The UK Government has announced relief measures to help both individuals and businesses impacted by COVID-19. In this episode, Mike Whitacre interviews Jonathan Clark, a Tax Director in Frazier & Deeter’s London office. Listen now for an overview of the measures and steps you or your business can take now.
Untangling the Technical is available on iTunes and Spotify. Listen now using the player below or download it to listen later. (If you cannot see the player, please accept functionality cookies at the bottom of this page and refresh.)
Untangling the Technical: UK Relief Measures for COVID-19 Transcript
This transcript was assembled by hand and may contain some errors.
It has been edited for readability.
Mike Whitacre Hello everyone and welcome to Untangling the Technical, Frazier & Deeter’s podcast in which we take a look at complex topics to break them down for business people navigating today’s ever-changing tax and regulatory environment.
I’m Mike Whitacre, and today we’re excited to have with us Jonathan Clark from Frazier & Deeter’s London office. Jonathan is an expert in U.K. employment taxes and other areas, such as personal tax and global mobility. Jonathan, welcome.
Jonathan Clark Hi, Mike. It’s great to be here.
Mike Today, we want to talk about the relief measures that have been announced by the U.K. government to help both individuals and businesses impacted by the COVID-19 virus. Jonathan, before we get into the details of these measures, could you give us an overview of what has been announced so far?
Jonathan Ever since the middle of March, the UK government have actually had daily press briefings with the UK public announcing a variety of measures. The key ones that are being announced for businesses so far include a job retention scheme for businesses and their employees, self-employed income support scheme for those who aren’t employees and work on a self-employed trading basis.
There’s also measures that help deferral of income tax payments and outstanding tax payments for businesses and individuals, as well as announcements of cash grants for small businesses in the retail, hospitality and leisure sector, which have been severely hit by the quarantine. There are exemptions from business rates as well.
Finally, the government has also announced a business loan interruption scheme. This is government backed through commercial lenders and it’s designed to get cash loans to businesses when they need them and as soon as possible. All these steps being taken by the UK government are quite unprecedented in recent times, definitely nothing that’s been announced a similar scale in peacetime. The stats say that they represent at least a 330 billion pound package of support for businesses, which is equivalent to about 15% of UK GDP.
Mike You know, there’s a lot of unprecedented actions going on right now. That sounds like some pretty substantial support. Jonathan, what do you think is the most helpful to businesses in the UK?
Jonathan Sure, one of the most significant measures that was announced was the new job retention scheme. Now, the idea of this scheme is to help employers keep their staff on. Ultimately, I think the UK government, like many governments around the world, feel that when this crisis does come to an end, hopefully they can bounce back and the economies don’t suffer too long with a lag effect.
Now, the Coronavirus job scheme is temporarily open to all UK employers: businesses, charities and employment agencies. It’s available from the 1st of March 2020, and at the moment it’s covering at least three months of wages. But as things go, that could be extended. The idea behind the scheme is to support those employees who are severely affected by the Coronavirus, employers can claim up to 80% of furloughed employees wages. A furloughed employee is someone who is on a leave of absence from a company – not terminated, but effectively their employment contracts are put on hold.
This 80% is up to a total of two and a half thousand pounds a month for most UK employees. They are also covering the cost of employer, national insurance and employer pension contributions as well. So, it’s quite a significant amount that the government is helping with the costs towards employees for businesses.
Mike Alright, Jonathan, we understand the general outline of what’s in the program. How do businesses actually apply for this scheme?
Jonathan At the moment, there isn’t an online place where businesses can go to apply for the scheme. This measure was announced a couple of weeks ago and due to the scale of what’s required to be set up the government says they’re currently working night and day to get it running. All the eligibility criteria is outlined, but the actual system is not in place yet.
What the government have said is they aim to have this in place by the end of April 2020, so by the end of this month. Now, the key point, is when the scheme is set up employers can backdate their claims to the 1st of March. So that is any kind of cost you might be incurring for furloughed employees from the 1st of March will be eligible under this scheme.
