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By Cheaper Accountant, Mar 27 2020 06:28AM

We added a blog earlier this week to provide details of three of the key Government support packages for businesses facing difficulties caused by the Covid-19 coronavirus. This outlined the support arrangements for those employees who employed via PAYE and what employers needs to do to claim the 80% Government wages grant. A lot of questions have been asked about the Self Employed and what support they will be able to access. There was initially little on offer when the initial support measures were announced. However, the Government has now announced further measures for the Self Employed and this blog post will outline what support is available and what this means for those who are Self Employed.

The details on all of the Government support measures may still evolve as the finer details are worked through. HMRC are still in the process of implementing systems and processes to facilitate all of these measures.

Who qualifies for this support?

HMRC have indicated that those individuals who are Self Employed or a Member of a Partnership will be able to access this support scheme.

In addition to the above the following criteria will apply:

1. You must have filed a personal Self-Assessment Tax Return for the tax year 2018/19.

2. You must have traded during the 2019/20 tax year.

3. You must be trading when you apply for this Government support or would be trading had it not been for Covid-19.

4. You must intend to trade during the tax year 2020/21.

5. You must have actually lost trading profits due to Covid-19.

There is a final test that must also be satisfied.

Your trading profits from your Self-Employment business activities must be less than £50,000.

More than half of your total income must also be from your Self-Employment business activities.

HMRC will apply this final test to:

- The 2018/19 tax year alone.

- The average trading profits for the tax years 2016/17, 2017/18 and 2018/19.

The average here will simply be the total income for the three tax years divided by 3.

If you started trading between 2016 and 2019 then only the tax years where a self-assessment tax return was submitted to HMRC with Self-Employment trading activity will be used in the above calculation.

How much money will I receive?

HMRC will pay a taxable grant of 80% of the average profits from the following three tax years (where applicable):

i. 2016/2017

ii. 2017/2018

iii. 2018/2019

HMRC will simply take the self-employed trading profit for each of the three years, total these, and then divide by three.

For example:

2016/2017 self-employed trading profit = £5,000

2017/18 self-employed trading profit = £10,000

2018/19 self-employed trading profit = £15,000

Total of the above = £30,000.

Average = £10,000

The above yearly average will then be used to calculate a monthly value. We are assuming that this is likely to be simply 1/12 of the average annual trading profit (the initial HMRC guidance isn't clear on this).

Assuming this is correct the Government Grant payable (for three-month period) in the example above would be £10,000 x 3/12 = £2,500 x 80% = £2,000.

This will then be automatically paid to the individual by HMRC at the start of June at the earliest. One payment will be made for the three months in question.

You must note that this is capped at a maximum grant payment of £2,500 per month for a period of three months.

How do I apply for this grant?

HMRC have indicated that they will review the data that they hold for all Self-Employed individuals and they will decide if an individual is eligible for the scheme and then write to the individual inviting them to apply for the Government grant online.

HMRC have stated that Self-Employed individuals do not need to call HMRC. They have commented that this will simply slow them down further and delay them from completing the urgent work needed to implement the above grant scheme.

Once the application has been competed HMRC will contact you to inform you of how much cash you will receive and when this will be paid.

We do hope that all clients remain well and healthy during these testing times. We are always here to help and support all clients in any way we can.

By Cheaper Accountant, Mar 24 2020 06:24AM

The UK Government has recently announced a number of measures that are aimed at supporting small businesses during the current Coronavirus, or Covid-19, crises. Many of the finer details are yet to be released at the time of writing this blog update as things are changing here on an almost daily basis. We have received a large volume of questions from clients relating to what Government support they can access and how to access these cash payments.

The virus has certainly impacted the daily lives of millions of people around the world and the spread of the virus appears to be far from over. This is likely to lead to one of the most challenging and testing times many of us have experienced during our lives as our daily routine changes beyond all normal recognition. As isolation becomes the new norm for most people across to the UK the Government has pledged financial support to businesses expected to amount to £350 billion. This is a significant contribution towards helping some of the financial difficulties that people will inevitably face but there are already many people asking if this will be enough. I suspect that people’s lives may well change quite considerably and many of us may have to learn to live with less, hopefully only for the short term.

Before I get into some of the specifics, I first wanted to express my hope and wishes that all clients, their family members and loved ones remain fit and well and my heart goes out to anyone who has or is suffering some of the more significant outcomes resulting from this virus. The Cheaper Accountant team are here to help you in any way we can and will endeavour to keep responding to all client questions and queries as quickly and efficiently as possible during this difficult time.

I’ll now present initial details (which are subject to change and further clarification by the Government) on three of the measures that may benefit our clients.

1. Wage Cost Support

HMRC will be tasked with reimbursing 80% of what they are calling “furloughed” employees. This basically means all employees that a company cannot afford to pay the wages for due to the coronavirus.

These employees are those who have been asked to stop working but have not been made redundant.

The employers in this scenario will be able to access Government funds to cover part of the regular monthly salary cost to prevent these employees from being made redundant.

How does the Wage Scheme Work?

The employer and employee will need to discuss and agree to the employee being classified as a furloughed worker. The employee will then remain on the employer’s payroll, rather than being terminated.

We believe that no work can be undertaken for the employer during the furloughed term in order to qualify for Government assistance.

The employer will then be able to claim a grant of up to 80% of the salary cost up to a cap of £2,500 a month.

The scheme will initially be operated for a period of three months.

What should an employer do?

An employer will need to categorise all impacted employees as furloughed workers and then inform the impacted employees of this change. The aim will be to seek agreement from the employee.

We are currently expecting that an online submission will then need to be made to HMRC to notify them of all furloughed employees to ensure eligibility and to facilitate the grant payment.

HMRC are currently implementing the systems and processes that are required to allow the scheme to operate as at the present the functionality simply doesn’t exist.

Early indications were that the first payments would be made during late April but backdated to 1 March.

2. VAT Payment Deferral

The Government has granted a three-month deferral for VAT payments until the end of June for all UK businesses. This means that no VAT payments will need to be made during the period 20 March 2020 through to 30 June 2020.

This will be applied automatically, and companies will not be required to apply to benefit from the above deferral.

The tax liability will need to be paid later down the line and will not be extinguished by the Government. The Government has indicated that liabilities accruing during this period will need to be paid by the end of 2020 or possibly even as late as the first quarter of 2021.

All VAT reclaims and refunds will be processed as normal.

3. Income Tax Payment Deferral

The Government has announced that all payments due on 31 July 2020 will be deferred until 31 January 2021. With no interest or penalties being applied during the deferral period.

This will again be applied automatically, and individuals will not be required to apply to benefit from the above deferral.

This applies to any person who is self-employed.

Feel free to contact us via emailing if you need any further clarification on any of the above three support packages.