Managing cash flow for both businesses and self-employed individuals is critical in the current circumstances and managing tax liabilities is key to that. Businesses should ensure that they are maximising currently available tax reliefs and keeping accurate details of trading information in order to establish any tax losses for the period.
In addition, the following COVID-19 specific tax implications should be considered.
Coronavirus Job Retention Scheme
All UK employers who operate a PAYE scheme and who have furloughed employees are entitled to a taxable grant, administered by HMRC, of 80% of wage costs of each furloughed employee up to a maximum of £2,500 per month plus employer's NICs and an amount equal to the minimum auto-enrolment pension payment. The scheme was originally backdated to 1 March 2020 and available for an initial 4 months to June 2020. On 12 May 2020, the UK government announced that the scheme will be extended through to the end of October 2020 . Accompanying this announcement was a relaxation of the current rules, whereby from August to October, employers will be able to bring furloughed employees back part time, with employers asked to contribute towards the salaries of furloughed staff.
HMRC launched the online CJRS portal on 20 April, with the first grant being paid within 6 days. HMRC have asked employers to prepare to make CJRS claims by establishing the number of employees being furloughed, their names, NI and payroll/works numbers as well as the furlough period and the amount being claimed.
For further details see our FAQs here.
Self-Employment Income Support Scheme
The scheme provides support to self-employed taxpayers who receive most of their income from self-employment and who have been adversely affected by COVID-19. The scheme provides a taxable grant equal to 80% of the average monthly profits over the last 3 years up to a cap of £2,500 per month. It will be available for an initial 3 months but may be extended. The taxpayer must be trading at the time of the claim (or would have been trading but for COVID-19).The taxpayer must also intend to continue trading in the tax year 2020-21.
The scheme will be targeted at those taxpayers with trading profits less than £50,000 in 2018-19 or an average profit of less than £50,000 for 2016-17, 2017-18 and 2018-19.
The online portal for making claims is now open, and payments are expected to be received by 25 May, or within six working days of completing a claim. Taxpayers do not need to wait for an invitation to claim from HMRC and can check their eligibility using the recently launched online tool.
We have a dedicated 'COVID-19: Support for the Self-Employed' legal update – please read this for further information on the SEISS and other support packages for the self-employed.
Scotland's Newly Self-Employed Hardship Fund
The Scottish Government announced an additional £34m for Scotland's newly self-employed to be managed by local authorities. Those eligible may receive cash grants of £2,000 which will be paid in early May.
The scheme is targeted at self-employed individuals who became self-employed on or after 6 April 2019 and do not qualify for SEISS. Applications should be made directly to local authorities with further information available here.
VAT - Payments deferred for 3 months from 20 March 2020 until 30 June 2020
All VAT registered businesses benefit from VAT payments being deferred for 3 months starting from 20 March 2020 until 30 June 2020, though VAT returns still have to be submitted on time. Refunds and repayments will be processed by HMRC as usual.
There is no need to apply for this, but if you pay by direct debit, cancel your direct debit or the VAT will still be collected. Cancel direct debits as soon as possible if you have a 31 March return date, but do remember to reinstate for VAT payments after 1 July 2020.
You have until the end of the 2020-21 financial year to pay the VAT deferred.
If you have a VAT payment that was due on or before 19 March 2020 and you have not made payment, this payment will still be due and you should pay this to avoid surcharges.
On 3 April 2020, HMRC clarified existing guidance to confirm that this support does not extend to VAT MOSS and import VAT payments.
Income tax self-assessment payments due 31 July 2020 deferred to 31 January 2021
Payments due on 31 July 2020 may be deferred until 31 January 2021. This means that if you are due to pay a second instalment of income tax on 31 July 2020, it can be deferred. You do not have to be self-employed to benefit from the deferral.
There is no need to apply, but if you have a direct debit in place, cancel it or payment may be taken automatically.
Deferral is optional, and you can pay the income tax due on 31 July 2020.
Self-assessment returns still require to be submitted by the normal filing dates. You may wish to consider filing early to crystallise any refunds due if relevant.
HMRC Time to Pay – call HMRC on 0800 024 1222
HMRC may negotiate time to pay arrangements for tax and have set up a COVID-19 specific hotline. The line can be very busy, but persevere.It is useful to have cash flow forecasts and budgets ready to hand and worth ensuring that tax filings are up to date.
If you have filed an income tax return and the amount overdue is less than £10,000 you may be able to arrange to pay in instalments through your online self-assessment account.
