UK coronavirus update – practical information for Businesses

During the last few days the government has issued several new initiatives to support businesses in the UK and we envisage they will continue to introduce more during the coming week. We have summarised below some of the key areas to date that will most likely affect you and provided links to the government information for you to see the details.

VAT

VAT payments due between 20 March 2020 and 30 June 2020 will be deferred, meaning businesses will not need to make these VAT payments at the normal time. Businesses will then have until the end of the 2020-21 tax year (assumed to mean the end of the company’s VAT year, in March, April or May 2021, although this is not clear from the announcement) to settle any liabilities that have accumulated during the deferral period.

The deferral applies automatically and businesses do not need to apply for it. VAT refunds and reclaims will be paid by the government as normal.

Income Tax payments

Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021. This is an automatic offer with no applications required. No penalties or interest for late payment will be charged in the deferral period.

HMRC Time to Pay

HMRC’s Time to Pay scheme can enable firms and individuals in temporary financial distress as a result of Covid-19 to delay payment of outstanding tax liabilities. HMRC’s dedicated Covid-19 helpline provides practical help and advice on 0800 0159 559.

HMRC are being very helpful during the current Covid-19 virus situation and one of our clients has shared their experience –

“It took a long time and a couple of attempts to get through, but it was a very straight forward process when the call was answered. There were no questions asked and I was immediately given a three-month deferral for both VAT and PAYE.  I was not required to submit any further information.”

The above followed discussions with our client and with their agreement to contact HMRC directly.

Coronavirus Job Retention Scheme

Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months and can include workers who were in employment on 28 February.

To claim under the scheme employers will need to:

• designate affected employees as ‘furloughed workers’ and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and

• submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required. Clarits can help with checking information and inputting into the new portal once it has been set up by HMRC.
• HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
• The employer may choose to fund the difference, but is not obliged to under the terms of the scheme.
• While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support may benefit from the VAT deferral announced above and may also be eligible to apply for a Coronavirus Business Interruption Loan.

Furloughed workers will not be able to do any work for the company during the period of furlough so, at present, this should be seen as an alternative to redundancies rather than as a subsidy for employment.

Further details and the other measures introduced can be found here.

We would urge you read the information before making key decisions regarding your business. For advice and help with any or all of these measures please get in-touch with your usual contact at Claritas Tax.

Iain Wright
Managing Director