Lock-down independence day 4th July 2020

The changes to lock-down announced by the Prime Minister last week are summarised below. Most are effective from 4th July 2020.

Pubs, restaurants and hairdressers will be able to reopen, providing they adhere to COVID Secure guidelines.

From the same date, two households will be able to meet up in any setting with social distancing measures. This will open up the possibility that people can now enjoy staycations in England with the reopening of accommodation sites.

In order to begin restoring the arts and cultural sector, some leisure facilities and tourist attractions may also reopen, if they can do so safely – this includes outdoor gyms and playgrounds, cinemas, museums, galleries, theme parks and arcades, as well as libraries, social clubs, places of worship and community centres.

Following a review, the Prime Minister has also set out that where it is not possible to stay two metres apart, guidance will allow people to keep a social distance of ‘one metre plus’.

What is one metre plus?

This means staying one metre apart, plus mitigations which reduce the risk of transmission.

The Prime Minister underlined that as we begin to reopen the economy, it’s important that we do not increase the risk of transmission which is why “close proximity” venues such as nightclubs, soft-play areas, indoor gyms, swimming pools, water parks, bowling alleys and spas will need to remain closed for now. The Government is continuing to work with these sectors to establish taskforces to help them to become COVID Secure and reopen as soon as possible.

While the infection rate continues to fall, the Prime Minister has been clear that the public must continue to follow social distancing guidelines to keep coronavirus under control. The Government will keep all measures under constant review and will not hesitate to apply the handbrake, or reverse measures, should the virus begin to run out of control.

These changes apply in England only.

Option to defer VAT payments ends this month

One of the government’s schemes to assist VAT registered businesses with their cashflow during the current COVID disruption was the deferral of VAT payments.

The VAT payments that could be deferred cover payments due between 20 March 2020 and 30 June 2020.

VAT traders that have taken advantage of this support will have likely deferred just one VAT payment.

The following terms and conditions of this deferral option are set out below:

  • You have a choice; you can pay the VAT that comes due or defer the payment.
  • HMRC have said that they will not charge interest or penalties on any VAT you do defer.
  • The deferral does not include payments for VAT MOSS or import VAT.
  • HMRC will continue to process repayments as usual.
  • You will need to plan to pay any VAT deferred in this way by 31 March 2021.

In all circumstances you must file all returns by the due date even if you defer payment

However, deferral does not mean cancellation and as we have reminded readers above any VAT deferred will need to be paid by 31 March 2021.

This means that you would have nine or more months to save for the VAT deferred.

Readers are advised to make sure that they plan accordingly, otherwise the apparent relief in being able to skip a VAT payment will return to haunt you next year.

This is not an ongoing offer. The deferral option ceases for any VAT payments due after 30 June 2020.

Readers who suffer significant set-backs during the current disruption have one further option. There is a formal “Time to Pay” arrangement that you may be able to use when the VAT becomes due and cash funds are restricted.

Leaving salaries or dividends in your company

Director/shareholders of small companies may be considering reducing their salaries and/or dividends during this uncertain period. Even if firms are managing to maintain profits or breakeven, prudence would suggest that until things improve we should do what ever we can to preserve cash reserves.

Many directors have taken the sensible option to minimise their salaries and take any balance as dividends. In this way, NIC costs can be kept to a minimum.

For those who are under the State Retirement Age there may also be a need to maintain salaries above the threshold that provides NIC credits towards a state retirement pension.

All directors that receive dividends from their company should probably aim to take a minimum dividend of £2,000 a year as this is tax-free.

If you are thinking of moving to a new house you may need to sustain your income (salary and dividends) at a realistic rate to qualify for a mortgage.

Does this mean you have no choice? That you will need to continue taking salary and dividends at pre-COVID levels even if all the cash is not required for private purposes?

Fortunately, there is a solution

HMRC will generally accept that payrolled salaries and dividends voted will be considered as taken by director/shareholders if credited to their loan accounts with the company.

 

These loans can then be repaid at a future date – when cashflow has eased – with no additional tax complications.

What about tax liabilities?

Director’s salaries will be subject to PAYE and therefore any income tax due should be deducted and paid by the company. The net salary is the figure that will be credited to your loan account.

Dividends are a different matter. Dividends form part of your annual self-assessment and any dividend taxes due will be payable personally by the director whether or not they actually draw the dividends from the company. Accordingly, advice should be taken to work out the amount of dividend taxes payable. The tax amount should then be withdrawn and saved to meet these future liabilities and the after tax amount transferred to the directors’ loan account with the company.

We can help

If you would like to consider your options regarding the withdrawal of salaries and or dividends from your company, please call.

New support for High Street retailers

The High Street Task Force has launched a range of support options for High Street traders in England. In a press release issued 12 June it was announced:

 

A package of support to help high streets to get back on their feet has been launched ahead of shops reopening from 15 June.