Tax free payment of over £300 per year to help with the costs of working from home
The tax free flat rate payment which employers can pay to employees working from home increased from £4 to £6 per week from 6 April 2020. Where no flat rate payment is made, employees may be able to claim some expenses in their self-assessment tax return or by making a tax repayment claim to HMRC.
New CGT 30 day payment and reporting regime – relaxation on penalties
To allow taxpayers to get used to the new rules, HMRC have announced that no late return penalties will be charged in relation to CGT returns for disposals of residential property completing between 6 April 2020 and 30 June 2020 provided the return is submitted and payment made by 31 July 2020. For disposals completing from 1 July 2020 onwards, penalties will be charged if the return is not submitted within 30 days of completion.
Payment of duty and import VAT
HMRC have announced that the payment of duty and import VAT via duty deferment accounts on 15 April can, subject to a financial hardship test be delayed.
If your business is experiencing severe financial difficult because of COVID-19 you can contact HMRC for approval to enter an extended payment period.
You should contact the Duty Deferment Office by:
- Telephone: 03000 594243
- Email: cdoenquiries@hmrc.gov.uk, or
- Telephone the COVID-19 helpline on 0800 024 1222.
Business (Non-domestic) Rates and Support Grants
Depending on the type of business and its location, specific COVID-19 related business rates relief and support grants may be available.
It is important to note that each of the four UK jurisdictions has separate rules and guidance on COVID-19 support available. Broadly, each jurisdiction is providing (a) business rates relief of between 25% to 100% for businesses in the retail, hospitality and leisure sector for 2020/21, and (b) two tiers of loans aimed at small businesses and businesses in the retail, hospitality and leisure sector.
ENGLAND
Business Rates Relief for Retail, Hospitality and Leisure sector
No rates are payable for 2020/2021 for properties which are wholly or mainly used:-
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure, including museums, theatres and gyms
- as hotels, guest & boarding premises and self-catering accommodation
- as estate agents, lettings agencies and bingo halls
This 100% retail discount will be applied automatically by local authorities, though in some cases rates bills may have to be reissued to reflect this.
Contact your local authority if you think you are eligible for this relief and you haven't heard from them.
Business rates holiday for nurseries for 2020/2021
Nursery premises used by providers on Ofsted's Early Years Register and wholly or mainly used for the provision of the Early Years Foundation Stage are eligible for 100% relief from rates for 2020/2021.
This relief should be applied automatically but contact your local authority if it isn't.
Support Grants
- Retail, Hospitality and Leisure Grant (RHLG) - Businesses in the retail, hospitality and leisure sector with a Rateable Value between £15,000 and £51,000 can apply for a cash grant of £25,000.
- Small Business Grant Fund (SBGF) – cash grants of £10,000 are payable to businesses in England in receipt of either Small Business Rates Relief or Rural Rates Relief (including those with Rateable Value between £12,000 and £15,000 in receipt of tapered relief) as of 11 March 2020.
- Additional Fund Announced 2 May 2020 – a new £617 million 'discretionary' fund will be made available to local authorities. The fund is aimed at small businesses with under 50 employees that have previously been outside the scope of the RHLG and SBGF.
Under each of the above grants eligible businesses will receive one grant per property. Cash grants have been paid from early April. Businesses should refer to their local authority website for information on how to apply.
In addition, local authorities may be able to agree special payment plans so that the business rates due for 2020/21 are split over 9 months from July 2020 to March 2021, meaning that businesses will not have to pay anything until July 2020. Contact your local authority for further information.
SCOTLAND
Business Rates Relief
All non-domestic properties in Scotland will get a 1.6% rates relief for 2020/21 which effectively reverses the increase in poundage for 2020-21 previously announced at Scottish Budget 2020.
Retail, hospitality and leisure businesses will get a 100% rates holiday for 2020/21.
These reliefs will be applied automatically by local authorities.
Support Grants
The Coronavirus Business Support Fund is being administered by local authorities on behalf of the Scottish Government. This fund is broken into two grants:
- Retail, Hospitality, Leisure Support Grant (RHLSG) - Retail, hospitality and leisure business ratepayers with a rateable value between £18,001 and up to and including £50,999 can apply for a one-off grant of £25,000
- Small Business Support Grant (SBSG) – small businesses can apply for a one-off cash grant of £10,000 if they are eligible for the Small Business Bonus Scheme relief or the Rural Relief. You can also get this grant if you applied for Nursery Relief, Business Growth Accelerator Relief or Disabled Relief but are eligible for the Small Business Bonus Scheme.
