FINANCIAL MEASURES FOR DIRECTOR / SHAREHOLDERS AND HIGH INCOME SOLE TRADERS
Rolling updates of the financial measures announced by the government to help director/ shareholders of UK micro businesses survive in these turbulent times
To help you understand all of the tax and financial measures announced by the government, we have created this Rolling COVID-19 Tracker which we will update daily as new measures and clarity on exiting measures are announced.
This page looks at the measures that have been announced that might relate to you if you the director / shareholder of your own business.
We have assumed that you don’t pay rates on a rented property. If you do, you will find rates related measures on our main COVID-19 tracker.
If you are in financial distress due to COVID-19 you can call the new HMRC COVID-19 helpline – Tel: 0800 024 1222
Bookmark this page and check back regularly.
Measures for Entrpreneurs
Whilst it may appear that director/shareholders have been ignored, but that’s not quite true. Whilst there is no direct benefit or grant to replace the profit of a sole trader who makes more than £50k a year or a director/shareholder who earns their income from a combination of low directors pay and high dividend. There are many initiatives that are there to help us.
On 19 March 2020 the Bank of England cut interest rates to a historic low of 0.1%, having previously reduced them to 0.25% on the day of the Spring Budget.
All UK mortgage holders can apply for a 3 month mortgage holiday IF they are adversely affected by COVID-19.
Call your mortgage provider and ask for the holiday if you believe you are going to be adversely impacted.
Many lenders have texted their customers and asked that they don't call them, but apply online.
After the 3 month payment holiday, you will see a small uplift in your monthly repayment as the unpaid repayment is added to the remaining balance of your loan.
Updates from 31st October 2020
For mortgage holders who have been adversely affected COVID-19 - mortgage payment holidays have been extended from 3 months to 6 months. If you have already taken a 3 month holiday you can extend it to 6.
If you have not taken a mortgage payment holiday yet, you can apply for one now and until the 31st January 2021.
Interest continues to accrue but your credit rating will not be adversely affected.
Time To Pay Arrangements
Generous time to pay arrangements on current tax arrears
Do call HMRC, but expect to sit on hold, they have a huge rise in calls and a lot off staff off or self isolating. Be patient!
Companies House Filing Deadlines
3 month filing extension for company accounts announced by HMRC for those who might struggle to meet their filing deadline due to COVID-19.
- As part of the agreed measures, while companies will still have to apply for the 3-month extension to be granted, those citing issues around COVID-19 will be automatically and immediately granted an extension.
- Applications can be made through a fast-tracked online system which will take just 15 minutes to complete.
- The application must be made before the original filing date has passed.
Income Tax - Deferred
A simple way of getting cash to the self-employed, is to defer taxes.
Rather than give money, HMRC have taken less money... for now.
Self-assessment income tax payments for the self-employed which were due on 31 July 2020 can now be deferred until 31 January 2021.
Deferral is automatic, you don't need to ask to defer.
If you have put that money aside, you can now use it to fund living expenses instead.
If you haven't put cash aside, it does at least give you more time to fund your 2021 bill.
Ringfence the money into a separate bank account and only spend it if you absolutely have to.
Updates 24 September 2020
Self-Service Time To Pay Scheme Announced
The Chancellor announced that taxpayers with up to £30,000 of Self-Assessment liabilities due on 31 January 2021, whether deferred from July 2020 or otherwise due by 31 January under self-assessment, could make payment in 12 monthly instalments under the time to pay arrangements.
This means the final payment would not be due until January 2022
Individuals will be able to log onto their personal government gateway and set up a time to pay arrangement without calling HMRC. the application will get automatic and immediate approval.
If their SA debts are over £30,000, or they need longer than 12 months to repay their debt in full, they will still be able to use our Time to Pay arrangement by calling HMRC.
Coronavirus Job Retention Scheme
The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by Coronavirus (COVID-19).
- Grants of up to £2,500 per employee where those employees are unable to work (are ‘furloughed’) because of coronavirus, covering 80% of salary costs.
- Intended to run for three months in the first instance with the first payments expected in early April and the scheme fully up and running by the end of that month.
- The grants will be paid via HMRC.
- All UK employers will be eligible.
- What next? At present, no information has been provided on how to apply. Though it is generally understood to mean ‘stood down but still employed’, there is as yet no official definition of ‘furloughed’. It is unclear whether employers will be expected to make up the remaining 20% of salary.
Updates from 27 March 2020
Full guidance has now been published setting out how businesses can claim through the coronavirus job retention scheme. Some key details are as follows:
- Only employers that created and started a PAYE payroll scheme on or before 28 February 2020 are eligible.