The High Streets Task Force will provide access to cutting-edge tools, training, information and advice for high streets across England as part of the government’s efforts to get shops back in business safely from 15 June.

This support is open to local councils and all organisations involved with high streets and will include free access to online training programmes, webinars, data and intelligence on topics including recovery planning and coordination, public space and place marketing.

The support will form one part of the Task Force’s 4-year programme which will focus on the long-term transformation of town and city centres and helping communities reimagine and revitalise their high streets.

The Task Force has also today confirmed Mark Robinson, co-founder of Ellandi and leading investor in regional town centres, has been appointed as the Chair of the Task Force Board.

The new Board will guide the work of the Task Force and act as a national voice for high streets, supporting them to transform town and city centres.

The announcement follows the opening of the government’s £50 million Reopening High Streets Safely Fund which will support local councils to safely reopen their high streets and other commercial areas.

You can register your interest in support for this initiative at https://www.highstreetstaskforce.org.uk/ 

Problems as we emerge from lock-down

The precautions taken by government to contain the COVID-19 outbreak, commonly known as lock-down, have created varying problem for UK businesses. As we ease our way out of lock-down many of us will have further issues to confront. This post considers some of those issues.

According to the Office for National Statistics, economic activity in the UK fell by 20.4% in April 2020. This is the largest drop in a single month since records began in 1997.

Which group do you fit into?

The way in which you can respond to efforts to re-open doors to business depends on how your firm continues to be affected by lock-down. There are three broad categories:

  1. You are unable to trade. COVID-19 restriction mean you cannot sell your goods and services. Pubs, restaurants and much of the leisure industries fall into this group. Typically, this has resulted in the furlough of all staff and a complete absence of sales.
  2. You have managed to stay open for business, but at a much reduced level of activity. Perhaps some staff have been furloughed, sales are much reduced, the business has struggled to avoid losses and depletion of cash reserves.
  3. You have experienced no drop in activity. It has been business as usual.

Very few businesses will be fortunate enough to be in the third category.

 

Group 1 – emerging from total lock-down

The major problem for this group is that lock-down will not disappear overnight. Restrictions are likely to be eased and slowly to avoid a second wave of infection. Social distancing will reduce a business owners’ ability to trade at pre-March 2020 levels. As this will limit the potential to re-establish sales it may be impossible to reinstate staff and breakeven. Businesses in this group may have to fund losses for some time and even with government support, may find it difficult to stay solvent.

Group 2 – emerging from a reduced trading position

In this group, businesses may have maintained some activity, but have possibly struggled to stay profitable. Cash reserves, even with grants received and cheap, government-backed loans, will likely be reducing. For these businesses, much will depend on demand for their goods and services

Group 3 – Business as usual

Those businesses that find themselves largely unaffected should count their blessings. However, any continuing downturn in demand, economic activity, will at some point have a large-scale dampening effect on demand as consumers reign in expenditure “just in case”.

What action should we be taking?

Now is not a good time to stick your head in the sand and hope all turns out well in the end.

Now is the time for constructive reflection and planning.

We would urge business readers, whichever group they fit into, to take a hard look at their forecasts and reshape them based on a gradual return to pre-COVID activity levels.

And Brexit, still bubbling along in the background, will need to feature in your considerations.

If you need help organising your thoughts to produce a road map to find your route out of lock-down, please call.

Ban on evictions extended by two months

Renters across England and Wales will receive greater protection after the government extended the suspension of new evictions until 23 August.

 

The Ministry of Housing published the following press release 5 June 2020:

Millions of renters across England and Wales will receive greater protection after the government extended the suspension of new evictions until 23 August.

The extension announced by the Housing Secretary today (5 June 2020) takes the moratorium on evictions to a total of five months to ensure that renters continue to have certainty and security.

Ministers are also working with the judiciary, legal representatives and the advice sector on arrangements, including new rules, which will mean that courts are better able to address the need for appropriate protection of all parties, including those shielding from coronavirus. This is to ensure that judges have all the information necessary to make just decisions and that the most vulnerable tenants can get the help they need.

Where tenants do experience financial difficulties as a result of the pandemic, the government is clear that landlords and tenants should work together and exhaust all possible options – such as flexible payment plans which take into account a tenant’s individual circumstances – to ensure cases only end up in court as an absolute last resort.

Over the coming weeks, the government is taking careful steps to ease lockdown measures, alongside decisive steps already taken to unlock the housing market so people can move if they need to – for example where they may need to move for work or for family reasons.

While the government is taking unprecedented action to protect tenants and landlords during these times, the ultimate ambition is to transition out of these measures at the end of August to allow the market to operate while ensuring people have appropriate access to justice.

