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Covid-19 Outbreak: Support For The UK’s Self-Employed & Limited Companies

Published on Tuesday 24 March 2020 in Van News

Covid-19 Outbreak: Support For The UK’s Self-Employed & Limited Companies

 

More than 5 million self-employed people make up 15% of the UK's workforce, either as sole traders or limited companies. A big chunk of that figure are van-driving tradespeople who account for many of our loyal customers. We understand that as the Covid-19 outbreak locks down areas of the UK & limits the ability of many people to work that it's a really hard & overwhelming time for everyone - that's why we have pulled together all of the information about the support available from the UK Government into one place.

After announcing its wage support scheme for UK businesses, the Government revealed a similar programme for the self-employed called the Self-employment Income Support Scheme (SISS). The scheme allows those self-employed people operating as sole traders or in a partnership to claim a taxable grant worth 80% of trading profits (up to a maximum of £2,500 per month) for the next 3 months.

This article takes a detailed look at the SISS scheme, the Coronavirus Job Retention Scheme (which provides salary support for employees & employers alike) & includes a rundown of the other schemes the UK's self-employed workers & limited companies can currently benefit from during the Covid-19 outbreak. It is broken into the following sections:

 

 

We will keep this page updated with the latest information - latest update 07/04/2020

 

 

 

SECTION A: Self-Employment Income Support Scheme (SISS)

If you're self-employed, a sole trader (or operating in a partnership), through SISS you can apply for & receive taxable grants worth up to 80% of your average monthly profits. The grants will start being paid from the beginning of June, are limited to £2,500 per month & up to 95% of the UK's self-employed are eligible to receive them.

If you are the director of a limited company who pays themselves a salary through PAYE, you may be eligible for financial support through the Coronavirus Job Retention Scheme (CJRS) covered in Section B.

 

Who Is Eligible For SISS?

There are 3 things that qualify you to benefit from this scheme. They are:

  • Your average annual trading profits are less than £50,000 - which means if your annual profits exceed £50,000 then you won't be eligible.

  • You earn more than half of your total income from self-employment - this needs to be visible in your 2018/19 tax return, or in the average of your last 3 tax returns from the 2016/17, 2017/18 & 2018/19 tax years.

  • You filed a tax return for the 2018/19 tax year - meaning you've been self-employed since before the 9th April 2019. You may have been due to file the 2018/19 tax return this year, but you've got until the 23rd April 2020 to do that & then you can apply for SISS. If you can't file a 2018/19 tax return you are not eligible for SISS & will not be able to claim the grants.

This means that if you're a company director who pays yourself a salary/dividends, you're not eligible for SISS. However, you may be eligible for financial support for CJRS (see Section B) if you're currently using a pay-as-you-earn scheme.

 

How To Apply For SISS

You don't need to. If you're eligible, you'll be contacted by the Government who will send you a form to fill out. Once that form has been submitted to HMRC, the Government will pay the grants into your bank account automatically.

If you think you're eligible but don't hear anything from the Government, get in touch with them when they start contacting other people in the same situation as you.

 

When Do The Monthly Grant Payments Begin?

The grant payments will start hitting bank accounts from early June to cover you for March, April & May.

 

How Much Money Per Month Will Be Given?

The grants are worth 80% of your profits with a limit of £2,500 per month - the calculations are based on your tax returns for the tax years 2016/17, 2017/18 & 2018/19.

If you started self-employed work after April 2018, HMRC will use the 2018/19 tax return, but if you've only got a few months of self-employment under your belt during that time this is what will be counted as your total profit for the year - HMRC will not pro-rata your grant based on monthly profits.

 

What If June Is Too Long To Wait?

The lack of payments until June is concerning for some self-employed people who might already be struggling. The Government is advising people eligible for SISS & already in need of support to try applying for a business interruption loan (see Section C) or universal credit until the grants start being paid (see Section G).

Don't forget, you could also use some of the money you may have set aside for your tax payments to cover any expenses you might have right now until the grants are paid in early June. This might make sense for some people because the July self-assessment tax payment can be deferred until January 2021, which is really handy (see Section D).

You can find out more about this scheme here.

 

I Am A Self-Employed Sole Director Of A Limited Company - What Support Is There For Me?

As covered in this section, if you are the sole director of your own limited company, you are not eligible for support through SISS. However, if you pay yourself a salary through your company's PAYE, you are eligible for support from the Government through CJRS (explained in Section B below).

