13th May 2020
This article was last updated on 13 May at 17:25.
COVID-19 is clearly having a significant impact on many UK businesses, although it’s still unclear as to what the full impact will be over the coming months. Businesses are continually evaluating short-term and medium-term liquidity and to do this effectively, it is important to understand what your business can do and which government schemes are available to you. It is worth noting the difference between the schemes that will assist your cashflow and those that will only provide temporary cost savings. Preserving cashflow in the short-term is positive but be mindful that delayed payments will need to be made at some point in the future – and will not aid your regulatory capital resource position. Measures taken to reduce costs will have a permanent impact on your cashflow and capital adequacy as these amounts will not need to be paid down the line.
We have identified below which financial, tax and accounting measures may be relevant to your firm.
Deferring payment of taxes
HMRC has set up a dedicated COVID-19 helpline (0800 024 1222) to help those in need to discuss and agree a bespoke Time to Pay (TTP) arrangement. It is understood that HMRC’s approach is an open willingness to allow businesses to defer tax payments. What is key is communicating with HMRC prior to the tax due date and that the business remains compliant with all its tax filing deadlines. Early action on this is highly recommended. Current experience is that HMRC are taking a light touch on the information they require before agreeing to a payment plan. Further details are here.
We understand that the HMRC Coronavirus helpline can currently provide a PAYE deferral to June 2020, but they are not currently providing TTP arrangements. You can contact the Payment Support Service (0300 200 3835) Monday to Friday between 08:00 and 16:00 should you require a payment plan.
HMRC guidance and advice is ever evolving, but the key message is if you are unable to settle a tax liability on time, contact HMRC before the liability becomes due for payment. Falling to do so will result in penalties in addition to interest payments.
Self-assessment income tax payments
For the self-employed, self-assessment income tax payments due on 31 July 2020 are to be deferred until 31 January 2021. This means both the 31 July 2020 and 31 January 2021 payments become due on 31 January 2021. This is automatic with no application required. No interest will be charged during the deferral period. HMRC also updated its guidance (on 25 March) to make it clear that the deferral of self-assessment income tax payments applies to all self-assessment tax payers, not just the self-employed.
Other assistance for the self-employed is available, and we hope further measures will be announced in due course.
Quarterly payment regime for companies
As a result of the financial downturn many companies may have now overpaid their quarterly payments to date and may become eligible to request a repayment from HMRC – further details are here.
No business is required to pay VAT from 20 March 2020 to 30 June 2020. While this is an automatic offer with no applications required we recommend businesses cancel their direct debits to avoid HMRC ’accidentally’ taking VAT payments during this period. Since many financial services firms will be in a VAT repayment position, we advise that you continue to submit your return to the usual timetable in order to ensure timely VAT refunds.
This announcement and other VAT aspects relating to COVID-19 including bad debt relief and other VAT measures and considerations are here.
Cost savings, rebates and grants
Coronavirus Job Retention Scheme (CJRS)
The Government has introduced the CJRS to provide financial support so businesses (including public sector, charities and local authorities) can continue to pay salaries to those employees that would have otherwise been laid off or made redundant as a result of COVID-19. The scheme will remain open until 31 October 2020 (having been extended by four months as announced on 12 May).
Following the Government’s announcement on 15 April, employees that were employed and on a PAYE payroll on or before 19 March 2020 are eligible to qualify. This change extends the eligibility date from that originally announced of 28 February (thereby allowing thousands more employees to qualify). All UK businesses are eligible and HMRC will reimburse up to 80% of ’furloughed workers‘ wage costs, capped at £2,500 per month.
HMRC’s reimbursement system is now live and available here. Once claims are submitted, HMRC aims to pay the claim by BACS in to the employer’s bank account within six working days. The Government has announced that 5,000 HMRC staff will operate the scheme by manning phone lines (0800 024 1222) and webchat services (see here for access to HMRC’s webchat).
As part of the claim process under CJRS, employers must first calculate how much they can claim. HMRC have an online CJRS calculator which is here. The same page also includes various examples of working out the CJRS grant amount in a range of circumstances.
To access the CJRS the business must have enrolled for PAYE online. In addition to the businesses themselves, HMRC has confirmed that agents that are authorised to act on behalf of clients for PAYE matters, will also be able to make a claim, however file only agents, including Payroll Bureaus, will not be able to access the service due to data protection reasons. Our recommendation is that businesses who do not have an employer’s HMRC PAYE online account should register immediately as the enrolment process can take up to 10 days.
The CJRS also has employment law ramifications. This useful article by the House of Commons Library looks at how the scheme will fit within existing employment law. In addition to the monthly salary grant (lower of £2,500 or 80% of wage), the grant will also reimburse businesses for the related employer National Insurance and minimum auto-enrolment pension scheme contributions. This is a move that could save businesses an extra £300 a month for each furloughed worker. The ICAEW has also produced further useful guidance by tackling many frequently asked questions in relation to how the Job Retention Scheme applies to directors/founders of owner-managed companies. The link is here.
Extension to the Statutory Sick Pay (SSP) regime for SMEs
Temporary changes are being made to SSP regulations as part of the Government’s response to helping businesses during this period of disruption. Further details are here. HMRC’s online SSP calculator is available for employers to work out statutory sick pay for employees. See here.
