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The Chancellor, Rishi Sunak, has announced three important updates to the Job Retention Scheme.
Firstly, the concept of flexible furloughing has been brought forward by a month to 1st July 2020. This will enable businesses to bring furloughed employees back to work on a part-time basis.
It will be left for the individual business to determine the best approach for their circumstances but there are some considerations to bear in mind:
HMRC will publish further guidance on flexible furloughing and the details for employers to calculate claims on 12th June.
The Job Retention Scheme will close to new entrants from 30th June. Thereafter, employers will only be able to furlough employees have been furloughed for a full three-week period prior to 30th June.
As a result, 10th June is the final date by which an employer can furlough an employee for the first time.
Employers will have the deadline of 31st July to make any claims in respect of the period to 30th June.
From 1st July, there are three significant changes to how the scheme will operate:
The optionality will remain for the employer to make the claim ahead of an imminent payroll run, at the point payroll is run or after payroll has been run.
From August, to continue to use the Job Retention Scheme, the employer will start to share some of the costs.
This will be on a tapered monthly basis between August and October but, throughout the period, the employee must continue to receive the 80% of their normal salary capped at £2,500.00.
In August, the employer will be required to pay the Employer’s National Insurance and pension contributions. It is estimated that, for the average claim, this represents 5% of the total cost.
In September, in addition to the Employer’s National Insurance and pension contributions, the employer will be required to cover 10% of the pay. Overall, this will equate to roughly 14% of the total cost.
In October, the level of the pay element for the employer will increase to 20% making the inclusive percentage covered by the employer up to 23%.
Official figures estimate that in the region of 40% of employers are not making a claim for Employer’s National Insurance and pension contributions, so the financial impact of the change would be less severe.
Whilst the tapered approach is sensible as part of a strategy to re-energise the economy, it does beg the question of how many businesses will even this limited contribution be too much.
The Chancellor also announced that Self-Employment Income Support Scheme will be extended, and we will review the details in our next newsletter.
At CooperFaure, we are nearing the tenth week of switching to a remote working model with the team working from home since the office was closed in response to COVID-19 on 16th March . We know that that this is the case for millions of employees up and down the country.
There is a cost to working from home and, understandably, in many cases, employers are not in a position to cover these costs.
In response to this, last week HMRC updated the guidance in their Employment Income Manual to say that, from 6th April 2020, it will accept that employees who are required to work at home can claim a deduction of £6 per week or £26 per month to cover the additional costs of incidentals such as light, heat and water without having to support the claim with receipts. For previous tax years, the rate has been set at £4 a week or £18 a month.
Rishi Sunak is currently evaluating increasing the amount for the 2020-21 tax year to £50 per month in light of evidence that the average actual extra costs are in excess of the current allowance.
In addition, tax relief is available for the full cost of items that an employee has purchased to facilitate home working such as an office desk, chairs, filing cabinets, bookcases, stationery and printer ink along with the actual cost of business telephone calls.
HMRC will not accept claims for costs that are not exclusively for work purposes such as broadband, insurance and clothing costs.
In theory, there is the ability to claim tax relief on the full cost of substantial equipment that an employee has had to purchase such as a laptop or printer. However, HMRC may challenge whether the purchase is exclusively for work purposes and, if so, this would have to be evidenced.
It is important to emphasize that the tax relief is only available where there is no alternative to working from home, such as office closure due to COVID-19, rather than where an employee chooses to do so.
For employees not required to submit a personal tax return and with a total claim of under £2,500.00 in a tax year, you can start the application process here.
Assuming that you meet the eligibility questions, HMRC will direct you to create a Government Gateway User ID and password. This process takes roughly ten minutes and you will need your National Insurance number and either a recent payslip or P60 or a valid UK passport.
For those employees who are submitting personal tax returns, the claim will need to be included as part of the tax return process.
Employees who have a claim in excess of £2,500 in a tax year will need to register to submit personal tax return here.
Whilst we recognise that these are not huge sums, a standard rate taxpayer with £1,000 of expenses will get £200 of relief, these are an entitlement. As the Tesco’s tagline says ‘Every Little Helps’.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.
HMRC has announced that the application process for the Future Fund will go live from Wednesday 20th May initially until the end of September 2020.
The Future Fund is designed to provide government loans to UK-based companies ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
The key eligibility criteria for the business are that:
Before going into the details, it is important to flag that this scheme in underpinned by Convertible Loan Notes which enables the investor both to opt to have their loan repaid and to earn interest on their investment. As a result, the investment from private investors will be outside the scope of SEIS and EIS tax relief.
The rationale for making the Future Fund incompatible with SEIS and EIS is to ensure that the government support goes to businesses that have been scrutinised by professional investors rather than by a cohort of friends, family and crowdfunders. This higher level of scrutiny is hoped to ensure fewer failures.
In addition, it would require legislation to bring the scheme inside SEIS and EIS which would have further delayed the launch which is time critical.
However, research undertaken by British Business Bank and the UK Business Angels Association indicates that over 85% of angel investors use EIS and SEIS to support their investments.
