Most of the developments yesterday were in relation to Mr Johnson’s announcement on Monday night, in relation to the restriction of public activity, but there has been plenty of behind the scenes work going on with a view to moving on with the existing financial support schemes and importantly,  to extending help to the self-employed.

Assistance to the Self-Employed

There have been no formal announcements on this matter, but a widely leaked document has revealed that Parliament has approved a Clause in the Coronavirus Bill headed up “Statutory self-employment pay”, under which the Government will be able to approve payments to the “self-employed and freelancers” representing 80% of their average annual profits for the last three years, up to a maximum of £2,917 per month. Mr Sunak was answering questions in the House of Commons this morning, many of which related to help for the self-employed, and he insisted that plans were being drawn up but that he could not divulge any details until they had been finalised.   This would take a number of days as the assessment of what is a fair amount to be paid is a very difficult task.

It is easy to see what the problems will be here as HMRC does not have the same type of detailed information on pay that it has for employees through their payroll schemes.  They will therefore have to rely on figures in tax returns, which currently have only been prepared up to 5 April 2019.   The draft Clause indicates that the period to be reviewed will be the three years to that date and, as is evident to anyone who is self-employed, that figure may well bear little resemblance to their current level of earnings on which they have based their current outgoings. Also,  some people may have only recently become self-employed and have not yet submitted a tax return.   And what about losses or large profit reductions owing to big capital spends? These are just some of the issues that will be exercising the minds of the policymakers at this moment.

A matter that still does not appear to have been included in this initiative is one with which readers of these bulletins will be very familiar – what is going to happen to director/shareholders who do not fall into either of the categories  “self-employed” or “freelancers”?   As yet there is no indication that any consideration is being given to these individuals who at the moment will not qualify for benefit either as employees or as self-employed.

Furlough

There have been no further announcements or guidelines on how the Job Retention Scheme will work. We recommend that you liaise with your payroll provider regarding the practical steps that they will need you to take to provide them with the information that they will require to run the March payroll (if this has not already been processed).  If you prepare your own payroll, you will need to keep an eye open for official guidance and we will provide updates whenever they become available.

Coronavirus Business Interruption Loan Scheme (CBILS)

The main banks have started to make details available to business customers of the types of finance that might be available to them, so if you think that this could be a viable option for you, you should check your bank’s website for details. Don’t forget that you may also be able to obtain an interest (and possibly capital)  repayment holiday if you have an existing loan, and you should approach your usual contact at the bank if appropriate. There are plenty of details of the CBILS on the British Business Bank website ( https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/ ).

Many businesses have raised the possibility of using the scheme to boost their cash flow by taking advantage of asset or invoice-based finance, which has traditionally been used by businesses to release the value of their trade debtor book. This type of finance can be covered by the CBILS, but not all lenders will be offering it. There is a list at this address – https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils/accredited-lenders/ and you can filter it to show which lenders can offer what type of finance and in which areas of the country. You will need to bear in mind, however,  that the value of trade debtors as security for a loan has in many cases been severely diminished by the effects of the crisis and this will clearly not assist in making a successful application. In addition, mainstream invoice financing is normally restricted to sales of goods rather than services as a result of the lower security offered by invoices for the latter.

Small Business Grant Fund (SBGF) and Retail, Hospitality and Leisure Grant Fund (RHLG)

The Government committed to providing guidance to local authorities on the grants to small businesses and those in the retail, hospitality and leisure sectors by 23 March, and they have kept to that promise with the rules being received by the councils last night. They have been working hard on this and many councils will have contacted people who have enquired about the scheme today.

As already signalled by the Government, there will be no need for businesses to contact the council to obtain the grants as the councils have been given the eligibility criteria and will be able to identify qualifying businesses from their database. The rules are as follows:

  • SBGF – this is the £10,000 grant and will be paid to all businesses which already qualify for Small Business Rate Relief (including tapered relief for rateable values between £12,000 and £15,000) or Rural Rates Relief. There will be one grant per qualifying property.
  •  RHLG – this is the grant for businesses in the retail, hospitality and leisure (RHL) sectors with properties with rateable values of less than £51,000 as at 11 March 2020. Properties with rateable values of up to £15,000 will qualify for a grant of £10,000 and properties with rateable values over £15,000 and less than £51,000 will qualify for the £25,000 grant. No grants will be payable for properties with rateable values of £51,000 or over. The definition of a property that falls within the RHL sectors is one which would have been eligible for a discount under the business rates Expanded Retail Discount Scheme,  had that scheme been in force for 11 March 2020.

As mentioned above, businesses which qualify for the grants will be contacted by their local authority without taking any further action. They will be asked for certain information about the business, including details of how they would like the grant(s) to be paid to them (i.e. BACS or cheque). If you think that you should qualify but don’t receive a communication to that effect then you should contact the business rates department. We are aware that Brighton and Hove City council are hoping to make some FAQs available on their website tomorrow, which will hopefully will cover many of these queries.

The date when the grants will be paid by the local authorities has not been announced, but hopefully this will be very soon as the Government is committed to funding all grants made by councils as long as it is satisfied that the eligibility criteria have been met. You should try to be patient as the councils are working hard to deliver this initiative as soon as possible.

VAT Deferment

Many people pay their Vat by direct debit, and it is not yet clear whether it will be necessary for businesses to cancel this arrangement if they wish to take advantage of the interest free deferral of upcoming Vat payments to March 31st 2021, or whether HMRC will do this on application. The next Vat payment due is for returns covering the quarter ended 29 February, which is payable on 7 April, or 10 April if paid by direct debit. You will still need to submit your return on time as usual, and you should make a note to ensure that you have taken the necessary action to stop the direct debit in good time, if applicable (and if you want to defer).

(24 March 2020)

Author: Peter Hedgethorne, Director