Tax and financial measures to support businesses and individuals through the Covid-19 crisis
Guide date: 23 March 2020
Only a few days have passed since the Chancellor pumped another £330bn (the equivalent of 15% of GDP) into the British economy, and the Spring Budget is a distant memory. With the situation constantly evolving, the Chancellor announced a further rescue package on 20 March 2020. At the forefront of this is the “Coronavirus Job Retention Scheme”, which could potentially save hundreds of thousands of jobs. Also announced was a deferral of VAT and income tax liabilities.
This Guide provides an up-to-date summary of the tax and financial measures intended to help businesses and individuals through the Covid-19 crisis.
This Guide provides a practical overview for businesses and individuals alike – after all, every person or business in the UK will be affected by the Covid-19 crisis in some way. The UK’s 5 million self-employed workers are currently the group that has received the least amount of direct help. Aside from the benefits of VAT and income tax deferrals, mortgage holidays and protection of renters from eviction, self-employed people are largely directed to the welfare system.
The current position set out in this Guide may not the end of the matter. In particular, pressure is mounting on the Chancellor to throw a lifeline to the self-employed, so the current position may not the end of the matter. No doubt, further measures will be announced in the coming days or weeks. In the current situation, a week is a very long time.
What’s in this Guide?
I. BUSINESSES
A. Tax and financial measures to support businesses in distress
II. PRIVATE INDIVIDUALS
A. Tax and financial measures to support employees (including individuals on zero-hours contracts who are paid through PAYE)
B. Tax and financial measures to support self-employed people and other individuals who are suffering the financial effects of Covid-19 (not
including employees covered under B. above
III. OTHER MEASURES DESIGNED TO SUPPORT BUSINESSES AND CONSUMERS AND TO STIMULATE THE ECONOMY MORE GENERALLY
A. Financial measures
B. Tax measures
I. Businesses
A. Tax and financial measures to support businesses in distress
1. Coronavirus Job Retention Scheme
In order to preserve jobs and prevent lay-offs, UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. HMRC to reimburse 80% of those workers’ wage cost, up to a cap of £2,500 per month
| When it is being done | HMRC are in the process of setting up a system for reimbursement. |
| Eligibility | All UK employers. The Chancellor has indicated that the scheme should cover “anybody who is on the PAYE system”, and thus could cover people on ‘zero hours contracts’ (although questions remain as to how their ‘wage’ should be calculated). |
| Who to contact / how to access | HMRC: Employers must designate affected employees as ‘furloughed workers,’ and notify those employees and HMRC
Further details TBC |
2. VAT deferral
Businesses will not need to make a VAT payment during the period from 20 March to 30 June. Taxpayers will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal. VAT returns should be filed as normal.
| When it is being done | Deferral period: 20 March to 30 June 2020 |
| Eligibility | All businesses registered for UK VAT |
| Who to contact / how to access | No application necessary |
3. Income tax deferral
For income tax self-assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. No interest or penalties will accumulate
| When it is being done | Deferral of income tax self-assessment payment to 31 January 2021 |
| Eligibility | Any individual paying income tax through self-assessment |
| Who to contact / how to access | No application necessary |
4. Business rates relief
100% relief from business rates for businesses in England in the retail, leisure and hospitality sectors, regardless of their rateable value, for 1 year (starting on 1 April).
| When it is being done | From 1 April 2020 for 1 year |
| Eligibility | Businesses based in England in the retail, hospitality and/or leisure sector. Properties that will benefit from the relief will be occupied hereditaments that are wholly or mainly being used as:
– shops, restaurants, cafes, drinking establishments (e.g. pubs), cinemas, live music venues, theatres |
| Who to contact / how to access | Local Authority (supported by the government) There should be no action needed, and Local Authorities will re-issue bills where necessary. However, businesses should establish whether they qualify and, if so, ensure they get the relief (e.g. by contacting the relevant Local Authority). Further information: click here |
5. Cash grants for retail, hospitality and leisure businesses
Businesses in England in the retail, leisure and hospitality sectors:
– a rateable value up to £15,000: cash grant of £10,000
– rateable value between £15,001 and £51,000: cash grant of £25,000
| When it is being done | One-off government grant (provided through Local Authority) |
| Eligibility | Same as for business rates relief (see point 4. above), but subject to rateable value thresholds |
| Who to contact / how to access | No action needed, Local Authorities are supposed to contact eligible businesses
Queries should be directed at relevant Local Authority |
6. Cash grants for small businesses that pay little or no business rates
Small businesses in England that are eligible for small business rate relief or rural rate relief will be entitled to a one-off cash grant of £10,000.
