29 May COVID19 Update

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‘Office lights will be turned on, windows thrown open, work clothes and school uniforms will be pulled out of the wardrobe, shops and factories will start to hum with activity’ were Rishi’s opening comments on Friday. As we enter this new phase we it won’t be quite as romantically put as this.

Looking over the announcements we’ve summarised these below, or if you’d prefer to watch the job retention video click here, and the self-employed income support scheme click here:

Job Retention Scheme – The Facts:

You will have heard the news of the flexible furlough scheme being introduced earlier than expected, and from the 1st July to help businesses and employees get back into work.

You will also have heard that the employers contribution will remain voluntary until September when 10% will be contributed by employers, and 20% in October.

Flexible furlough: So, what are the details:

  • You can apply for furlough for the normal hours that are not worked, so if your employee works usually 40 hours per week, and you bring them back for 10 hours you can claim the new flexible furlough grant for the remaining 30 hours.
  • To claim for the flexible furlough, you must have been previously furloughed employees.
  • A new flexible furlough arrangement must be signed and confirmation in writing.
  • Further guidance will be available on 12 June but we know that you will need to report what the employees usual hours are and the hours worked.
  • As expected, and in line with holidays, the employer will pay full pay as in line with their employment contract and employers will be responsible for the tax and NIC on those amounts

Closed to new entrants

  • Please note the scheme will close for new entrants on 30 June
  • From 30 June only employers who have been furloughed for a full three-week period prior to 30 June can be included going forward
  • You have until 31 July to make any claims in respect of the period to 30 June
  • From 1 July, the scheme will only be available to employees who have previously used the scheme
  • The number of employees an employer can claim for under the new furlough cannot exceed the maximum number under any previous claim
    • Say you have 10 staff and you furloughed 6 and retained 4, and you only ever claimed for 6 staff under the existing furlough. Under the new scheme, you cannot put all 10 on the new job retention scheme and put them all on restricted hours. You’ll be restricted to 6 that have previously been included on the old scheme
    • Looking at this further if you hadn’t applied a rota system and if had been the same 4 staff that had been retained, then you cannot then claim for them from the 1 July as they would have had to have a full 3 week period where they had been furloughed, to be eligible
    • Unless you originally put all 10 on furlough, then you will be limited to the maximum number you’d included on a furlough claim. Say March 6, April 6, May 4, June 2. In this scenario, 6 is the maximum number of employees that can be on the new furlough scheme.
  • The claim should be done at the point of the payroll is run, or after the payroll has been run.
  • The new scheme will be available to make claims from 1 July

Tapering relief away:

June, July will continue in the same way, with 80% met by the taxpayer (government), with a cap of £2,500. With Employers National Insurance and Pension being also met. Note, from July the new flexible scheme will mean you will have to pay employees for the hours they work.

August, 80% will still be met by the government, but employers national insurance and pension will be met by the employer.

September, 70% will be met by the government, employers will contribute 10% and also meet the employers national insurance and pension contributions. So the government will pay to the cap of £2,187.50 and employers will pay £312.50.

October, 60% will be met by the government, employers will contribute 20% and also meet the employers national insurance. So to the cap, £1,875 paid by the government, £625 by the employer).

You can still choose to top up.

  JUL AUG SEP OCT
Government Contribution        
Employers National Insurance & Pension Yes No No No
Wages 80% 80% 70% 60%
Up to £2,500 £2,500 £2,187.50 £1,875
Employer Contribution        
Employers National Insurance & Pension No Yes Yes Yes
Wages 10% 20%
Up to £312.50 £625
Employee receives 80% 80% 80% 80%

The Timeline:

So to summarise, the below summarises when things kick in and when you need to do things by:

