The following information provides advice and guidance for accountancy clients who have been or will be impacted by Coronavirus (Covid-19).
Self-Employment Income Support Scheme
On Thursday 26 March, the Chancellor released details on how the Government would support the self-employed workforce during the Covid-19 crisis.
The main points of the Chancellor's statement includes the following:
- Anyone who is self-employed and who has seen a loss of income because of Covid-19 may be eligible for financial support.
The Self-Employment Income Support Scheme will pay a grant worth 80% of trading profits up to a maximum of £2,500 per month for the next 3 months – it is only available however for sole traders and members of partnerships.
To be eligible for the scheme an individual must have derived the majority of their income from self-employment and filed a 2018/2019 tax return. Any late filers will now be given an additional 4 weeks (from yesterday's date – 26/3/20) to file their return.
- The scheme will only be open to those who have an average trading profit of less than £50,000 per financial year.
- Grants will be based on the average profit made by self-employed individuals in their last three financial years (or will be based on applicable tax returns if they have traded for less than 3 years).
- HMRC will use internal information to contact all those who are eligible.
- The intention is for the grants to be available/payable from June 2020.
- The Chancellor referenced the current inconsistency between employment status and actual tax paid. This may signal his intention to change the way the self-employed are taxed in future.
Unfortunately, this announcement also confirmed that the Self-Employment Income Support Scheme will not apply to any individuals who pay themselves a salary and/or dividends via their own Limited Companies.
Limited company owners may however, be eligible to claim grants via the Coronavirus Job Retention Scheme (CJRS), as well as other support packages outlined below.
It is our understanding that if you currently pay yourself a small Directors Fee (salary) from your business, and if this fee was in place before 28 February 2020, then you can continue to make payments to yourself. You can then claim 80% of the payment back via the CRJS.
Please be advised, Director Fees are confirmed on the weekly/monthly financial statements issued to you by Champion. The present optimum level of Director Fees is £166.00 per week or £719.33 per month.
At these levels you will be able to claim back £132.80 per week or £575.46 per month via CRJS.
Note - The optimum Director Fee level will increase from 06 April 2020 to £169.00 (£135.20) per week or £732.33 (£585.86) per month.
As the company director/owner it will be your personal responsibility to apply for CRJS grants. Champion will provide more information on how this can be achieved when we receive further details from HMRC.
It is also important to understand that the continued payment of Directors Fees can only be achieved if you have sufficient financial reserves in place within your business. There may a time delay (i.e. end of April 2020) before HMRC begin to pay out to grant applicants.
If it is your intention to continue to pay yourself a Directors Fee, please confirm your decision to firstname.lastname@example.org or call a Champion advisor on 0161 703 2549. You will also need to provide Champion with a weekly/monthly email so we can prepare a financial statement for you and then submit all relevant PAYE return details to HMRC.
If your company does not have sufficient reserves then you can potentially continue to make these payments using funds that are set aside for the payment of Corporation Tax.
It is important to understand however, that this will result in the company generating an overdrawn Directors Loan Account (DLA). Due to the current circumstances, this should hopefully be a short term solution and when you return to your assignment we can adjust your statements (reducing the dividend) until the company is back on track thereby removing the DLA.
HMRC have confirmed that limited companies will be able to defer VAT payments that would have been due in the period 20 March 2020 - 30 June 2020, inclusive.
This will generally mean the deferral of one quarter's VAT - payments that would ordinarily have been due on 07 April, 07 May or 07 June 2020. This is an automatic offer and no application is required. Limited companies will not need to make a VAT payment during this period.
HMRC has confirmed that limited companies will however need to cancel their direct debits. Businesses that have a direct debit mandate in place to pay their VAT and wish to defer payment will need to contact their bank to cancel that mandate. This needs to be done before the direct debit is due to be collected. Businesses will also need to remember to reinstate their direct debit mandate once the deferral is over.
Limited companies will then have up until 31 March 2021 to pay the VAT liability they have previously deferred.
HMRC will not charge interest/penalties on any amount deferred, as long as the liability is paid in full by 31 March 2021.
VAT refunds and reclaims will be paid by HMRC as normal.
Businesses should continue to file their VAT returns on their normal due dates.
Personal Tax - Payment on Account Deferral
HMRC have confirmed that relevant individuals can defer the Income Tax payment on account amounts they would have ordinarily needed to make before 31 July 2020. They can instead defer the amount due until 31 January 2021.
This is an automatic offer and no application is required.
The deferral is optional - some taxpayers may prefer to make the July 2020 payment to avoid a larger payment in January 2021.
It may also be possible that you can access Universal Credit. You can check to see if you are eligible by clicking HERE
Business Interruption Loans
New Business Interruption Loans being introduced will now be interest free for 12 months, rather than six months. Details on how to access this funding can be found HERE
3 Month Mortgage Holiday
The government have announced a 3 month holiday for those who are in difficulty due to the Covid-19 crisis. You can find more details about this by clicking HERE
It is important to remember that you will still owe the amounts that you don't pay as a result of the mortgage payment holiday. Interest will continue to be charged on the amount you owe.
The Government is providing nearly £1 billion of support for renters, by increasing the generosity of housing benefit and Universal Credit, so that the Local Housing Allowance will cover at least 30 per cent of market rents in local areas.
The Government are issuing further guidance on a daily basis via their business support website
The Champion business will also continue to provide you with regular updates over the coming weeks.
Should you require any further clarification, please email email@example.com or contact a Champion advisor on 0161 703 2549.