one tax return showing a year’s worth of trading income
  • Their annual profits are no more than £50,000 in 2018/19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
  • They have submitted their self-assessment tax return for 2018/19 (those who have yet to submit their return must do so within 4 weeks)
  • They earn more than 50% of their annual income from self-employment (eg it is expected that those with high levels of rental income in addition to self-employed profits would not qualify)
  • They were trading during 2019/20 and will carry on (when the Covid-19 crisis is over) and have lost income as a result of the crisis.

Individuals who commenced self-employment after 5 April 2019 will not be able to apply for the scheme as they have no tax records on which payments can be calculated. Individuals trading through a personal service company will not be eligible but may be able to claim under the Coronavirus Job Retention Scheme.

For those who can claim, in calculating the amount of grant payable, HMRC will average the individual’s profits over the past three tax years (or a shorter period, provided profits have been declared on at least one tax return).

The scheme will operate for a minimum of three months but it is not expected that HMRC will be able to make payments to individuals until the beginning of June 2020 (when the three month grant will be paid as a lump sum). Individuals who are already registered as self-employed will be contacted by HMRC and asked to complete an online claim before payments are made.

On Budget day, the Chancellor announced that the Government would make it easier for those not able to work as a result of the Covid-19 crisis to claim state benefits. For those who are sick or required to self-isolate, the Employment Support Allowance will be paid from Day 1 of the sickness period. In addition, the requirements of the Universal Credit Minimum Income Floor will be temporarily relaxed for those who have COVID-19 or are self-isolating in line with official guidance. This means that all self-employed individuals should be able to make a claim and receive support at the same weekly amount as employees receiving SSP are entitled to (currently £94.25 per week).

Self-employed individuals who are normally required to make a self-assessment tax payment on account on 31 July 2020 will not now need to make this payment – it can be deferred until 31 January 2021. 

Local Authorities will also operate a Hardship Fund for families and businesses in financial difficulties: support for individuals is expected to take the form of Council Tax relief. 

On 17 March, the Chancellor also announced that mortgage lenders would offer an initial three-month mortgage payment holiday for those in financial need as a result of the Covid-19 crisis. This payment holiday can also be claimed by buy-to-let landlords. To support private tenants struggling to pay their rent, the government has announced a three-month ban on all evictions from residential property, and housing benefit and Universal Credit will be increased to allow the local housing allowance to cover at least 30% of market rents.

In addition, the government has delayed the introduction of the off-payroll labour/IR35 reforms for private sector businesses until 6 April 2021. Self-employed individuals will still need to consider their existing IR35 obligations when accepting work, but a delay in placing new obligations onto engagers will prevent further disruption to the contractor market for the 2020/21 tax year. Read more on IR35.

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VAT Deferral 

On 20 March 2020, the Chancellor announced that UK VAT registered business will be able to delay the payment of VAT return liabilities falling due between 20 March and 30 June.

HMRC have now released some guidance to provide a little more detail about this deferral. The guidance confirms that the deferral is automatic and covers all UK VAT registered businesses (presumably including taxable persons that are not established in the UK), but not businesses who pay UK VAT via MOSS (Mini One Stop Shop).

If businesses choose to delay their VAT payment then the VAT payments falling due in the period between 20 March and 30 June will not need to be paid immediately but instead should be paid at some point before the 30 March 2021. HMRC have also confirmed that there should be no interest or penalty charges. The deferral is automatic and does not need to be applied for, but any organisations that choose to pay their VAT liability as normal are able to do so in the normal way. The VAT returns due to be submitted during the deferral period must be submitted as usual. HMRC have recommended however, that businesses who normally pay their VAT by direct debit, cancel the direct debit with their bank– just in case HMRC’s systems attempt to automatically collect on receipt of the VAT return.

Naturally, businesses may need to consider the impact of any time to pay arrangement or deferral on current or future borrowing.

Read about further VAT issues to consider.

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Tax - Improved Time To Pay arrangements

The government has announced extra resources to assist those struggling to pay their tax liabilities and in financial distress. HMRC will be committing 2,000 experienced call handlers to support taxpayers. 

This includes a dedicated COVID-19 helpline to help those in need. The helpline number is 0800 024 1222. Opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm. 

Support will include agreeing a bespoke Time To Pay arrangement with HMRC. This will help those struggling with cash flow and allow those who enter into arrangements to spread liabilities owed over a pre-agreed period. In addition, HMRC will waive late payment penalties and interest where businesses experience administrative difficulties contacting HMRC or paying taxes due to COVID-19.

As always, it will be important to get upfront agreement from HMRC before a payment deadline. There is also a commitment to suspend debt collection proceedings.

