Owner/employees of small limited companies will only be able to access minimal help from the Government’s COVID-19 support packages. Here we look at the key measures the Treasury has announced to shore up the nation’s finances.
Coronavirus Job Retention Scheme
The largest single COVID-19 support measure is aimed at employees, which make up around 90% of the UK’s workforce. It will pay a proportion of wages for those who are ‘furloughed’ (not working in any way); staff who would otherwise be made redundant as a result of the crisis. View the official news release here.
- The package is open to all businesses who pay their staff via PAYE.
- The support is limited to 80% of wages, up to a maximum of £2,500.
- HMRC will reimburse employers, who must still pay their employees’ wages. Employers can decide whether or not to make up the final 20% of salaries.
- The CJRS will last for three months, from 1st March 2020.
- The scheme will be up-and-running at some stage from the end of April; applications will be made via the HMRC portal.
Umbrella company contractors are paid via PAYE. We are awaiting guidance on whether or not they can benefit from the CJRS.
Self-Employed Income Support Scheme
The SEISS is aimed at those who work for themselves, but with some notable exceptions. It will provide a similar level of support as the CJRS in the form of a direct cash grant equal to 80% of profits, to a maximum of £2,500 per month.
- To qualify, your trading profit during the 2018/19 tax year must be under £50,000, or the average of the last 3 tax years must be under £50,000.
- During these periods, at least half of your income must have been derived from self-employment.
- The Chancellor has also provided Self Assessment late-filers with four more weeks to file their 2018/19 returns, so they can access the support package. Unfortunately, if you have never filed a tax return, you won’t be eligible.
- The direct cash grants will be paid in a single lump-sum installment covering March, April and May, and will start to be paid at the beginning of June.
- HMRC will reimburse
Importantly, limited company directors are excluded from this scheme. If you are a limited company director, you may still be eligible to claim up to 80% of your PAYE salary, via the CJRS.
Again, you will only be able to claim if you are ‘furloughed’, and not working at all. We are awaiting the final legislation to see if directors can still carry out a company’s statutory duties whilst furloughed.
Other measures which may benefit limited companies
VAT deferral – your business can defer its next payment (before the end of June 2020), although you must still submit your quarterly VAT return, as usual. If you pay your VAT liabilities by Direct Debit, this will still be automatically taken, unless you cancel the instruction.
Self-Assessment deferral – the second payment-on-account, due by the end of July 2020, does not need to be paid until January 31st, 2021. Again, this is merely an interest-free delay; you will still need to pay what you own but at a later date.
The Coronavirus Business Interruption Loan Scheme provides Government loans of up to £5m to eligible businesses. Over £330bn of Government-backed loans will be made available via traditional lenders, administered by the British Business Bank. The first 12 months of any type of loan will be interest-free.
If your business is affected by coronavirus, HMRC has extended its ‘time to pay’ arrangements, which suspend debt collection measures if you cannot afford to pay your tax. HMRC will waive its usual 3.5% annual interest fee during the crisis. Time to Pay arrangements are negotiated on an individual basis.
Other measures, announced by the Government over the past few weeks, include lenders to allow mortgage payment holidays of up to three months, and £20 billion of business rates support and grants.