The package of announcements on this topic include:

  • The introduction of emergency legislation so landlords will not be able to start proceedings to evict tenants for at least a 3 month period which will remain in place until at least September;
  • Extending mortgage payment holdings to include landlords whose tenants are experiencing financial difficulties due to the pandemic;
  • Supporting businesses to continue to pay their staff through the furlough scheme, as well as strengthening the welfare safety net with a nearly £7 billion boost to the welfare system and increasing Local Housing Allowance;
  • Delivering £180 million in Discretionary Housing Payments to councils across the country to support renters with housing costs in the private and social rented sectors;

 

· Guidance which helps landlords and tenants to work together to resolve issues at the earliest opportunity.Renters across England and Wales will receive greater protection after the government extended the suspension of new evictions until 23 August.

 

The Ministry of Housing published the following press release 5 June 2020:

Millions of renters across England and Wales will receive greater protection after the government extended the suspension of new evictions until 23 August.

The extension announced by the Housing Secretary today (5 June 2020) takes the moratorium on evictions to a total of five months to ensure that renters continue to have certainty and security.

Ministers are also working with the judiciary, legal representatives and the advice sector on arrangements, including new rules, which will mean that courts are better able to address the need for appropriate protection of all parties, including those shielding from coronavirus. This is to ensure that judges have all the information necessary to make just decisions and that the most vulnerable tenants can get the help they need.

Where tenants do experience financial difficulties as a result of the pandemic, the government is clear that landlords and tenants should work together and exhaust all possible options – such as flexible payment plans which take into account a tenant’s individual circumstances – to ensure cases only end up in court as an absolute last resort.

Over the coming weeks, the government is taking careful steps to ease lockdown measures, alongside decisive steps already taken to unlock the housing market so people can move if they need to – for example where they may need to move for work or for family reasons.

While the government is taking unprecedented action to protect tenants and landlords during these times, the ultimate ambition is to transition out of these measures at the end of August to allow the market to operate while ensuring people have appropriate access to justice.

The package of announcements on this topic include:

  • The introduction of emergency legislation so landlords will not be able to start proceedings to evict tenants for at least a 3 month period which will remain in place until at least September;
  • Extending mortgage payment holdings to include landlords whose tenants are experiencing financial difficulties due to the pandemic;
  • Supporting businesses to continue to pay their staff through the furlough scheme, as well as strengthening the welfare safety net with a nearly £7 billion boost to the welfare system and increasing Local Housing Allowance;
  • Delivering £180 million in Discretionary Housing Payments to councils across the country to support renters with housing costs in the private and social rented sectors;
  • Guidance which helps landlords and tenants to work together to resolve issues at the earliest opportunity.

Furlough scheme changes clarified

HMRC released more information on the up-coming changes to the furlough scheme (CJRS) last week. A summary of two of the issues are set out below.

Have you over-claimed?

If you have made an error when making a claim under the CJRS and as a result you have received too much money, you must pay this back to HMRC.

Somewhat belatedly, HMRC have updated the application system so you can tell them if you have over-claimed in a previous claim – when you apply you will be asked if you need to reduce the amount to take account of a previous error. Your new claim amount will be reduced to reflect this. You should then keep a record of this adjustment for six years.

If you have made an error in a CJRS claim and do not plan to submit further claims, HMRC are working on a process that will allow you to let them know about your error and pay back any amounts that you have over-claimed.

Further guidance on this topic will be issued at a later date.

Why the 10th June is an important date

The CJRS will close to any employee who has not been formally furloughed for three weeks by the 30th June 2020.

Effectively, this means that you must add employees by 10th June to qualify them for the CJRS. HMRC’s notes on this topic confirm:

So, if you intend to furlough an employee who hasn’t been furloughed before, you will need to agree that with them and start their period of furlough on or before 10 June – this is the last day on which someone who has never been furloughed before can start a period of furlough and qualify for the scheme – this ensures the minimum three-week period is complete by 30 J‌un‌e.

CJRS will close 31 October 2020

As we have previously reported, the furlough scheme will close – no further claims after this date – on 31 October 2020.

Of all the announcements on this scheme, this is one that demands our attention.

We suggest that you start planning your options regarding staffing levels sooner rather than later. If you need help preparing the required “what-if” analysis, please call.

October may seem to be a distant spot on your calendar, but ground-rush principals apply. Consider your options sooner rather than later.

Re-opening retail businesses from June 2020

A time-table has been announced for the re-opening of thousands of high street shops, department stores and shopping centres in England once they are COVID secure.

