COVID-19: UK Government’s tax and financial relief measures

United Kingdom

The focus of the UK Government’s 2020 Budget last week was providing support to businesses during the COVID-19 outbreak. At the time, the £12 billion COVID-19 relief package announced seemed ground-breaking, but within a week it seems like small change in the face of the challenges businesses are dealing with up and down the country.

The majority of the measures introduced last week were aimed at supporting small and medium sized businesses. The UK Government’s new £330billion fiscal package announced on 17 March 2020 by the Chancellor now also includes support for large businesses.

CMS will continue to provide update on any further announcements and developments.

Tax returns

  • Neither HMRC nor the UK Government has confirmed whether there will be any relaxation on tax filing deadlines. For the time being, businesses should try to meet their tax compliance obligations to avoid penalties being assessed by HMRC.

PAYE liabilities

  • HMRC has verbally confirmed to CMS that in relation to PAYE due to be paid for month 11 (i.e. March 2020) this can be deferred for two months, subject to specific agreement with HMRC. 
  • The HMRC adviser CMS spoke to said there is no guidance available for month 12 (i.e. April 2020).

Reimbursement of statutory sick pay

  • The UK Government announced that it would reimburse employers who have less than 250 employees (as of 28 February 2020) for up to two weeks statutory sick pay for each employee who is absent due to self-isolation as a result of COVID-19. 
  • HMRC has verbally confirmed to CMS that they are expecting businesses to account to HMRC for income tax and employee and employer’s national insurance contributions on statutory sick pay in the usual way. The reimbursement that employers can claim will be of the net amount paid to employees. Businesses will therefore bear the tax cost of paying statutory sick pay.
  • HMRC has verbally confirmed to CMS that businesses will need to keep records to support their reimbursement claims but “fit notes” will not be required evidence.
  • We are waiting for the UK Government to publish its plan for how businesses will claim reimbursement and how long such claims will take to be processed. 

Business rates relief

  • The Chancellor announced on 17 March that the business rates holiday is now extended to all businesses in the retail, hospitality and leisure sector for the next 12 months irrespective of rateable value.
  • The business rates holiday for any business with retail property with a rateable value of less than £51,000 for the 2020/21 period is now:
    • extended to the leisure and hospitality sector
    • increased from 50% to 100% for the next 12 months and
    • complemented with an up to £25,000 cash grant for these smaller businesses.

“Time to Pay”

  • This is a scheme under which HMRC agrees specific tax payment arrangements with taxpayers on a case-by-case basis. Ordinarily this scheme is only available to those in significant financial distress. At Budget 2020, the Chancellor stated that businesses may be able to access this scheme to help them manage the cash flow difficulties that COVID-19 may impose.   
  • HMRC has not indicated the extent to which a business would need to be affected by COVID-19 to qualify for a “Time to Pay” arrangement. However, we consider the Chancellor’s announcement that an additional 2,000 experienced HMRC call handlers will be available to support taxpayers during COVID-19 shows willingness on HMRC’s part to assist taxpayers in these challenging times. 

Further relief measures

  • Government Debt Support. UK Government backed and guaranteed loans of £330bn will be made available on attractive terms for small and large business. Any business can access these facilities where it needs cash for suppliers, fixed costs or employee costs etc. The Chancellor has indicated the UK Government is willing to increase this capacity should there be demand. Both of the following schemes are expected to be up and running by next week:
    • A new Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will enable businesses with a turnover of no more than £41 million to apply for a loan of (now) up to £5 million, with the UK Government covering up to 80% of any losses with no fees.
    • For larger firms a new lending facility has been agreed with the governor of the Bank of England, to be provided through low cost easily accessible commercial paper.

The Chancellor has said his focus is on providing employment support to businesses by providing liquidity and assisting with funding fixed costs through the provision of debt. Understandably there will be concerns in relation to the terms of these new UK Government debt facilities, particularly in respect of the term, interest rates and repayment terms. There will also be practical concerns of whether businesses can get these facilities in place before they have to make difficult decisions.

  • Local Authority cash grant. At Budget 2020 a £3,000 cash grant was announced for 700,000 of the smallest businesses, delivered by Local Authorities. On 17 March the Chancellor announced increasing the quantum of this to £10,000.
  • The Chancellor also announced:
    • a support package for airlines and airports is expected to be introduced
    • ongoing discussions with business leaders in sectors most impacted, such as hospitality, leisure and retail about further relief measures
    • the current UK Government action and advice is sufficient ground for those businesses that have a policy of insurance for pandemic to make claims under those policies
    • further measures are expected in the coming days following discussions with, eg trade unions and business groups, including new forms of employment support and
    • for those in difficulty arising from COVID-19 mortgage lenders will offer a three-month mortgage payment holiday.