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Paying Statutory Sick Pay (SSP)

A number of measures have been announced. All employees who self-isolate will be able to claim SSP and, as a temporary measure, SSP claims can be made from Day 1 rather than Day 4 of illness. Employees who are caring for someone who is self-isolating will also be able to claim SSP on this basis.

Businesses with fewer than 250 employees as at 28 February 2020 will be able to reclaim SSP expenditure up to a maximum of two weeks per employee from the government. Details of the reclaim method have not been announced, but it is expected that the government will confirm that employers will claim by offsetting any amount of reclaim for a period against the amount of PAYE payable to HMRC for the period. 

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Coronavirus Job Retention Scheme

Employers who find it necessary to lay employees off temporarily on furlough can apply to HMRC for a grant to help retain those staff. The grant will cover up to 80% of the employee’ usual monthly wage costs up to a maximum of £2,500 per employee per calendar month, plus the associated employer’s NIC and minimum automatic enrolment employer pension contributions on that wage. This help is available to any business or organisation who had a PAYE scheme established before 28 February 2020 and needs to furlough employees who were engaged before that date.

It is important to note that the grant is only payable in respect of furloughed employees.  Those who continue to provide services or generate income (even part time) are not covered. Employee PAYE and NIC is still payable as usual whilst employer NIC and minimum automatic enrolment pension contributions will be covered by the grant. The specially designed HMRC portal to use to make a claim is expected to be available to employers by the end of April. Businesses are to treat any claim as business income subject to Corporation/Income tax and wages paid out to furloughed workers are also treated as a business expense. Read our FAQs on the scheme.

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Potential tax issues arising from international travel restrictions

International staff

Managing international staff through the Covid-19 crisis will be increasingly demanding: in many cases physical assignments will not happen, be delayed or postponed and redundancies may increase. Here are some important issues to consider: 

If assignees need to stay in the UK or come back to the UK because of the virus, they will need to consider the impact on their UK residence days under the Statutory Residence Test – see below.

As well as tax residence issues where individuals remain in a country as a result of Covid-19, this could also affect their eligibility for expatriate tax concessions, social security and withholding taxes on earnings. It could trigger unexpected personal tax liabilities and potentially have an impact on the tax status of the employer – see below. 

Many staff with international roles will have returned home so are working from a single location: those with cross border ‘commuter’ jobs may now be working remotely from their home jurisdiction. We expect that a number of countries will introduce concessions to their usual rules – for example, we understand that France may not insist on French social security if employees have to remain there for an unexpected period of up to 60 days. However, without an official, multi-country relaxation of tax and social security rules there will be tax impacts for both the employee and employer to manage.    

Of course, all jurisdictions will still expect all relevant tax returns and filings to be made and, as yet, deadlines have not been moved. 

It is vital for employers to have a strategy for dealing with their international employees and to ensure that all issues are thought through before final action is taken, otherwise unintended consequences and costs will arise. For help and advice - contact us.

Directors, corporate residence and economic substance

Current travel restrictions may make it more complex for companies to manage their tax residence and economic substance positions if they are reliant on directors travelling to meetings in other territories. For example, if board meetings have to be held in the UK or remotely, or the company is effectively controlled by directors in the UK as a result of travel restrictions arising from the Covid-19 crisis, in theory, this may affect whether or not the company is liable to UK corporation tax. In addition, if there are not sufficient staff in a particular location or jurisdiction as a result of the crisis, the business may not be able to prove that it has a sufficient economic substance in the jurisdiction, and the anti-avoidance legislation of other tax jurisdictions may therefore apply.  

Different jurisdictions may well take different approaches during the Covid-19 crisis. For example, Jersey has announced that it is relaxing its economic substance and residence rules during the crisis. We would expect other jurisdictions to make short term concessions in time but, to date, the UK government has yet to make any comment on corporate residence issues or related tax rules. 

Any business that may be affected by residence or economic substance issues as a result of the Covid-19 crisis should seek expert advice on their specific circumstances. For help and advice - Contact us.

Personal tax residence – days in the UK

The rules for establishing whether or not individuals are tax-resident in the UK (the statutory residence test) depend, amongst other factors, on the number of days spent in the UK in a tax year (6 April to April). Non-UK resident individuals who end up spending more time in the UK than planned as a result of the Covid-19 crisis may find that they exceed the permitted number of days in the UK relevant to their circumstances.

However, up to 60 days spent in the UK can be ignored if they result from ‘exceptional circumstances’ and HMRC has issued new guidance on how these rules apply during the Covid-19 crisis - read more.

UK tax residence is a complex issue and there may be many other issues to consider in determining your personal tax status. For help and advice on tax residence issues please contact us or see our online tool for an indicative view of your likely residence status. 

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