For businesses operating out of multiple premises, the cash grant was initially a one-off grant to be paid to each business, regardless of the number of properties. However, on 15 April 2020 the Scottish Government announced an extension to the Business Support Fund for additional premises. If businesses are eligible for the full one-off £10,000 or £25,000 on their first property as above, they may be eligible for a grant worth 75% of these amounts for each subsequent property. This brings the scheme in Scotland more in line with the position in England where there is a full grant for each property.
Businesses should apply for grants on their local authority website by filling in the Coronavirus Business Support Fund form. Payments are being made within 10 working days of receiving the form.
WALES
Business Rates Relief for Retail, Hospitality and Leisure sector
No rates are payable for 2020/2021 for properties which are wholly or mainly used:-
- as shops, restaurants, cafes, drinking establishments, cinemas and live music venues
- for assembly and leisure, including museums, theatres and gyms
- as hotels, guest & boarding premises and self-catering accommodation
- as estate agents, lettings agencies and bingo halls
This 100% retail discount will be applied automatically by local authorities, though in some cases rates bills may have to be reissued to reflect this.
Contact your local authority if you think you are eligible for this relief and you haven’t heard from them.
Support Grants
- Businesses in the retail, hospitality and leisure sector with a Rateable Value between £12,000 and £51,000 can apply for a cash grant of £25,000.
- Welsh businesses in receipt of the Small Business Rates Relief with a Rateable Value up to £12,000 can apply for cash grants of £10,000. Ratepayers with multiple premises are restricted to a maximum of two grants in each local authority area.
Businesses should refer to their local authority website for information on how to apply.
NORTHERN IRELAND
Business Rates Relief
All business ratepayers in Northern Ireland will be given a three month rates holiday for April, May and June 2020, effectively giving businesses a 25% discount on 2020/21 rates bills.
Support Grants
- Small Business Support Grant Scheme – businesses currently in receipt of the Small Business Rate Relief may be eligible for a one-off cash grant of £10,000. Businesses are restricted to one grant, regardless of the number of premises held. The application form can be found here.
- Hospitality, Tourism and Retail Grant – businesses in the hospitality, tourism and retail sectors with a rateable value between £15,000 to £51,000 are eligible for a one-off cash grant of £25,000. From Monday 20 April 2020, access to the application and further information will be available on the Northern Ireland Executive website.
ADDITIONAL SCOTTISH GOVERNMENT ASSISTANCE
£20 million Creative, Tourism & Hospitality Enterprises Hardship Fund
The Scottish Government has announced a £20 million Creative, Tourism & Hospitality Enterprises Hardship Fund to be managed by the Enterprise Agencies in partnership with Creative Scotland and VisitScotland for creative, tourism and hospitality companies not in receipt of business rates relief. This will benefit companies of up to 50 employees with rapid access £3,000 hardship grants or larger grants of up to £25,000.
£45 million Pivotal Enterprise Resilience Fund
The Scottish Government has also announced a £45 million Pivotal Enterprise Resilience Fund to be managed by the Enterprise Agencies for vulnerable SME firms who are vital to the local or national economic foundations of Scotland.
Stamping of Stock transfer forms – emergency electronic procedures
HMRC have designed temporary, emergency processes to allow taxpayers and their advisers to email stock transfer forms for stamping, and HMRC will deal with those electronically rather than by applying a physical stamp. HMRC will accept e-signature of stock transfer forms.
New guidance can be found on the Completing a Stock Transfer Form page, and on the Paying Stamp Duty page.
Do not send any further stock transfer forms to the Stamp Office from now on - they will not be processed.
If you have already sent stock transfer forms to HMRC you need to resubmit the STFs electronically. If you don't do this, the STFs will not be stamped or returned to you until these temporary COVID-19 measures end.
Transfer pricing
The effects of Coronavirus on global business activities could have implications for transfer pricing arm's length pricing. Transfer pricing arrangements should be reviewed.
Tax residence
HMRC have updated their guidance on the circumstances in which the current pandemic may be treated as an "exceptional circumstance" which could lead to certain time spent in the UK not being taken into account in establishing UK tax residence. Specific advice should be sought on individual circumstances. Read our blog for more details.
Permanent Establishments
HMRC has issued guidance providing some comfort in respect of the question whether employees who do not normally work in the UK, but are stranded here as a result of the travel restrictions imposed due to COVID-19, could create a permanent establishment (PE) in the UK.
Our legal update, COVID-19: Government Support Schemes for Businesses, provides further information on UK and Scottish Government support available.
