COVID-19 Support for Accountants & Clients

Friday, March 27, 2020

Below is a summary of some of the key support measures implemented by Government that are likely to affect practising accountants and their clients.

This guidance is accurate at 27/03/2020 10:03am

Self-Employed Income Support Scheme

Policies relating to the Coronavirus crisis are changing day by day so it is important to stay up to date with recent developments. It is advisable to visit the official government business support pages for more information – which can be accessed here

Self-employed individuals will receive a taxable cash grant worth 80% of their average monthly trading profits, as reported through self-assessment, over the last three years. The Government claims this will cover 95% of people who primarily receive their income through self-employment. As with the Coronavirus Job Retention Scheme, the payments will be capped at £2,500 per month.

The Scheme will only be open to those who reported trading profits of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from the last three years (2016-17, 2017-18 and 2018-19). Additionally, the Scheme is only open to those who earned more than half their income from self-employment. 

Those who operate through a limited company are not eligible for the scheme. Though, such individuals are eligible for the Coronavirus Job Retention Scheme if they operate a PAYE scheme.  

Grants made under the scheme will be paid in one lump sum in June. Eligible individuals can continue to trade and do not need to stop work to receive the grant. Those unable to trade and are struggling financially are advised to apply for Universal Credit, and to approach their mortgage provider for a three-month mortgage holiday.

HMRC will invite applications once the scheme is operational. Individuals and agents should not contact HMRC directly. The Government have advised that a simple online form will be made available to those who they determine are eligible for the grant.

Coronavirus Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CBILS) is a series of government backed loans for viable businesses suffering disruption as a result of the current crisis. Government will guarantee 80% of each loan and will pay all interest and fees on the product for the first twelve months.

CBILS covers a variety of products being made available through banks, building societies and other financial institutions. A full list of the businesses offering products under the CBILS can be found here

Businesses interested in obtaining one of these products should contact their main businesses bank first. It should be noted that many banks are only offering products to existing customers.

To obtain a product under the CBILS businesses will need to meet the following criteria:

  • Be UK based, with turnover of no more than £45 million per annum
  • Be able to confirm that they have not received de minimis State aid beyond €200,000 equivalent over the current and previous two fiscal years
  • Have a sound borrowing proposal, but insufficient security to meet the lender’s requirements

Sole traders and unincorporated partnerships are eligible to apply for products covered under the scheme. Although, some organisations may not qualify for the scheme, or for the full interest/fee free period. These include aquaculture and agriculture businesses as well as financial institutions such as banks and insurers. You should check with the specific lender for exclusions.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme (CJRS) is available to all UK employers except those in the public sector or those not operating through PAYE. The CJRS allows employers to claim 80% of worker’s wage costs up to £2,500 per calendar month. The employer can pay the remaining 20% at their discretion. These costs include any applicable employee tax deductions.

Works must be classed as ‘Furloughed Workers’, meaning that they cannot carry out any work for the employer while the scheme is being used. Employers must write to affected employees to inform them of this status. Workers cannot designate themselves as ‘furloughed’, only their employer can do this. Workers can be designated as ‘furloughed’ not just because the business cannot operate, but also if workers are unable to work as they are caring for children due to the school closures

Employers must be careful when designating a worker as ‘furloughed’ and only paying the 80% covered under the scheme. Unless there are specific layoff clauses in the employees’ contract, the employee may still be entitled to their full salary, which would mean the employer might be required to pay the 20% top up to the 80% covered under the CJRS.

While a worker is designated as a ‘furloughed worker’ they are still entitled to continuity of service and continue to accrue holiday entitlement. In many ways the position is similar to employee on maternity leave.

For workers on zero hour contacts their pay in February should be used as a benchmark for the wage costs. Workers who did not earn in February are advised to claim universal credit.

Those operating through a limited company as a director-shareholder will be eligible to use the scheme, providing they operate a PAYE system.  

The scheme will run initially for three months, though maybe extended. HMRC are currently developing a portal which can be used to apply for the scheme.

Companies House Filling Extension 

From the 25 March companies affected by the crisis will be able to apply for a three-month extension to their accounts filing deadline. Companies will need to apply for the extension, but should automatically be granted it. Applications can be made here.  

MOT Extension

Any car or van which requires an MOT from 30 March 2020 will be given an extension of six months. More information can be found here

Business Rates Holiday

Eligible businesses will not need to pay business rates for the year 2020/21. Businesses receiving the holiday will not need to take any action but should receive a revised bill from their local authority.

The scheme will use existing powers under section 47 of the Local Government Finance Act 1988. It will be for each local authority to determine if a business is eligible for the scheme.

The following properties will receive the holiday:

  1. Shops, restaurants, cafes, drinking establishments, cinemas and live music venues (confirmed examples include, but not limited to: Opticians, Charity shops, Car dealerships, Petrol stations, Hair dressers/salons, Tanning shops, Nail bars, Dry cleaners, Funeral directors, Sandwich shops, Pubs)
  2. Premises used for assembly and leisure
  3. Hotels, guest and boarding premises and del-catering accommodation (for example, caravan parks and holiday homes)
  4. Nurseries that are listed on Ofsted’s Early Years Register

Cash Grant for Retail, Hospitality and Leisure

Those businesses who will receive the business rates holiday (with the exception of nurseries) will also be entitled to a cash grant. If the business has a rateable value under £15,000 they will receive a grant of £10,000. If the rateable value is between £15,001 and £51,000 they will receive a grant of £25,000. This will not need to be repaid.

As with the business rates holiday, businesses will not need to apply for the grants. Local authorities will be writing to eligible businesses.

Income Tax Deferral for the Self-Employed

Self-assessment payments due in July will be deferred until January 2021. This scheme is automatic and does not require an application. Those who have a direct debit in place with HMRC to pay this liability should cancel it before HMRC attempts to automatically take payment.

VAT Deferral

Businesses will not be required to pay their VAT liability from now until June. They will then be given until the end of the financial year to settle this. The Association understands that businesses must continue to charge and report VAT as normal. VAT refunds and reclaims will still be paid as normal.

The scheme is automatic, and businesses do not need to apply. Those who have a direct debit in place with HMRC to pay their VAT liability should cancel this before HMRC attempts to automatically take payment.

Time to pay

HMRC will review late or missed payments for all businesses and self-employed people on a case by case basis. If the late or missed payment is a result of coronavirus HMRC may offer support.

Statutory Sick Pay Rebate

Small and medium sized businesses will be able to reclaim the full cost of paying statutory sick pay, for two weeks, to employees who have been absent due to coronavirus.

The mechanism by which this rebate can be claimed is still being developed.