Tax service

UPDATED: More support for businesses affected by COVID

The Government has announced new measures designed to help small businesses affected by the ongoing coronavirus crisis.

SEISS

The Self-Employment Income Support Scheme (SEISS) is made up of four taxable Government grants for self-employed individuals.

While the first two grants are closed, the third grant is now open for applications and you have until 29 January 2021 to apply.

  • It covers the period from 1 November 2020 to the end of January 2021 and it’s now open to apply. The deadline to apply is 29 January 2021. This is to ensure HMRC’s systems can cope with the volume of traffic – as the deadline for filing self-assessment income tax returns is 31 January 2021.
  • You can get as much as £7,500.This is made up of 80% of three months’ worth of average monthly trading profits capped at £2,500/mth. To calculate this HMRC looks at your tax returns from 2018/19, 2017/18 and 2016/17. This is exactly what the first grant was worth.

    NOTE: The max amount that you can claim has been upped THREE TIMES since SEISS 3 was first announced. At first, it was announced that it’d be worth £1,875 (20% of average profits), and then this was upped to a max of £3,750 (so 40% of average profits) and then increased to a max of £5,160 (55% of average profits), and finally to the current £7,500.

In September, the Chancellor announced an extension of the SEISS to provide support throughout the winter period, with two grants to cover the period until April. To be eligible for the grant extension self-employed individuals, including members of partnerships, must:

  • Have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants)
  • Declare that they intend to continue to trade and either:

-Are currently actively trading but are impacted by reduced demand due to coronavirus

-Were previously trading but are temporarily unable to do so due to coronavirus

Click here to find out more.

Universal credit

The government changed the welfare system so that self-employed people can now access Universal Credit in full.

You can apply for Universal Credit now – the minimum income floor has been suspended so the self-employed are able to claim

Working tax credits allowance will be increased by £1000

You can make a claim for Universal Credit while you wait for the self-employed grant or any loans, but any grant received will be treated as part of your self-employment income and may affect your amount of Universal Credit. You can take on part time paid work but, again, that will impact the amount of Universal Credit you receive. Any Universal Credit claims for earlier periods will not be affected.

Click here for more information.

Self-Isolation Support Grant

People on low incomes who need to self-isolate and are unable to work from home in areas with high incidence of COVID-19 will benefit from a new payment scheme.

Starting with a trial in Blackburn with Darwen, Pendle and Oldham to ensure the process works, eligible individuals who test positive with the virus will receive £130 for their 10-day period of self-isolation. Other members of their household, who have to self-isolate for 14 days, will be entitled to a payment of £182.

Scottish Self-Isolation Support Grant

Applications for the Self-Isolation Support Grant have opened for low income workers in Scotland who are asked to self-isolate and would lose income if they needed to isolate.

The £500 grant will help those who have been asked by Test and Protect to isolate, following testing positive for coronavirus (COVID-19) or having been in close contact with someone who has tested positive.

These payments are designed to help people self-isolate for the required period to stop the spread of the virus, but who would face financial hardship due to being asked to self-isolate and will be targeted at those in receipt of Universal Credit or legacy benefits who are employed or self-employed.

The Local Self-Isolation Assistance Service is also being introduced to support people needing to isolate. As well as being able to self-refer for support through the existing National Assistance Helpline, local authorities will now contact those being asked to self-isolate to offer help, advice and assistance including help to access essential food and medication or local support services.

The service will deliver an initial 30 minute call, followed up by two 10 minute calls during the period of self-isolation and will initially prioritise the most vulnerable individuals. This will ensure people are referred to the relevant services for support while maximising uptake of the Self-Isolation Support Grant for those who are eligible.

People can apply for the Grant by contacting their local authority.

People will be informed on how to apply for the Self-Isolation Support Grant after they have been contacted by Test and Protect and asked to self-isolate through a follow up call from their local authority. People may make an application of their own accord prior to the follow-up call from their local authority.  

Payments are available to eligible people who were told to self-isolate from 28 September onwards.

The Self-Isolation Support Grant does not cover people who are quarantining after returning to the UK from abroad, unless they have tested positive for coronavirus or have been told to stay at home and self-isolate by the Test and Protect Service. 

Click here for more information.

Other key developments

Self-assessment payments can be delayed further. Our DIA tax advisor is checking the detail on this but gives the following advice:

  • If you had a Payment on Account due for the Tax Year 2019/20 in July 2020, which you deferred under the previous extension given to January 2021, you are now entitled to defer this for a further period up to 31 January 2022.
  • In addition, if you have any balance of tax to pay for 2019/20, after taking into account the Payments on Account already made, you are also entitled to defer this until 31 January 2022.
  • So essentially, the next tax due will only hit in January 2022.
  • However, you should be diligent in putting money aside for the total tax due in January 2022, as some it may have accumulated to a substantial sum.

Longer period to pay back Bounce Back Loans 

The Government has also announced a new ‘Pay As You Grow’ scheme which will give those who’ve borrowed Bounce Back Loans more flexibility in how they repay. The time you have to apply for a new Bounce Back Loans has also been extended. Here are the key points:

  • New AND existing Bounce Back Loans can now be repaid over 10 years (previously it was six). The first year is interest-free and the rest at 2.5%.
  • You can now take payment holidays and interest-only repayment periods on Bounce Back Loans. Again, this applies to new and existing loans. 
  • The scheme has now been extended to 31 March 2021.

The Bounce Back Loan Scheme, launched in May 2020, was introduced to help smaller businesses impacted by coronavirus (COVID-19). It aims to assist businesses to borrow from £2,000 up to 25% of a business’ turnover (the maximum amount available is £50,000).

