There have been a number of developments in financial support packages, including a completely new initiative for small business grants, announced over the weekend, and they are detailed below, along with some practical issues around the claims for Job Retention Scheme grants.
Self Employed Income Support Scheme (SEISS)
HMRC have issued further guidance this week on the way in which self-employed people are going to be able to claim the grant available under the SEISS, (this scheme has been described in full detail in previous bulletins). More details were promised once the Job Retention Scheme was off the ground and HMRC resources could be redeployed to developing the detail of the financial assistance for the self-employed, and this is the first stage of that process.
Information on who is eligible for the grants has already been well publicised, and most self-employed people will have a good idea of whether or not they qualify. They are now being given the chance to check whether HMRC agree with them! This can be done by accessing a web page at https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference where you will be invited to enter your self-assessment reference (UTR) and national insurance number, whereupon you will be informed of HMRC’s opinion of your eligibility.
If all is good and you are informed that you do qualify, you will be advised of the date when you will be able to make a claim (the dates will start at 13 May), and to add your contact details in advance of that date. To enter those details (which will be used by HMRC to keep you informed of progress with the claim) it will be necessary to enter your Government Gateway login and password and move on to a screen to input the contact details. If you do not have a login/password, you will be given the opportunity to create them so that you can move on with the process. You will need the login/password again on your appointed day (13 May at the earliest), when you will be able to re-enter the Government Gateway and claim the grant, advising the bank account details for its receipt, which should happen within 6 days after the claim. It is not clear how much information will be provided on how HMRC have calculated the amount of the grant, but hopefully this will be sufficient to enable people to check it to their records and appeal if they do not agree with it.
However……..if you think that you are eligible for a grant but the computer says “no”, you will be directed to a page where you will be able to ask HMRC to review your eligibility by means of email correspondence, whereby you will presumably be able to put your case based on the figures to hand. It would be advisable to revisit the eligibility rules and possibly seek expert advice before embarking on this process as HMRC’s opinion on the situation should have been based on information in the tax returns for the three years ended 5 April 2019.
To recap, the maximum grant will generally be based on 80% of the average profit for the 3 years ended 5 April 20019, up to a maximum of £2,500 per month. At the moment the grant will be paid for the three months ending 30 June 2020, and will be paid in a lump sum (maximum £7,500) which will have to be included in the business’ taxable profit. There are “wrinkles” in the rules to deal with unusual circumstances, and these can be found in the guidance (https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme), and in previous issues of these bulletins. Presumably because of the difficulties in checking compliance, it is not necessary for self-employed workers to cease activity (in contrast to furloughed workers under the Job Retention Scheme), but they will only have to confirm that their business has been negatively affected by the Coronavirus crisis.
Job Retention Scheme (JRS)
It is now two weeks since the system for claiming the JRS grants has been available, and we are now accumulating experience of making the claims. The following points are some of those that we think are useful to claimants:
- The calculator provided by HMRC is a very useful and user-friendly tool (in the writer’s humble opinion!). It should at least be used to check manually calculated claims as it will be invaluable evidence of accuracy in the event of an HMRC audit. Copies of the results of the online calculator should be retained for this purpose, along with a note of the calculator version number (it is under ongoing development to deal with more unusual situations). At present it will not calculate accurate figures for NICs and pensions where the 80% grant limit is topped up, so additional calculations are required in this situation.
- At the beginning of the 2020/21 tax year, the allowance for employers’ NIC is available to deduct from that NIC figure when making payment to HMRC. The first payment for 2020/21 is due to be made on 19 May. The allowance is £4,000 this year, and the JRS grant cannot be claimed for NICs to the extent that it is covered by that figure. The online calculator does not take this into account and it is therefore important that this adjustment is made manually to the grant claim.
- It is useful to show furlough payments separately on payslips from top-ups and payments for non-furlough periods, as this enables the grant claims to be more clearly calculated, assuming that they are prepared after the payslips have been produced.
- It is important to keep a record of all calculations in case of HMRC audit in future.
- The grant for NIC payments cannot be claimed for employees where NICs are not due – this is the case for staff under the age of 21, and for apprentices under age 25.
From this week it will be possible to make the second three-weekly claim and we would suggest that the above points are borne in mind when preparing them (and possibly for reviewing the first claim).
Bounce Back Loan Scheme (BBLS)
More detail on the availability of the new £50,000 maximum BBLS loans was published today, and the banks have established their application processes so that they can be started today.
As a recap, the loans are 100% guaranteed by the Government and can be for between £2,000 and £50,000, up to 25% of turnover (i.e. the business’ annual turnover must be at least £200,000 to obtain the maximum amount). The loans can have a term up to six years, and can be repaid at any time without penalty. No repayments will be required and no interest charged for the first 12 months, and no lending fees will be payable. The interest after the first 12 months will be 2.5%. No guarantees can be taken over a borrower’s (or shareholder/director’s) personal assets. To the extent that the loan amount qualifies under the scheme, a CBILS loan already granted can be converted to the BBLS scheme to enable the borrower to take advantage of the enhanced benefits of the BBLS.
It is necessary to apply through your bank’s website and they will start the application procedure by providing a “short” application form which can be approved “within days”. It is promised that the lending criteria will be based purely on the viability of the business before the onset of the Coronavirus crisis and will therefore be much easier for the banks to approve.
For those many small businesses that have drawn a blank in applications for a CBILS loan, this may well be the lifeline announced with some fanfare by Mr Sunak last week, although it must of course be grasped only with the understanding that it is a loan, not a grant, to the business, and the Government guarantee will only be applied in meeting the bank’s debt after the bank has exhausted all possible avenues for collecting the money from the borrower.
Top Up Grants
The Government announced a “Discretionary Fund for Small Business” (DFSB?) last Friday. This fund is designed to provide grants to businesses that did not qualify for the property based Small Business Grant Fund (SBGF), which is only available to businesses with a potential liability to business rates. Like the SBGF and the Retail, Hospitality and Leisure Grant Fund (RHLGF), the new scheme will be administered by local authorities who will be given discretion as to which businesses qualify based on their knowledge of the local marketplace. The Government have indicated 4 possible sectors which should qualify, which are:
- Businesses in shared spaces.
- Regular market traders.
- Small charities working from properties that would meet the criteria for Small Business Rates Relief.
- Bed and breakfast businesses that pay council tax rather than business rates.
However they have made it clear that local authorities should only use this list as a guide, and must make their own decisions based on the nature of businesses in their area.
The grants will be for up to £25,000 and will be available to businesses with less than 50 employees.
Local authorities will now be busy working out how to administer these grants, and we will need to keep a close eye on their websites to find out the details as to when and how claims can be made, as well as the eligibility criteria.
Author: Peter Hedgethorne, Director
(4 May 2020)