The other thing the government has said is if any employees were made redundant before the end of February, but they are rehired, they will also qualify for this scheme. So if businesses let employees go before they are aware of this job retention scheme that’s going to be put in place, they will be eligible to be rehired and those employees’ costs will also qualify for the scheme too.
Mike Okay, makes sense. That’s some of the general things. Are there other cash flow measures that have been announced to help businesses in the short and the long term?
Jonathan Yes, of course. As I said, the scheme isn’t actually in place yet. They hope that the first payments will be available for employees towards the end of April. But there are immediate ways that the government announced to help businesses with their cash flow in the short term. Firstly, most UK businesses are VAT registered and have to do a quarterly VAT return. What the government has said is any VAT payments due between March 2020 and June 2020 can be delayed and the payment of VAT won’t be due until March 2021. And also there will be no interest or penalties on that deferral.It’s really there to help with businesses that had an immediate tax payment due, they can defer that to a later time.
The government has also announced that tax payers who file their tax returns on a self-assessment basis (self-employed), and who have payments on accounts which are advance tax payments coming up on the 31st of July, can also be delayed until January 2021 with no interest or penalties applying.
In the long term, one of the other measures announced by the government is this business interruption loan scheme. The idea of this loan scheme is to support SME businesses with access to loans, increased overdraft and financed assets of up to five million pounds per business and that can be available for up to six years. That’s more of the long term support.
The way this business interruption loan scheme works is it will be done by the main high street banks and the commercial lenders, but the government will be backing those loans through those commercial lenders. The idea is that these loans will cover the costs in the immediate short term that businesses might be facing with the interruption of COVID-19.
One of the things the government is willing to do with these loans by the high street lenders is, first of all, it will cover the first 12 months of interest due on any loans and it will also cover any lender fees.
The idea being that businesses can get upfront loans at no initial costs and with lower initial repayments for the first 12 months. What they’re also doing to encourage high street lenders to actually lend to SME businesses is the government is guaranteeing up to 80% on each loan of the amount borrowed. So the government is really putting their support behind SMEs’ with the help of cash flow.
Finally, I mentioned before that the government, with VAT and self-assessment, they’re allowing businesses to defer payments that are coming up to be due. But HMRC have also announced a thing called the Time To Pay Service. So any businesses or self-employed people that have outstanding tax liabilities that are due, they are able to apply to HMRC on a case by case basis and request, based on their individual circumstance, that the amount they owe is reduced, or they extend the time they have to pay.
All these measures in the round are designed to help businesses with their cash flow in the short and long term in these times at the moment.
Mike Thanks, Jonathan. This is really good information. You mentioned earlier some cash grants and business rate exemptions. Could you tell us a little bit more about these?
Jonathan At the moment, these cash grants and business rate exemptions are available specifically to the retail, hospitality and leisure sector, though that is quite a broad definition of businesses.
Any listeners that feel they might fit in that criteria, I would recommend they seek the appropriate detailed definitions on the government website. But the idea is that the government said that businesses that fall within the sector won’t have to pay business rates for the 2021 tax year.
Mike What are business rates?
Jonathan Business rates are payable by businesses to their local council authority rather than central government. They’re essentially a charge on non-domestic properties such as shops, offices, pubs and factories. The charge essentially depends on the size of the non-domestic property and also the location. That’s quite commonly known in the UK as a property’s ratable value.
The idea is that businesses in the retail, hospitality and leisure sector in the UK, who’ve been severely disrupted by COVID-19, they don’t have to pay these business rates for the 2020/21 tax year. That’s a significant saving for these businesses who at the moment don’t have any income coming through their doors, especially when you couple that with the job retention scheme for their employees and all the short term and long-term cash flow initiatives that are out there. It really is quite a substantial amount of support that is available to this sector.
Now, we talked about grants, one of the other things the government is doing is it’s giving cash grants of up to 25,000 pounds per property for businesses in the sector too. But that is only available for the slightly smaller businesses in this industry who operate in properties with a ratable value of less than 51,000 pounds per year.
Mike That sounds like really good opportunities for businesses. How do eligible businesses in these sectors access these grants or business rates release?
