The majority of the measures announced so far are designed to improve cashflow by the deferral of tax payments. For contractors, consultants and freelancers using limited companies, there is very little support in the form of grants or subsidies. This is unlikely to change.
Self-employment Income Support Scheme
The coronavirus self-employment income support scheme does not apply to contractors, consultants and freelancers who use a limited company.
“Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”HM Treasury
Coronavirus Job Retention Scheme
What is it: a grant for employees who can’t work due to coronavirus
Applies to: companies with employees, including one-person limited companies
The Coronavirus Job Retention Scheme is a grant to pay employees’ wages, and will be administered by HMRC. You will be reimbursed up to 80% of salaries (up to a cap of £2,500 per employee per month), the payments can be backdated to 1st March. As of 12/05/2020, the scheme will run until August in the current form (meaning if you claim, you cannot work), and will support part-time working from August to October.
The important aspect to note is that this is only available for your payroll / PAYE earnings: dividend income from your limited company is not covered by this or any other support scheme. This means, in many cases, only a small proportion of your total income will be supported by this grant.
In order to qualify, you must have had a PAYE scheme set up on 28th Feb 2020, and employees (including you if you want to claim for your earnings) must have been on your payroll on this date too.
Calculating your qualifying salary
There are very explicit rules covering how to calculate qualifying salaries to prevent abuse:
- If you pay yourself/your employees a consistent salary each month, the figure will be the actual salary on 28th Feb 2020
- If your/your employees pay varies it will be the higher of the same month’s income from the previous year, or the averaged monthly earnings for the 2019/20 tax year.
For example, if you previously topped up your salary in March 2019, you can use this amount as the basis of your claim. But if your salary has been consistent over the last 12 months, topping up your salary in March 2020 will not increase your entitlement. Remember: HMRC have access to RTI information, meaning they have an electronic copy of you and your employees’ historic monthly payslips.
Claiming your grant
You must formally designate impacted employees (including yourself, if applicable) as ‘furloughed workers’, and notify them as such in writing. Once an employee is furloughed, they cannot actively take part in running the company or engaging in revenue-generating activities. The only exception is for taking part in training.
For the avoidance of doubt: this scheme cannot be used to top-up part-time or reduced hours earnings. It’s binary: you either don’t work at all via your limited company and claim, or you don’t claim. This will change after August 2020, when the scheme will be updated to support part-time working.
Once you’ve designated you and/or your employees as furloughed you will be able to submit information about them and their earnings to HMRC via their online portal. You will then be reimbursed 80% of wage costs, as well as an additional top-up to cover employer’s national insurance and statutory pension payments. You must pass the reimbursed wages on to employees, and the payments will be subject to usual deductions (employee’s national insurance, income tax, etc).
inniAccounts clients: we will handle claiming JRS on your behalf. Please see this page for details.
This is a grant. You will not be expected to repay this subsidy.
Sick pay for self-isolation
What is it: £94.25 per week of sick pay paid for by the government
Applies to: anyone self-isolating who has or is using a PAYE scheme
If you find yourself self-isolating, you are entitled to claim statutory sick pay (SSP) and the government will refund the cost to small businesses – including contractors and consultants using limited companies. It’s not a huge amount (£94.25 per week), but you should be eligible to claim it.
If you’re an inniAccounts client and find yourself self-isolating and you’d like to claim SSP, please contact your account manager and they’ll arrange for your payroll to be configured. We don’t yet know how to claim this back from the government, but when we find out we’ll let you know.
If you’ve found yourself using an umbrella recently, you are legally entitled to statutory sick pay (and the umbrella cannot pass this cost on to you). Contact your umbrella company for more details.
You will be refunded SSP. You will not be expected to pay it back.
VAT payment deferral
What is it: VAT payment due up between 20 March 2020 to 30 June 2020 can be deferred until April 2021
Applies to: any VAT registered business
Any VAT payments due between now and the end of June can be deferred until the end of the tax year (April 2021). This is available now, and no applications are required. You can simply hold back any VAT payments due over the coming three months.
This is not a grant. You’ll still need to pay the amount in full before April.
This is a useful, quick means to improve cash flow. However, if your earnings have been depressed during the last quarter due to IR35, it may not be beneficial as limited VAT could be due.
Whilst there’s no application process, this measure is designed for businesses facing distress. If you are able to pay your VAT without putting yourself into distress, we recommend that you do.
