Coronavirus: Support for Businesses
We’ve been keeping close watch of the latest government support for businesses and continue to have frequent dialogue with our clients. However, the government guidance isn’t always easy to understand and there remains some grey areas open to interpretation. In this post, we address 5 specific recent questions from our clients and provide our response:
Can Directors be furloughed?
Yes. Most Directors will also be employees, evidenced by way of a written employment contract with the company. Where a Director is unable to fulfil their duties as an employee due to Coranavirus (Covid-19), the company may write to the Director with a notice of their proposal to furlough the Director. Note that all employees must consent to the change in their employment status and this can be done by way of signing an agreement letter. For employees, alternatives to furloughing may include resignation or, in cases where the role will cease to exist, redundancy (subject to terms of employment).
In our opinion, the need to furlough should be evidenced on logistical or commercial grounds, e.g. there is no work because the company cannot trade, or it is not commercially viable to trade, due to the Coronavirus impact.
Are Dividends covered as part of the Government's support measures?
No. The government guidance is currently silent on Dividends and instead specifically references PAYE earnings as those which will be covered under the Coronavirus Job Retention Scheme (CJRS). For most Directors this will mean a low minimum salary typically just above the Primary Threshold for National Insurance (£719 a month or £8632 per annum).
Do grants need to be re-paid?
No. This may sound obvious but it’s a legitimate question – hand outs from the government do not come often and many companies are sceptical of what is being said. We are basing our response on the Chancellors briefing on 17th March at 30:38 minutes. That said, the terms by which businesses will be eligible are specific to all businesses which claim SBRR (Small Business Rates Relief, for companies which would normally have to pay business rates but have a property with a rateable value of less than £12,000) and those businesses in the Retail, Leisure or Hospitality sector with a rateable value of less than £51,000.
How long is the VAT payment deferral?
Payments of VAT which would normally be paid in the period 31st March 2020 to 30th June 2020 will not need to be paid until 31st March 2021. This means retaining cash in the bank for a longer than normal time frame. VAT returns should still be made as normal and businesses do not need to apply. Those businesses aiming to receive a reclaim in this period will be refunded as normal, but may experience delayed processing times.
Can we defer Corporation Tax and PAYE/NI payments?
Yes, but businesses must call the government helpline specifically to request this. Without calling HMRC your business may be subject to the usual penalties for a delayed or non-payment. You will need your Corporation Tax UTR or PAYE reference to hand when calling HMRC.
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We hope this provides some additional clarity on specific questions we've received over the past couple of weeks. Note that while all information provided here has come from a government source (www.gov.uk or through daily government television broadcasts), some government guideance has been subject to our intepretation, subject to future government guideance, changes and terms. As always, clients may call our office direct to discuss any matter related to Coronavirus government support measures.
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