THE LATEST HELP - FOR THE SELF-EMPLOYED AS WELL AS THE EMPLOYED

Here’s the news you have all been waiting for – measures to support the self-employed during the coronavirus pandemic.

But is it all it’s cracked up to be?

We have taken a closer look at who is eligible and how to apply for help so you don’t have to.

We have also updated our advice for those who run businesses after further details of the Coronavirus Job Retention Scheme were revealed.

Let’s start with the self-employed.

What help is there?

Self-employed workers can now apply for a grant worth 80% of their average monthly profits to help them cope with the financial impact of coronavirus, following an announcement from the chancellor last night.

Just like the help available for furloughed employed staff, the money will be up to a maximum of £2,500 a month.

However, employed workers will receive their monthly and as soon as April while the self-employed will be paid in a single lump sum that will not begin to arrive until the start of June at the earliest.

Why is it taking so long?

Understandably, the government had faced criticism for failing to provide support for the self-employed in its earlier package of economic measures.

And here at KBL we are acutely aware – thanks to handling the accounts of so many sole traders and freelancers – just how many people were desperate for news of a relief package.

It’s therefore a little bittersweet to be told that yes, there is help available, but you won’t get your hands on anything for two and a half months.

I could almost hear the collective sigh when that wait was mentioned.

However, there is good reason for the wait – mainly because the Treasury are is going to find this administratively very difficult.

The reason they can move so much faster for employees on a payroll is that those payrolls interact every month with HMRC. The proof of earnings is readily available.

What’s more a firm will just continue making its normal payments to staff and then get money back from a Treasury.

With the self-employed measures, the government sending money out to people, which it doesn't do very often.

Think of it this way, if you have ever had a tax refund, it tends to come months later and in the form of a cheque.

With self-employment, the government is trying to organise payments to potentially millions of people - that's going to take some time.

Who is eligible?

Self-employed people will be able to apply for a grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month.

To be eligible, at least half your income needs to have come from self-employment as registered on the 2018-19 tax return filed in January - anyone who missed the filing deadline has four weeks from now to get it done and still qualify.

The scheme is open to those who earn under £50,000 a year - up to 3.8 million of the 5 million people registered as self-employed.

Unlike the employee scheme, the self-employed can continue to work as they receive support.

The money, backdated to March, will arrive directly into people's banks accounts from HMRC, but not until June.

The grants will be taxable and will need to be declared on tax returns by January 2022.

Who isn’t eligible?

Company owners who pay themselves a dividend are not covered and neither will you qualify if profits are over £50,000 p.a. on average for the three years.

The “trading profit” will be based on an average of your “trading profits” for the three tax years 2016/17, 2017/18 and 2018/19. 

You do not need to have traded in all 3three years but you MUST have traded in 2019/20 and continue to trade in 2020/21.

Sadly, the scheme does not cover people who only became self-employed very recently - the chancellor said they would have to look to the benefits system for support.

One further thing to be aware of - the chancellor said he can no longer justify, after things get back to normal, that self-employed people pay less tax than the employed. But that is a worry for another day.

What about the employed?

The Government has also set out more details around its job retention scheme – which a lot of you have been clamouring for.

The scheme is not live yet – its expected at the end of April when an online portal will be available to employers on the HMRC website that will allow them to claim 80% of the wages for furloughed staff up to £2,500 a month.

To qualify furloughed staff must have been on the payroll on February 28th, 2020. They can be full time or part time employees, employees on emergency contracts, employees on flexible or zero-hours contracts and those made redundant since February 28th.

Furloughed employees cannot work while furloughed but their wage is subject to usual income tax and other deductions.

Employees cannot be furloughed if they were hired after February 28th or are on sick leave or self-isolating (when Statutory Sick Pay is paid).

To claim you need:

·        An employee’s ePAYE reference number

·        The number of employees being furloughed

·        The claim period (start and end date)

·        Account claimed (per minimum length of furloughing of three weeks)

·        Your bank account number and sort code

·        Your name and phone number

Please note that it falls down to the employer to work out the amount they are claiming and the HMRC retain the right to retrospectively audit all aspects of the claim.

You should also be aware that you can submit one claim at least every three weeks and claims can be backdated only as far as March 1st.

HMRC will pay money via BACs transfer.

Once the Government ends the scheme, employees can decide whether employees can return to their duties. If not, it may be necessary to consider termination of employment.

There are further elements of this scheme which will need to be explored on a case by case basis – such as those with varying pay each month and those returning from parental leave.

