With the Coronavirus (COVID-19) pandemic continuing to affect people across the globe, societies have to develop new norms in order to survive it. The economic and social effects of the pandemic have hit global economies and businesses hard, a phenomenon that is expected to continue for some time. Companies, freelance contractors and self-employed individuals across United Kingdom have not been spared either as many of them continue to suffer. Some Contractors operating in the Retail, Hospitality and Leisure sectors have had their contracts terminated by their clients. In response, the government has formulated an economic stimulus that will enable most of the enterprises to survive.
Some of the steps taken by the government to support businesses across United Kingdom include:
Direct Financial Support
The UK Chancellor of the Exchequer, Rishi Sunak, on March 17 2020 unveiled a £330 billion plan to help firms access cheaper loans and survive the financial implications of the Coronavirus (COVID-19). The aim of these loan guarantees is to supplement the £30 billion emergency fund that had been set aside during the formulation of the 2020 U.K. Budget. With the emergency funds, the government seeks to fund the National Health Service and enable the local authorities and the public sector to pay workers who have been furloughed.
Homeowners (owner-occupiers) that are facing financial difficulties due to Covid-19 can contact their lenders to apply for a three-month mortgage payment holiday which can effectively put a pause on your mortgage repayments for the period. If you have asset finance or car loans, you can also contact your lender to request for a three-month payment holiday.
Self-employment Income Support Scheme
Rishi Sunak, released a new package of measures on March 26 2020 for self-employed workers which was welcomed by Business groups and Union Leaders.
The self-employment income support scheme will support self employed individuals (including members of partnerships) who have been affected by Covid-19. The scheme will allow one to claim a tax grant worth 80% of trading profits up to a maximum of £2,500 per month for up to 3 months initially but may be extended if needed. The first claim can be made by the beginning of June 2020.
To work out the amount that can be claimed HMRC will add together the total trading profit for the last 3 tax years (2016/17, 2017/18 & 2018/19) then divide this by 3 to calculate the size of the grant payable. However, self-employment trading/partnership trading profit must be less than £50,000 and more than half your income should come from self-employment. HMRC will contact individuals who are eligible for the scheme and invite you to apply online.
U.K. Government to help firms pay their employees through the Corona Virus Job Retention Scheme
The government has proposed mechanisms to help enterprises pay salaries for their employees under the Job Retention Scheme. The scheme will ensure that all employers with a PAYE scheme will have access to financial support to help them pay part of the salaries of employees who would have otherwise lost their jobs because of the effects of the COVID-19 pandemic. This applies to employees who have been asked to stop working, but who are being kept on the payroll, otherwise described as furloughed workers. HMRC will reimburse 80% of their wages, up to £2,500 per month. The aim is to ensure that companies do not lay off workers during this economic crisis. This scheme will cover the cost of wages backdated to March 1 2020 and is initially open for 3 months, but will be extended if necessary. If you are a director of a limited company and paid through PAYE you may be able to take advantage of this scheme as well.
The government has postponed the Off-Payroll Reforms
The proposed Off-Payroll Reforms under the IR35 rules will delay by one year the reforms that were supposed to come into force in April 2020. The reforms aimed at reclassifying the self-employed contractors in United Kingdom and including them as part of the workers under the payroll taxation. Many companies in United Kingdom are optimistic that the delay would give them the time they needed to plan for the expected changes. The government considers the delay an opportunity to deal with the concerns raised by British firms before they enact the proposed reforms under the IR35 rules.
Deferment of V.A.T. and Income Tax
Accounting for a significant part of firms’ expenses is VAT and income tax. As such, the government believes that a tax-based intervention could ease things for firms during this period of economic hardships. As an incentive to companies, the government has deferred the payment of VAT for three months and this deferral will apply from March 20 2020 to June 30 2020. Customers who usually pay VAT by direct debit can cancel their direct debit with their bank during this period. VAT refunds and reclaims will be paid by the government as normal. Income tax payments due in July 2020 under the self-assessment systems for individuals may be deferred until January 2021.
The government believes the two interventions will offer U.K. enterprises the much-needed tax reliefs during these economic times. The economic uncertainties caused by the COVID-19 have pushed many companies into a financial crisis.
The HMRC has also provided support for businesses in financial distress and with outstanding tax liabilities with the time to pay service where they may be eligible to receive support with their tax affairs. These arrangements are agreed on a case by case service and are tailored to individual circumstances and liabilities. To access this scheme, you can contact HMRC in their dedicated helpline 08000 159 559.
Government grants for companies with employees diagnosed with COVID-19
SMEs that have employees diagnosed with COVID-19 will receive reimbursements from the U.K. government. The government, through the Statutory Sick Pay (S.S.P.), has offered to help small and medium enterprises offset the costs of treating employees with COVID-19. The refund will be accounting for expenses incurred by SSP eligible workers for up to two weeks after contracting the virus. Employers who qualify for Statutory Sick Pay must be firms with a workforce of less than 250 employees. The government has encouraged traders to keep records of staff absences attributable to COVID-19 to make the SSP program successful. However, it will not be mandatory for companies to provide a G.P. fit note to qualify for a refund.
Support for companies in the retail, leisure and hospitality industry
The retail, leisure, and hospitality industries have been adversely affected by COVID-19, and the government is willing to give firms in this sector a boost. The government has promised Cash Grant Scheme provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property.
Businesses in these sectors with a property that has a rateable value of up to £15,000 will receive a grant of £10,000.
Businesses in these sectors with a property that has a rateable value of between £15,000 and less than £51,000 will receive a grant of £25,000.
Corona Business Interruption Loan Scheme
This loan scheme is a temporary intervention aimed at ensuring that SMEs can access finance through loans, invoice finance, overdrafts, and asset finance up to £5 million for up to 6 years to help them mitigate the effects of COVID-19. The credits will be interest-free for the first 12 months because the government will cater for all lender-levied fees. Firms will also not need to guarantee the loans since the government will offer an 80% loan guarantee for all loans extended under the Coronavirus Business Interruption Loan Scheme. The government is working with more lenders to ensure that this program is rolled out countrywide. Currently, over 40 government-accredited lenders including all the major banks will be able to offer the Coronavirus Business Interruption Loan Scheme.
Protection from eviction for commercial tenants
Commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction.
These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June.
There is the option for the government to extend this period if needed.
This is not a rental holiday. All commercial tenants will still be liable for the rent. Commercial tenants are protected from eviction if they are unable to pay rent.
The aim of the U.K. government’s intervention is ensuring that the effects of the pandemic are mitigated and that businesses continue running without a layoff of workers. This is because layoffs would have adverse economic effects on the economy. The government is also working with financial institutions and local authorities to come up with more interventions. UK prime minister confirmed in a statement that his government is ready commit more resources into protecting the nation from the adverse economic effects of the pandemic.