Updated from 3rd March Budget 2021
The Ashcroft team continue to provide ongoing help and advice to our clients, helping you to make sense of the new lockdown measures and government packages available.
We know that the current COVID-19 crisis is causing significant concern from both a public health and financial perspective. In these testing times, much of the business community is facing unprecedented pressures and difficulties.
We are building on the expertise we have gained during this challenging year to support you and your business in the most effective ways.
HM Government and The Bank of England continue to amend and offer several initiatives to support individuals, SMEs and larger corporations through this difficult period. On this page you will find a summary of all the key details.
Summary of key support measures
- Whilst HMRC have not formally extended the self assessment filing deadline they have now confirmed that late filing penalties will not apply if 2019/20 returns are submitted by 28 February 2021, effectively extending the deadline by a month. Additionally, HMRC have confirmed that Covid-19 related delays may be grounds for reasonable excuse for late filing when appealing against penalties.
- Self assessment tax payments due on 31 July 2020 were automatically deferred until 31 January 2021. No penalties or interest will arise.
- • There is no automatic deferral of amounts due on 31 January 2021 (which will include any amounts deferred from 31 July 2020). However, HMRC have deferred the date that 5% late payment penalties will be charged from 3 March to 2 April. This means taxpayers have until midnight on 1 April to settle their liabilities without incurring penalties (interest will still be charged on the late payment).
- Payment plans are available for individuals who owe £30,000 or less and are up to date with their tax returns. This can be set up online without needing to call HMRC.
- Time to pay arrangements may be available if the above conditions are not met – contact HMRC as soon as possible to agree an instalment plan.
- Support available for home-owners in the form of mortgage holidays of up to 6 months, these must be agreed by 31 March 2021 and must end by 31 July 2021. Interest will still accrue on the outstanding balance. Repossessions on hold until April 2021.
- Self-Employment Income Support Scheme (SEISS)
The SEISS is designed to support self-employed individuals (including members of partnerships) whose finances have been adversely impacted by COVID-19. The scheme provides taxable grants to the value of 80% of trading profits, up to a cap of £2,500 per month. The scheme had been extended to a third grant covering the period from 1 November 2020 and a fourth grant expected to cover the period from 1 February 2021. The fourth grant and a further fifth grant were confirmed in the 2021 budget covering the period from 1 February to 30 September 2021.
In order to claim the first and second grants the following criteria needed to be met:
- Be self-employed or a member of partnership.
- Carry on a trade which has been adversely affected by Covid-19
- Filed your 18/19 tax return by 23 April 2020
- Have traded in the 2019/20 tax year and intend to continue to trade in the 2020/21 tax year (Covid restrictions permitting)
- Have average trading profits of less than £50,000 which are more than 50% of your total income in the tax year 2018/19 (or on average in the tax years 2016/17, 2017/18 and 2018/19)
In order to claim the third and fourth grants you needed to be eligible for the first and second grants (see above criteria) and declare that you intend to continue to trade but are impacted by reduced demand due to coronavirus or are temporarily unable to trade due to coronavirus. The eligibility criteria for the fourth and fifth grants will look at 2019/20 tax returns rather than 2018/19 (provided they were filed by midnight on the 2nd March 2021), and the fifth grant will be reduced to 30% if Covid has resulted in a decrease in your turnover of less than 30%.
You can claim under the SEISS while continuing to work as long as your business has been adversely affected at the date of the claim (unlike the furlough scheme).
- Test and Trace Support Payment – you may be eligible for a £500 payment from your local council if you’ve been told to self-isolate, are on a low income and cannot work from home such that you will lose income as a result of self-isolating
- Universal Credit – the increased rate can be claimed if you (and your partner) have less than £16,000 in savings and are under state pension age.
- VAT deferral – VAT payments due between 20 March to 30 June 2020 were automatically deferred until 31 March 2021. Business can opt into a scheme which allows them to pay the deferred amount in instalments will the full amount being paid by 31 March 2022. More details of the scheme will be announced in due course. You should continue to file your VAT returns on time and the payment date for all VAT payments outside of this window are unchanged.
- If you are unable to pay any other taxes on time you should contact HMRC to request a Time to Pay Arrangement as soon as possible – this lets you spread the cost of your tax bill by paying what you owe in instalments.
