Updated 9 June: Self Employed Income Support Scheme and temporary zero rating of PPE
A summary of where we are
These notes apply to England, some of the rules are devolved to other parts of the UK.
Job retention scheme (‘furlough’)
A payment of 80% of salary originally for 3 months. This only relates to the current crisis. Start date is 1 March 2020. See update below for claims from July.
- Government pay a taxable grant
- must have been in employment on 28 February 2020
- if acted early and already made some redundant can reverse and furlough
- if off under SSP can leave them on SSP and when this ends can furlough
- for zero hour contracts –
- if has been for 12 months take higher of some month and average over a whole year
- if not 12 months then average
- if only a few days then pro rate
- bonuses etc not included
- Must pay at least the 80% but employers can decide to pay more
- for the first period of claim the government will pay lower of
- £2,500
- 80% of pay plus employer responsibilities (employer NIC and minimum auto enrolment pension). If 80% is lower than minimum wage that is not changed as not actually working
- that employee cannot do any work other than some training
- If the employee has two jobs, one can be under furlough with the other unaffected. Therefore people can have income from other sources
- Minimum period is 3 weeks
- Directors cannot technically be furloughed because of duties under Company Law, but it appears that this should not cause a problem if the company is stopping, but further advice may be needed on this
- Dividends do not count towards the 80% test
Amounts paid under these arrangements do not count as state aid for the purpose of restricting the employment allowance
Update 29 May 2020:
From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time. This is a month earlier than previously announced to help support people back to work. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.
From August 2020, the level of government grant provided through the job retention scheme will be slowly tapered to reflect that people will be returning to work. That means that for June and July the government will continue to pay 80% of people’s salaries. In the following months, businesses will be asked to contribute a modest share, but crucially individuals will continue to receive that 80% of salary covering the time they are unable to work.
The scheme updates mean that the following will apply for the period people are furloughed:
- June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
- August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
Self employed
For self employed a first taxable grant will be made of up to 80% of profits for each months or £2,500 lower. This will be based on normal profits from 3 year period 2016/17, 2017/18 and 2018/19. If less then use the years available.
A second grant will be available for the following three months, see update below.
- It is only open to these self employed where more then half of income from self employment profits not over £50,000
- The first scheme will cover March April and May, with payment probably in June. Business loan should apply in the meantime
- Must have filed 2018/19 tax return and if not already done will allow another 4 weeks. But note penalties in bringing it up to date.
- Must still be trading and intend to carry on into 2021
- Do not contact HMRC as they will calculate and contact you.
Amounts paid under these arrangements will count as de minimis state aid for the purposes of employment allowance.
Update 29 May 2020: Those eligible under the Self-Employment Income Support Scheme (SEISS), which has so far seen 2.3 million claims worth £6.8 billion will be able to claim a second and final grant in August. The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
Update 9 June 2020: no payments on account needed on 31 July 2020, so the claim to reduce payment is not needed. Direct debits will still be taken by HMRC so these may need to be cancelled where in place. This means that the payment due on January 2021 could become quite large for some people and provision should be made for this.
Self employed income support scheme receipts are now being received and this seems to be going smoothly. These amounts are taxable and subject to class 4 NIC on a receipts basis.
On the tests, every claimant needs to be able to demonstrate that they have been affected by COVID which is probably possible for most self employed, but all.
It is a requirement of the scheme that the trader intends to continue trading in the same form. For example, in the case of a sole trader was trading in 18/19 but who has incorporated, that company would not be able to make the claim.
Check if you are eligible using HMRC tool
VAT
No payments required between 20 March 2020 and 30 June 2020. Still need to file the VAT returns . Payment deferred until end of 20202/21 tax year – auto
Repayments can still be made and can voluntarily pay. Note that you need to cancel direct debit arrangements. This will need to be set up again when payments resume.
Update 9 June 2020: Sales of PPE are zero rated temporarily between 1 May 2020 and 31 July 2020. This needs to be watch where temporarily producing PPE during the current crisis.
Income tax
Income tax 31 July payment can be deferred until 31 January 2021. automatic offer. Originally only applied to self employed, but extended to all taxpayers
Time to pay arrangement still available – talk. Current debts be potentially be included = HMRC number 0800 0159559
Statutory Sick Pay
HMRC to refund 2 weeks of SSP for the two weeks of being self isolated. Applies to employers of up to 250 employees. Test date is 28 February 2020. Can qualify for up to £94.25 from day 1 (not day 4) with effect from 13 March 2020
directors of small companies who meet the requirements can also claim SSP if earning enough (£118 per week)
self employed can claim employment and support allowance
Business Rates.
Retail hospitality and leisure (see detailed list) no business rates in 2020/21. England only other countries devolved.
cash grants of up to £25,000 relating to trading from buildings per property. Retail and hospitality grant scheme – automatic. Let them do their jobs
if not paying business rates, small or rural will get one off £10,000 grant. Local councils will deal with this also
these amounts do count as de minimis state aid for the purposes of state aid.
Loans
from Monday 23 March gov guaranteed loans 12 month interest free
larger business will get debt factoring in short term
Insurance may be worth looking at
Further information
The following groups provide further information
Low Income Tax Reform Group
HMRC