You may also be eligible for several other schemes explained in this article. They include:

  • Coronavirus Business Interruption Loan (see Section C).

  • Deferred VAT & income tax payments (see Section D).

  • The Time To Pay Scheme (see Section E).

  • Taking a mortgage holiday (see Section F).

  • Claiming universal credit (see Section G).

 

 

SECTION B: Coronavirus Job Retention Scheme (CJRS)

If you're a UK employer - this includes directors of limited companies that pay themselves a salary through their business - the Coronavirus Job Retention Scheme (CJRS) is designed to help you remove the need to fire employees to save money during the Covid-19 outbreak. It will run for at least 3 months, starting in March. It may be extended if the lockdown continues.

Through CJRS, employers can claim for 80% of furloughed employees' (employees on leave due to the outbreak) usual monthly wages, limited to up to £2,500 a month, plus Employer National Insurance contributions & minimum automatic enrolment employer pension contributions for that wage.

If you are a director of a limited company who pays themselves a salary through PAYE, you are also eligible for financial support through CJRS for your own salary too.

 

Who Is Eligible For CJRS?

All UK employers that created a PAYE payroll scheme on 28 February 2020 are eligible. Any UK organisation with employees can apply for CJRS, including businesses, recruitment agencies, charities & public authorities.

HMRC has confirmed that everyone who is paid a salary by a company through PAYE can be furloughed & benefit from the job retention scheme.

The director of a limited company is therefore also allowed to claim 80% of their own PAYE salary payments too, but will not be able to work while doing so. However, dividends are not covered by CJRS or SISS (see Section A) & are not taken into account.

 

Which Employees Can Be Claimed For?

Any employee you try to claim for should have been on your PAYE payroll on 28 February 2020, & be one of the following employee types:

  • Full-time employees (including directors of limited companies who pay themselves a salary through their company's PAYE).

  • Part-time employees.

  • Employees on agency contracts.

  • Employees on flexible or zero-hour contracts.

A furloughed employee must not undertake work for or on behalf of the organisation. The employee must have been told in writing that they have been furloughed for a business to apply for CJRS.

07/04/2020 update: Anyone who left their job for any reason after 28 February 2020 can be re-hired by their old employer and included in the furlough scheme. Originally the guidance only referred to people who the employer had made redundant. Employers don't have to take anyone back on, but if they choose to, they can add them to the furlough scheme (obviously employee agreement to furlough will be needed but employers could make it clear that this will happen).

Salaried directors can be furloughed and may continue to carry out their statutory duties but cannot do any other work during furlough. Salaried members of LLPs and other office holders can be furloughed too.

Apprentices can be furloughed but all parties should consider whether a 'learning break' is more appropriate. They can carry on with the training but obviously this is likely to be restricted to online training now. They should get paid for the training and anything above the 80% cap cannot be claimed under the Scheme. End of 07/04/2020 update.

 

 

What Is Needed to Claim CJRS Support?

You'll need the following information to claim for CJRS:

  • Your ePAYE ref number.

  • Number of employees being furloughed.

  • The claim period's start & end date.

  • Amount claimed (based on the minimum length of furloughing of 3 weeks).

  • Your bank account number & sort code.

  • Your contact name & telephone number.

The Government website says: "You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim." So make sure you check your maths.

For more information on this scheme, head here.

 

 

SECTION C: Coronavirus Business Interruption Loan Scheme (CBILS)

If you're the owner of a UK-based SME, the Coronavirus Business Interruption Loan Scheme (CBILS) can provide loans of up to £5 million if your business is experiencing lost/deferred revenue & disruptions to your cash flow because of the Covid-19 outbreak.

 

Who Is Eligible For CBILS?

To be eligible for a loan through CBILS, your business must:

  • Be UK-based in its business activities with an annual turnover of no more than £45m.

  • Have a borrowing proposal which would normally be considered good for a loan by a lender (if Covid-19 hadn't come along) & would enable your business to trade out of this period of uncertainty.

  • Smaller businesses from any sector can apply for the full amount (except for banks, building societies, insurers & reinsurers [not insurance brokers], the public sector including state primary/secondary schools, employer, professional, religious/political membership organisations or trade unions).

Each lender will also have their own eligibility criteria – you can do a quick check here.

 

What Types Of Finance Are Available?