| When it is being done | One-off government grant (provided through Local Authority) |
| Eligibility | Any business based in England that is:
– a small business receiving small business rate relief (SBBR) or rural rate relief (RRR); and that |
| Who to contact / how to access | No action needed, Local Authorities are supposed to contact eligible businesses. Queries should be directed at relevant Local Authority |
7. Coronavirus Business Interruption Loan Scheme for small businesses
A new temporary coronavirus business interruption loan scheme will be made available through the British Business Bank, allowing businesses to access loans of up to £5 million, with no interest due for the first 12 months. The government will guarantee 80% of each loan at no charge to businesses or banks, subject to a per-lender cap. The business interruption loan scheme will temporarily replace the enterprise finance guarantee (EFG).
| When it is being done | Aimed to be available from the beginning of the week starting 23 March 2020 |
| Eligibility | Any UK based business that:
– has a turnover of no more than £41 million per annum; and Full eligibility criteria will be published when the scheme goes live |
| Who to contact / how to access | To be delivered through lenders accredited by the British Business Bank (which includes all of the major banks) – click here |
8. Loans for larger firms through the COVID-19 Corporate Financing Facility
The Bank of England to set up a new scheme to provide liquidity to large firms to help them bridge Coronavirus disruption to their cash flows, by buying short-term debt from them.
| When it is being done | Aimed to be available from the beginning of the week starting 23 March 2020 |
| Eligibility | Any UK business, but note Bank of England eligibility criteria (including with regard to credit rating). |
| Who to contact / how to access | The Bank of England – click here |
9. Dedicated helpline for businesses seeking a deferral on tax liabilities
Businesses or individuals with outstanding tax liabilities may be able to agree additional time to settle their tax affairs through HMRC’s ‘Time To Pay’ scheme, for which a dedicated helpline has been set up. This is being scaled up. Owing to demand, HMRC are prioritising calls from businesses or individuals who have missed a tax payment or are in danger of missing a tax payment due to Covid-19.
| When it is being done | From 11 March 2020 |
| Eligibility | Businesses or individuals with outstanding tax liabilities |
| Who to contact / how to access | HMRC – click here |
10. Statutory sick pay (SSP) – funding employers with fewer than 250 employees for SSP paid for Covid-19 related sickness absence for up to 2 weeks
Small and medium-sized businesses with fewer than 250 employees will be able to reclaim up to 2 weeks’ worth of SSP paid for Covid-19 related sickness absence under the new eligibility criterial. Business eligibility will be based on the number of employees as at 28 February 2020.
| When it is being done | Eligible period for this scheme to commence from the day on which regulations extending SSP to self-isolators come into force
Based on the Coronavirus Bill (as published on 19 March 2020), this should be 13 March 2020 |
| Eligibility | UK based small and medium-sized businesses with fewer than 250 employees |
| Who to contact / how to access | TBC – existing systems are not designed to facility such employer refunds for SSP. The government will work with employers over the coming months to set up a repayment |
11. Insurance cover
The government has provided confirmation that government advice to avoid pubs, clubs and theatres etc. is sufficient for businesses to claim on their insurance where they have appropriate business interruption cover for pandemics in place.
| When it is being done | N/A |
| Eligibility | Insurance policies differ significantly, so businesses will need to check the terms and conditions of their specific policy and contact their providers. Most businesses are unlikely to be covered, as standard business interruption insurance policies are dependent on damage to property and will exclude pandemics. |
| Who to contact / how to access | Insurance provider. If there is any doubt as to the correct position, it will be prudent for affected businesses to take specialist legal advice. – HLaw may be able to assist |
12. Contracts: termination, ‘force majeure’ and frustration
Not a government measure, but similar principles apply as for point 11 (insurance cover)
| When it is being done | N/A – ordinary legal principles apply |
| Eligibility | Specific contract wording to be reviewed, case by case, as to how, when and why contract performance may be delayed, suspended or terminated by either party on the grounds of government order or wording such as “beyond a party’s reasonable control”, with particular attention to any deadlines for service of notices, as well as the contract law principle of “frustration of contract”. |
| Who to contact / how to access | It will be prudent for affected businesses to take specialist legal advice |
II. Private Individuals
A. Tax and financial measures to support employees (including individuals on zero-hours contracts who are paid through PAYE)
1. Coronavirus Job Retention Scheme
In order to preserve jobs and prevent lay-offs, UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis. HMRC to reimburse 80% of those workers’ wage cost, up to a cap of £2,500 per month.