Anything else I should be aware of?

Yes.

The Chancellor announced a VAT payments deferral on 20 March to support businesses with cashflow during the COVID-19 pandemic.

It means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June. Businesses have until 31 March 2021 to pay any VAT deferred as a result of this announcement.

You do not need to inform HMRC if they wish to defer payment - you simply opt in by not making VAT payments due in this period. So now is the time to cancel any direct debits if this is how you normally pay. 

Should you wish, you can continue to make payments as normal during the deferral period and whatever you choose to do, don’t forget that you must continue to submit VAT returns as normal.

We are here for you

As usual, we are here to answer questions and help you make the best of a very difficult situation. We will also strive to keep you informed as things change.

We have a list of clients wanting us to do all of the necessary paperwork they need to access the help they are entitled to.  To be added to that list, please e-mail us today and let us know.

HELP TO KEEP YOUR BUSINESS AFLOAT – AND HOW TO ACCESS IT

Every day seems to bring a new wave of information for us all to digest. But on Friday, the Chancellor unveiled a whole host of measures designed to protect businesses – and their employees.

Since then, the phone has been ringing off the hook – which is totally understandable.

Each and every one of you is trying to figure out what this means for you and how it will work in practice.

Here, I aim to lay out the detail behind the biggest of these benefits – and help you work out if you are eligible to apply for help.

Let’s start with the big one – the Coronavirus Job Retention Scheme.

Coronavirus Job Retention Scheme

What is it?

Well first of all it’s huge and will be something many of you will need in the coming months as you struggle to protect the future of your business and jobs for your staff.

In short, it means that the government will pay up to 80% of wages for workers' at risk of being laid off due to the coronavirus pandemic.

Eligibility

Any employer in the country will be able to apply. The scheme will be open for three months initially but will be extended if required.

How to access the scheme

You will need to:

·        designate affected employees as ‘furloughed workers,’ and notify your employees of this change

·        submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal

What happens next?

HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers.

What does it mean for the employee?

As an employer, you must discuss the Coronavirus Job Retention Scheme with any employee you aim to classify as a furloughed worker before you take any more steps.

For the employee this would mean that you are kept on your employer’s payroll, rather than being laid off.

You cannot undertake work for them while you are furloughed.

This will allow your employer to claim a grant of up to 80% of your wage for all employment costs, up to a cap of £2,500 per month.

Your employer could choose to fund the differences between this payment and your salary, but does not have to.

How we can help

If you make the decision to furlough any of your staff, we can help you navigate the online portal on the HMRC website and access the benefit.

Deferring VAT and Income Tax payments

What is it?

This is also a huge relief to many businesses we work with. The Government will support businesses by deferring Valued Added Tax (VAT) payments for three months.

If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be also deferred to January 2021.

For VAT, the deferral will apply from 20 March 2020 until 30 June 2020.

Eligibility

All UK businesses are eligible. If you are self-employed you are eligible for the deferred Income Tax payments.

How to access the scheme

This is an automatic offer with no applications required.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.

Self-employment measures

On Friday night – following the announcements - former Labour leader Ed Milliband tweeted: "This is a very welcome announcement for employed workers. I am afraid it appears inadequate for the millions of self-employed, gig economy workers."

IPSE, which represents self-employed workers, said the government had done "nowhere near enough".

Treasury minister Stephen Barclay said it would be "operationally" hard to protect self-employed incomes.

But he said the self-employed were being helped by measures such as the deferral of self-assessment tax requirements, payment holidays for mortgage payers and the strengthening of the welfare "safety net".

Sick pay is the main change here. The chancellor has announced that the “self-employed can now access in full universal credit at a rate equivalent to statutory sick pay for employees”.

The current statutory sick pay rate for employees is £94.25 per week of statutory sick pay for up to 28 weeks. The government announced last week that the money will be payable from day one instead of day four for affected individuals.

We are here for you

As always, we will do everything we can to help you maximise your income and manage your finances effectively – particularly through this very challenging and difficult time.

We continue to monitor the situation and will do our utmost to keep you abreast of changes as they occur.

As always, we you, your families and your colleagues good health. Stay safe.

HELPING YOUR BUSINESS SURVIVE THE HEALTH CRISIS

There is no escaping the fact that the coronavirus pandemic looks likely to create major challenges for businesses large and small, for the employed and self-employed and everyone from the company director to the entrepreneur.