  • June – Taxpayer will continue to support businesses and pay 80% of furloughed members of staff wages, the National Insurance and pension contributions
  • 10 June – if you want to place new employees on the scheme you will need to do so by this date
  • 12 June – further information released
  • 30 June – old furlough scheme closed, only employees who have been furloughed for a full three week period prior to 30 June can be included going forward
  • 1 July – flexible furlough available
  • July – support for 80% will continue,
  • 31 July – date to make a claim in respect of the period to 30 June
  • August – support for 80% will continue, but employers will meet the National insurance and employer pension contributions (which to quantify account for just 5% of total employment costs)
  • September – support will be reduced to 70% and employer will have to contribute 10%
  • October – this support will be reduced to 60% and employers will contribute 20%
  • The scheme will then close

Self Employed Income Support Scheme

This has also been extended, applications will be open in August for the second and final grant.

This grant will be paid in one instalment and will cover another three months’ worth of average monthly profits, capped this time at 70% of trading profits, to a maximum of £6,570.

So as a reminder you’re eligible for the self-employed income support scheme if:

  • You submitted a tax return for 2018/19 (note if it was late, under enquiry, or you made an adjustment then this will alter your claim)
  • You continued to trade in 2019/20 and intend to keep trading in 2020/21
  • You’re been adversely affected by COVID19 (remember keep your records to document your evidence)
  • Average trading profits of £50k or less and have to be more than 50% of your total income

Remember under this scheme, you don’t have to stop work, you can start a new trade, you can take up employment, volunteer or become a reservist in the armed forces.

As a reminder, the first grant was an amount of 80% of your average monthly trading profits, for 3 months, capped at £7,500 in total. Paid in one limp sum. Applications were open from 13 May (with tiered opening) and will close on 13 July 2020.

Rishi announced on Friday, a further taxable grant that will be issued as a final support for those that qualified for the SEIS originally.

It will be a grant of 70% of 3 months average profits, capped at £6,570 in total.

Its based on the same eligibility as above.

You don’t have to have claimed the first grant to be eligible, so say you were continuing to trade as usual, but now seeing a downturn.

Irrelevant if this is your first claim, or your second, you will need to confirm at the time of applying for this grant, that your business has been adversely affected.

Applications open in August, and more information available from 12 June 2020.

Generally, and if you haven’t made a claim yet and wanting to understanding a few facts:

  • The grant is taxable, but not VATable
  • Government guidelines originally given for how your business may have been affected by COVID19 include, being off sick, shielding, you may have caring responsibility, you may have had to scale down, temporarily shut, your supply chain may be restricted or closed, staff may be off, and you may have fewer or no customers.

Taxable profits are those profits after income, less allowable costs (stationery, travel, staff costs, general costs, purchases etc.) to get you to your profit, less tax allowances such as capital allowances (the allowance you get when you buy equipment, likely to be 100% of the cost of the asset in the first year if a van, printer etc) and this will be your trading profit.

HMRC will take the average of:

  • 2016/17
  • 2017/18
  • 2018/19

Add them all together and divide by three (or however many years were relevant to you).

This will need to be less than £50k, and more than half of your total income, so excluding other income such as employment income, pension, dividend income).

What other support is out there?

  • Discounted loans
  • Tax Cuts
  • Mortgage holidays
  • Enhanced welfare
  • Grants

Grants

Did you miss out on the Small Business Grant Fund, and the Retail, Hospitality and leisure Grant fund and do you have property related costs, and are a small business? Then these may be available to you. This discretionary top up grant as it is called, is there for those who missed out of these reliefs and targeted at those who are in shared business accommodation.

A link to Derby Councils application is here, but check out your local authority’s website for information on who can apply and how to apply, these differ from region to region.

 What other support is there for you?

For those who have worries about paying bills, getting food, mental health and feeling safe. I would suggest you take a look at the governments support tool here. This will provide you with links to Citizens Advice, Money Advice service, Mind, Childline and Shelter for example.

Any queries on any of this please do not hesitate to get in touch with us here at Vibrant, contact us on the website, drop us an email at hello@vibrantaccountancy.co.uk or give us a call. We love a chat.

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