This page covers some of the Financial Support set up by the UK Government due to Coronavirus, that is available to UK charitable Science Centres.
Job retention scheme
Directors – There has been some debate over whether directors of a trading company qualify for the scheme because they cannot totally shed their responsibilities as a director even if furloughed. In principle we believe directors may qualify based on their previous PAYE earnings providing they do nothing other than carry out the minimum statutory duties as a director. We are expecting some clarity around this soon.
Starters and leavers – You may rejoin employees made redundant since 28 February and then furlough them under the scheme but any new joiners since 28 February are not be eligible.
Self isolators – Employees who are off work due to public health guidelines can be furloughed.
Training/volunteering – A furloughed employee can undergo training so long as they do not provide services to or generate revenue for the organisation. However, if they do spend time carrying out official training they should be paid at least the minimum wage for the time spent doing so.
Employees whose pay varies – there are simple ways of calculating “normal” earnings.
One man band companies – Contractors working through a company, paying themselves a small salary and dividends, should be eligible for the scheme based on their PAYE earnings but not their dividends. If this causes particular hardship, a claim to Universal Credit should be possible.
Employers National Insurance and Pension Contributions – The subsidy covers the national insurance contribution on the claimed amount as well as the minimum auto enrolment pension contribution (currently 3%).
Holidays – Here is a link to the ACAS website that does a good job of explaining the position for employers around holiday leave https://j.mp/39GeyNj
Process - Employers will claim the subsidy via an on-line portal which won’t be available until end of April at the earliest. In the meantime, employers must meet the payroll cost of everyone including furloughed staff in the normal way. Those struggling for cashflow might consider delaying payment of a portion of salaries or look for a loan.
Self-Employment Income Support Scheme
To be eligible you must have submitted a tax return for the last financial year 2018/19 and your profits must be less than £50,000, or average less than £50,000 in recent years and it must make up more than half your income. You will receive 80% of the recent average. The scheme is not yet up and running. HMRC will contact and invite eligible individuals to apply.
Coronavirus Business Interruption Loan Scheme (Cbils)
The government backed emergency loan provision is getting mixed press. The government offers a guarantee of 80% of the loan to the providing bank but the guarantee covers only 80% of the top slice of the banks losses in the event of a default. The lender is exposed to the remaining 20% so will be closely scrutinising viability and looking for additional cover if possible. The big 4 clearing banks have agreed not to request directors guarantees for loans of under £250,000 and the government clearly wants the banks to relax their normal lending criteria but it remains to be seen to what extent they are prepared to do so. There are 40 accredited lenders, and some examples of quick turnarounds, but generally applications are likely to take time unless the business already has a well-established credit history with the funding provider. The standard identification process for new customers could present a few issues by itself.
Research And Development Tax Credits
This is a hugely beneficial scheme for many of our clients, not just high-tech start-ups, but any business that incorporates innovation in their product or service. For companies depending on a refund for their cashflow it’s encouraging to hear this coming from HMRC:
‘At a time of pressure on HMRC operational resources, our first priority is to maintain our published aim of clearing 95% of SME tax credit claims within 28 days and we have implemented contingency plans to support this, including applying extra resource to the work. Currently we are meeting this aim. ‘
One condition of repayment of a refundable tax credit is the viability of the company so some thought may be required around the presentation of claims for businesses adversely affected by Coronavirus.
The receipt of only one form of state aid by the company is also a condition of obtaining a refund and the CBILS loan has been notified as a form of state aid so it’s important to think about the impact of an application for a CBILS loan if a company is also expecting to make an R&D Tax credit claim.
Local authorities have started contacting businesses about the grants available to businesses that qualify for Small Business Rates Relief or meet the criteria for Leisure and Hospitality traders. If you haven’t heard anything you should follow it up. Companies may apply to Companies House for a 3 month extension to file their accounts which will automatically be granted for any reason to do with Coronavirus.
The extension is not automatic without actually applying for it.
From Friday 27th March:
Furloughing and the Corona Virus Job Retention Scheme.
Essentially, the government will subsidise 80% of the cost of so-called “furloughed employees” for the duration of the crisis up to a maximum of £2,500/week.
Furlough is an expression more common in the US than the UK and means laying-off staff because of a shortage of work.