Here at KBL Accounts, we pride ourselves on staying abreast of any changes to the financial landscape, so we can inform and advise our clients accordingly. This has been vital during this escalating health crisis as the situation changes minute to minute.

However, there are some answers we simply do not have for you… yet.

This is because details on who can benefit and how are still in discussion.

However, as professional accountants, we are at the forefront of managing, safeguarding and advising on the financial stability and integrity of the businesses we work for. So, we want to reassure you that we are closely monitoring this situation and we will keep you all informed if, and when, we think you need to act.

The highlights to date

There has been a raft of support measures offered to business and workers to protect against the economic emergency caused by the coronavirus.

These include £330bn in state-backed loans, £20bn in other aid, a business rates holiday and grants for retailers and pubs. Help for airlines is also being considered.

But what does this mean for you?

This will vastly depend on the sector you are in, the size of your business and your assets.

However, the highlights – and our immediate reaction to them - are:

LOANS

·        The government will make available £330bn of loans backed by the state to support businesses.

The idea behind the loans is to support businesses that need urgent access to cash, such as to pay landlords and suppliers.

Only firms able to demonstrate they were in sound financial heath before the virus struck will be eligible, while the terms will be comparable to what the firms could have received in the commercial bond markets prior to the crisis.

For smaller firms, the chancellor said he would expand the business interruption loan scheme – a plan announced at last week’s budget that will be delivered by the British Business Bank, the state-backed lender – to offer firms up to £5m of loans with no interest due for the first six months, up from a previous proposal of just £1.2m.

Our thoughts: At this stage, we would urge caution on taking any business loans but would urge all businesses to explore the grant schemes instead – whether they think they need them or not. Loans are likely to be low interest to begin with but that money will need to be clawed back somehow once this crisis is over – and this might include hefty interest rises.

CASH GRANTS

·        All small companies occupying business premises with a rateable value of between £15,000 and £51,000 will be eligible for grants worth £25,000.

Britain’s smallest 700,000 businesses – across all sectors of the economy – will also be eligible for cash grants of £10,000.

Our thoughts: Forget the loans at the moment and concentrate on the grants. In our opinion anyone eligible for a business grant should take one – whether they need it or not. Once the crisis is over, the economy will be in a bit of a mess. You may not need the help now but you might kick yourself later when the struggle doesn’t vanish alongside the virus and the grants are no longer on offer.

BUSINESS RATES

·        The taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms, in a dramatic escalation of a relief package announced during The Budget.

The original plan was for the rates holiday to apply only to small firms in the sector, although this was expanded to support to all companies in the industry. Even before the change, the plan would have covered almost half of all business premises in England. Now it will go much further.

Our thoughts: The measures are designed to protect some of Britain’s biggest employers, with at least 6m jobs across the retail and hospitality industries. It’s a brilliant idea and one all businesses in this sector will benefit from.

OTHER STEPS

Support for the food industry will be provided by relaxing regulations to allow pubs and restaurants to start providing takeaways without securing planning approval.

The chancellor has also confirmed that the government’s advice that the public should stay away from pubs, clubs and theatres is sufficient for companies to claim on their insurance if they had a pandemic clause.

Britain’s biggest mortgage lenders have agreed to support customers struggling to repay their home loans as a result of the coronavirus, with payment holidays of up to three months. There is now plans to protect renters for the same period of time.

In a hint of further steps to come, the government is now in talks with trade unions and business groups to develop “new forms of employment support to help protect people, jobs and incomes” – this could be in the form of enhanced sick pay or benefits which could be made more generous.

What about the self-employed?

Significant number of workers, particularly those in the gig economy  or on flexible contracts, are likely to see a big drop in income.

The chancellor has said that people ineligible for statutory sick pay (SSP), such as the self-employed, will be able to claim employment and support allowance (ESA) from the first day they are out of work, rather than the eighth day, as was previously the case. However, ESA is just £73.10 per week, or £57.90 for people aged under 25. That is not enough for most people to live on.

Zero-hours contract workers can claim SSP if they earn more than £118 per week. If they earn less, they may be able to claim unemployment benefits.

All of this is still being discussed.

We are here for you

As we have seen in the last few days, the situation is rapidly evolving.

We will strive to keep you abreast of all the changes – and how you or your business can ride through the storm as it unfolds.

As always, you are welcome to ask us questions on your business and personal finances and how these may be affected. However, we are currently being inundated with emails so please be patient with us. We will respond to each and every one of you but it may take us slightly longer than usual.

In the meantime, please stay safe.