COVID-19 update for small businesses
The Government has announced an extension to the grant scheme for the self-employed, if the business continues to be adversely affected by COVID after 14 July 2020. The grant which is worth 70% of the average trading profits for a 3 month period to a cap of £6,750. The grant can be claimed between 17 August - 19 October 2020.
Businesses which did not make a claim for the first grant are still able to claim for the second grant provided the business has been affected by COVID-19. Evidence of how the business was adversely affected must be retained.
The grant does not have to be repaid, but is subject to income tax and national insurance.
To make a claim the following conditions must also apply:
you traded during the tax year 2018/19 and filed a self-assessment tax return by 23 April 2020
you trading in the tax year 2019/20
you intend to continue to tax during 2020/21
your annual profits do not exceed £50,000 and make up at least 50% of your total income
Your eligibility for the grant is calculated based on trading profits over a 3 year average. If the business has not been trading for the full 3 years the calculation is adjusted for the period of trading.
There are a few circumstances which may affect your eligibility, however these are unlikely to apply to the majority of claimants. More information can be found on the GOV.UK website, if you think you may be affected.
Claims for the grant must be made by the taxpayer and not through your Agent or Accountant.
Other support for the self-employed
Taxpayers are able to defer payment of self-assessment income tax and VAT payments
the 2nd payment on account, due 31 July 2020 can be deferred until 31 January 2021. You do not need to make and election to defer and you do not need to wait until 31 January to make the payment (payment can also be made through instalments). If the payment is deferred until the end of January, the total payment due on 31 January will be the deferred payment, the first payment on account for 2021/22 and balancing payment arising in the tax year 2019/20. This could equate to more than 100% of your self assessment income tax liability for 2020/21.
the payment of VAT during the period 20 March - 30 June 2020 could be deferred until 31 March 2021. VAT registered businesses must pay VAT as normal after 30 June 2020.
Job retention scheme
From 1 July, employees can bring furlonged employees back to work for any amount of hours, while still being able to claim the grant for the hours not worked. Only employees who where eligible before 1 July are eligible for this extension. From 1 August employees will be asked to contribute to the scheme by paying the employers NI and pension contributions. The level of contribution will continue to fall each month until the scheme is wound up at the end of October 2020.
COVID business interruption loan
Small businesses can apply to participating lenders for loans up to £5m over a period of 3 or 6 years depending on the type of finance required. Government support is provided by underwriting 80% of the loan with the lender and paying all interest and fees in the first 12 months. The business need to demonstrate that it is a viable business if it wasn't for the pandemic and satisfy the lender that the loan is affordable. For loans over £30,000, the business will also need to confirm that it was not in financial difficulty as at 31 December 2019.
COVID bounce back loan
This scheme is designed to help small businesses access finance more quickly during the pandemic. Loans are available through participating lenders of up to 25% of turnover and between £2,000 - £50,000. Government support is provided by underwriting 100% of the loan and paying all interest and fees in the first 12 months. No repayments will be due during the first 12 months. Loans over 6 years are available under the scheme.
Retail, hospitality and leisure grant fund
Business with property with a rateable value between £15,000 and £51,000 or under maybe entitled to a one-off grant of up to £25,000 from their local council.
Additional support is available to Restaurants under the eat out to help out scheme, which allows a discount of 50% (up to £10 per diner) on food and soft drinks to be reclaimed from the Government. It applies to meals served on Monday - Wednesday until 31 August 2020.
Small business rate relief
Business with property with a rateable value under £15,000 maybe entitled to a one-off grant of up to £10,000 from their local council.
This is a brief introduction to the Governments support to small business in response to the pandemic. More information about individual schemes can be found on the GOV.UK website. If you would like further details on specific schemes, we would be happy to help.