Details are still a little sketchy, but it appears that businesses will need to formally notify staff without work for the duration of the crisis that they are furloughed; this then needs to be recorded on an HMRC portal being set up. The government is working on a system of reimbursement although in many cases the subsidy might simply be taken as a reduction of PAYE of the remaining workers. For businesses expecting to reclaim cash, they are unlikely to get it before pay day and may have to use existing cash or additional borrowing to pay staff in the meantime. The banks still do not have much detail on the Business Interruption Loan scheme. It is fair to say that there’s been a luke-warm reception from some businesses about being saddled with additional borrowing that still needs to be paid off in an uncertain future. However, it may be a viable option for previously profitable businesses.
Deferment of VAT liability
The Chancellor announced a VAT payments deferral on 20 March to support businesses with cash flow during the COVID-19 pandemic.
This means that all businesses with a UK VAT registration have the option to defer VAT payments due between 20 March and 30 June.
You therefore have until 31 March 2021 to pay any VAT deferred as a result of this announcement.
You do not need to inform HMRC if you wish to defer payment. You can opt in to the deferral simply by not making VAT payments due in this period. If you pay by Direct Debit you should cancel this with your bank. You should do so in sufficient time so that HMRC does not attempt to automatically collect on receipt of their VAT return.
Should you wish, you can continue to make payments as normal during the deferral period. HMRC will also continue to pay repayment claims as normal. You must continue to submit VAT returns as normal.
A. Yes you do even though you don’t actually need to pay any liability falling due in the next 3 months until 5 April 2021.
If you pay your VAT by direct debit you must cancel the instruction otherwise it will get taken as normal.
Q. Do I still need to pay PAYE
A. Yes you do but HMRC are offering generous Time to Pay arrangements (TTP). Be aware that there is no penalty on the first monthly default but there could be penalties on subsequent ones without a TTP.
Job Retention Scheme
Q. If I reduce the working hours of staff can I claim 80% of the cost of that rather than laying staff off completely?
A. No you can’t. The scheme is intended as an alternative to redundancy not a subsidy for employment.
Q. Can I top up staff wages above the 80%?
A. Yes you can but there’s no obligation under the scheme to do so.
Q. Are there are legal considerations to furloughing staff?
A. Yes there are. It’s probably a breach of their employment contract so you would require consent as an alternative to redundancy and you need to select staff fairly if you’re not laying off all staff. There may be rights to redundancy after a certain period.
Q. Can furloughed staff do some work whilst they are laid off?
A. No because to qualify the employer is stating that there is no work to do and the staff member would be under no obligation to participate.
Q. Can furloughed staff do some training whilst they are laid off?
A. In principle the answer for work based training would be no because that would happen under normal working conditions although if the employee chose to voluntarily train themselves from home clearly that couldn’t be prevented.
Q. If I intend to take on a new member of staff can I furlough them?
A. No. Only staff employed at 29th February 2020 can be furloughed.
Q. Do I have to process the payroll as normal?
A. Yes you do, paying staff at the reduced or topped-up rate and processing deductions as normal. You need to pay them their net pay and claim the money back later.
Q. Do employees accrue holiday pay whilst furloughed?
A. The initial thought is probably yes because the employee is retained under their existing working arrangements although the transition to furlough is by consent so it may be possible to agree something different.
Q. Can I communicate with my employees whilst furloughed?
A. Yes of course.
Q. Does the scheme apply to zero hours contracts?
A. We are awaiting the details but it almost certainly will based on average hours over a period.
Support for self-employed people was announced 26th March 2020.
The grant of £10,000 for all small business who are eligible for small business rates relief and the grant of £25,000 per property (with rateable value between £15,000 and £51,000) for businesses in the retail, leisure and hospitality are vital lifelines for those eligible.
The scheme is funded by central government but administered by the local authority so it will be important to see how quickly the local authorities can distribute the much needed money.
More details have emerged of the Corona Business Interruption Loan Scheme (CBILS) where the government underwrites 80% of the loan. There are 40 lenders signed-up to the scheme but it will probably be quicker to approach an existing bank/lender contact. The scheme is suitable for strong, viable businesses in need or working capital although I expect other businesses may be put off by additional security requirements.
On other issues it’s worth checking your insurance policies to see if any costs are covered by the type of pandemic/forced closure we are experiencing and also worth making sure you protect your position through the non-performance of a contract from the perspective both as a supplier and receiver of services where the performance of the contract has been frustrated by what’s going on.
With thanks to Corrigan Associates, ASDC Auditors, for this information
Covid-19 Funding Live tracker
Visit Third Sector’s funding tracker for regularly updated information on Covid-19 funding and emergency grants .