With things moving very quickly and news from different sources sometimes dis-jointed, I tried to organise it in some sensible intelligible form which will be helpful to you during these worrying times and at the same time tried to explain items (as far as possible) which are of concern and will effect majority of you, I tried to squeeze the whole article into one but soon realise it was too long, so I have decided to split the article into 3 separate articles i.e. those concerning Director / Shareholders, Self Employed, and finally Employers / Other issues, if you prefer to read the whole article in one email, it is also on our website., under Covid19 Tab.
In due course we will produce and streamline forms for loans and make them available those of you wishing to apply for Business Interruption Loans etc,
The Coronavirus Self-employed Income Support Scheme
Who can apply?
You can apply if you’re a self-employed individual or a member of a partnership and:
· have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19;
· traded in the tax year 2019-20;
· are trading when you apply, or would be except for COVID-19;
· intend to continue to trade in the tax year 2020-21; and
· have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must have been less than £50,000 and more than half of your income from self-employment. This is determined by at least one of the following conditions being true:
· having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income;
· having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
HMRC have confirmed that the self-employment income support scheme does NOT cover income from property only income from self-employment or partnership which was reported on their self-assessment form.
If you started trading between 6th April 2016 and 5th April 2019, HMRC will only use those years for which you filed a Self-Assessment tax return to make the calculation.
If you started self-employment after 5th April 2019 you are not eligible for this scheme.
How the grant will be calculated:
The grant will be based on 80% of the average profits from the tax years (where applicable):
· 2016 to 2017
· 2017 to 2018
· 2018 to 2019
To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
It will be up to a maximum of £2,500 per month for 3 months.
HMRC will pay the grant directly into your bank account, in one instalment.
How to apply:
HMRC will contact you directly if you are eligible for the scheme and invite you to apply online.
HMRC says Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
If you are late submitting your 2019 Self-Assessment tax return (due date for submission was 31st January 2020) you can still submit it by 23rd April 2020, for the figures to be included in the grant calculation. Get in touch with us if you are not a client at www.shaikhandcoaccountants.com.
· You can carry on working (if work is available), it is not a requirement of the Coronavirus Self-employed Income Support Scheme that you stop all work.
· HMRC have used the expression ‘average profits’ and ‘trading profits’ in the guidance. These expressions are not used on the Self-Assessment tax return form but almost certainly refers to ‘Net business profit for tax purposes. This figure is calculated after Capital Allowances for purchases of capital equipment.
· There is a requirement that to claim these reliefs, `business must have lost trading/partnership trading profits due to COVID-19. We think most businesses will be able to justify this, but there will be a few that possibly can’t.
Government backed loans up to £5million (business Interruption)
To support primarily COVID19 affected small and medium sized businesses
· No interest for first 12 months (government to pay interest for 12 months).
· Government to provide a guarantee of 80% on each loan without any charge.
· Loans up to £5 million.
· Provisions to provide further discretionary financial support to businesses.
· Borrower is liable to repay 100% of the loan.
It’s since been reported that some banks are inserting these clauses, which go against the aim of the scheme.
Please be vigilant –trading as a sole trader or a Partnership you are personally liable for the loan.
Grants (non-repayable) to retail, hospitality and leisure businesses who occupy ‘rateable’ properties operating from smaller premises and are based in England.
£25,000 Grant—for business with a rateable value over £15,000 and below £51,000. £10,000 Grant—for business eligible for Small Business Rate Relief (SBRR) or Rural Rate Relief, to help meet their ongoing business costs (business properties with rateable value up to £15,000).
You do not need to do anything. This grant will be administered by local authorities, who will write to you if you are eligible for this grant this is expected to start from 1st April 2020
These above are grants and not repayable.
Other Matters :
Time To Pay service Facility
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
You can call HMRC‟s dedicated helpline on 0800 0159 559 for help and advice.
For Income Tax (Self-Assessment)
Payments due on the 31st July 2020 will be deferred until the 31st January 2021.
This applies to all those that are self-employed. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.
You will still need to pay the amount in full before 31st January 2021
All UK business registered for VAT
Can defer VAT payments due between 20th March 2020 and 30th June 2020 until the end of tax year 2020-21, therefore, have until 31 March 2021 to pay any VAT deferred as a result of this. VAT refunds and reclaims will be paid by the government as normal.
You will be required to cancel any Direct Debit mandates you have with HMRC in order to take this option.
NOTE—VAT Returns are due as normal. Only payment is deferred. This is an automatic offer with no applications required.
Relaxation in planning regulations
Relaxation in planning regulations to allow pubs and restaurants to start providing takeaways without a planning application.
Self-employed people can now access full universal credit at a rate equivalent to statutory sick pay.
Businesses that have cover for both pandemics and government ordered closures should be covered. The government and insurance industry confirmed on 17th March 2020 that advice to avoid pubs, theatres, etc., is sufficient to make a claim as long as all other terms and conditions are met. It goes without saying, Insurance policies differ significantly, so businesses should check the terms and conditions of their specific policy and contact their providers directly.
· Mortgage borrowers can apply for a three-month payment holiday from their lender.
· Tenants can apply for a three-month payment holiday from their Landlord.
· Tenants cannot be evicted from their home over the next three months.
· Homeowners cannot have their home repossessed over the next three months.
Both residential and buy-to-let mortgages are eligible for the holiday.
Borrowers still owe the amounts that they do not pay as a result of the payment holiday and interest will continue to be charged on the amount they owe.
As we said earlier, some people slip through the net and will have to rely on Universal Credit and other benefits, or the Coronavirus business interruption loan scheme to stay afloat. This includes people who started as a sole trader after 5th April 2019 for example and we can think of quite a few clients who fall into this category.
There are no provisions for owners of holiday let properties that are losing out heavily through cancellations and the shutdown.
Please refer to further Bulletin 3 which will be following this and relates to Employee issues and other provisions in legislation.
We are here to help and support all our clients , we also have a Tab on Covid19 on our website where we have and will carry on putting useful guidance .
Stay safe and Healthy
Gulam M Shaikh