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 email@example.com if you need any further clarification on any of the above three support packages.