Financial Information due to the Coronavirus

Here are some interesting points to note regarding arrangements that are being put in place due to the Coronavirus.

Employees

·       State will pay 80% of your salary, up to £2,500/month. This is officially called the Coronavirus Job Retention Scheme (CJRS), and it allows employers to put staff who can't work on 'furlough' – ie, on hold – and the Government will cover their salary. HMRC says the aim is to officially launch during the week commencing 20th April, with the first payments being made by the end of April.

·       Your employer can choose to 'top up' the Government grant. It can pay your full salary while you're furloughed – but it's not obliged to do this and may not have the funds to be able to do so.

·       It's up to your employer to decide and define who is furloughed. It could be because you've no work to do, but it can also be because you have to be home to look after children or you are self-isolating.

·       Money will be paid to employers "before the end of April". It will be issued through grants which can be paid out to any employer. The earliest point wages can be backdated to is 1st March 2020. 

·       You'll still need to pay tax and national insurance contributions on this wage. And while you're on furlough, you'll still have the same rights as you did when you were employed – including any entitlement to statutory sick pay or maternity pay, as well as redundancy payments.

·       You can work elsewhere while on furlough. There's nothing in the furlough rules which stops you from taking a job elsewhere if you're placed on furlough by an employer (doing so wouldn't affect your furlough pay either). Revised guidance confirms that existing contracts of employment need to allow for this.

·       You can be furloughed multiple times. Each furlough must be at least three weeks.

·       Employers must notify employees of their furlough status in writing and keep this record for at least five years.

Self-Employed

You can't get statutory sick pay if you're self-employed. But if you have to take time off work because you're sick or self-isolating – or if you've lost all your income due to coronavirus – you might be entitled to claim benefits.  Plus, further help has been announced in the form of the new Self-employment Income Support Scheme (SEISS). 

Under this scheme, self-employed workers will be able to apply for taxable grants to combat loss of income due to the coronavirus pandemic. Here's how it'll work and some eligibility criteria...

·       The grants are worth up to 80% of your profits. This is capped at £2,500 a month and is taxable. As it's a grant, it means you don't have to pay it back.

·       Grants are decided on your profits over the last three years. 

·       You must have filed a tax return for 2018/19 - you've got until 23 April to do so. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018/19 tax return but missed the deadline this year, you'll have until Thursday 23 April to submit your tax return and then you can still access the scheme. However, if you only have a few months' self-employment on your 2018/19 return, this will be counted as your total profit for the year – the Government won't pro-rata it based on your monthly profits. 

·       You must earn more than 50% of your total income from self-employment. This must have been the case for either your 2018/19 tax return or, if not, the average of your 2016/17, 2017/18 and 2018/19 tax returns.

·       Your average trading profit must be less than £50,000/year. This is essentially a 'cliff-edge' requirement – so those whose average annual trading profit is £50,000 or more won’t be able to get any support from this scheme.

For both these requirements, the Government says it will first check your 2018/19 tax return – if you met the requirements that year, you'll be eligible.

However, if you earned more than £50,000 (or earned less than half of your income from self-employment) in 2018/19, the Government will then check your 2016/17 and 2017/18 tax returns, if you filed them for those years. If on average over the three years you earned less than £50,000 and made more than half your income from self-employment, you'll still be eligible.

·       This scheme's expected to start paying out in June. Payments will likely be backdated to cover March, April and May (in the form of a lump sum). The scheme will operate across the UK and is set to last for at least three months, though this could be extended.

·       Unlike the employee scheme, here you CAN keep working. You also do not need to prove coronavirus impact – all who qualify get it.                                                 

·       You CAN apply for both the scheme and universal credit. The best approach is to apply for universal credit now, and if you start receiving self-employed income support in June too then this will be classed as income, meaning the amount of universal credit you receive will decrease.

If you've savings put aside to pay tax, it NEEDN'T reduce your universal credit. Universal credit (UC) payouts are reduced if you've savings (or technically capital). The drop starts at £6,000 savings and by £16,000 you can't claim.  It has now been agreed that if you've got savings to pay tax, put a note of this in your online UC journal, and tell them when they call, and it should be discounted from the calculations.

How do I apply for the SEISS?

Those who are eligible for the SEISS will be contacted by HMRC directly – the Government hasn't said when this'll be, only that it will happen "once the scheme is operational". At that point you'll be asked to fill in an online form, and the grant will then be paid directly into your bank account.

There's no need to contact HMRC now as there's nothing you can do to apply at this stage. We'll be following the scheme closely and keep you fully updated as and when you can apply.

Small Business Grants

·       £10,000 grant for all small businesses that qualify for Small Business Rates Relief (SBRR) or Rural Rates Relief. For SBRR, the rateable value of the property used by the business needs to be valued at £15,000 or less.

·       £25,000 grant for businesses in hospitality, leisure and retail whose rateable value is between £15,000 - £51,000.

·       Local Authorities responsible for delivering the funding to eligible businesses. They will then be reimbursed by the Government.

Business Loans

·       Coronavirus Business Interruption Loan Scheme (CIBLS), as overdrafts for up to three years, term loans for up to six years, etc., are available to small and medium businesses from 23/03/2020 for up to £5 million, interest free for 12 months. This scheme will help any viable business with a turnover of up to £45m.

·       No Personal Guarantees required for loans up to £250,000; otherwise Personal Guarantees limited to 20% of any amount outstanding on the CBILS lending after any other recoveries from business assets. Even businesses that would qualify for an ordinary commercial loan could apply. Applications must be supported by the usual documentation e.g. accounts/business plan/proposed repayment schedule. Loans made at Lender’s discretion.

General Information

Mortgages

For those in difficulty due to coronavirus, mortgage lenders will offer at least a three-month mortgage holiday.

Overdrafts, Credit Cards & Loans

At the beginning of April, the financial regulator confirmed that banks should offer a temporary payment freeze on credit cards and loans for three months and offer interest-free overdrafts of up to £500 on current accounts, in a set of new rules introduced to combat the effects of coronavirus on people's finances.

The measures introduced mean firms are expected to:

·       Offer a temporary payment freeze on loans and credit cards for up to three months, for consumers negatively impacted by coronavirus. These payment holidays won't be interest-free though, so while they'll help those with cash flow problems, only do this if you need to.

·       Allow customers who are negatively impacted by coronavirus and who already have an arranged overdraft on their main personal current account up to £500 charged at zero interest for three months – if they request it.

·       Make sure that all overdraft customers are charged no more than they would have been before recent overdraft pricing changes came into force.

·       Ensure consumers using any of these temporary payment freeze measures will not have their credit file affected.

·       Usually if you have a 0% credit card deal and miss a payment, you lose the 0% deal immediately and begin paying interest. But under the new rules you WON'T be penalised if you take a payment holiday and will instead get to keep the 0% deal.

However, it won't apply to car finance, payday loans and other short-term credit, though with car finance at least, the regulator is expected to make a further announcement soon.

If we can be of any assistance please do not hesitate to contact us.