Good evening

Please find my latest update below as at 26^th March 2020

Assistance for the self employed

Further to our earlier update with the draft legislation, The Chancellor has just announced the following measures to support the self-employed:

Self-employed individuals will be able to claim a grant of up to the lower of:

• 80% of the average net monthly profits over the preceding 3 years
• or £2,500

Note:    The grant will be treated as a taxable income.

Eligibility:

The grant will be available to all self-employed individuals, who:

• have majority of their income earned through self-employment activities
• and have trading profit of up to £50,000
• and have filed their self-assessment tax return for 2018/19

To ensure individuals who are genuinely eligible do not miss out on this support:

• Individuals who have not yet filed their self-assessment tax return for 2018/19 (which was due by 31^st Jan 2020) are allowed to get it filed within the next 4 weeks.
• HMRC estimates that 95% of the self-employed will benefit from the scheme

• For people newly self-employed they will not be eligible for this scheme.

 

Mechanics:

This will not be immediate – the scheme will be operated for the first 3 months initially and will be live no later than the beginning of June, with payments likely to be backdated.

If eligible, HMRC will contact you directly and money will be paid directly into the individual’s bank account.

Unlike with the job retention scheme, self-employed individuals can continue to work as they receive support.

We will confirm further details as they are released.

 

Other areas:

 

Clients are starting to face very practical issues in trying to access the support that the various government policies are putting in place.

 

Business Interruption Loans

There are numerous reports that many of the banks – RBS and NatWest seem to be the exception – are proving difficult – and are assessing loans on strict commercial lines and while there is a Government Guarantee being provided to the banks for 80% of any loans the banks are seeking personal guarantees from directors in respect of the final 20%.

It does appear however, that during the last working day, such has been the public and media pressure in relation to this that many of the providers are starting to fall into a more responsible line.

Please bear in mind that there is only an interest free period for 12 months and it is reported that thereafter the banks are charging commercial rates of around 12%.

To give an example of the process, one client had received the following list of requirements from one of the major high street banks in support of a loan application:

 

• 3 years financial accounts and latest MI where this is available.
• Does the businesses 2019 trading performance demonstrate affordability of this and their existing debt?
• Does the client have up to date cash flows and what do these show?
• Are they based on existing trading levels or on assumptions?
• 6 months business and personal bank statements
• What, if any, security is being offered by the client?
• Details of how the figure requested has been arrived at, impact statement around COVID-19 e.g. is the business currently closed, wages to pay, ongoing expenses.
• What other options have been explored – Furlough, rate relief, time to pay arrangements etc.?
• When the pandemic is resolved, how long do they believe it will take them to start recovery? What challenges will they face? E.g. future loss of contracts/staff availability.
• What changes is the business making in the short to medium term to help drive business performance either back to pre-virus levels or beyond

 

This contrast with what is reported on banks public websites:

• We are continuing outreach from dedicated relationship directors who remain in close contact with clients and will continue to assist with individual challenges such as working capital, liquidity, supply chains, and FX, to provide the appropriate support
• We are providing responsible support to clients that have a funding requirement resulting from coronavirus
• We are ready to aid short term cash flow pressures with measures such as capital repayment holidays, temporary increases to overdrafts and extending existing trade facilities
• Talk to us about new, extended or amended lending facilities²
• We are holding client calls to discuss the economic impacts, what we are seeing now, what we expect to see in the FX and commodity markets, as well as the supply chain impact and options
• New extended or amended lending facilities will be subject to the banks existing risk appetite and credit criteria, including usual affordability considerations.

Please note that this scheme is not a giveaway but loans will be made in accordance with strict lending criteria

 

We are happy to assist with any application and provide any details that are required to support – there are some real traps here

 

 

The Job Retention Scheme –

 

Details as to how it will operate are slowly coming through it does appear that there will not be any immediate return of funds to employers.

The Chancellor has stated the Government will tonight publish detailed guidance on this previously announced scheme

However, a good current summary was today released by the Institute of Chartered Accountants as follows:

1. Furloughed members of staff must not work for the employer during the period of furlough.
2. Furlough is from 1 March 2020, so is to be backdated. It will last for at least 3 months and will be extended if necessary. Note that while the scheme is backdated to the beginning of March as it is intended to support all those employed then, a firm will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer. This will of course be subject to employment law in the usual way.
3. It is available to employees on the payroll at 28 February 2020.
4. All UK businesses are eligible, ‘any employer on the country, small or large, charitable or non-profit’ to use the Chancellor’s words.
5. The scheme pays a grant (not a loan) to the employer.
6. The grant will be paid to the employer through a new online system which is being built for this purpose.
7. The employer will pay the employee through payroll, using the Real Time Information (RTI) system as usual, as required by the employment contract. This contract may be renegotiated but that is a matter for employment law. So RTI system reporting of payroll will continue as normal.
8. Scheme will be administered by HMRC:
   Relevant employees must be designated as furloughed employees.
   • Employers will submit information to HMRC through a new online portal.
   • As this will take time to build, businesses should look to the Coronavirus Business Interruption Loan Scheme to support cash flow in the meantime. The narrative used in the information released so far says ‘if your employer cannot cover staff costs due to COVID-19 they may be able to access support…’. This is a conditional phrase which may relate to existing funds available to the employer. We do not yet know how these might be determined, nor whether there is a bar of some description.
9. Maximum grant will be calculated per employee and is the lower of:
   80% of ‘wages’. The notes published so far, use the phrase ‘wage for all employment costs up to a cap of £2,500 per month’. It is our understanding that this includes employers’ NIC and pension contributions. Wages will be determined by reference to a defined period (yet to be announced).
   • £2,500 per month.

 

HR Support –

 

Clients who have taken out our Professional Fees Insurance do have access to the Employment Law Helpline. While various schemes are being announced – employees still have the protection of the law and employers are bound by those laws and their employment contracts. If in doubt clients should take appropriate advice if they want to ensure they do not get claims from former employees.  If you need a reminder of these details then please let me know.

 

The Coronavirus Act 2020

 Last night the Government passed emergency legislation to address some of the emerging issues arising out of this crisis.

Many of you have been asking about paying rent.

For your commercial property, the Government has banned landlords from terminating leases for non-payment of rent until June. They could enforce in other ways but the provisions are designed to give tenants some breathing space.   You must consider whether you are update with previous rents.

Please note these provisions relate only to leases. If you have a licence of an office share this will not apply.

For residential leases the government has restricted evictions for the next three months.

For detailed advice about your property requirement please get in touch and we can connect you with property law experts.

Other Assistance

For employees – https://www.gov.uk/government/news/coronavirus-support-for-employees-benefit-claimants-and-businesses

 

For business – https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

 

General – https://www.moneyadviceservice.org.uk/en/articles/coronavirus-and-your-money

 

Do let us have any questions and do feel free to share any of the above information with colleagues, family and friends and we are happy to answer questions from them also as we work together in these difficult times.

Kind regards

Ben