HMRC have updated their guidance for employers in assessing an employee’s fitness to work for SSP purposes. The guidance now states ’if your employee has been self-isolating for more than 7 days because of COVID-19, they can obtain an isolation note from NHS 111 as proof of this if you require it’.
The ICAEW has released useful guidance on the COVID-19 measures introduced for SSP and how employers can recover SSP. The guidance is here.
Commercial and reporting considerations
Audit and financial reporting
As COVID-19 continues to spread with deepening effects on the economy and restrictions to daily life, entities with 2019 and early 2020 year ends must consider the effects on their activities and how these are reflected in their financial statements. The impacts must also be considered for the practicalities of the reporting and auditing process and planned for accordingly. Our initial thoughts on these effects and implications can be found here.
The ICAEW is monitoring the situation closely and collating resources as conditions unfold, which is available on their coronavirus hub. They have issued guidance on what COVID-19 means for going concern matters, additional disclosure and audit reports.
The FRC have also issued their own guidance. Read more here.
Statutory Residency Test
Has COVID-19 made you a UK resident?
HMRC have made some announcements relating to an individual’s tax residency status if they are unexpectedly required to remain in the UK due to the COVID-19 outbreak. Further details here.
Have you received your business rates grant? The Government has published data stating that as of 20 April nearly 50% of COVID-19 related business support has been paid out by Local Authorities (relating to 491,725 business properties). The announcement is here.
For further details on the changes to business rates, please see here.
Businesses that have cover for pandemics and government-ordered closure or unspecified notifiable disease and government-ordered closure should be covered. Insurance policies differ significantly, so businesses are encouraged to check the terms and conditions of their specific policy and contact their providers. Unfortunately, it is expected that most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemic. Further details here.
Making a will in times of social distancing
Many people in these difficult times will be considering making a will for the first time, or changing their existing will. It is important to remember that the signing requirements for a will are stringent, and if they are not followed the will may be invalid. For a will to be properly executed it must be signed in the presence of two independent witnesses. It is essential that any witness is not a beneficiary or the spouse of a beneficiary named in the will; if a beneficiary witnesses the will they will lose all entitlement under the will. Witnessing by videoconferencing is not permitted in England and Wales. Witnesses must be physically present and see you sign the will, this could however be through a window or from another room if you are in line of sight. It is recommended that if you need to rely on these measures, you should video the signing process so that it is clear formalities have been complied with. If you are in any doubt you should discuss your situation with your solicitor. The Law Society and other bodies are currently in discussion with the Ministry of Justice as to whether these requirements can be relaxed in the present situation. We will update you on any developments.
Commercial tenants – protection from eviction
The Government has announced that commercial tenants who cannot pay their rent because of COVID-19 will be protected from eviction if they are unable to pay rent. These measures will mean no business will automatically forfeit their lease and be forced out of their premises if they miss a payment up until 30 June. This measure has been included as Section 82 in the emergency Coronavirus Bill. Further information is here.
COVID-19 is a global crisis, and organisations need to access local knowledge from around the world to manage their operations. haysmacintyre is the south UK member of MSI Global Alliance, an association of independent but like-minded legal and accounting firms with over 260 member firms in more than 100 countries. MSI has established a dedicated COVID-19 webpage to share the articles of our fellow member firms, committed to helping international businesses navigate these uncertain times. The website is here. If you are interested in the COVID-19 measures introduced by a particular country and cannot find any details on the MSI dedicated page please email CV19@haysmacintyre.com.
Further details for COVID-19 related financial, tax and accounting measures
- Fraudulent activities – it has been widely reported that cases of fraud or fraudulent attempts have substantially increased during the crisis. Fraudsters are taking advantage of this emergency and change of working environment measures to defraud organisations. We set out here our fraud awareness and preventative measures that organisations need to consider during these uncertain times.
- Companies House filing deadlines – from 25 March 2020 corporates will be able to apply for a three month extension to filing their accounts. Further details here.
- Gender Pay Gap – deadlines for this year’s reporting (2019/2020) have now been suspended and there will be no expectation on employers to report their date. Further information is here.
- Mortgage payment holidays – additional financial support for business owners and the self-employed has come in the form of a three-month mortgage holiday for homeowners struggling to make repayments due to the effects of COVID-19. This also includes buy-to-let mortgages. While a number of lenders have already announced repayment holidays, the Government’s latest announcement means now all lenders will have to honour the three-month time frame. Anyone struggling with repayments is advised to contact their lender directly.
- IR35 changes – deferred until April 2021. Further details are here.
- Risk management – is a priority for all organisations to reduce immediate and long-term impact. COVID-19 is now on everyone’s risk mitigation strategies. Some emerging risks are difficult to foresee and the impact on organisations cannot be judged. Further details for key actions that require consideration in the current climate are here.
This is just a snapshot of the various initiatives available to businesses, and includes some of the most successful actions we have seen taken. Whilst these are undoubtedly challenging times, the one certainty to bear in mind is that this will pass, and with time we will resume business as usual.
If you have any queries regarding your Financial Services business or require any assistance, please do not hesitate to contact Melanie Pittas, your usual haysmacintyre contact or email CV19@haysmacintyre.com.