CBILS supports a wide range of business finance, but most providers are currently offering term loans, so that's what we're going to focus on. The amounts for term loans have been released as follows:

  • For a limited company: between £10k - £5 million.

  • For sole traders & partnerships: between £25,001 - £5 million.

 

How Does A CBILS Loan Work?

The scheme provides the lender with a government-backed partial guarantee (80%) against the outstanding facility balance - as the borrower, you will be 100% liable for the debt. The following terms will apply (your lender may have additional terms):

  • All interest & fees will be paid by the Government for 12 months with repayment terms starting at 3 months to 6 years for term loans.

  • The scheme can be used for unsecured lending of £250,000 & under.

  • If the lender can offer finance on normal commercial terms, without the need to make use of CBILS, they will do that instead.

 

If you use CBILS for all or part of your borrowing, the lender:

  • Might need a 100% personal guarantee, along with a debenture (long-term security) in the name of a limited company or LLP.

  • Will take a lending charge over any other allowable personal asset (e.g. investment property) or business asset (e.g. premises) even if they don't have lending values based on normal commercial terms.

  • Will NOT take a charge over your personal private residence in respect of the CBILS borrowing because this is not permitted under the scheme's rules.

 

How To Apply For A CBILS Loan

First, approach your own bank to find out what they're offering in the way of CBILS support. If you have access to a Relationship Manager, they can advise you on what is available.

Put together a personal income & expenditure form for directors/shareholders of the business - your bank might need this & your financial accounts for the last 3 years (if you're a sole trader or partnership).

Submit all required information to your bank (or any other lender you might choose).

What happens next will be determined by your bank or lender.

 

How Much Money Should A Business Request?

It's hard to say. Each business is different, but we've put together some questions to help you work out how much to apply for (if you decide a term loan is the best option for your business):

  • Can you anticipate how long your business will be affected?

  • What is your turnover within that time period?

  • What are your business costs within that time period?

  • How much do you need to keep business costs covered?

  • Are there any other routes for income by diversifying your business plan?

Normally, term loans are not required to be paid back for 6 months. For example, you might be anticipating not trading for the next 3 months, but the following 3 months you'll be able to build up enough capital to start repaying the loan.

For more information on this scheme head here.

 

 

SECTION D: Deferring VAT & Income Tax Self-Assessment Payments

If you're self-employed or the owner of a UK-based VAT-registered business, you'll be pleased to know that the Government is deferring VAT payments for 3 months. Also, if you're self-employed, income tax payments due in July 2020 under the Self-Assessment system will also be deferred to January 2021. For VAT, the deferral applies from 20th March 2020 until the 30th June 2020.

All UK businesses & self-employed workers are eligible for both schemes.

 

How To Access The VAT Scheme

Don't worry, this is an automatic offer with no applications required. Businesses will not need to make a VAT payment during this period. Taxpayers will be given until the end of the 2020 to 2021 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds & reclaims will be paid by the government as normal.

 

How To Access The Income Tax Scheme

Again, this is automatic & for Income Tax Self-Assessment, payments due on the 31st July 2020 will be deferred until the 31st January 2021.

Will there be any penalties to pay? No penalties or interest for late payment will be charged in the deferral period.

You can find out more about this scheme here.

 

 

SECTION E: Scaled-Up Time To Pay service

If you're the owner of a UK business or self-employed worker in financial difficulties due to outstanding tax payments as a result of Covid-19, HMRC has scaled up the Time to Pay service.

A Time to Pay Arrangement with HMRC is effectively a debt-repayment plan for outstanding taxes. Companies or individuals that have defaulted on payments of Corporation Tax, VAT & PAYE can ask HMRC for extra time to pay (this is where the name comes from). These repayment agreements usually set out that you will pay it back over a period of 6-12 months.

 

What Has Changed In The Time To Pay Scheme?

All businesses & self-employed people in financial difficulties & with outstanding tax liabilities, may now be eligible to receive support with their tax affairs. These arrangements are agreed on a case-by-case basis & tailored to individual circumstances.

 

Who Is Eligible For The Scaled-Up Time To Pay Scheme?

You are eligible if your business pays tax to the UK government and/or has outstanding tax liabilities.

 

How To Access The Time To Pay Scheme

If you have missed a tax payment or you might miss your next payment due to the Covid-19 outbreak, please call HMRC's dedicated helpline: 0800 0159 559. If you're worried about a future payment, please call nearer the time it's due.

