This is our third update, designed to provide you with continued clarity on what the latest Government announcements mean to business owners across the UK.
A summary of Friday’s updates from Mr Sunak’s announcement:
Coronavirus Business Interruption Loan Scheme
The interest free period on loan finance has now been extended to 12 months from 6 months. Applications open today (Monday 23rd March) and you should approach your own bank in the first instance about applying.
Employee Wages Grant
A brand new grant has been made available to support wages paid through PAYE in the UK. The key notes being:
- There will be a maximum grant of 80% per employee per month capped at £2,500 per month per employee
- Anyone earning £37,500 per year will be covered for up to 3 months but Mr Sunak did say he would extend this period if necessary
- The grant is administered by HMRC and available for employees being “furloughed” (temporary leave of absence), therefore workless but not jobless
- This includes all employers so charities, large, medium and small companies; basically anyone operating a PAYE scheme
- It’s expected businesses will need to prove that sales orders or customer activity dictate that the employee cannot work; further clarity is required on this point and we will keep you posted when we hear more
Our advice on this update
It’s important to understand your sales pipeline and expected sales activity to make the correct calls and at the right time. We are on hand to provide our clients with cashflow support to give the visibility needed and to understand their cash burn which will be key in being able to decide which employees are “furloughed”.
It’s unknown at this point what evidence HMRC will require to prove that a business can’t afford to maintain wages but the Government do trust HMRC to ensure the grants are given to those who legitimately need them.
In relation to offering Time to Pay arrangements, Mr Sunak went one step further by announcing the following:
- VAT liabilities due between now and the 30th June 2020 would be deferred
- The liability must be settled by the end of the financial year (5th April 2020)
- No impact is expected for those in VAT refund positions
Our advice on this update
Whether or not you are hit hard financially by the current situation, you will be given a VAT holiday.
This quarter’s VAT liability will still be due at the end of the financial year, meaning cash needs to either be kept aside or funding will be required.
Regardless of your situation, forward planning is crucial.
Self Employed Individuals
Mr Sunak announced that any self assessment payments would be deferred until 31 January 2021.
This means for those paying more than £1,000 of personal tax (non PAYE income) per year will not need to pay their payments on account which are due on 31st July 2020.
Our advice for those of you who are self-employed
The deferral of payments on account due on 31st July 2020 until 31st January 2021 will be welcomed by many.
However, similar to the VAT holiday, the tax liability is still due further down the line so forward planning is essential to ensure you budget for the eventual liability.
In summary, we are buoyed by the continued support of our Government and will be working with many businesses over the coming days and weeks to update cashflow forecasts and start to apply for the new support provided by the Government.
Stay safe and well
The Clear Vision Team