| When it is being done | HMRC are in the process of setting up a system for reimbursement. |
| Eligibility | All UK employers. The Chancellor has indicated that the scheme should cover “anybody who is on the PAYE system”, and thus could cover people on ‘zero hours contracts’ (although questions remain as to how their ‘wage’ should be calculated) |
| Who to contact / how to access | HMRC. Employers must designate affected employees as ‘furloughed workers,’ and notify those employees and HMRC
Further details TBC |
2. Extension of statutory sick pay (SSP)
SSP will be available to individual employees diagnosed with coronavirus or self-isolating from the first day of leave rather than the fourth day
| When it is being done | Based on the Coronavirus Bill (as published on 19 March 2020), this measure should commence retrospectively from 13 March 2020 |
| Eligibility | Employees diagnosed with coronavirus or self-isolating |
| Who to contact / how to access | Employers in the first instance |
3. Mortgage holiday
The government has agreed with mortgage lenders that they will support customers that are experiencing issues with their finances as a result of Covid-19, including through payment holidays of up to 3 months.
| When it is being done | With immediate effect (from 17 March 2020) |
| Eligibility | This will extend to landlords whose tenants are experiencing financial difficulties due to coronavirus. This will alleviate the pressure on landlords, who will be concerned about meeting mortgage payments themselves, to avoid pressure on tenants as a result |
| Who to contact / how to access | Mortgage lenders in the first instance or your mortgage broker |
4. Renters’ protection from eviction
Emergency legislation will be passed so that landlords will not be able to start proceedings to evict tenants (whether in private or social accommodation) for at least a 3 months period. At the end of this period, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.
| When it is being done | With immediate effect (from 19 March 2020) |
| Eligibility | Tenants in England and Wales. Similar measures expected for Devolved Administration |
| Who to contact / how to access | Click here for details |
5. Income tax deferral
For income tax self-assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. No interest or penalties will accumulate.
| When it is being done | Deferral of income tax self-assessment payment to 31 January 2021 |
| Eligibility | Any individual paying income tax through self-assessment |
| Who to contact / how to access | No application necessary |
6.Universal credits
This could be relevant for employees whose wages are reduced (e.g. under the Coronavirus Job Retention Scheme) or who are laid off, as a result of the Covid-19 crisis:
- People affected by Covid-19 will be able to claim Universal Credit and access advance payments, without the current requirement to attend a jobcentre
- The requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those affected by the economic impact of COVID-19 so that Universal Credit can be accessed in full, at a rate equivalent to SSP
- The Universal Credit standard allowance, will be increased for the next 12 months, by £1,040 a year (£20 a week)
- The Working Tax Credit basic element will be increased for the next 12 months by £1,040 a year (£20 a week)
| When it is being done | From 19 March 2020 – temporarily (for at least 3 months) From 6 April 2020, for 1 year From 6 April 2020, for 1 year From 6 April 2020, for 1 year |
| Eligibility | Subject to the new measures, normal eligibility criteria for Universal Credit apply |
| Who to contact / how to access | Application made online in the normal way (but without any requirement to attend a jobcentre) |
B. Tax and financial measures to support self-employed people and other individuals who are suffering the financial effects of Covid-19 (not including employees covered under B. above)
1.Mortgage holiday
The government has agreed with mortgage lenders that they will support customers that are experiencing issues with their finances as a result of Covid-19, including through payment holidays of up to 3 months.
| When it is being done | With immediate effect (from 17 March 2020) |
| Eligibility | This will extend to landlords whose tenants are experiencing financial difficulties due to coronavirus. This will alleviate the pressure on landlords, who will be concerned about meeting mortgage payments themselves, to avoid pressure on tenants as a result. |
| Who to contact / how to access | Mortgage lenders in the first instance or your mortgage broker |
2. Renters’ protection from eviction
Emergency legislation will be passed so that landlords will not be able to start proceedings to evict tenants (whether in private or social accommodation) for at least a 3 months period. At the end of this period, landlords and tenants will be expected to work together to establish an affordable repayment plan, taking into account tenants’ individual circumstances.
| When it is being done | With immediate effect (from 19 March 2020) |
| Eligibility | Tenants in England and Wales. Similar measures expected for Devolved Administrations |
| Who to contact / how to access | Click here |
3. VAT deferral
Businesses will not need to make a VAT payment during the period from 20 March to 30 June. Taxpayers will be given until the end of the 2020/21 tax year to pay any liabilities that have accumulated during the deferral period.
VAT refunds and reclaims will be paid by the government as normal. VAT returns should be filed as norma
| When it is being done | Deferral period: 20 March to 30 June 2020 |
| Eligibility | All businesses registered for UK VAT |
| Who to contact / how to access | No application necessary |
4. Income tax deferral
For income tax self-assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021. No interest or penalties will accumulate.
| When it is being done | Deferral of income tax self-assessment payment to 31 January 2021 |
| Eligibility | Any individual paying income tax through self-assessment |
| Who to contact / how to access | No application necessary |
5. Universal credits
People affected by Covid-19 will be able to claim Universal Credit and access advance payments, without the current requirement to attend a jobcentre.