Jonathan The best bit about these measures is that businesses don’t need to do anything. Unlike some of the other schemes where you need to apply to the government or HMRC, for these grants, business rates or reliefs, the local authority will actually write to individual businesses and tell them if they’re eligible for a grant or business rate exemption.
Businesses have been told to expect to here from their local authority in the next couple of weeks. One of the things to point out is that if you’re a business whose already a received business rate for 2020/21 that was issued before these announcements were made. You don’t need to do anything, but just expect that your local authority will be sending you an amended bill advising of the revised amount as soon as possible.
Mike Okay, that sounds all clear thanks for that, Jonathan. What’s the government doing to support individuals that are self-employed and don’t qualify for the job retention scheme?
Jonathan On the 26th of March, the government also announced an additional support scheme for self-employed individuals. This is known as the Self-employed Income Support Scheme. The scheme is open to all self-employed individuals, and that includes individuals that are members of partnerships. So, two or more self-employed people working in a business together, and is available to those self-employed people where the majority of their income comes from self-employment and who have profits of less than 50,000 pounds per year.
The scheme is similar to the job retention scheme, the scheme will provide a grant to self-employed individuals of up to 80% of their profits. Up to a cap of two and a half thousand pounds per month so it’s on par with the job retention scheme. One of the key things about the scheme is that it’s a huge thing that’s been announced, and again, it’s in process of being built by HMRC. The difficulty with self-employed versus employed is that with employed people HMRC have access to employees data on a monthly basis from an employer’s payroll submission.
The complications with self-employed people are that they only have the information for people that register, file their tax returns and register to pay national insurance as a self-employed individual. They are working on this scheme, but they have said that it’s unlikely to be rolled out until the end of May or beginning of June. One of the key criteria to be eligible to participate in this scheme is that the individual must have filed a tax return for the 2018-2019 tax year as a self-employed individual. The trading profits need to be less than 50,000 pounds per annum and more than half of your total income on your tax return needs to come from self-employment.
If it’s the case that you’re self-employed and employed, but the majority of more than half of your income comes from employment, you’ll have to use only the job retention scheme to cover your cost of living. One of the other things the government has said is if you haven’t yet filed your 2018/19 UK tax return, which technically should’ve been due on the 31st of January 2020, but if you still haven’t gotten around to that, then you still have an additional four weeks from the date they made the announcement of the scheme to do so.
Mike So if you’re self-employed and you’re behind in your tax return filing, it’s really important to get that filed as soon as possible, right?
Jonathan Yes, that’s correct. If you haven’t done your 2018-2019 UK tax return, essentially you’d need to do it by the 23rd of April 2020. Otherwise, even though you might meet all the other criteria for the scheme, you won’t be eligible if you didn’t declare your earnings in time.
Mike Okay, that’s really good to know. Is there anything else you feel that may be worthwhile to mention for our listeners?
Jonathan Some other broad points that might be worth mentioning is that the government said any kind of businesses that operate in a commercial tenancy, so they rent shop faces or restaurant property that cannot pay their rent because of COVID-19, they will be protected from eviction. This means that businesses that are struggling won’t automatically forfeit their lease or forced out of a premises if they miss a payment up until the 30th of June 2020.
The government has said depending on how things progress, they might be happy to extend that period if necessary. Now, that’s not to say that these businesses who operate these commercial leases don’t have to pay the rent to that landlord at all, it’s just saying there is some leniency there with the date of payment of rent and avoidance of eviction.
One of the other key things I’d like to say is some of the measures that I’ve mentioned today, such as the business rates and grants, they are specific to England, and as part of the UK we have a devolved government with Scotland, Wales and Northern Ireland.
In places like Scotland, Wales and Northern Ireland some of the grants and business rates released vary slightly, so I would recommend our listeners check the local government website to see what’s applicable to them. But the main measures, such as the job retention scheme and the self-employment scheme and the loans, that applies and no changes whereabouts within the UK, your business sits there.
Mike That’s great. Jonathan, thanks so much for joining us today. For any of our listeners who want to learn more about the relief measures available to businesses in the UK, they should go to www.frazierdeeter.co.uk or feel free to contact a member of the Frazier & Deeter UK team. Thank you for joining us for this edition of Untangling the Technical.