Further to yesterday’s update, as expected, the Chancellor’s address to the nation yesterday concentrated on the self-employed.
Additionally, further guidance was released relating to some of the other previously announced measures that businesses.
Self-employed
After a mounting pressure, the government finally released its proposal to provide support to the self-employed.
The government’s initial published guidance can be found here.
The headline points of the announced scheme are:
- The scheme covers those who are self-employed or a partner/member of a partnership;
- The government will pay self-employed people 80% of their average monthly income over the last three years, up to £2,500 per month (consistent with the maximum amount available under the Job Retention Scheme for employees).
- This is open for the next three months but may be extended;
- The scheme is available to those that:
- have submitted their self-assessment tax return for the tax year 2018-19 (any 2018/19 tax return not yet filed needs to be filed before 23 April 2020 to be able to access the scheme);
traded in the current (2019/20) tax year; - are trading when they apply, or would be but for COVID-19;
- intend to continue to trade in the next (2020/21) tax year; and
- have lost trading/partnership trading profits due to COVID-19.
- have submitted their self-assessment tax return for the tax year 2018-19 (any 2018/19 tax return not yet filed needs to be filed before 23 April 2020 to be able to access the scheme);
- There is a profit-related ceiling for access to the scheme. To access the scheme the individual’s trading profits must be less than £50,000 and more than half of their income (presumably taxable income) must come from self-employment. This is determined by meeting either of the following:
- having trading profits/partnership trading profits in the 2018/19 tax year of less than £50,000, and these profits constitute more than half of your total taxable income
- having average trading profits in the 2016/17, 2017/18, and 2018/19 tax years of less than £50,000, and these profits constitute more than half of your average taxable income in the same period.
- The support will be in the form of a grant that will be paid by direct bank transfer in one instalment.
- Access is expected to be no later than the beginning of June. HMRC will contact eligible people with an online form.
Some of our broad, initial observations are:
- There will be a rush for some to file their late 2018/19 tax return;
- There appears to be no support for those that commenced self-employment in the current (2019/20) tax year;
- The June one-off payment looks very far away for many self-employed individuals; and
- The £50,000 ceiling appears too low.
Job Retention Scheme
Further guidance on the Job Retention Scheme has been released. It is vital that businesses wishing to take advantage of the scheme digest all of the available guidance and seek advice, where required.
The main guidance issued yesterday can be found here and here.
Some of the main points that we have picked out of the guidance are:
- The guidance states that “Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) 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” – which suggests the grant is for the relevant employee’s wage costs (fees, commission and bonuses are not to be included) plus class 1 NIC and pension contributions;
- The guidance reiterates that an employer can choose to top up an employee’s salary beyond the 80% grant, but must pay the employee the lower of 80% of their regular wage or £2,500 per month;
- For employees with variable pay, the guidance states that “If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
- the same month’s earning from the previous year;
- average monthly earnings from the 2019-20 tax year.
- If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.”
- For employees with variable pay, the guidance states that “If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
- To claim, the employer must have created and started a PAYE payroll scheme on or before 28 February 2020;
- Any UK organisation with employees can apply;
- Qualifying furloughed employees must have been on the PAYE payroll on 28 February 2020 and can be on any type of contract;
- Where an employee has been made redundant after 28 February 2020, the employer can re-employ the employee and place them on furlough instead and be able to claim the grant;
- Furloughed employees cannot undertake work- employees on reduced hours or reduced pay will not qualify as they continue to carry out work;
- Furloughed employees will need to be furloughed for a minimum of 3 weeks. Employees can be furloughed more than once – this suggests that there is flexibility to “dip in and out” of the scheme;
- The employee’s wage will continue to be subject to income tax, NIC etc;
- The guidance states – “To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication”. This is likely to be very prudent from an employment law perspective anyway, but this needs to be adhered to and appropriate records kept.
- “A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.”
There was (oddly) some information was lost in the guidance for the self-employed scheme (see above). At the end of this guidance it stated “If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme”.
Urgent – VAT Deferral – Cancel direct debits
Whilst the released guidance states that the VAT deferral is automatic, we have been advised that businesses wishing to take advantage of the deferral should cancel the relevant direct debit in sufficient time.
Action should be taken now!
HMRC coronavirus business helpline
HMRC has changed the dedicated phone number for the coronavirus helpline targeted at business and the self-employed to increase capacity.
The new number is 0800 024 1222.
We have a specific focus on maintaining effective communication with our clients, and all in Cornwall, getting information to you that will help you and your business in these uncertain times.
We are committed to attempting to disseminate information and advice as soon as more information is released from government.
We will provide further email updates, and update our website as and when further announcements are made and detail/guidance released.