The Prime Minister’s announcement published 25 May 2020 says:

  • outdoor markets and car showrooms will be able to reopen from 1 June, as soon as they are able to meet the COVID-19 secure guidelines to protect shoppers and workers. As with garden centres, the risk of transmission of the virus is lower in these outdoor and more open spaces. Car showrooms often have significant outdoor space and it is generally easier to apply social distancing
  • all other non-essential retail including shops selling clothes, shoes, toys, all furniture stores, books, and electronics, tailors, auction houses, photography studios, and indoor markets, will be expected to be able to reopen from 15 June if the government’s 5 tests are met and they follow the COVID-19 secure guidelines, giving them 3 weeks to prepare

Shops like supermarkets and pharmacies have been trading responsibly throughout the pandemic. Building on this and in line with the government’s roadmap, reopening non-essential retail is the next step towards restoring people’s livelihoods, restarting the UK’s economy, and ensuring vital public services like the NHS continue to be funded.

Businesses will only be able to open from these dates once they have completed a risk assessment, in consultation with trade union representatives or workers, and are confident they are managing the risks. They must have taken the necessary steps to become COVID-19 secure in line with the current Health and Safety legislation.

The government is taking action to help businesses re-open and protect their staff and customers, including:

  • publishing updated COVID-secure guidelines for people who work in or run shops, branches, and stores, after consultation with businesses, union leaders, Public Health England and the Health and Safety Executive
  • working with local authorities to continue to carry out spot checks and follow up on concerns by members of the public

The updated guidance considers the best practice demonstrated by the many retailers which have been allowed to remain open and have applied social distancing measures in store. Measures that shops should consider include:

  • placing a poster in their windows to demonstrate awareness of the guidance and commitment to safety measures
  • storing returned items for 72 hours before putting them back out on the shop floor
  • placing protective coverings on large items touched by the public such as beds or sofas
  • frequent cleaning of objects and surfaces that are touched regularly, including self-checkouts, trolleys, coffee machines and betting terminals, for example

The vast majority of businesses will want to do everything possible to protect their staff and customers, but tough powers are in place to enforce action if they do not, including fines and jail sentences of up to 2 years.

As per the roadmap, hairdressers, nail bars and beauty salons, and the hospitality sector, remain closed, because the risk of transmission in these environments is higher where long periods of person to person contact is required.

Self-employed grants claim process now open

Since 13 May 2020, it has been possible to use online processes, accessed via the gov.uk website, to:

  • Clarify if you are eligible to apply for the Self-Employed Income Support Scheme, and
  • Lodge your claim. Payment should usually be in your bank account within 6 days.

Are you eligible?

By entering your unique tax reference number and National Insurance number you will be advised if you are eligible to make a claim and when you should do this. The link to this facility is on page https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

However, there have been comments in the press that HMRC has had problems with the complex calculations involved in making this decision. If you were expecting to receive a payment under this scheme and are advised that none is available, you should challenge the outcome with HMRC.

Register your claim

If a claim is eligible you will be directed to register your claim by using your personal Government Gateway ID and password.

You will also need:

  • UK bank details (only provide bank account details where a Bacs payment can be accepted) including:
  • bank account number
  • sort code
  • name on the account
  • your address linked to your bank account

Finally, you will be asked to confirm that your business has been adversely affected by coronavirus.

Note: claims for the first quarter to 31 May 2020 will close 13 July 2020

SEISS extended for final three-month period

It was announced 29 May that the SEISS would be extended for a further three-month period to 31 August 2020. Applications for this period will be opened late August 2020. The amount that can be claimed for June-August 2020 will be limited to 70% of eligible earnings capped at a maximum grant of £6,570.

Calculating holiday pay for workers without fixed hours

Government guidelines on this topic advise:

The amount of pay that a worker receives for the holiday they take depends on the number of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work and working.

A worker continues to accrue holiday entitlement while they are on sick leave, maternity leave, parental leave, adoption leave and other types of statutory leave. A worker may request holiday at the same time they are on sick leave.

The majority of the UK’s workforce are full-time workers on fixed hours and fixed pay. For these workers, typically on a fixed monthly salary, if they take a week’s holiday, they will receive the same pay at the end of the month as they normally receive.

The situation becomes more complicated when a worker does not work fixed or regular hours and so does not receive the same amount of pay each week, month or other pay period.

In these circumstances an employer should normally look back at a worker’s previous 52 paid weeks (known as the holiday pay reference period) to calculate what that worker should be paid for a week’s leave.

If a worker has not been in employment for long enough to build up 52 weeks’ worth of pay data, their employer should use the number of complete weeks of data they have. For example, if a worker has been with their employer for 26 complete weeks, that is what the employer should use.

If a worker takes leave before they have been in their job a complete week, then the employer has no data to use for the reference period. In this case the reference period is not used. Instead the employer should pay the worker an amount which fairly represents their pay for the length of time the worker is on leave. In working out what is fair, the employer should consider:

  • the worker’s pay for the job
  • the pay already received by the worker (if any)
  • what other workers doing a comparable role for the employer (or for other employers) are paid