- Coronavirus grants are available to business impacted by national or local lockdowns – the amount is based on the rateable value of the business property and whether you have been forced to close completely or are still able to provide some services despite being severely impacted by the restrictions. The grants are managed by local councils.
- Restart grants are available in April 2021, with non-essential retail able to claim up to £6,000 per premises and hospitality and leisure businesses able to claim up to £18,000 per premises.
- Business rates – Business in the retail, hospitality and leisure sectors and nurseries will not have to pay 2020/21 business rates. or the first 3 months of 2021/22. There will also be discounts available for the remainder of 2021/22 depending on whether the business had to close. Additionally, all business in receipt of either Small Busines Rates Relief (SBRR) or Rural Rates Relief (RRR) are eligible for a payment of £10k per property. Businesses in the retail, hospitality and leisure sectors with a property with a rateable value up to £15k are also entitled to a grant of £10k per property. This grant increases to £25k per property where rateable values are between £15k and £51k.
- Further one-grants of up to £9k per property have been announced for businesses in the retail, hospitality and leisure sectors following the start of the third national lockdown. The grants will range from £4k for rateable values up to £15k to £9k for rateable values of over £51k.
- VAT will be cut from 20% to 5% for the hospitality and tourism sectors from 15 July 2020 to 30 September 2021, , with an interim rate of 12.5% until 31 March 2022 before returning to 20%. This reduced rate will only apply to supplies of food and non-alcoholic drinks, as well as accommodation bookings and leisure attractions.
- Financial support – there are various loans and financing schemes available, each with their own terms and eligibility criteria;
Coronavirus Business Interruption Loan Scheme (CBILS) – available to small and medium-sized business based in the UK with turnover of up to £45million on loans and finance up to £5million. The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months. The scheme is open to applications from self-employed individuals and partnerships as well as companies until 31 March 2021. You will need to show that your business would be viable were it not for the pandemic and has been adversely impacted by the coronavirus.
Bounce Back Loan Scheme (BBLS) – enables small and medium-sized businesses to borrow between £2,000 and £50,000 (capped at 25% of turnover) for up to 6 years. There government guarantees 100% of the loan and there will be no repayments, fees or interest in the first 12 months. The remaining period of the loan will attract interest at 2.5%. You cannot apply if already claiming under CBILS but a CBILS loan can be transferred to this scheme if the loan amount is £50k or less. The scheme is open for applications until 31 March 2021.
The government has recently announced additional flexibility on the repayments, so before your first repayment is due you can extend the term of your loan to 10 years, move to interest-only repayments for a period of 6 months (you can use this option up to 3 times), or pause your repayments for a period of 6 months (you can use this option once).
Coronavirus Large Business Interruption Loan Scheme (CLBILS) – introduced to tackle the so-called “squeezed middle” businesses not covered by CBILS. It provides a government guarantee of 80% to banks making loans of up to £25m to businesses with an annual turnover of between £45m and £250m and up to £200m for business with turnover above £250m. The loans will be offered at commercial interest rates, but the government will not cover any interest or fees. Companies borrowing more than £50m will be subject to restrictions on dividend payment, senior pay and share buybacks during the period of the loan, including a ban on dividends and cash bonuses unless previously agreed before funding. The scheme is open for applications until 31 March 2021.
Recovery Loan Scheme – this new scheme will launch on 6 April and will be available to businesses of any size. Loans of £25,000 to £10 million will be available and the government will guarantee 80% of the balance.
Future Fund – aimed at supporting the UK’s innovative businesses that are currently affected by Covid-19 but are ineligible for the other support programmes because they are either pre-revenue or pre-profit and typically rely on equity investment. Under the scheme the government will match third party investment with convertible loans between £125k and £5m. Interest on the loans will be at least 8% p.a. and they will mature after a maximum of 36 months. To be eligible the company must have raised at least £250k from private third party investors in the last five years. The scheme is open for applications until 31 January 2021.
Covid Corporate Financing Facilities (CCFF) – aimed at supporting the liquidity of larger corporates “who make a material contribution to the UK economy” by allowing them to raise short-term (up to 12 months) financing through issuing commercial paper which will be purchased by The Bank of England.