The British Business Bank will be delivering the Future Fund and the link to the scheme overview is here.
The application process will be investor-led. This means an investor, or lead investor of a group of investors, applies in connection with an eligible company. However, businesses will be able to register their interest.
The Future Fund will match up to 100% of the private investment from a minimum amount of £125,000 to a maximum of £5 million.
There are some restrictions on how the funds can be used and they must not:
The loans will carry a minimum of non-compounding interest rate of 8% per annum. The level of interest can be higher if the business and private investors agree.
Unlike a standard bank loan, the interest is not payable on a monthly or annual basis. Rather, it will accrue until the loan converts at which point the loan and interest will either be repaid or convert in equity.
Under the scheme, the Convertible Loan Notes will mature after thirty-six months. The loan cannot be repaid early by the company except with the express agreement of the investors.
The Convertible Loan Note Agreement is predefined and cannot be negotiated. The template is available here.
A business needs to consider carefully whether the Future Fund is the right vehicle for them. The scheme has been primarily designed for businesses that rely on equity investment and are unable to access the Coronavirus Business Interruption Loan Scheme or Bounce Bank Loan Scheme as they are either pre-revenue or pre-profit.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.
HMRC has announced that the application process for the Self-Employment Income Support Scheme will go live from today.
The scheme is open to a self-employed individual or a member of a partnership who:
HMRC has given examples of ‘adversely affected by COVID-19’ to include those who:
If you meet these conditions, the final qualifying criteria are that your trading profits in a year must be no more than £50,000 and at least equal to your non-trading income.
The first step is to check whether HMRC believe that you are eligible for the scheme here. For this you will need your Self-Assessment Unique Taxpayer Reference number and your National Insurance number.
If this check confirms your eligibility, you will be given a date between 13th and 18th May from which you can apply.
You will need your personal Government Gateway User ID and password. Perversely, we as agents are not able to make the application on behalf of our clients through our online portal.
If you do not have these, there will be a fast-track process to set them up without the need for activation codes through the post.
It is vital that you ensure that your bank and contact details are up to date on this platform.
HMRC will first look at your 2018-19 Self-Assessment tax return in isolation but, if you are not eligible based on this tax return, they will then look 2016-17, 2017-18 and 2018-19 collectively.
HMRC have published worked examples on the calculation process here.
The application process will show how HMRC has calculated the grant that they believe you are due to receive. At this point, you can share the calculation with your agent for verification and the agent can seek a review of the calculation where appropriate.
Once your claim has been submitted, you will be notified immediately if your grant is approved and, if this is the case, the grant will be paid into your bank account within six working days.
It is important to remember that the grant itself is taxable income and, as such, it will need to be reported:
At this stage, the Self-Employment Income Support Scheme covers the period between April and June 2020 with a maximum grant of £7,500.00. However, with the news that the Job Retention Scheme has been extended to October, we expect further developments.
There are two glaring categories who will receive little or no financial support, those who started in Self-Employment after 6th April 2019 and those Company Directors whose earnings are predominantly paid in Dividends.
For the latter category, Rishi Sunak again highlighted in parliament the difficulty in distinguishing between the Dividends that are earned from those received as passive income from a share portfolio.
However, everyone who has a second payment on account for 2019-20 tax year due on 31st July can choose to delay that payment irrespective of the income source. No application is necessary for this and no penalties or interest will be charged in the deferral period.
The final payment for the 2019-20 tax year will be due by 31st January 2021 and we would strongly advise that your tax return be filed as soon as possible to crystallise the amount the due or, indeed, any potential rebate.
Over the weekend, the government announced that they had been in discussions with local authorities in England to provide additional support for certain small businesses previously outside the scope of the business grant funds scheme through a discretionary fund.
This will be via a 5% uplift to the £12.33 billion funding previously announced for the Small Business Grants Fund and the Retail, Hospitality and Leisure Grants Fund schemes with £617 million to be made available.
The government will confirm the exact amount allocated to each local authority during the course of this week.
This additional fund is targeted at small businesses with ongoing fixed property-related costs. The government is asking local authorities to prioritise:
However, local authorities have the discretion to make payments to other businesses based on local economic need.
The key criteria are that a business must be small with fewer than fifty employees and be able to demonstrate that they have seen a significant drop of income due to COVID-19 restriction measures.
There will be three levels of grant payments – the maximum will be £25,000, a second tier of £10,000 and local authorities will have option to make payments of any amount under £10,000.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.
The Bounce Back Loan Scheme goes live today and the British Business Bank have published more detailed guidance.
The main eligibility criteria for a business are:
The key terms for the scheme itself are as follows:
For those businesses looking to access there scheme, the first port of call should be your current bank so long as they are on the British Business Bank accredited lenders list here. All the main Hight Street banks are on this list.
However, you can apply to any lender on this list under the scheme.
We will continue to report any developments as they come through. In the meantime, please email support@cooperfaure.co.uk if you have any questions or would like any other information.