Coronavirus: Self-Employed and Furloughed Workers

 

This forth client bulletin concentrates on financial steps business should take now.

SELF-EMPLOYED SUPPORT ANNOUNCEMENT

Last night, Chancellor announced the “coronavirus (COVID-19) Self-employment Income Support Scheme“, which you can use if you are self-employed or a partner and you have lost income due to the impact of coronavirus.

Some of the details from the official HMRC announcement about this important new financial aid package are noted below. Please contact us if your need advice.

Who can apply?

You can claim a taxable grant worth 80% of your trading profits, up to a maximum of £2,500 per month, for the next 3 months (see detail below). The scheme may be extended depending on how the crisis evolves.

Your annual self-employed trading profits must also be less than £50,000.

How to apply?

You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online.

CORONAVIRUS JOB RETENTION SCHEME:  FURLOUGHED WORKERS – UPDATE

HMRC has just issued Guidance on the operation of this scheme. The Guidance is detailed and precise, but lengthy. In order that you get the correct facts, please read the HMRC Guidance:-

             https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

Some key points to highlight from the guidance are as follows:

• The HMRC refund application platform is NOT open for use. No date specified.
• Employers can to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
  NB  Until now, there has been uncertainty about the £2,500 cap. Would NI be added on top of £2,500, or not? That point is now clear.
• Types of employees that you can claim for, include: full-time employees; part-time employees; employees on agency contracts; employees on flexible or zero-hour contracts.
• The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
• Furloughed employees can not undertake work for or on behalf of the employer, but they can volunteer (e.g. charity etc).
  NB  Another point which previously caused confusion, but is now clear.
• Switching employees to “furloughed” status is covered by employment law, and requires changes to contracts of employment to be negotiated and put in place in most instances.
  NB  This should not meet any objections, but don’t ignore it.
• Wages of furloughed employees will be subject to Income Tax and National Insurance as usual.
• Employees will also pay automatic enrolment contributions on qualifying earnings.
• Employers will be liable to pay Employer National Insurance contributions on wages paid.
• Employers must also pay automatic enrolment contributions on qualifying earnings.
• Payments received under this scheme by a business must be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes.
  NB  This is an important point that has now been clarified.
  
• HMRC retain the right to retrospectively audit all claims.

 SOLVENCY OF YOUR BUSINESS

If you are concerned about the solvency of your business, contact us immediately. We can help you to prepare a financial statement, even if we have to estimate several possible outcomes given the uncertainty of the crisis.

Obtaining clarity on the accurate, up to date financial position of your business will provide more clarity on the most suitable next step. It is worth remembering that the unfortunate reality is many other businesses will be in the same position, and you don’t want to be at the end of the queue when it comes to negotiating with suppliers and bankers.

APPLYING FOR ADDITIONAL BUSINESS FINANCE:   UP-TO-DATE ACCOUNTS

Comments from local business owners are showing that Banks are still requiring up-to-date accounts and cash-flow forecasts for most forms of business finance, including the Coronavirus Business Interruption Loan Scheme. Speak to us as soon as you realise that you may need to apply and we can discuss preparation of the financial information.

NORMAL BOOKKEEPING, ACCOUNTS, TAX, and COMPANIES HOUSE

Don’t forget to send us your accounts and tax return information as soon as possible after your company year-end (or 5th April, for personal tax). This will enable us to advise you as early as possible of your tax liability, in order that you can effectively provide for that liability or get a Time To Pay arrangement in place, if necessary.