- The scheme covers full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts.
- Employees made redundant after 28 February 2020 but rehired by their employer can be furloughed.
- Employees hired after 28 February cannot be furloughed.
Furlough Director / Shareholder
It may be possible to furlough a director from their own company. There is some debate in this area – can a director be furloughed when they still have fiduciary duties to perform to look after the interests of the company, particularly through times of crisis. Is there any real benefit when a furloughed wage is likely to be between £530 and £830 a month depending on the directors’ salary. Surely the director is better focussed on the long game – keeping the business going, adapting the company to the changing environment, keeping in touch with customers and focusing on marketing?
Making a claim will be via portal (still in dev’t!)
To make a claim, employers will need to provide:
- ePAYE reference number
- number of employees being furloughed
- the claim period
- amount claimed
- bank account number and sort code
- contact name and number.
Q2 VAT Payments - Deferred
The fastest way to get cash into a small business is to defer the VAT payments.
VAT is still owed to HMRC, but not due until the end of the financial year.
Any VAT Deferred in the next 3 months, has to be repaid before 31 March 2021.
Cancel you VAT direct debit unless you do actually want to pay it! Not everyone needs to defer.
Defer if you must, move to a separate bank account and ringfence that cash.
Spend carefully and wisely.
Remember - it is still owed to HMRC.
Updates from 24 September 2020
Businesses who have deferred VAT to 31st March 2021, can now enter into an arrangement to pay the debt (interest free) over 12 months to March 2022.
Business who can pay their deferred VAT on time are expected to do so, but those who are unable to pay may opt-into the scheme to spread the repayments.
More information on how to opt in, will be issued closer to the time.
Coronavirus Small Business Interruption Loan Scheme
Business loan scheme backed by the government to help a small business through the crisis, no interest for the first 12 months
- Maximum turnover for eligible businesses was previously set at £41 million per year; it has now been increased to £45m.
- The interest-free period has been increased from six months to twelve.
- The scheme is being managed by the British Business Bank but businesses will access them via one of 40 accredited lending providers, including most major banks.
- Online introducers like Capitalise have access to some of the accredited lenders which might make it easier to find the support you need.
- The maximum value of a facility provided under the scheme will be £5 million – higher than the £1.2m announced initially.
- What next? Discuss business plans with existing lending providers. Loans available from Monday 23 March 2020.
Updates from 25 March 2020
The British Business Bank has published comprehensive details of how the coronavirus business interruption loan scheme (CBILS) can be accessed:
- Eligibility: an SME must be UK-based with annual turnover of no more than £45m and have a proposal which would be considered viable by the lender under normal circumstances.
- Types of finance available: Term loans, overdrafts, asset finance, invoice finance.
- How to apply: via one of the accredited lenders on this list. In the first instance, the British Business Bank is urging businesses to apply online and asking those who don’t need emergency finance to ‘consider the urgency of your need’. More detail is available here.
Updates from 03 April 2020
Only 1000 out of 130000 applications have been approved so far, and suggested changes have been outlined
BANKS HAVE BEEN CRITICISED FOR
- Pushing borrowers towards commercial lending, many with controversially high rates from some banks, some as high as 30%
- Requiring personal guarantees on government-backed loans which are £100,00 or higher
- No longer restricted to those who were refused credit in the past
- Interest rates aren't capped just yet, but this may be one to keep an ear to the ground for
- Personal guarantees will be banned for loans up to £250,000
In order to apply for a CBILS loan, most lenders will want:
- Last 3 years full accounts with detailed P&L
- Last 12 months business bank statements (Lloyds Bank usually need 6 months
personal as well)
- Up to date management accounts
- Aged debtor and creditor lists
- Confirmation of any outstanding debt (provider, term, repayment)
- Statement of personal assets, liabilities, income and expenditure from all Directors
- Home addresses of all directors/ shareholders
- Paragraph on how Covid-19 has affected the business and what the funds will
specifically be used for
- 12 month cash flow forecasts
The above requirements will vary from lender to lender. If you do not have everything listed here, a CBILS loan could still be an option to provide finance to support your business but might take longer to approve.
Note: For many customers approaching their existing lenders for a smaller facility, the process may be automated and therefore may not require the same level of documentation.
Access to Welfare For Low Income Individuals
The minimum income floor for access to universal credit has been suspended for low income individuals affected by the economic impact of coronavirus.
This support is available if needed for the lowest-income individuals and families affected by COVID-19, regardless of employment status.