March 24, 2020

The latest UK Government measures to reduce the burden to Companies impacted by Coronavirus

Below is a quick summary of the new measures introduced by the UK Government to ease the burden to businesses caused by Coronavirus (COVID-19):

Value Added Tax (VAT)

The UK government will support businesses by deferring Valued Added Tax (VAT) payments for three months. The deferral will apply to payments due from 20th March 2020 until 30th June 2020, although taxpayers should be aware that they must file the VAT return on time and in accordance with recent Making Tax Digital changes too. All UK businesses are eligible but Non-Established Taxable Persons (NETPs) are not able to defer VAT payments, meaning non-resident VAT payers must stick with the usual payment deadlines.

This is an automatic offer from HM Revenue & Customs (HMRC) with no application required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until at least 31st March 2021 to pay any liabilities that have accumulated during the deferral period. Interest is not expected to be charged on the deferral, but the announcements have been silent on that topic.

VAT refunds and reclaims will be paid by the government as normal.

Income Tax

For self-employed taxpayers, the second payment on account of tax due by 31st July 2020 will be deferred until 31st January 2021.

It appears this will not apply to employees who are required to file a Self Assessment Tax Return. There is no need to make an application for this extension to take effect. No interest for late payment will be levied during this deferral period.

Salary Grants

On Friday, the Chancellor announced measures to help businesses ride out the economic crisis created by COVID-19. An important part of the package is the Coronavirus Job Retention Scheme. The key features of the scheme are:

  • Employees are placed on ‘furlough’ leave rather than dismissed 
  • The government will fund 80% of wages up to a maximum of £2,500 per month 
  • Available for any employee on the payroll on 1 March 2020 
  • Payments will be available from the end of April and backdated to 1 March

Employers cannot unilaterally require employees to accept being furloughed, which is a temporary unpaid leave of absence, unless the employee’s contract of employment contains a clause explicitly granting this permission. Although employees are likely to agree to such a measure, especially if the alternative is redundancy, consultation with employees will still be a very important part of the process. Detail is not yet available on how employers can claim financial assistance under the Scheme.

Employers will also need to submit information about the relevant employees to HMRC through a new portal. Because systems are not currently set up to facilitate this, HMRC is working hard to create a system for reimbursement as quickly as possible.

Coronavirus Business Interruption Loan Scheme (CBILS) 

Created by the British Business Bank, CBILS is designed to support a wide range of business finance facilities with overdrafts, asset finance, term loans and invoice finance; however, not all lenders can provide every type of finance available.

To determine whether your company may be eligible, all the following criteria must be satisfied:

  1. Your application must be for businesses purposes
  2. You must be a UK based small or medium sized enterprise (SME) with annual turnover not exceeding £45m
  3. Your business must generate more than 50% of its turnover from trading
  4. Your CBILS-backed facility will be used primarily to support trading in the UK
  5.  Your borrowing request does not exceed £5m

Finance terms are up to six years for asset finance and term loans and up to three years for overdrafts and invoice finance facilities. 

How to access finance: In the first instance, you should approach your own finance provider; however, you should also consider approaching other lenders if you are unable to access the finance you need.

Demand for the CBILS is likely to be high, therefore HMRC recommends considering the urgency of your need.

It is also worth noting that decision-making is fully delegated to the accredited lenders and the CBILS guarantee is to the lender. As with any commercial transaction, the borrower is always 100% liable for repayment.

Statutory Residence Test (SRT)

For the purposes of day counting for SRT, HMRC considers that the circumstances are ‘exceptional’ if you: 

  • are quarantined or advised by a health professional to self-isolate in the UK as a result of the virus;
  • find yourself in a ‘lockdown’ situation as a result of the virus;
  • are unable to leave the UK due to the closure of international borders; or 
  • are asked by your employer to return to the UK temporarily as a result of the virus.

In Conclusion

Our focus here at NSN is on ensuring our clients can operate as normally as possible and have access to the latest information that is broadly relevant for them. If you have any issues currently impacting your business due to the Corona Virus that you think we might be able to help you with, please do not hesitate to contact us: 08000546200