For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those affected by the economic impact of COVID-19 so that Universal Credit can be accessed in full, at a rate equivalent to SSPThe Universal Credit standard allowance, will be increased for the next 12 months, by £1,040 a year (£20 a week). The Working Tax Credit basic element will be increased for the next 12 months by £1,040 a year (£20 a week).
| When it is being done | From 19 March 2020 – temporarily (for at least 3 months) From 6 April 2020, for 1 year From 6 April 2020, for 1 year From 6 April 2020, for 1 year |
| Eligibility | Subject to the new measures, normal eligibility criteria for Universal Credit apply |
| Who to contact / how to access | Application made online in the normal way (but without any requirement to attend a jobcentre) |
6. ‘New style’ Employment and Support Allowance (ESA) (which may be paid instead of some elements of Universal Credit)
‘New style’ ESA will be payable for people affected by the economic impact of COVID-19 from the first day of sickness, rather than the eighth day
| When it is being done | – |
| Eligibility | Subject to the new measures, normal eligibility criteria for the ‘new style’ ESA apply |
| Who to contact / how to access | Application made in the normal way (but without any physical appointment being necessary) |
7. Off-payroll working reform (IR35) postponed
The reform to the off-payroll working rules (commonly referred to as IR35), scheduled to come into force on 6 April 2020, has been postponed for 1 year.
| When it is being done | Postponed from 6 April 2020 to 6 April 2021 |
| Eligibility | N/A |
| Who to contact / how to access | N/A |
III. Other measures designed to support businesses and consumers and to stimulate the economy more generally
A. Financial measures
1. Interest rate cut
Central bank interest rate cut from 0.75% to 0.25% (on 11 March 2020) and then to 0.1% on 19 March 2020.
| When it is being done | With immediate effect (from 11 March 2020 and 19 March 2020 respectively). When / the extent to which these interest rate cuts will filter through to benefit businesses and/or individual, will depend on the individual terms of their loan or mortgage etc., and on what a particular lender will do (e.g. lenders will likely retain a margin above 0.1% to cover their admin costs). |
| Who to contact / how to access | N/A |
2. Bank of England to provide additional liquidity to support banks in lending to small businesses
Click here for further Bank of England measures to respond to the economic shock of Covid-19.
| When it is being done | As soon as possible after announcement on 11 March 2020 |
| Who to contact / how to access | N/A |
3. UK banking sector
The UK banking sector has confirmed that it will support consumers through overdrafts and loan and mortgage repayment relief where necessary, through trade body UK Finance
| When it is being done | As soon as possible after announcement on 11 March 2020 |
| Who to contact / how to access | UK Finance (being the collective voice for the banking and finance industry) – click here |
B. Tax measures
1. Off-payroll working reform (IR35) postponed
The reform to the off-payroll working rules (commonly referred to as IR35), scheduled to come into force on 6 April 2020, has been postponed for 1 year
| When it is being done | Postponed from 6 April 2020 to 6 April 2021 |
| Who to contact / how to access | N/A |
2. Employer national insurance
The Employment Allowance for Employer National Insurance Contributions will increase from £3,000 to £4,000. Note that (at least for now) this will count as ‘state aid’ reducing the SEIS funding limit.
| When it is being done | From 6 April 2020 |
| Who to contact / how to access | HMRC – to be integrated into normal employment tax compliance |
3. Research & Development
The Research and Development Expenditure Credit (the RDEC, also known as the ‘Above the Line’ credit) is a standalone credit that is brought into account as a receipt in calculating trading profits.
The current general rate is set as 12% of qualifying R&D expenditure. This measure increases the rate of the RDEC from 12% to 13%.
More generally, the government intends to increase research and development spending to £22 billion by 2024/25 (described as the largest and fastest increase in R&D investment on record)
| When it is being done | For expenditure incurred on or after 1 April 2020 |
| Who to contact / how to access | To be claimed on the relevant tax returns as normal. |
4. Corporation tax / income tax – structured building allowance
The Structures and Buildings Allowance will be increased from 2% to 3% (giving relief on an extra £100,000 next year if you’re buying a building worth £10 million).
| When it is being done | From 1 April 2020 for corporation tax purposes and from 6 April 2020 for income tax purposes |
| Who to contact / how to access | To be claimed on the relevant tax returns as normal |
5. VAT
New zero rate for women’s sanitary products. New zero-rate for e-publications
| When it is being done | From 1 January 2021 / From 1 December 2020 |
| Who to contact / how to access | N/A |
6. Duties frozen
Fuel duty to be frozen for another year.
A planned increase in spirits duty will be cancelled and duties for cider and wine drinkers in England will be frozen
| When it is being done | Tax year 2020/21 Tax year 2020/21 |
| Who to contact / how to access | N/A |
7. Business rates
A fundamental review of business rates will be carried out
| When it is being done | Due to report back in autumn 2020 |
| Who to contact / how to access | N/A |