COVID-19: tax and liquidity measures announced by the UK Government

Tax

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Corporation Tax

• No relaxation on tax filing deadlines has been announced.
• Businesses should try to meet their tax compliance obligations to avoid penalties.
• Where it is not going to be possible for a business to meet its tax compliance obligations, it may consider applying for relief from penalties under the Time to Pay regime (which applies to corporation tax, VAT and PAYE).
• Businesses may be able to revise the amount of their first corporation tax instalment payment due in May 2020, in light of their updated business forecasts for FY20.

VAT

• All next VAT payments will be automatically deferred from 20 March to 30 June 2020.
• Taxpayers will have until the end of the 2020 to 2021 tax year to pay any VAT liabilities that have accumulated during this deferral period.
• Subject to the above, where possible, businesses should try to meet their tax compliance obligations to avoid penalties.
• Where it is not going to be possible for a business to meet its tax compliance obligations, it may consider applying for relief from penalties under the Time to Pay regime (which applies to corporation tax, VAT and PAYE).

National Insurance contributions (“NICs”) and PAYE

PAYE

• HMRC has verbally confirmed to CMS that PAYE due to be paid for month 11 (i.e. March 2020) can be deferred for two months, subject to making specific agreement with HMRC. No guidance is currently available for month 12 (i.e. April 2020). Statutory sick pay (“SSP”)
• The Chancellor announced a reimbursement to employers with less than 250 employees (as of 28 February 2020) of up to two weeks’ SSP for each employee absent due to self-isolation as a result of COVID-19. This will capture SSP from Day 1, rather than Day 4. Detail as to whether employee headcount applies on a group or company basis is yet to be confirmed.
• HMRC has verbally confirmed to CMS that they are expecting businesses to account to HMRC for income tax and employee and employer’s NICs on SSP 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 SSP.
• The Coronavirus Bill enables HMRC to make regulations to provide funding to employers for SSP payments made in the context of the pandemic. Funding can be provided in advance as well as in arrears and can be made in the form of deductions from the employer’s existing National Insurance liabilities. It is encouraging that, despite the information received from HMRC by CMS noted above, the Coronavirus Bill enables the HMRC regulations to also capture PAYE amounts in respect of SSP.
• 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.
• Regulations and UK Government guidance is awaited on how businesses will claim reimbursement and how long such claims will take to be processed. Corona Virus Job Retention Scheme
• HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
• This will be backdated to 1 March 2020 and open for a minimum of 3 months without a funding cap.
• HMRC are working to set up a system for reimbursement.
• To be eligible:
  • employers need to designate affected employees as ‘furloughed workers,’ and notify such employees of this change and
  • information will need to be submitted to HMRC about the employees that have been furloughed and their earnings through a new online portal. Further details on the information required are awaited.

Income tax

IR35

• The introduction of the extension to the private sector of IR35 has been deferred until 6 April 2021. Self-assessment
• Income tax self-assessment payments due on 31 July 2020 will be deferred until 31 January 2021.
• All self-employed individuals are eligible for this automatic offer.
• No penalties or interest for late payment will be charged in respect of the deferral period.

Property

• Business Rates Retail Discount of 100% applies for 2020/21 to properties used for the majority of retail, leisure and hospitality businesses.
• No rateable value cap applies to the relief.
• The relief will apply from the next council tax bill in April 2020.
• Government guidance published on 18 March 2020 included a non-exhaustive list of businesses that can benefit including:
  • shops, restaurants and cafés, including post offices, opticians, petrol stations and art galleries;
  • cinemas and live music venues;
  • museums, nightclubs, sport and leisure facilities, stately homes, theatres and gyms;
  • public halls and clubhouses; and
  • hotels, guest and board houses, holiday homes and caravan parks and sites.
• Businesses that will not benefit include: providers of financial, medical and professional services, other services such as letting agents, post office sorting offices and casinos and gambling clubs.
• The eligibility for the discount will be assessed and calculated on a daily basis. To assess the business rate charge that will no longer be payable, please use the business rates calculator.
• There are additional implications of COVID-19 to consider from a tenant’s perspective.

Financial support

Loans and grants

• Two UK Government-backed and guaranteed loan scheme will provide £330bn of finance to help businesses in these uncertain times.
• The schemes are expected to be up and running this week.
• Coronavirus Business Interruption Loan Scheme: delivered by the British Business Bank, enabling 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; and
• Covid Commercial Finance Facility: available to larger businesses, the Bank of England will acquire commercial paper from eligible businesses.
• Retail and Hospitality Grant Scheme: provides businesses in the retail, hospitality and leisure sectors with a cash grant of up to £25,000 per property. Businesses in these sectors with a rateable value of under £15,000 will receive a grant of £10,000. Businesses in these sectors with a rateable value of between £15,000 and £51,000 will receive a grant of £25,000. Local authorities will contact businesses eligible for this scheme.
• Small Business Grant Scheme: this is non-repayable £10,000 cash grant for small business. All businesses in receipt of small business rate relief or rural rate relief will be eligible. It is expected that local authorities will write to eligible businesses about further detail.

Payment arrangements

• Time to Pay: a debt repayment arrangement in respect of outstanding tax liabilities. Such plans are agreed on a case-by-case basis with HMRC. These are tailored to individual circumstances and liabilities. Businesses should approach HMRC with a realistic and manageable proposal of what they are able to afford to pay.
• Deferral plans: HMRC may agree to tax payments being deferred on a monthly basis.
• HMRC has a dedicated Debt Management Payment and Banking team for these types of arrangements.