You must file your VAT return as normal during this period, but you can skip the payment – remember you may need to cancel your direct debit.
Self Assessment payment on account deferral
What is it: July’s Self Assessment payments on account will be deferred until January 2021
Applies to: anyone who pays income tax via self-assessment, including tax due on dividends
Contractors and consultants who draw dividends usually pay self-assessed income tax in advance, via ‘payments on account’, due in July and January. The July 2020 payment will be deferred until January 2021.
This is not a grant. You’ll still need to pay the amount in January 2021.
If you’ve set aside cash for your July payment, this could be useful today. However, given it’s only been two months since the last payment, it may be of limited immediate use.
It will be of some help if your income has been or you expect it to be depressed. It will prevent the need for you to pay income tax in advance based on an outdated forecast of earnings.
This scheme is available automatically, and you don’t need to apply. You can simply skip your July 2020 payment on account and no penalties or interest will be applied.
HMRC’s Time To Pay
What is it: payment plans for outstanding taxes
Applies to: any company or individual in financial distress
If you’re facing financial distress and you have an outstanding tax liability, HMRC’s Time To Pay (TTP) service may be beneficial. TTP is a long-established means for HMRC to support businesses who are unable to meet tax payment deadlines. With TTP, HMRC will discuss your business’s finances and – should they approve – they will allow you to pay any outstanding tax liabilities as monthly instalments. These payment plans are agreed on a case-by-case basis.
This is not a grant. It’s a monthly payment plan for outstanding tax.
You should only contact HMRC if you have missed, or are about to miss a tax payment. If your next tax payment is some time away, HMRC has asked that you contact them closer to the time to help manage demand for the service.
Here are some tips for using Time To Pay:
- Expect to be on hold for some time – demand is significant and HMRC are currently scaling up call centres
- Make sure you have all the required information to hand:
- Payment reference numbers (CT UTR, self-assessment UTR, VAT number, PAYE accounts office reference number)
- Details of the outstanding tax liabilities
- How much you think you can realistically pay now, and each month
- Expect to be asked about your businesses and your personal income and expenditure, and assets such as bank accounts and savings. It is likely that HMRC will want to establish if your business is still viable.
- Make sure you’re authorised to speak to HMRC
- You’ll need to be either a company director or an ‘authorised agent’ – i.e. an accountant with pre-existing authorisation to speak on your behalf
- We would advise that you also write to HMRC asking for a deferral
- Summarise the above in a letter, and ensure that you include your payment reference numbers
- You should write to each individual department if needed (CT, income tax/PAYE, VAT)
- Corporation Tax Services, HMRC, BX9 1AX
- PAYE and Self Assessment, HMRC, BX9 1AS
- HMRC VAT Written Enquiries, Crown House, Birch Street, Wolverhampton, WV1 4JX
inniAccounts clients: please contact us for support with TTP
What is it: quick-access loans of up to £50,000, and more complex loans up to £5m
Applies to: all companies who have been impacted by CV19
There are two loan schemes in operation:
- The Coronavirus Business Interruption Loan Scheme (CBILS), which offers unsecured loans up to £250k, and secured loans up to £5m. The application process is similar to a traditional loan, and requires submission of forecasts and will be tested by the lender.
- The more popular Bounce Back Loans, which offer low-interest loans of up to £50,000. They’re available quickly (often next-day), the application is straightforward as the criteria is less stringent than CBILS. There are no repayments for the first year, and the interest rate is fixed at just 2.5%.
It is likely that most smaller companies who require a loan will first investigate if the Bounce Back Loan is suitable for them. We’ve written a page on this: can contractors use Bounce Back Loans?
This is a loan You will need to repay it.
Small Business Grant Scheme for businesses that occupy properties
What is it: a £10,000 grant
Applies to: small companies who occupy ‘rateable’ properties
If your business formally occupies a property (such as an office) which is rateable (this would exclude home offices), then you may be entitled to a grant. In addition, your business must be based in England and receive the small business rate relief, rural rate relief or tapered relief.
In these circumstances, you will qualify for a £10,000 grant. This grant will be administered by local authorities, who will write to you if you are eligible for this grant. You do not need to do anything.
This grant will be useful to the small number of contractors and consultants who rent commercial premises to run their businesses.
This is a grant. You will not be expected to repay this.
Should you need further income support, the only backstop at present is Univeral Credit. This is typically worth £409.89 per month. The government have recently relaxed the application rules for the self-employed, making it more accessible.
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