As we start another, if not typical, working week we look at the announcements made by The Chancellor of the Exchequer on Friday afternoon to support individuals, employees and businesses.
The changes are fast-paced and updated and enhanced daily. The new measures provide more stability for businesses, both large and small, across the UK to ensure that jobs are retained by putting employees on temporary leave (‘furloughed workers’).
A summary of the changes announced are:
Salary payments – Covid-19 Job Retention Scheme
Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. All UK businesses are eligible for this no matter their size.
To enable access to the scheme, businesses will need to:
- designate affected employees as ‘furloughed workers’ and notify your 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.
- 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)
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.
Measures for the self-employed
Previously not eligible for payments if they are off work sick, the self-employed will now be able to access sickness benefit of £94.25 a week.
The Government will further support businesses by deferring Valued Added Tax (VAT) payments for three months. The deferral will apply from 20 March 2020 until 30 June 2020.
There are no applications required. Businesses will not need to make a VAT payment during this period (20 March 2020 to 30 June 2020) until the end of the 2020-21 tax year.
Further guidance will follow. All refunds will be paid as normal which is essential in the agriculture and housebuilding sectors.
For Income Tax Self-Assessment, payments due on 31 July 2020 will be deferred until 31 January 2021 and there will be no penalties or interest for late payment in the deferral period.
Support for businesses through the Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme (previously announced), delivered by the British Business Bank (in conjunction with partners), launches today to support primarily small and medium-sized businesses to access bank lending and overdrafts.
The Government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The Government will not charge businesses or banks for this guarantee and the Scheme will support loans of up to £5 million in value.
Businesses can access the first 12 months of that finance interest-free, as Government will cover the first 12 months of interest payments, which is an increase from the previously announced 6 months.
The full rules of the Scheme and the list of accredited lenders is available on the British Business Bank website. All the major banks will offer the Scheme once it has launched. There are 40 accredited providers in all.
You should talk to your bank or finance provider (not the British Business Bank) as soon as possible and discuss your business plan with them. This will help your finance provider to act quickly once the Scheme has launched. If you have an existing loan with monthly repayments, you may want to ask for a repayment holiday to help with cash flow.