Sustainable Innovation Fund (SIF) – a new £200m fund to provide grants to businesses for new projects focusing on sustainable economic recovery from Covid-19. The fund will be administered by Innovate UK. The third round closed on 30 September 2020 and there are currently no plans for a further round.
- Corporation tax loss relief – HMRC have updated their guidance to allow companies to claim relief for the carry back of losses arising in “exceptional circumstances” before the end of the loss-making period. The claim can be made by writing to HMRC but will need to be supported by management accounts and forecasts showing how the anticipated loss has been calculated. They have also updated their guidance for companies who make quarterly instalment payments to allow them to reclaim payments made before the exceptional circumstances caused their estimated profits to fall.
- Companies can also carry back losses arising between 1 April 2020 and 31 March 2022 an extra 2 years.
- Extended filing deadlines – the filing deadline for statutory accounts has been automatically extended by 3 months for all companies. Please note that there has been no change to the corporation tax payment deadlines. The filing deadline for many Company Secretarial forms, including the annual confirmation statement, has been extended from 14 days to 42 days. These extensions apply to filings due on or before 5 April 2021.
- Coronavirus Job Retention Scheme (CJRS) – under this scheme Government will cover up a portion of the wage cost of employees designated as “furloughed” because of the COVID-19 pandemic, provided they are kept on the employer’s payroll. All UK businesses are eligible. The scheme has been extended until 30 September 2021.
From 1 November 2020 you can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month (employers can top up salaries above this level if they choose to). Employers must pay the associated employer NIC and pension costs. Dividends are excluded.
From 1 July 2021 the government will pay 70% and employers will have to pay the other 10%, and this will change to 60% and 20% respectively for August and September 2021.
You can claim for employees who were employed on 30 October 2020 as long as you have made a PAYE RTI submission between 20 March and 30 October 2020 notifying a payment of earnings for that employee. You do not need to have previously claimed for the employee to claim for periods from 1 November 2020. Employees who were made redundant on or after 23 September 2020 can be re-employed and included in the claim.
Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.
- Home-working expenses – employers can pay employees £6 a week to reimburse them for additional household expenses incurred whilst working from home. You can reimburse costs in excess of this if they are additional (i.e. not a proportion of fixed costs that would have been incurred anyway) and the employee retains receipts to support the amounts paid. The rules around providing computer equipment or office furniture to employees have also been relaxed – this will be an exempt benefit provided they are only reimbursed the exact amount, the equipment was obtained for the sole purpose of enabling the employee to work from home as a result of the coronavirus outbreak and there is no significant private use.
- Statutory Sick Pay Rebate Scheme – a new online service for SME’s with fewer than 250 employees to recover coronavirus related SSP payments made to their employees. Businesses can reclaim SSP paid to employees from day 1 for up to 2 weeks – no sick note is required, an isolation note from NHS111 online is sufficient.
- Apprenticeships and work placements – a new grant of £2,000 will be made available to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1 August 2020 to 31 March 2021. Employers who provide trainees with work experience will be awarded a further £1,000 per trainee.
Moreover, under the new Kickstart Scheme, £2bn has been allocated to fund 6-month work placements for people aged 16-24 and deemed at risk of long-term unemployment. Funding will cover 100% of the National Minimum Wage for 25 hours per week plus associated National Insurance Contributions and automatic pension enrolment contributions.
How Ashcroft Partnership can help
It is clear that the Government is fully committed to assisting businesses and the wider economy through this crisis. We would recommend keeping a constant eye on the gov.uk website for further details on how these and other measures will be implemented.
The Ashcroft Partnership is fully committed to working with our clients and the local business community to make sense of the new measures and support packages and to provide ongoing support and advice.
Our Corporate Finance team, for example, is on hand to assist with cash flow modelling and applications for funding, as well as general advice regards working capital management. Likewise, our Tax Team can assist with HMRC applications along with the other measures detailed above.
Please note, we will be providing regular updates as we hear further news from Government, banks and other agencies executing the schemes. Information from our teams advising businesses and individuals through these challenging times will appear elsewhere on this page.
(Information Updated 15th January 2021)