Covid-19: Update from 27th March 2020
On Friday 27th March I watched a webinar hosted by the Federation for Small Business (FSB) and following this, spent a bit more time exploring the HMRC website.
Self Employed or Partnerships
If you submitted a tax return for the year 18/19 and intend to submit a tax return 20/21 they will look at your previous tax returns, take an average of the profit and give you 80% of this capped at £2,500.
There is no system set up for this as of yet but the FSB say HMRC will be in touch and it looks like a very simple process, i.e. tick this box if you have been affected and the money they have calculated will be sent.
The downside to this is that I heard the Chancellor say June, which means there is a while until these processes are put in place. Another worry is that dividends will not be taken into account.
50% of your self-assessment profit needs to come from proper self-employment. When thinking of partnerships, the view is that it will be based on the individual’s return, not the main partnership. Therefore, if the partnership’s profit is below £100,000 and it’s a 50% partnership one would be entitled to the grant. The grant given will be deemed taxable income.
Don’t worry, I haven’t forgotten about the 19/20 tax return! They are not taking these figures into account so you don’t have to file this quickly on April 6th 2020 but if this would have been your 1st tax return, I am sorry to say this taxable grant will not be offered to you.
Director for a small limited company
Good news for micro-businesses, the government have provided clarity to the FSB: so long as the Director was getting paid through PAYE, they can be furloughed and claim 80% back. Though under normal circumstances, a Director could not make themselves redundant or lay themselves off due to the duties of Directors, they have understood that these are unusual circumstances and have provided this support to accommodate.
Updated guidelines have been written and I shared this with you this morning. If you closed your doors and it was before being told of the Job Retention Scheme, they have said that you can claim as far back as the 1st March 2020.
If you were still employing people between 1st March and when you closed your doors you should pay them what you would have normally paid and then furlough them once the doors closed, you will not be able to claim for that period between 1st March and when you closed. I have also read on the HMRC website that the grant for furloughed staff will be paid into the business bank account so long as it is held within the UK.
This system is still not set up and may not be for another month and payments will not be made until May. Other than Directors you can’t have staff working for you if they are furloughed.
I understand that your business might have been affected by a downturn and that is why Grants for the local Authority and Coronavirus Business Interruption Loan Scheme (CBILS) have been set up.
What I have said above will lead to a lot of businesses having a serious cash-flow problem and I have already seen that some customers are not getting money in from some companies. The FSB said that there are over 40 banks offering CBILSs and other financial aid to businesses but though at the moment, this varies from bank to bank. We can only expect this to straighten out over time. They also iterated that there is no cap on CBILS and no time limits. The best advice given was; talk to your own bank first but take into account that some banks have not been helpful or are not offering CBILS just the products they already have. Some banks are asking for personal guarantees or very high-interest rates.
The FSB is taking this very seriously as this was not the government’s intention when these schemes were initiated. They also highlighted that personal guarantees will not be on people’s houses and they will be looking at possessions and other assets. Think before you take on a loan, yes it will be great for immediate cash flow but will you be able to continue to pay after things return to normal?
Poor Payment Practice
The FSB has asked that we ALL take a serious look at how long we are taking to pay people. In the news, it has been said that the likes of Wetherspoons are refusing to pay their suppliers and laid off all their staff. On the other hand, Tesco (who are normally bad payers) and Morrisons have said they will be amending their payment terms, some down to immediate payments to help with the crisis. Please do have a look at invoice financing and Bad Debt Insurance for more information.
Should I claim this whilst I wait for grants and loans to come in?
This has to be a personal decision and some restrictions have been relaxed.
Would you need to pay it back if you received furloughed payments?
I believe you would need to pay it back but how this is worked out I do not know at this moment in time
If you have got to the bottom of this message and need clarification or have any questions, then do get in touch with me