You can find out more about this scheme here.

 

 

SECTION F: Mortgage Holidays

If you're a homeowner & struggling to keep up with your mortgage payments, the best advice is to speak to your bank because they've all agreed to offer help to customers by offering at least a 3-month mortgage holiday agreement if it's needed.

 

How Does The Mortgage Holiday Work?

Let's give you an example: if you have 20 years & 3 months of payments left, you'll be able to agree with your bank to not pay for 3 months & spread the cost over the next 20 years.

Our advice would be to talk to your bank to find out the terms of any mortgage holiday agreement before deciding it's the right thing to do.

 

Is My Bank Offering A Mortgage Holiday?

Following an agreement with the Government, all banks should be offering those struggling to make payments at least a 3-month break through signing a voluntary agreement with their banks.

Call your bank to find out what kind of support they can offer you in terms of a mortgage holiday. Here are the phone numbers of some of the biggest banks offering mortgage holidays (and other forms of support, including overdraft expansions) to their customers right now:

 

  • Royal Bank Of Scotland - 03453 030 344

  • NatWest - 03453 030 299

  • Barclays - contact details here

  • Santander - 08009 123 123

  • TSB - 03459 758 758

  • Virgin Money, Clydesdale Bank, Yorkshire Bank - contact details here

  • Metro Bank - 03450 808 500

  • Post Office (mortgages provided by Bank of Ireland UK) - support & contact details here

  • Co-operative Bank - 03457 212 212

  • First Direct - contact details here

 

 

SECTION G: Universal Credit

If you're a self-employed worker who needs help making ends meet during the outbreak, you can now claim universal credit at a similar rate to statutory sick pay. Universal credit will give you a safety net while you're waiting for any of the other schemes to process your application.

Please note, the more savings you have, the less universal credit you can claim & if you (and your partner) have savings of £16,000 plus, you won't be eligible for any universal credit at all.

 

How Much Universal Credit Can The Self-Employed Claim?

If you're single & at least 25 years old, you can claim a monthly allowance of up to £409.89 (both new & existing claims) - that's £4,918 per year. Before the outbreak the annual allowance was just £3,813.

You may get more or less than the standard allowance dependent on your earnings (or your partner's if you live with them), whether you've got children & other factors.

The Chancellor has also confirmed that he's scrapped what is known as the 'minimum income floor' - the amount used to work out benefit payments. Simply put, if you earn more than that minimum income floor you're entitled to less universal credit, if you earn less you won't be allowed anything extra.

Can Universal Credit Be Claimed If You Have Savings?

The more savings you have, the less universal credit you can claim. If you (and your partner) have over £16,000 in savings, you will not be able to claim any universal credit.

You can find out more about universal credit here.

 

 

SECTION H: Frequently Asked Questions

We've also seen a lot of questions being asked by our customers & online, so we've pulled a few of them together to answer here (as more questions come in, we will add them here):

 

Can I Claim Benefits For Taking Time Off To Look After My Kids?

If you're a sole trader or self-employed, you will not be able to claim any benefits for taking time off to look after your children, unless you're using a registered childcare provider.

Right now, you can only claim employment support allowance from the first day of sickness in the event that your whole household needs to either self-isolate or is ill.

 

Are Mobile Phone Companies Giving Customers Free Data & Calls?

Some companies are offering their customers extra data & free calls to help people stay in contact during the outbreak.

Sky Mobile is giving contract & SIM-only customers 10GB of extra data free through April & Virgin Mobile is offering "Pay Monthly" customers unlimited minutes to other mobile users & landlines with a 10GB data boost for a month too.

As a nice little bonus, Sky is also giving customers on its Sky Talk & landline packages free calls to all UK landlines from now until the end of April.

 

Will Life Insurance Cover Me For Covid-19?

Your life insurance policy should cover your for any claims you might have to make because of the Covid-19 infection. Life insurance policies are usually based on you declaring pre-existing conditions, but Covid-19 is new so any claim you make on an existing policy as a result of it will be fine.

If you're taking out a life insurance policy today or in the future, expect to be asked if you've tested positive for Covid-19 or had to self-isolate because there may be exclusions applied to future policies now Covid-19 is a known condition.

 

For more news and insights visit the Vanarama blog, or take a look at latest van leasing offers.

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