The Government will cover any interest payable in the first 12 months through a Business Interruption Payment to the lender, and lenders benefit from a 100% government-backed guarantee.

The government has set the interest rate for this loan at 2.5% per annum. No repayments are due during the first 12 months. Businesses remain 100% liable to repay the full loan amount, as well as interest, after the first year.

The scheme is delivered through a network of accredited lenders.

The scheme is open to most businesses, regardless of turnover, who meet the eligibility criteria and who were established on or before 1 March 2020. Borrowers are required to declare, amongst other things, that:

  • The business is engaged in trading or commercial activity in the UK at the date of the application, was carrying on business on 1 March 2020 and has been adversely affected by coronavirus (COVID-19).
  • The business (and any wider group of which it is part, defined by having a holding company at the top of their structure) is not already in the process of applying for or has not already received a Bounce Back Loan Scheme facility.
  • The business (and any wider group of which it is part, defined by having a holding company at the top of their structure) has not yet obtained a loan through either the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, or the Covid Corporate Financing Facility, unless that loan will be refinanced in full by the Bounce Back Loan Scheme facility.
  • That the business is a company or limited liability partnership incorporated or established in the UK, or tax resident in the UK.
  • The business is not a bank, building society, insurance company, public sector organisation, state-funded primary or secondary school, or an individual other than a sole trader or a partner acting on behalf of a partnership.
  • Whether or not the business was, on 31 December 2019, a “business in difficulty” and does not breach State aid restrictions under the Temporary Framework; and if it was a “business in difficulty” then it must confirm it does not breach de minimis State aid restrictions and will not be used to support export-related activities.
  • At the time of submitting their loan application, the business is neither in bankruptcy, liquidation or similar.
  • More than 50% of the income of the business (together with that of any member of any group of which it is a part) is derived from its trading activity. This confirmation is not required if the borrower is a charity or a further education college.
  • They will use the loan only to provide economic benefit to the business, and not for personal purposes. They have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.

Possible uses for such loans (which savvy members have asked us about) are to consolidate any existing business loans and other debt – such as car loans and credit cards at a cheaper and fixed rate of interest or to make purchases to help get your business back on the road, and hopefully grow, such as a new training car. At 2.5% the rate of interest is far lower than most lease deals or car loans. 

As Martin Lewis, Money Saving Expert, said on the launch of bounce back loans:

“There is nothing in the bounce back rules stopping you from using the loan to support your income (though it’s worth checking your own tax situation and corporate structure in case anything there limits it). However, as I know a positive ‘you can do this’ is better than a ‘there’s nothing saying you can’t’, we’ve got confirmation in writing from the Treasury.

“It has confirmed there are no strict rules on what these loans may be spent on, as long as it is under the banner of working capital or investment – i.e. things to keep the lights on, like debt service, bills, running costs and, crucially, wages. And more so, again, it has confirmed you can apply for this loan even if the only reason is to support your income.”

These loans are perhaps a better option for limited companies as well who have so far struggled to see what tangible financial support is available to them.

Click here for more information.

Business interruption loans

The Coronavirus Business Interruption Loan Scheme (CBILS) provides financial support to smaller businesses (SMEs) across the UK that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.

CBILS has been significantly expanded along with changes to the scheme’s features and eligibility criteria. The changes mean even more smaller businesses across the UK impacted by the coronavirus crisis can access the funding they need.

Importantly, access to the scheme has been opened up to those smaller businesses that would have previously met the requirements for a commercial facility but would not have been eligible for CBILS. Insufficient security is no longer a condition to access the scheme.

This significantly increases the number of businesses eligible for the scheme.

British Business Bank operates CBILS via its accredited lenders. There are over 40 of these lenders currently working to provide finance. They include high street banks.

A lender can provide up to £5 million in the form of:

  • Term loans
  • Overdrafts
  • Invoice finance
  • Asset finance

The scheme gives the lender a government-backed guarantee for the loan repayments to encourage more lending. The borrower remains fully liable for the debt.

On balance business interruption loans do not seem as workable for the smaller driving and riding school businesses. Bounce back loans appear to be more relevant for this type of business’s needs. If you have applied for a business interruption scheme loan, you can switch to a bounce back loan.

VAT deferral

Businesses can delay VAT payments under the ‘New Payment Scheme’. Rather than paying in full by March 2021, they will now be able to spread payments throughout the 2021-22 financial year.

Mortgage payment holiday

Homeowners who were struggling to pay their mortgage due to COVID-19 were originally given the option to apply to their bank for a three-month holiday on their mortgage payments. This was later expanded into a further three-month holiday, meaning that some homeowners were able to take advantage of six-months’ worth of holiday in total. The original deadline to apply for a holiday was 31 October 2020.

In response to the new coronavirus lockdown measures, the Government has announced an extension to this measure. This will be available to those who have not yet taken advantage of a full six-months’ worth of holiday.

Under the new proposals, the FCA states that:

  • If you have not yet taken a payment holiday, you will be eligible for two payment holidays of up to six-months in total
  • If you currently have an initial payment holiday, you will be eligible for another payment holiday of three months
  • If you have resumed repayments after an initial payment holiday, you will be eligible for another payment holiday of up to three months 

Homeowners have until 31 March 2021 to request an initial payment holiday. 

You won’t be eligible for a payment holiday if you’ve already had two payment holidays of up to six months in total, but you may ask for tailored support from your lender.

Click here for more information on payment holidays.

Click here to find out more about coronavirus financial support for your business.

More information available here.

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